[Federal Register: April 29, 2008 (Volume 73, Number 83)]
[Notices]
[Page 23293-23301]
[DOCID:fr29ap08-118]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57703; File No. SR-Phlx-2008-31]

Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change Relating to Changes to Phlx's
Governing Documents in Connection With the Acquisition of Phlx by the
Nasdaq Stock Market, Inc.

April 23, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 21, 2008, the Philadelphia Stock Exchange, Inc. (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been substantially prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Phlx proposes to: (1) Amend the Exchange's Restated Certificate
of Incorporation (``Certificate of Incorporation''), By-Laws, and Rules
of the Board of Governors (``Rules''), and adopt certain Rules to
reflect changes in connection with the proposed acquisition of the
Exchange by The Nasdaq Stock Market, Inc. now known as The NASDAQ OMX
Group, Inc. (``NASDAQ OMX''); and (2) update certain language and make
other minor, technical amendments to the Certificate of Incorporation,
By-Laws, and Rules. The Exchange also requests Commission approval for
an affiliation between the Exchange and certain broker-dealer
subsidiaries of the NASDAQ OMX, as described herein. The Exchange
requests that the proposed rule change become operative upon
consummation of the Nasdaq OMX Merger.\3\
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    \3\ Telephone conversation between Cynthia Hoekstra, Vice
President, Phlx, and Richard Holley III, Senior Special Counsel,
Division of Trading and Markets, Commission, on April 23, 2008.
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    The text of the proposed rule change is available at the Exchange,
the Commission's Public Reference Room, and http://www.Phlx.com/
exchange/phlx_rule_fil.htm. The text of Exhibits 5A through 5C of the
proposed rule change is also available on the Commission's Web site
(http://www.sec.gov/rules/sro/phlx.shtml).

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C, below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On November 7, 2007, NASDAQ OMX announced that it had entered into
an agreement with the Exchange pursuant to which NASDAQ OMX would
acquire all of the outstanding capital stock of the Exchange. In
connection with this acquisition, Pinnacle Merger Corp., a Delaware
corporation and wholly owned subsidiary of NASDAQ OMX, would be merged
with and into the Exchange, with the Exchange surviving the merger
(``NASDAQ OMX Merger'').\4\ As a result of the NASDAQ OMX Merger, all
of the Exchange's common stock would be owned by NASDAQ OMX; Phlx
shareholders would receive cash consideration for their shares and
would not retain any ownership interest in the Exchange.
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    \4\ The NASDAQ OMX Merger is defined as the merger of a wholly
owned subsidiary of NASDAQ OMX with and into the Exchange, with the
Exchange as the surviving corporation, in connection with the
acquisition of the Exchange by NASDAQ OMX. See proposed By-Law
Article I, Section 1-1(ii).
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    Thereafter, NASDAQ OMX would operate the Exchange as a wholly-owned
subsidiary. The Exchange would continue to be registered as a national
securities exchange, with separate Rules, membership rosters, and
listings, distinct from the rules, membership rosters, and listings of
The NASDAQ Stock Market LLC (the ``NASDAQ Exchange''). Additionally,
the Exchange would continue to be a separate self-regulatory
organization (``SRO'').
    The purpose of the proposed rule change is to amend the Exchange's
Certificate of Incorporation, By-Laws, and Rules to reflect NASDAQ
OMX's proposed ownership of the Exchange. Most of the amendments
reflect the Exchange's new ownership structure and some are designed to
conform Phlx's governance provisions to those that are currently
applicable to the NASDAQ Exchange. These revised governance provisions
collectively regulate the Exchange and its directors, officers, and
employees in light of its ownership by NASDAQ OMX, and, among other
things, are designed to preserve the Exchange's independent Board of
Governors (``Board'').
a. Stock
    Specifically, Article SECOND of the Certificate of Incorporation
would be updated to reflect the address of the Exchange's registered
office. Article FOURTH would be amended to: (1) Reduce the amount of
Common Stock that the Exchange has authority to issue to 100 shares;
(2) eliminate the designation of Class A and Class B Common Stock;\5\
and (3) reduce the amount of Preferred Stock that the Exchange has
authority to issue to 100 shares. Of the 100 shares of Preferred Stock
that may be issued, there would continue to be one share that is
designated as Series A Preferred Stock.\6\
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    \5\ See similar changes to current Exchange By-Law Article I,
Section 1-1(d).
    \6\ The one authorized share of Series A Preferred stock is
currently issued and outstanding, and held by the Trust pursuant to
the Trust Agreement. See By-Law Article I, Section 1-1(ee) and
proposed Section 1-1(mm). At this time, there are no other
outstanding shares of Preferred Stock. The single share of Series A
Preferred stock is held by the Trust for the purpose of electing
those ``Designated Governors'' voted for by Phlx Members as provided
in By-Law Articles I and III. Pursuant to the Trust Agreement, the
Holder of the Series A Preferred Stock is required to elect the
nominees for Governor elected by the Members. The NASDAQ OMX Merger
would not result in a transfer of ownership of the Series A
Preferred Stock.
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    All of the authorized shares of Common Stock shall be issued and
outstanding, and shall initially be held by NASDAQ OMX. The Exchange
would not issue additional Preferred Stock, other than the existing one
share of Series A Preferred Stock, unless the resolution(s) providing
for the issuance of such Preferred Stock has been filed with and
approved by the Commission under Section 19 of the Act \7\ and the
rules promulgated thereunder. Additionally, Common Stock and Preferred
Stock (including the Series A Preferred Stock) may not be transferred
or assigned, in whole or in part, to any entity, unless such transfer
shall be filed with and approved by the Commission

under Section 19 of the Act \8\ and the rules promulgated
thereunder.\9\
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    \7\ 15 U.S.C. 78s.
    \8\ Id.
    \9\ See proposed Certificate of Incorporation, Article FOURTH,
and proposed By-Law Article XXIX, Section 29-4.
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    Additional changes to the Certificate of Incorporation are being
proposed in connection with Common Stock dividend rights,\10\ voting
rights,\11\ required notice by stockholders to the Exchange of Common
Stock ownership in excess of certain thresholds,\12\ ownership
concentration limits,\13\ and automatic conversion of Class A Common
Stock.\14\ These changes are being made to delete language customarily
applicable to non-public companies with several stockholders, which is
no longer necessary because NASDAQ OMX would become the sole holder of
Common Stock.
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    \10\ See proposed Article FOURTH, (c)(ii).
    \11\ See proposed Article FOURTH, (c)(iii).
    \12\ See Article FOURTH, (c)(iv).
    \13\ See Article FOURTH, (c)(v).
    \14\ See Article FOURTH, (c)(vi).
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b. Board
    With respect to the composition of the board of directors, the
Exchange's Board is currently composed of the Chairman of the Board,
who is the individual holding the office of the Chief Executive Officer
of the Exchange, and 22 other Governors, consisting of two Governors
who are Member Governors, one Governor who is a Philadelphia Board of
Trade[reg] (``PBOT'') \15\ Governor, six Governors who are Stockholder
Governors, 12 Governors who are Independent Governors, and one Governor
who is the Vice-Chairman of the Board.\16\ The Exchange proposes to
amend the current composition of the Board so that the number and
qualifications of the Governors would be fixed from time to time by the
Board in accordance with the By-Laws. The Board would be composed of a
majority of Independent Governors.\17\ Specifically, the Board would
include one Governor who is the Chief Executive Officer of the
Exchange, one Governor who is the Vice-Chair of the Board,\18\ one PBOT
Governor,\19\ one Member Governor,\20\ one Stockholder Governor,\21\
and a number of Designated Independent Governors.\22\ The Designated
Governors (i.e., Designated Independent Governors, the Member Governor,
and the PBOT Governor) \23\ are intended to comply with the requirement
in Section 6(b)(3) of the Act,\24\ which requires that the rules of an
exchange assure a fair representation of its members in the selection
of its directors and administration of its affairs and provide that one
or more directors shall be representative of issuers and investors and
not be associated with a member of an exchange, broker, or dealer (the
``fair representation requirement''). The Designated Independent
Governors, together with the Member Governor and the PBOT Governor,
would equal at least 20% of the total number of Governors. All
remaining Governors would be Independent Governors. A Governor would be
permitted to fill only one position on the Board.
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    \15\ The Philadelphia Board of Trade[reg] is Phlx's futures
exchange subsidiary, and at this time, would continue to operate as
such after the NASDAQ OMX merger.
    \16\ See By-Law Article IV, Section 4-1.
    \17\ See proposed Certificate of Incorporation Article SIXTH and
By-Law Article IV, Section 4-1. ``Independent Governor'' would
continue to be defined as a Governor who is a person affirmatively
determined by the Board as having no Material Relationship with the
Exchange or any affiliate of the Exchange, any Member of the
Exchange or any affiliate of such Member, or any issuer of
securities that are listed or traded on the Exchange or a facility
of the Exchange. See By-Law, Article I, Sections 1-1(f), 1-1(o) and
(p).
    \18\ The Vice-Chair would continue to be an individual who,
anytime within the prior three years, has been a Member primarily
engaged in business on the Exchange's equity market or equity
options market or who is a general partner, executive officer (vice-
president or above) or a Member associated with a Member
Organization primarily engaged in business on the Exchange's equity
market or equity options market. See By-Law Article V, Section 5-3.
    \19\ A PBOT Governor would continue to be defined as a Governor
who is a member of PBOT and is duly elected to fill the one vacancy
on the Board allocated to the PBOT Governor. See By-Law Article I,
Section 1-1(aa).
    \20\ A Member Governor would continue to be defined as a
Governor who is a Member or a general partner or an executive
officer (vice-president and above) of a Member Organization and is
duly elected to fill the vacancy on the Board allocated to the
Member Governor. See By-Law Article I, Section 1-1(u).
    \21\ A Stockholder Governor is defined as a Governor who is an
officer, director (or a person in a similar position in business
entities that are not corporations), designee or an employee of a
holder of Common Stock or any affiliate or subsidiary of such holder
of Common Stock and is duly elected to fill the vacancy on the Board
allocated to the Stockholder Governor. See By-Law Article I, Section
1-1(hh), and Article IV, Section 4-1 and proposed language in
Certificate of Incorporation Article SIXTH.
    \22\ ``Designated Independent Governors'' would continue to be
defined as those Independent Governors who are elected by the holder
of the Series A Preferred Stock in accordance with Article SIXTH of
the Certificate of Incorporation. See By-Law Article I, Section 1-
1(f).
    \23\ The term ``designated'' refers to a governor who is elected
by the Holder of Series A Preferred Stock to reflect the vote of the
Members. See also proposed changes to Article FOURTH of the
Exchange's Certificate of Incorporation and By-Law Article I,
Sections 1-1(e) and (f).
    \24\ 15 U.S.C. 78f(b)(3).
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    In terms of the election process, the Designated Governors would be
elected by the vote of the holder of the Series A Preferred Stock
(i.e., the ``Trust'') in accordance with the results of the vote of
Members conducted under By-Law Article III. All other Governors (i.e.,
Independent Governors, Vice-Chair, Chief Executive Officer, and
Shareholder Governor) would be elected by a plurality vote of the
holder of Common Stock (i.e., NASDAQ OMX). All Governors would be
elected for terms of one year as recommended by NASDAQ OMX to conform
with its understanding of current corporate best practices by allowing
frequent review of the performance of all Governors.\25\
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    \25\ Currently, Phlx Governors are divided into three classes.
Each such class is constituted by election or appointment each year
to serve for three years and until their successors are elected and
qualify. Except for the Chairman and Vice-Chairman of the Board,
Governors do not serve more than two consecutive full three-year
terms. See By-Law Article IV, Section 4-3.
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    Article SIXTH would also be amended to provide that Governors,
other than Designated Governors, may be removed with or without cause
by vote of the holder of the Common Stock (i.e., NASDAQ OMX). This
change would reflect the Exchange's proposed status as a wholly-owned
subsidiary of NASDAQ OMX. Provisions governing the removal of
Designated Governors would be simplified to make it clear that such
removal may be made with or without cause but requires a vote of Member
Organization Representatives under By-Law Article III. A new Article
SEVENTH would provide that the stockholders (i.e., NASDAQ OMX) may act
by unanimous written consent, again reflecting the Exchange's proposed
status as a wholly-owned subsidiary.
c. By-Laws
    The proposed amendments to the By-Laws include changes to conform
to changes proposed for the Certificate of Incorporation, such as the
simplification of the Exchange's capital structure and restrictions on
stock transfer and the changes to the composition of the Board
described above. With regard to the composition of the Board
immediately following a closing of the NASDAQ OMX Merger, amended By-
Law Article IV, Section 4-3 would provide that the directors of
Pinnacle Merger Corporation, Inc. (the ``Merger Subsidiary''), the
wholly-owned subsidiary of NASDAQ OMX that would be merged with and
into the Exchange through the NASDAQ OMX Merger, would become the Board
of Governors of the Exchange immediately after the effective time of
the NASDAQ OMX Merger. The directors of the Merger Subsidiary would
satisfy the compositional requirements of the

Exchange Board contained in the proposed By-Laws, as determined by
NASDAQ OMX. The Designated Governors serving immediately after the
effective time of the NASDAQ OMX Merger would consist of certain
directors of the Merger Subsidiary who had been serving as Designated
Governors of the Exchange immediately before the effective time of the
NASDAQ OMX Merger, as selected by NASDAQ OMX.
    Article III, Section 3-3(a), Removal of Designated Governors,
currently provides that Designated Governors may be removed only for
cause, unless a majority of the Board recommends that one or more
Designated Governors be removed in accordance with Section 4-4 of the
By-Laws, in which case such Designated Governor(s) may be removed
without cause. In either case, removal of the Designated Governor
requires a vote by Member Organization Representatives at an annual or
special meeting. As proposed to be amended, Section 3-3 would provide
that Designated Governors may be removed, with or without cause, only
by vote of Member Organization Representatives at an annual or special
meeting.\26\
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    \26\ A special meeting could be called by Members or the Board.
See By-Law Article III, Section 3-2(b).
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    Article IV, Section 4-4, Duties and Powers, provides that in the
event of the refusal or failure of any Governor to discharge his duties
or for any reason deemed sufficient by the Board, the Board may, by the
affirmative vote of a majority of Governors then in office, recommend
to the Stockholders (and in the case of a Designated Governor, the
Members) that such Governor be removed and call a special meeting of
the Stockholders \27\ (and, in the case of a Designated Governor, a
special meeting of the Members and Member Organizations and
subsequently a special meeting of the holder of the Series A Preferred
Stock, who shall be required to vote in accordance with Article SIXTH
of the Certificate of Incorporation and the Trust Agreement) for the
purpose of voting on such removal. The Exchange believes that the
process set forth in Article IV, Section 4-4, remains an appropriate
and suitable process for the Board to address the refusal or failure of
a Governor elected by the Members to discharge his duties. Thus, in all
cases, authority to remove Designated Governors would rest with the
Members pursuant to Section 3-3, but the Board could recommend removal
and call a special meeting under Section 4-4.
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    \27\ This action may also be taken without a meeting. See
proposed By-Law Article XXVIII, Section 28-13 (providing for
Stockholder action without a meeting).
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    Article IV, Section 4-17, Interpretation of By-Laws, would be
amended to clarify that the Board shall determine whether an
interpretation of the By-Laws and the Rules must be filed with the
Commission as a proposed rule change, and if so, then such change would
not become effective until filed with, or filed with and approved by,
the Commission, as required under Section 19 of the Act \28\ and the
rules promulgated thereunder.
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    \28\ 15 U.S.C. 78s.
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    Article IV, Section 4-21, Annual Financial Report, would be amended
to reflect that the Board of Governors would no longer send out annual
financial reports as described in Section 4-21. However, annual
financial reports of the Exchange would continue to be available at the
Exchange and would also be reflected in the public consolidated
financial statements of NASDAQ OMX.
    Article V of the By-Laws would be amended to set forth in detail
the powers and duties relating to the Chair, Vice-Chair, and officers
of the Exchange. Specifically, the Exchange proposes to insert language
in By-Law Article V, Section 5-1, Board's Appointive Powers, to state
that the Board would appoint the officers of the Exchange as provided
in the By-Laws and shall fix their duties, responsibilities, and terms
of employment. Additionally, language would be added to Section 5-2,
Chair of the Board of Governors, to set forth the powers of the Chair
of the Board and to establish that the Board would select its Chair
from among the members of the Board who are Independent Governors.
Proposed Sections 5-4, Chief Executive Officer, and 5-5, President, set
forth the duties and powers of these officers of the Exchange.\29\
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    \29\ These provisions are consistent with current NASDAQ OMX By-
Law Article VII, and NASDAQ Exchange By-Law Article IV.
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    Article VI, Equity Stock Compensation, Section 6-1, Stock Incentive
and Option Plans, would be deleted as this provision is no longer
applicable due to the fact that NASDAQ OMX would be the sole owner of
the Exchange's Common Stock and any potential equity stock compensation
is likely to consist of NASDAQ OMX stock rather than Phlx stock.
    Additionally, By-Law Article IX, Trustees of Stock Exchange Fund,
Sections 9-1 through 9-6 would be deleted, as these provisions are no
longer deemed necessary after the acquisition of the Exchange by NASDAQ
OMX.\30\ The change reflects a simplification of the Exchange's
financial management, under which the Exchange's assets would be
subject to the oversight of the Board rather than separate trustees and
also subject to public company financial controls established by NASDAQ
OMX.\31\
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    \30\ The purpose of the Stock Exchange Fund was to appoint
trustees to manage the investment of certain funds of the Exchange
and collect interest, dividends and income from the funds for the
Exchange.
    \31\ The applicable references to the Stock Exchange Fund in
Article IV, Section 4-4, Duties and Powers, Removal of governors or
trustees of gratuity fund and stock exchange for cause, would also
be deleted and this section would be updated to reflect that there
is no longer a gratuity fund.
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d. Standing Committees
    Generally, the Standing Committees of the Board would remain the
same, except as discussed below. By-Law Article X, Standing Committees,
would also be updated to reflect the elimination of the Automation
Committee and Marketing Committee, as these committees are deemed no
longer necessary at this time because automation and marketing would be
guided and handled at the parent company level. Additionally, the
responsibilities of the Audit Committee would be updated to conform
with similar responsibilities and processes of the Audit Committees of
NASDAQ OMX and the NASDAQ Exchange.\32\ The composition of the
Executive Committee and the Finance Committee would be amended to
reflect the proposed changes to the composition of the Board.
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    \32\ See NASDAQ OMX Audit Committee Charter approved April 18,
2007 and NASDAQ Exchange By-Law Article III.
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    Several Exchange committees that currently review proposed rule
changes may review such proposals before the proposals are presented to
either the Executive Committee \33\ or the Board for approval for
filing with the Commission.\34\ These committees on

which Exchange members serve would continue to perform this function
after the NASDAQ OMX merger. For example, the Business Conduct
Committee (``BCC'') may review proposed changes to the disciplinary
Rules that are set forth in Exchange Rule 960 before these Rules are
presented to the Executive Committee or the Board. The BCC currently
consists (and will continue to consist) of nine members as follows:
three Independent Governors; one Member or person associated with a
Member Organization who conducts business on XLE; one Member who
conducts options business at the Exchange; and four persons who are
Members or persons associated with a Member Organization.\35\
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    \33\ The Executive Committee currently consists of nine
Governors; the Chairman of the Board; the Vice-Chairman of the
Board; the Chairman of the Finance Committee; the Chairmen of two
floor committees; two Stockholder Governors; and two Independent
Governors. See By-Law Article X, Section 10-14. As proposed herein,
the Executive Committee would be amended so that it would consist of
the Chair of the Board, the Vice-Chair of the Board, the Stockholder
Governor, a number of designated Governors equal to at least 20% of
the total number of Governors on the Executive Committee, and such
other Governors as the Board may appoint. See proposed By-Law
Article X, Section 10-14.
    \34\ Members using XLE (the Exchange's equity trading system)
are represented on the Exchange's Board through the exercise of
their voting rights for members of the Board. Currently, there is no
designated committee that reviews proposed rule changes covering
equity Rules. The Board or Executive Committee performs this
function.
    \35\ See By-Law Article X, Section 10-11.
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    Furthermore, the Options Committee makes or recommends for adoption
such Rules as it deems necessary for the convenient and orderly
transaction of business upon the equity and index options trading
floor, as well as makes and enforces Rules and regulations relating to
order, decorum, health, safety and welfare on the equity and index
options trading floor and the immediately adjacent premises of the
Exchange. Fifty percent of the Members of the Options Committee are
permit holders or associated with a Member Organization.\36\ Thus,
Member representation on Exchange committees would continue.
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    \36\ See By-Law Article X, Section 10-20.
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    Additionally, By-Law Article X, Section 10-15, Finance Committee,
would be amended such that the Chair of the Finance Committee would be
the Chair of the Board and would no longer be either the Vice-Chair,
Stockholder Governor or Member Governor. The Exchange also proposes to
amend the description of the composition of the Finance Committee
members to allow any Member or persons associated with a Member
Organization, who conducts business on XLE to be a member of the
Committee. Currently, the language states, in part, that the Finance
Committee shall include two Members or persons associated with a Member
Organization, who may be Governors, one of whom conducts business
primarily on XLE or on the equity options floor. Although this proposed
change is not directly related to the NASDAQ OMX Merger, the Exchange
proposes to delete the word ``primarily'' in order to allow a greater
pool of candidates to be eligible to serve on the Finance
Committee.\37\
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    \37\ This proposed change is consistent with a recent By-Law
change to Section 10-11, Business Conduct Committee, relating to the
composition of the Business Conduct Committee. In that proposal, the
Exchange expanded the type of business that may be conducted to
qualify as a BCC member. See Securities Exchange Act Release No.
57023 (December 20, 2007), 72 FR 74398 (December 31, 2007) (SR-Phlx-
2007-83).
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    The purpose of deleting the supplementary material in Section 10-15
is to reflect the updated responsibilities of the Finance
Committee.\38\ The Board would establish capital expenditure policies,
which may include delegation to Board committees and/or officers, but
would no longer reflect these policies in the By-Laws. This reflects a
more flexible approach, consistent with NASDAQ OMX's processes and the
functions of a public company parent.
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    \38\ Currently, the supplementary material relates to directives
that are applicable to the Finance Committee in the exercise of its
duties, powers and authority under the By-Laws. For example, the
supplementary material states that the Finance Committee may
authorize certain expenditures of any budgeted line items; may
delegate to the staff of the Exchange so much of its authority to
make expenditures as it deems appropriate; and shall perform its
functions and act with the same powers and limitations for the
Exchange and all subsidiaries of the Exchange. See By-Law Article X,
Section 10-15, Supplementary Material.
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    Also, in By-Law Article X, Section 10-19, Nominating, Elections and
Governance Committee, the Exchange proposes to delete the term limit
applicable to this Committee and delete the prohibition on Committee
members standing for re-election to the Board. These changes are
designed to increase the pool of candidates eligible to serve on the
Committee and the Board. Moreover, the deletion of these restrictions
is also supported by the fact that all Board members, including those
serving on the Committee, would serve for one-year terms and would
therefore have their qualifications for continued Board service under
more frequent review.
    In addition, the Nominating, Elections and Governance Committee
would no longer select all Chairs of the Standing Committees in
accordance with Article X. The Board would now appoint a person to fill
any vacancy in a Standing Committee, including Chairs, except for the
Chair of the Executive Committee, the Chair of the Nominating,
Elections and Governance Committee and the Chair of the Finance
Committee.\39\ This change reflects a general philosophy that the full
Board should have control over the composition of Standing Committees,
including the selection of their Chairs and is consistent with how
NASDAQ OMX currently operates.\40\
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    \39\ Pursuant to the By-Laws, the Chair of the Board is the
Chair of the Executive Committee and the Finance Committee and the
Chair of the Nominating, Elections and Governance Committee is
selected from among the members of such Committee who are
Independent Governors. See By-Law Article X, Sections 10-14(a), 10-
15 and 10-19(a).
    \40\ See NASDAQ OMX By-Law Article IV, Section 4.13.
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    Additionally, in By-Law Article X, Section 10-21, the Exchange
proposes to clarify the composition of the Quality of Markets Committee
by specifically stating that the members of this Committee would
include at least as many Independent members as it does the ``combined
number'' of Stockholder-chosen members \41\ and members who are Members
of the Exchange.\42\ The Exchange believes that adding the language
``combined number'' should clarify that the number of Stockholder-
chosen Committee members \43\ are added to the number of Members
serving on the Committee \44\ and that total is then compared to the
number of ``Independent'' Committee members (not to be confused with
``Independent Governors,'' which also rely on the definition of
``Independent'' in By-Law Article I, Section 1-1(o)).
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    \41\ See By-Law Article I, Section 1-1(gg).
    \42\ See By-Law Article I, Section 1-1(t).
    \43\ NASDAQ OMX, as Stockholder, would select the Stockholder
member(s) of this Committee, subject to Board approval pursuant to
By-Law Article X, Section 10-1(b).
    \44\ The Board would select the Member(s) serving on the
Committee pursuant to By-Law Article X, Section 10-1(b).
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    In addition, the Exchange proposes to adopt for the Quality of
Markets Committee a ``fair representation requirement'' consistent with
Section 6(b)(3) of the Act, \45\ which requires that the rules of an
exchange assure a fair representation of its members in the selection
of its directors and administration of its affairs. This language is
intended to ensure fair Member representation on the Quality of Markets
Committee.\46\
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    \45\ 15 U.S.C. 78f(b)(3).
    \46\ This provision is similar to the NASDAQ Exchange's Quality
of Markets Committee. See NASDAQ Exchange By-Law Article III,
Section 6.
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    By-Law Article XI, Section 11-1(b) would be amended to delete
references to a ``special committee of the Board of Governors'' that
hears appeals from determinations of the Nominating, Elections and
Governance Committee regarding eligibility for election to the Board.
The special committee had been composed of Governors not then standing
for re-election. However, because the proposed amendments to Section 4-
3 eliminate the ``staggering'' of the Board, requiring all Governors to
be elected annually, it would not be possible to form such a special

committee. Now that the Exchange proposes to reduce the size of its
Board, the Exchange believes that at this time, it would be more
practical for the full Board to hear an appeal pursuant to Section 11-
1(b) because all Governors would stand for re-election annually.
    In By-Law Sections 13-5, Liability of Officers, Directors and
Substantial Stockholders, 13-7, Violation of Terms of Registration, 17-
4, Time for Settlement of Insolvent Member or Participant, Extension,
and 18-3, Responsibility of Member or Participant for Acts of His
Organization, references to receiving an affirmative vote of either 14
or 15 Governors (which used to represent a supermajority) would be
changed to require an affirmative vote of a majority of all Governors.
This change is necessary as the number of Board members may be reduced
after the NASDAQ OMX Merger and therefore a vote of 14 or 15 Governors
may no longer be possible.
    Article XXII, Amending the By-Laws, would be amended to state
affirmatively that By-Law amendments must be filed with, and/or
approved by, the Commission as required under Section 19 of the Act
\47\ and that the holders of a majority of the shares of Common Stock
then issued and outstanding must affirmatively vote for By-Law
amendments.
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78s.
---------------------------------------------------------------------------

    Article XXVIII, Section 28-3, Nomination of Chairman and Vice-
Chairman of the Board of Governors; Independent Nominations by
Stockholders; Election of Nominees for Stockholder and Independent
Governors, currently provides for a nomination process in connection
with nominating and electing the above-referenced individuals. The
Exchange proposes to amend Section 28-3 to reflect that the Holder of
Common Stock would present to the Nominating, Elections and Governance
Committee its candidate recommendations for Vice-Chair, Shareholder
Governor and Independent Governors for placement on the ballot for
election by the Holder of Common Stock at the annual meeting of
Stockholders. These nominees would be placed on the ballot and elected
by the Holder of Common Stock. Additionally, the Board would now
appoint the Chair from among the members of the Board who are
Independent Governors.\48\ This approach is consistent with the NASDAQ
Exchange's processes for nomination of non-Member Representative
Directors by a nominating committee that may seek the input and
recommendations of NASDAQ OMX as the owner of the NASDAQ Exchange.\49\
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    \48\ See proposed By-Law Article V, Section 5-2.
    \49\ See NASDAQ Exchange By-Law Article III, Section 6.
---------------------------------------------------------------------------

    Article XXVIII, proposed Section 28-13, Action Without Meeting,
sets forth provisions relating to action that may be taken without a
meeting and the accompanying requirements relating to taking such
action. This provision sets forth specifically that any action required
or permitted to be taken at any annual or special meeting of
Stockholders may be taken by Stockholders without a meeting as set
forth in detail in Section 28-13, unless otherwise specified in the
Certificate of Incorporation of the Exchange. This language should
assist in providing greater flexibility in connection with taking any
action required or permitted to be taken at any annual or special
meeting of Stockholders and is consistent with proposed Article SEVENTH
of the Exchange's Certificate of Incorporation.
    Article XXIX, Capital Stock, would be updated. The proposed changes
to Sections 29-1 through 29-7 are similar to NASDAQ OMX By-Law Article
IX, Capital Stock, Sections 9.1 through 9.7, reflect standard
provisions for a Delaware stock corporation and also reflect the
contemplated ownership of all Common Stock by NASDAQ OMX. Existing
provisions in Article XXIX that contemplated a possible public offering
of the Exchange's stock would be deleted and replaced with restrictions
on stock transfer comparable to the restrictions included in the
Certificate of Incorporation and discussed above. Additionally,
proposed Section 29-8, Dividends, is similar to Section 15 of the LLC
Agreement of the NASDAQ Exchange, and prohibits the Exchange from using
Regulatory Funds to pay dividends.\50\
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    \50\ ``Regulatory Funds'' are defined as fees, fines, or
penalties derived from the regulatory operations of the Exchange.
However, ``Regulatory Funds'' shall not be construed to include
revenues derived from listing fees, market data revenues,
transaction revenues, or any other aspect of the commercial
operations of the Exchange even if a portion of such revenues are
used to pay costs associated with the regulatory operations of the
Exchange. See proposed By-Law Article I, Section 1-1(kk).
---------------------------------------------------------------------------

    Additionally, further changes to the Certificate of Incorporation
and By-Laws would be made to correct typographical errors and to update
the language to more accurately reflect current practices. For example,
the language relating to how the Exchange's Weekly Bulletin is
distributed would be updated to not restrict its distribution to mail,
but rather to permit distribution by e-mail and posting on the
Exchange's Web site.\51\ As a second example, references to
``Chairman'' would be replaced with ``Chair.'' Additionally, references
to the ``director'' of either the Membership Services or Examinations
Departments in Sections 17-1, Suspension for Insolvency on Declaration,
and 17-3, Investigation of Insolvency, would be deleted in favor of
more general references to the departments. Therefore, notices would
still be required to be sent to these departments, but not necessarily
to the director. This change should allow more flexibility in
connection with sending notices to these departments.
---------------------------------------------------------------------------

    \51\ See, e.g., By-Law Article XII, Section 12-5(d).
---------------------------------------------------------------------------

e. Rules
    The Exchange also proposes to amend the following current Exchange
Rules: (1) Rule 1, Definitions; (2) Rule 98, Emergency Committee; (3)
Rule 164, Trading Halts; and (4) Rule 972, Continuation of Status After
the Merger. More specifically, the Exchange proposes to update Rule 1,
Definitions, to include a definition of the NASDAQ OMX Merger, which
will apply to Rule 972.
    Rule 98, Emergency Committee, is proposed to be amended to reflect
that the Board shall establish the Emergency Committee and determine
its composition, which not only revises the members that comprise the
Committee, but allows for greater flexibility in appointing members to
this Committee. Currently, the Emergency Committee consists of the
following: the Chairman of the Board, the On-Floor Vice-Chairman of the
Exchange, the Off-Floor Vice-Chairman of the Exchange (this position,
however, no longer exists and reference to this position was
inadvertently not deleted previously from Rule 98), and the Chairmen of
the Options and Foreign Currency Options Committees.
    Rule 164, Trading Halts, is proposed to be amended to provide that
the officers of the Exchange designated by the Board shall have the
power to suspend trading in any and all securities traded on XLE
whenever in their opinion such suspension would be in the public
interest. Currently, only the Chairman and Chief Executive Officer or
his designee has the authority to suspend trading pursuant to Rule 164.
Under this proposal, there would no longer be one position entitled
``Chairman and Chief Executive Officer.'' Accordingly, the proposed
change allows for greater flexibility in designating individuals
responsible for declaring any trading halts and updates the rule to
reflect the proposed revisions

relating to the officers of the Exchange.\52\
---------------------------------------------------------------------------

    \52\ See proposed By-Law Article V, Sections 5-1 through 5-5.
---------------------------------------------------------------------------

    Proposed Rule 972, Continuation of Status After the NASDAQ OMX
Merger, is being amended to reflect that current members, \53\ inactive
nominees, member organizations, foreign currency options participants,
foreign currency options participant organizations, as well as approved
lessors of foreign currency options participations holding such status
prior to the NASDAQ OMX Merger would continue to hold such status
following the NASDAQ OMX Merger. This provision was adopted in
connection with and currently refers to the Exchange's 2004
demutualization.\54\ It is being amended to refer specifically to the
proposed NASDAQ OMX merger and to serve the same purpose as the
original provision, which is to make clear that the merger does not
affect membership status generally.
---------------------------------------------------------------------------

    \53\ The term ``member,'' defined in Rule 1(n), is not
capitalized, unlike the Exchange's By-Laws.
    \54\ See Securities Exchange Act Release No. 49098 (January 16,
2004), 69 FR 3974 (January 27, 2004) (SR-Phlx-2003-73).
---------------------------------------------------------------------------

    Additionally, the Exchange proposes to adopt two new Rules that
would reflect its status as a wholly-owned subsidiary of NASDAQ OMX
upon the effectiveness of the NASDAQ OMX Merger. The purpose of the
Rules is to guard against any possibility that the Exchange may
exercise, or forebear to exercise, regulatory authority with respect to
an affiliated entity in a manner that is influenced by commercial
considerations, to provide an opportunity for Commission review of
certain proposed affiliations, and to ensure that certain affiliated
members do not receive advantaged access to information in comparison
with unaffiliated members. The Exchange believes that the proposed
Rules would provide added assurance of regulatory integrity without
subjecting the Exchange and its affiliates to unwarranted restrictions
on their commercial activities.
    First, the Exchange proposes to adopt Rule 990, which is comparable
to NASDAQ Exchange Rule 4370. The rule provides that if a security
issued by NASDAQ OMX or any of its affiliates is listed on the
Exchange, the Exchange will apply special procedures to the regulation
of that listing, including reporting to the Commission and conducting
an annual independent audit of the security's compliance with Exchange
listing standards.
    Second, proposed Exchange Rule 985(a) would limit ownership of
NASDAQ OMX's voting securities by members of the Exchange and their
associated persons (i.e., their registered representatives). The Rule
is comparable to Rule 2130 of the NASDAQ Exchange, and provides that no
member or associated person of a member shall be the beneficial owner
of greater than 20% of the then-outstanding voting securities of NASDAQ
OMX. ``Beneficial ownership'' is defined with reference to NASDAQ OMX's
certificate of incorporation, which in turn provides that a person
shall be deemed the ``beneficial owner'' of, shall be deemed to have
``beneficial ownership'' of and shall be deemed to ``beneficially own''
any securities: (i) Which such person or any of such person's
affiliates is deemed to beneficially own, directly or indirectly,
within the meaning of Rule 13d-3 under the Act; \55\ (ii) subject to
certain narrow exceptions described in the certificate of
incorporation, which such person or any of such person's affiliates has
the right to acquire or to vote pursuant to any agreement, arrangement,
or understanding or otherwise; or (iii) subject to certain narrow
exceptions described in the certificate of incorporation, which are
beneficially owned, directly or indirectly, by any other person and
with respect to which such person or any of such person's affiliates
has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of such securities.
---------------------------------------------------------------------------

    \55\ Rule 13d-3 under the Act, 17 CFR 240.13d-3, in turn
provides that a beneficial owner of a security includes any person
who, directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise has or shares voting power
or investment power.
---------------------------------------------------------------------------

    Third, proposed Exchange Rule 985(b) would regulate the affiliation
between the Exchange and its affiliates, on the one hand, and Exchange
members, on the other hand, in a manner comparable to Rule 2140 of the
NASDAQ Exchange. In general, the proposed rule provides that the
Exchange must file a proposed rule change with the Commission before
the Exchange or an entity with which it is affiliated directly or
indirectly acquires or maintains an ownership interest in, or engages
in a business venture with, an Exchange member or an affiliate of an
Exchange member.\56\ The rule defines ``affiliate'' with reference to
Rule 12b-2 under the Act,\57\ which provides that if one person
controls, is controlled by, or is under common control of another
person, the persons are affiliates.
---------------------------------------------------------------------------

    \56\ As used in the rule, the term ``affiliate'' includes
natural persons, but the term ``entity,'' when used to describe an
affiliate, excludes natural persons.
    \57\ 17 CFR 240.12b-2.
---------------------------------------------------------------------------

    The proposed rule would make it clear that in a case where the
Exchange or an affiliate of the Exchange proposes an acquisition of, or
a merger or business venture with, an Exchange member, a proposed rule
change would be required. In order to make it clear that the obligation
to avoid affiliations that have not been filed is imposed by the rule
both on the Exchange and its members, moreover, the rule provides that
an Exchange member shall not be or become an affiliate of the Exchange,
or an affiliate of any entity affiliated with the Exchange, without a
proposed rule change.
    The term ``business venture,'' as used in the rule, is defined as
an arrangement under which the Exchange or an entity with which it is
affiliated, on the one hand, and an Exchange member or affiliate
thereof, on the other hand, engage in joint activities with an
expectation of shared profit and a risk of shared loss from common
entrepreneurial efforts. Thus, the term does not include, and the
proposed rule does not regulate, contracts with members or their
affiliates to provide goods, products, or services for consideration,
including, but not limited to, asset or stock purchase agreements that
do not result in ongoing ties with a member or its affiliates,\58\
credit or debt facilities, licenses of intellectual property, contracts
for investment banking, financial advisory, or consulting services,\59\
or the provision of transaction services or data to a broker-dealer
member or products or services to a listed company that is or that owns
a member broker-dealer.
---------------------------------------------------------------------------

    \58\ For example, in the case of an acquisition of a non-
Membersubsidiary of a Member in a transaction that did not result in
an ongoing affiliation with the Member, the transaction would not be
regulated by the rule.
    \59\ In some cases, such contracts may involve sharing of
confidential information with a Member in circumstances where a
Member acts as a fiduciary for Phlx or one of its affiliates. The
Member would be required to take measures to prevent such
information from being misused, and a failure to do so may
constitute a violation of Rules, including, depending on the
circumstances, Exchange Rules 707, 708, and 1020.
---------------------------------------------------------------------------

    The rule limits possible expansive interpretations of the term
``affiliate'' by stipulating that one entity is not deemed to be an
affiliate of another entity solely by virtue of having a common
director. For example, if one of the Governors of the Exchange is also
a director of an Exchange member, that member would not be deemed to be
an affiliate of the Exchange solely because of the common director. In
addition, the rule should not be construed to regulate in any manner

the selection of Governors or standing committee members of the
Exchange, NASDAQ OMX, the NASDAQ Exchange, or their affiliates,
provided such selections are conducted in accordance with applicable
provisions of governing corporate documents.
    In circumstances where a Commission filing is required, the rule
allows the Exchange to file, in appropriate cases, a proposed rule
change on an immediately effective basis under Section 19(b)(3)(A) of
the Act \60\ and Rule 19b-4(f) thereunder.\61\ For example, in cases
where a proposed affiliation or business venture would not result in
the establishment of a ``facility'' of the Exchange within the meaning
of Section 3 of the Act,\62\ a filing to establish Rules to govern the
operation of the affiliate or business venture would not be required or
appropriate. Rather, in such circumstances, the Exchange would expect
to engage in informal consultation with the Commission's Division of
Trading and Markets and/or members of the Commission, and would then
submit a filing to amend the rule itself, to establish that the
affiliation or business venture could exist as an exception to the
rule. Depending on the circumstances, such a filing might be submitted
on an immediately effective basis.
---------------------------------------------------------------------------

    \60\ 15 U.S.C. 78s(b)(3)(A).
    \61\ 17 CFR 240.19b-4(f).
    \62\ 15 U.S.C. 78c.
---------------------------------------------------------------------------

    There are also several important exceptions to the general filing
requirement of the rule. First, the rule would not require a filing for
transactions that result in an Exchange member acquiring or holding an
interest in NASDAQ OMX that is consistent with Rule 985(a) (discussed
above). Second, no filing would be required for the Exchange or an
entity affiliated with the Exchange acquiring or maintaining an
ownership interest in, or engaging in a business venture with, an
affiliate of an Exchange member if there are information barriers
between the member and the Exchange and its facilities, such that the
member: (i) Would not be provided an informational advantage concerning
the operation of the Exchange and its facilities, and would not be
provided changes or improvements to the trading system that are not
available to the industry generally or other Exchange members; (ii)
would not have knowledge in advance of other members of proposed
changes, modifications, or improvements to the operations or trading
systems of the Exchange and its facilities, including advance knowledge
of Exchange filings pursuant to Section 19(b) of the Act; \63\ (iii)
would be notified of any proposed changes, modifications, or
improvements to the operations or trading systems of the Exchange and
its facilities in the same manner as other Exchange members are
notified; and (iv) would not share employees, office space, or
databases with the Exchange or its facilities, NASDAQ OMX, or any
entity that is controlled by NASDAQ OMX.\64\ The Exchange's Board must
certify, on an annual basis, to the Director of the Commission's
Division of Trading and Markets that the Exchange has taken all
reasonable steps to implement the foregoing requirements with respect
to any affiliate to which they apply and is in compliance therewith.
---------------------------------------------------------------------------

    \63\ 15 U.S.C. 78s(b).
    \64\ Phlx would not construe these limitations to bar an
employee of an affiliated member from serving on a Phlx standing
committee, since: (i) Such committee members would be required to
sign confidentiality agreements with regard to information received
through committee service; and (ii) the committee member employed by
the affiliate would receive information provided through committee
service at the same time as other committee members.
---------------------------------------------------------------------------

    This exception is aimed at circumstances in which the Exchange or
an affiliated entity acquires, or enters into a business venture with,
an affiliate of an Exchange member, and the Exchange erects information
barriers between the member and the Exchange and its facilities. Thus,
the Exchange ensures that the member does not receive any advantage as
a result of its affiliation.
    In connection with the adoption of this rule, the Exchange hereby
requests Commission approval under the rule for the affiliation that
would result by virtue of the merger between the Exchange and the two
broker-dealer subsidiaries of the NASDAQ Exchange: Nasdaq Execution
Services, LLC (``NES'') and NASDAQ Options Services, LLC (``NOS''). The
acquisition of the entities that are now NES and NOS by NASDAQ OMX was
approved by the Commission in 2004 and 2005.\65\ The rules under which
NES currently routes orders to other market centers were approved by
the Commission in 2006 and subsequently amended on several
occasions.\66\ Notably, NASDAQ Exchange Rule 4758(b) establishes the
parameters for operation of NES as follows: (1) All routing of equities
by the NASDAQ Exchange is performed by NES, which, in turn, routes
orders to other market centers as directed by the NASDAQ Exchange; (2)
NES would not engage in any business other than: (a) As a outbound
router for the NASDAQ Exchange, and (b) any other activities it may
engage in as approved by the Commission; (3) NES would operate as a
facility, as defined in Section 3(a)(2) of the Act,\67\ of the NASDAQ
Exchange; (4) for purposes of Rule 17d-1 under the Act,\68\ the
designated examining authority of NES would be a self-regulatory
organization unaffiliated with the NASDAQ Exchange or any of its
affiliates; (5) the NASDAQ Exchange shall be responsible for filing
with the Commission rule changes related to the operation of, and fees
for services provided by, NES, and NES shall be subject to exchange
non-discrimination requirements; (6) the books, records, premises,
officers, agents, directors and employees of NES, as a facility of the
NASDAQ Exchange, shall be deemed to be the books, records, premises,
officers, agents, directors and employees of the NASDAQ Exchange for
purposes of, and subject to oversight pursuant to, the Act, and the
books and records of NES, as a facility of the NASDAQ Exchange, shall
be subject at all times to inspection and copying by the Commission;
and (7) use of NES is optional.
---------------------------------------------------------------------------

    \65\ See Securities Exchange Act Release Nos. 50311 (September
3, 2004), 69 FR 54818 (September 10, 2004) (Order Granting
Application for a Temporary Conditional Exemption Pursuant To
Section 36(a) of the Exchange Act by the National Association of
Securities Dealers, Inc. Relating to the Acquisition of an ECN by
The Nasdaq Stock Market, Inc.) and 52902 (December 7, 2005), 70 FR
73810 (December 13, 2005) (SR-NASD-2005-128) (Order Approving a
Proposed Rule Change To Establish Rules Governing the Operation of
the INET System).
    \66\ See Securities Exchange Act Release Nos. 56867 (November
29, 2007), 72 FR 69263 (December 7, 2007) (SR-NASDAQ-2007-065);
56708 (October 26, 2007), 72 FR 61925 (November 1, 2007) (SR-NASDAQ-
2007-078); 55335 (February 23, 2007), 72 FR 9369 (March 1, 2007)
(SR-NASDAQ-07-005); 54613 (October 17, 2006), 71 FR 62325 (October
24, 2006) (SR-NASDAQ-2006-043); 54271 (August 3, 2006), 71 FR 45876
(August 10, 2006) (SR-NASDAQ-2006-027); and 54155 (July 14, 2006),
71 FR 41291 (July 20, 2006) (SR-NASDAQ-2006-001).
    \67\ 15 U.S.C. 78c(a)(2).
    \68\ 17 CFR 240.17d-1.
---------------------------------------------------------------------------

    Currently, routing by NES on behalf of the NASDAQ Exchange takes
two forms: (i) Orders that access any liquidity on the NASDAQ Exchange
book that has a price equal to or superior to the prices available on
other ``automated market centers'' and thereafter route to seek the
best available price; and (ii) routing of ``directed orders'' to
automated market centers other than the NASDAQ Exchange on an
``immediate-or-cancel'' basis. Such directed orders may be designated
as ``intermarket sweep orders,'' which may be executed by the receiving
venue based on the representation of the market participant that it has
routed to all superior

protected quotations, or not so designated, in which case the orders
will execute only if their execution would not result in a trade-
through.
    NOS serves as the outbound router for the Nasdaq Options Market
(``NOM''), which commenced operations on March 31, 2008. Under Rule
Chapter VI, Section 11 for NOM,\69\ (1) NOM will route orders in
options via NOS, which serves as the sole ``Routing Facility'' of NOM;
(2) the sole function of the Routing Facility will be to route orders
in options listed and open for trading on NOM to away markets pursuant
to NOM rules, solely on behalf of NOM; (3) NOS is a member of an
unaffiliated SRO which is the designated examining authority for the
broker-dealer; (4) the Routing Facility is subject to regulation as a
facility of the NASDAQ Exchange, including the requirement to file
proposed rule changes under Section 19 of the Act; \70\ (5) NOM shall
establish and maintain procedures and internal controls reasonably
designed to adequately restrict the flow of confidential and
proprietary information between the NASDAQ Exchange and its facilities
(including the Routing Facility), and any other entity; and (6) the
books, records, premises, officers, directors, agents, and employees of
the Routing Facility, as a facility of the NASDAQ Exchange, shall be
deemed to be the books, records, premises, officers, directors, agents,
and employees of the NASDAQ Exchange for purposes of and subject to
oversight pursuant to the Act, and the books and records of the Routing
Facility, as a facility of the Exchange, shall be subject at all times
to inspection and copying by the NASDAQ Exchange and the Commission.
---------------------------------------------------------------------------

    \69\ See Securities Exchange Act Release No. 57478 (March 12,
2008), 73 FR 14521 (March 18, 2008) (SR-NASDAQ-2007-004 and -080)
(the ``NOM Approval Order'').
    \70\ 15 U.S.C. 78s.
---------------------------------------------------------------------------

    Unlike NES, NOS does not have a ``directed order'' for options that
are trading on NOM; rather, all routable orders for options that are
trading on NOM check the NOM book prior to routing. However, NOS also
routes orders in options that are not trading on NOM. When routing
orders in options that are not listed and open for trading on NOM, NOS
will not be regulated as a facility of the NASDAQ Exchange but rather
as a broker-dealer regulated by its designated examining authority.
However, as provided by Chapter IV, Section 5 of the NOM rules, all
orders routed by NOS under these circumstances will be routed to away
markets that are at the best price, and solely on an immediate-or-
cancel basis.
    Although not explicitly stated in Chapter VI, Section 11 of the NOM
Rules, NOS, like NES, will be subject to exchange non-discrimination
requirements, and the use of NOS will be optional.\71\ In addition, NOS
will not engage in any business other than the activities approved by
the Commission in the NOM Approval Order and such other activities as
may be approved by the Commission at a later date.
---------------------------------------------------------------------------

    \71\ Consistent with this restriction, Chapter VI, Section 11 of
the NOM rules provides that routing will be based on the user's
instructions and that a participant can designate an order as not
available for routing.
---------------------------------------------------------------------------

    In order to further restrict the interaction between the Exchange
and NES and NOS, the NASDAQ Exchange has agreed that it will, prior to
the closing of the NASDAQ OMX Merger, amend its rules to change the
routing practices of NES and NOS. With respect to NES, directed orders
will not be eligible for routing to Exchange facilities. With respect
to NOS, when routing orders in options that are not listed and open for
trading on NOM, NOS will not route to Exchange facilities. Routing of
orders that check the NASDAQ Exchange and NOM books prior to routing
will continue and such orders may be routed to the Exchange as
appropriate.
    The Exchange notes that at a later date, the Exchange may opt to
use NES and/or NOS to route on behalf of the Exchange.\72\ Such future
uses of NES or NOS would be reflected in filings to establish the terms
and conditions of such routing, but would not allow for routing of
directed orders to the NASDAQ Exchange, NOM, or any other affiliated
exchange or trading facility thereof.\73\
---------------------------------------------------------------------------

    \72\ Currently, the Exchange uses PRO Securities LLC (``PRO'')
to route equity orders. PRO is a wholly-owned subsidiary of Order
Execution Services Holdings, Inc. The Exchange routes options orders
through the Intermarket Option Linkage system.
    \73\ In this regard, it should be noted that both the New York
StockExchange and the NYSE Arca use NYSE Arca's broker-dealer
subsidiary to perform routing.
---------------------------------------------------------------------------

    In light of the foregoing facts and circumstances, in accordance
with proposed Exchange Rule 985(b)(i)(B), the Exchange proposes that
NES and NOS be permitted to become affiliates of the Exchange subject
to the following:
     With respect to NES, NES remains a facility of the NASDAQ
Exchange; use of NES's routing function by NASDAQ Exchange members
continues to be optional; and NES does not provide routing of directed
orders to the Exchange or any trading facilities thereof, unless such
orders first attempt to access any liquidity on the NASDAQ Exchange
book.
     With respect to NOS, NOS remains a facility of the NASDAQ
Exchange; use of NOS's Routing Facility function by NASDAQ Exchange
members continues to be optional; and NOS does not provide routing of
orders in options that are not listed and open for trading on NOM to
the Exchange or any trading facilities thereof.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \74\ in general, and furthers the objectives of
Sections 6(b)(1) and 6(b)(5) of the Act \75\ in particular, in that it
is designed to enable the Exchange to be so organized as to have the
capacity to be able to carry out the purposes of the Act and to comply
with and enforce compliance by members and persons associated with
members with provisions of the Act, the rules and regulations
thereunder, and Rules, and is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national system, and, in general, to protect
investors and the public interest.
---------------------------------------------------------------------------

    \74\ 15 U.S.C. 78f(b).
    \75\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or

(ii) as to which the Exchange consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule
change should be disapproved.

    The Exchange has requested accelerated approval of this proposed
rule change prior to the 30th day after the date of publication of the
notice of the filing thereof in the Federal Register. The Commission is
considering the Exchange's request to grant accelerated approval of the
proposed rule change following the conclusion of the 21-day comment
period.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-Phlx-2008-31 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2008-31. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2008-31 and should be
submitted on or before May 20, 2008.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\76\
---------------------------------------------------------------------------

    \76\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-9323 Filed 4-28-08; 8:45 am]

BILLING CODE 8010-01-P


MEMORANDUM:							9/30/07

SUBJECT:		Physical/Chemical Characteristics of Busan 77

From:			A. Najm Shamim, PhD., Chemist

			Regulatory Management Branch II

			Antimicrobials Division (7510P)

To:			Talia Lindheimer

			CRM for Busan 77 RED

			Risk Assessment and Science Support Branch

			Antimicrobials Division (7510P)

Thru:			Diane Isbell, Team Leader

			Regulatory Management Branch II

			Antimicrobials Division (7510P)

				And

			Mark Hartman, Chief

			Regulatory Management Branch II

			Antimicrobials Division (7510P)

PRODUCT CHEMISTRY SCIENCE CHAPTER FOR BUSAN 77 REREGISTRATION
ELIGIBILITY DECISION (RED)

Physical /Chemical Properties

Chemical Name:
Poly[oxyethylene(dimethylimino)ethylene(dimethylimino)ethylene
dichloride]

Trade/Common Names:	WSCP, Busan 77

Empirical Formula:  Variable as the polymeric units differ

Molecular weight:	3886(average)

Structure:

CAS#:		31075-24-8

Color:			Light amber/pale yellow 1, 2

Physical State:	Clear Liquid 1

Odor:			Mildly unpleasant, fishy 1

Stability:		Not applicable/waived1

Oxidation/

Reduction:		Compatible toward metals 1

Flammability:	> 99.5 o C 1

Explodibility:		Not Applicable

Storage Stability:	Stable 3

Miscibility:		Not Applicable 4

Corrosion

Characteristics:	No evidence of corrosion of the container based on 3
month study 4, 5

Dielectric Breakdown: Not Applicable 5

pH			6.9-7.3 ± 0.011, 2

Viscosity:		1.52 (20 o C), 1.005 ( 40 o)1 mpoise or 393.3 cSt 7

Melting Point:	Not applicable 2

Boiling Point:		111 o C 2

Density:		1.103- 1.1417 g/cc 1, 2

Dissociation

Constant:		Waived 2, 6

Vapor Pressure:	10.8 mm Hg (20 o ), 14.4 mm Hg (25 o C) 2

Solubility:		Completely soluble in water.7

Octanol/water

Partition Coefficient: Waived 6

The Agency notes: 1) The physical/chemical characteristics  studies were
conducted by more than registrants.

2) The P/Chem. Studies were conducted on TGAI which is 60% active in 40%
water.  It is, therefore, likely that some of the measured values may
not be attributed the pure TGAI.  It is particularly noted that a
polymer substance like Busan 77 shows a vapor pressure of 10.8 mmHg at
20 C.  Considering the fact the study was conducted with 60/40:
polymer/water ratio, the large  vapor pressure value may be due to water
vapor.

				Bibliography

MRID#			References

418984-01 	Summers, W. (1991) Product Chemistry for WSCP: Lab Project
Number: 105.01. Unpublished study prepared by Buckman Labs, Int. 31 p.

418984-03 	Bowles, D. (1991) Product Chemistry for WSCP: Lab Project
Number: 20/90-BUC.8: NA 90 9218/1. Unpublished study prepared by Twin
City Testing Corp. and Natec...GmbH. 88 p.

423724-01	Bowles, D. (1991) Product Chemistry for WSCP: Lab Project
Number: NA 909218/1. Unpublished study prepared by Twin City Testing
Corp. and NATEC Institut fur Naturwissenschaftlich-technische Dienste
GmbH. 88 p.

42615901 	Whetzel, J. (1992) Determination of Storage Stability and
Corrosion Characteristics of WSCP: A Supplement: Lab Project Number:
71/91-BUC.2. Unpublished study prepared by Twin City Testing Corp. 29 p.

46832601  	Wo, C. (2006) Physical and Chemical Characteristics: Color,
Physical State, Odor, Oxidation/Reduction, Flammability, pH, Viscosity,
and Density/Relative Density. Project Number: 19425, P801. Unpublished
study prepared by Product Safety Laboratories. 17 p.

46915602  	Wo, C. (2006) Physical and Chemical Characteristis (830
Series, Group B): Algae Clean Out W. Unpublished study prepared by
Product Safety Laboratories. 6 p.

47120304 	Tillman, A. (2007) Waiver Request for Certain Data
Requirements for WSCP MUP. Project Number: KT/200704. Unpublished study
prepared by Kerley Trading, Inc. 7 p.


[Federal Register: January 27, 2010 (Volume 75, Number 17)]
[Notices]
[Page 4365-4366]
[DOCID:fr27ja10-63]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice of Filings No. 1

January 14, 2010.
    Take notice that the Commission has received the following Natural
Gas Pipeline Rate and Refund Report filings:

    Docket Numbers: RP10-301-000.
    Applicants: Kinder Morgan Interstate Gas Trans. LLC.
    Description: Kinder Morgan Interstate Gas Transmission LLC submits
a Second Revised Sheet 4F et al.
    Filed Date: 01/08/2010.
    Accession Number: 20100111-0213.
    Comment Date: 5 p.m. Eastern Time on Wednesday, January 20, 2010.

    Docket Numbers: RP10-302-000.
    Applicants: Northern Natural Gas Company.
    Description: Northern Natural Gas Company submits a Fifth Revised
Volume 1 of 15 Revised Sheet 66B.35.
    Filed Date: 01/08/2010.
    Accession Number: 20100111-0212.
    Comment Date: 5 p.m. Eastern Time on Wednesday, January 20, 2010.

    Docket Numbers: RP10-303-000.
    Applicants: Texas Gas Transmission, LLC.
    Description: Texas Gas Transmission, LLC submits a report which
compares cash out revenues with cash out costs incurred for the annual
billing period of 11/1/08 thru 10/31/09.
    Filed Date: 01/11/2010.
    Accession Number: 20100111-0202.
    Comment Date: 5 p.m. Eastern Time on Monday, January 25, 2010.

    Docket Numbers: RP10-304-000.
    Applicants: Southern LNG, Inc.
    Description: Southern LNG submits Second Revised Sheet 43 to its
FERC Gas Tariff, Original Volume 1 to be effective 3/1/10.
    Filed Date: 01/11/2010.
    Accession Number: 20100111-0201.
    Comment Date: 5 p.m. Eastern Time on Monday, January 25, 2010.

    Docket Numbers: RP10-305-000.
    Applicants: Gulf South Pipeline Company, LP.
    Description: Gulf South Pipeline Company, LP submits a capacity
release agreement containing negotiated rate provisions executed by
Gulf South and Texla Energy Management, Inc.

    Filed Date: 01/11/2010.
    Accession Number: 20100111-0440.
    Comment Date: 5 p.m. Eastern Time on Monday, January 25, 2010.

    Docket Numbers: RP10-306-000.
    Applicants: Rockies Express Pipeline LLC.
    Description: Rockies Express Pipeline LLC submits Original Sheet No
11H.
    Filed Date: 01/12/2010.
    Accession Number: 20100113-0203.
    Comment Date: 5 p.m. Eastern Time on Monday, January 25, 2010.

    Docket Numbers: RP10-307-000.
    Applicants: High Island Offshore System, LLC.
    Description: High Island Offshore System, LLC Clarification of
Characterization of Service Agreements.
    Filed Date: 01/12/2010.
    Accession Number: 20100112-5140.
    Comment Date: 5 p.m. Eastern Time on Monday, January 25, 2010.

    Docket Numbers: RP10-308-000.
    Applicants: Algonquin Gas Transmission, LLC.
    Description: Algonquin Gas Transmission, LLC submits First Revised
Sheet No 1 et al. to FERC Gas Tariff, Fifth Revised Volume No 1.
    Filed Date: 01/13/2010.
    Accession Number: 20100113-0210.
    Comment Date: 5 p.m. Eastern Time on Monday, January 25, 2010.

    Docket Numbers: RP10-309-000.
    Applicants: Algonquin Gas Transmission, LLC.
    Description: Algonquin Gas Transmission, LLC submits FERC Gas
Tariff, First Revised Volume 2 and First Revised Sheet 108, to be
effective 2/13/10.
    Filed Date: 01/13/2010.
    Accession Number: 20100113-0208.
    Comment Date: 5 p.m. Eastern Time on Monday, January 25, 2010.

    Any person desiring to intervene or to protest in any of the above
proceedings must file in accordance with Rules 211 and 214 of the
Commission's Rules of Practice and Procedure (18 CFR 385.211 and
385.214) on or before 5 p.m. Eastern time on the specified comment
date. It is not necessary to separately intervene again in a subdocket
related to a compliance filing if you have previously intervened in the
same docket. Protests will be considered by the Commission in
determining the appropriate action to be taken, but will not serve to
make protestants parties to the proceeding. Anyone filing a motion to
intervene or protest must serve a copy of that document on the
Applicant. In reference to filings initiating a new proceeding,
interventions or protests submitted on or before the comment deadline
need not be served on persons other than the Applicant.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper, using the FERC Online links at http://
www.ferc.gov. To facilitate electronic service, persons with Internet
access who will eFile a document and/or be listed as a contact for an
intervenor must create and validate an eRegistration account using the
eRegistration link. Select the eFiling link to log on and submit the
intervention or protests.
    Persons unable to file electronically should submit an original and
14 copies of the intervention or protest to the Federal Energy
Regulatory Commission, 888 First St. NE., Washington, DC 20426.
    The filings in the above proceedings are accessible in the
Commission's eLibrary system by clicking on the appropriate link in the
above list. They are also available for review in the Commission's
Public Reference Room in Washington, DC. There is an eSubscription link
on the Web site that enables subscribers to receive e-mail notification
when a document is added to a subscribed dockets(s). For assistance
with any FERC Online service, please e-mail<EMAIL_ADDRESS>
or call<PHONE_NUMBER> (toll free). For TTY, call<PHONE_NUMBER>.

Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2010-1553 Filed 1-26-10; 8:45 am]
BILLING CODE 6717-01-P