Notice2024-28427
Self-Regulatory Organizations; Cboe Exchange, Inc.; Cboe C2 Exchange, Inc.; Cboe BYX Exchange, Inc.; Cboe BZX Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Order Approving Proposed Rule Changes To Amend the Bylaws of Cboe Global Markets, Inc.
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 5, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 234 (Thursday, December 5, 2024)</title>
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[Federal Register Volume 89, Number 234 (Thursday, December 5, 2024)]
[Notices]
[Pages 96696-96698]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-28427]
[[Page 96696]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101781; File Nos. SR-CBOE-2024-041; SR-C2-2024-016; SR-
CboeBZX-2024-087; SR-CboeBYX-2024-034; SR-CboeEDGA-2024-037; SR-
CboeEDGX-2024-059]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Cboe C2
Exchange, Inc.; Cboe BYX Exchange, Inc.; Cboe BZX Exchange, Inc.; Cboe
EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Order Approving Proposed
Rule Changes To Amend the Bylaws of Cboe Global Markets, Inc.
November 29, 2024.
I. Introduction
On October 11, 2024, each of the Cboe Exchange, Inc.; Cboe C2
Exchange, Inc.; Cboe BYX Exchange, Inc.; Cboe BZX Exchange, Inc.; Cboe
EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc. (collectively, the
``SROs''), filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\
proposed rule changes (the ``Proposals'') with respect to the bylaws of
Cboe Global Markets, Inc. (``CGM''), the parent company of the SROs
(the ``CGM Bylaws''). The Proposals amend the CGM Bylaws to provide
stockholders owning a combined 25% or more of CGM's outstanding stock
with the right to request a special meeting of the stockholders, to
refine CGM's current advance notice bylaws for annual stockholder
meetings, and to make other miscellaneous changes to the CGM Bylaws.
The Proposals were published for comment in the Federal Register on
October 29, 2024.\3\ The Commission did not receive any comment letters
on the Proposals. This order approves the Proposals.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release Nos. 101415 (October 23,
2024), 89 FR 86019 (SR-CBOE-2024-041) (``CBOE Notice''), 101421
(October 23, 2024), 89 FR 86016 (SR-C2-2024-016) (``C2 Notice''),
101420 (October 23, 2024), 89 FR 85999 (SR-CboeBYX-2024-034)
(``CboeBYX Notice''), 101419 (October 23, 2024), 89 FR 86051 (SR-
CboeBZX-2024-087) (``CboeBZX Notice''), 101416 (October 23, 2024),
89 FR 86046 (SR-CboeEDGA-2024-037) (``CboeEDGA Notice''); 101417
(October 23, 2024), 89 FR 86065 (SR-CboeEDGX-2024-059) (``CboeEDGX
Notice,'' and, collectively, ``Notices'').
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II. Description of the Proposal
First, The SROs propose to amend certain provisions of the CGM
Bylaws that relate to the power of stockholders to call a special
meeting. Specifically, the SROs propose to amend Section 2.3 of the CGM
Bylaws, which sets forth how a special meeting of the stockholders can
be called. Currently, Section 2.3 of the CGM Bylaws provides that only
the Chair of the CGM Board, the Chief Executive Officer or the CGM
Board itself may call a special meeting of the stockholders. The SROs
propose to amend Section 2.3(a) to state that a special meeting of
stockholders may be called: (i) at any time by the CGM Board pursuant
to a resolution adopted by the affirmative vote of a majority of the
total number of CGM directors then in office; or (ii) by CGM's
Corporate Secretary following the receipt of a written request in
proper form for a special meeting (a ``Special Meeting Request'') by
one or more stockholders.\4\ In order to call a special meeting, the
stockholders must hold, in the aggregate, at least 25% of CGM's
outstanding shares of common stock entitled to vote on matters brought
before the special meeting (the ``Requisite Percentage'').\5\ As such,
in addition to allowing stockholders with the Requisite Percentage to
call a special meeting, the SROs also propose to remove the Chair of
the CGM Board, the Chief Executive Officer, and the President of CGM
from Section 2.3(a) so that they may not individually call a special
meeting of the stockholders.
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\4\ Id.
\5\ Id.
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The SROs also propose to add new Sections 2.3(b), 2.3(c), 2.3(d),
2.3(e), 2.3(f), 2.3(g) and 2.3(h) of the CGM Bylaws to set forth the
procedures to implement the Proposals to allow a stockholder to call a
special meeting of stockholders (a ``Stockholder Requested Special
Meeting''). In summation, the SRO's proposal for these sections
includes instructions to properly submit a written request to call a
Stockholder Requested Special Meeting, explanations of the detailed
information required for a Special Meeting Request to have been
properly delivered, and explanations for how the CGM Board shall review
and process a Special Meeting Request. The SROs state that the proposed
amendments are designed to help ensure that the SROs are able to comply
with their disclosure and other requirements under applicable law and
to help ensure that that the CGM Board and its stockholders are able to
assess the proposed business and meeting request adequately.\6\
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\6\ See, e.g., CboeEDGX Notice, supra note 3, at 86067.
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Second, the SROs propose to amend Section 2.9 of the CGM Bylaws,
which govern proxy representation. The SROs propose to add language to
clarify that white colored proxy cards are reserved for exclusive use
by the CGM Board, and that stockholders soliciting proxies from other
stockholders of the CGM may use any other color proxy card.
Third, the SROs propose to amend Section 2.11 of the CGM Bylaws,
which are the advance notice bylaws, to reflect what the SROs assess
and represent are recent developments in Delaware Law.\7\ Section 2.11
sets forth that stockholders must notify CGM, during a specified period
in advance of an annual meeting or special meeting called by the CGM
Board, of an intention to nominate persons to the CGM Board or to
present a business proposal at the meeting. The SROs state that while
designing the proposed requirements for stockholders to call a special
meeting, they evaluated the existing requirements and determined that
the advance notice bylaws could be enhanced to help achieve more
fulsome disclosure and explanations from stockholders bringing business
or potential nominees before a stockholder meeting.\8\ Thus, the SROs
propose to amend Sections 2.11(a)(iii)(C), 2.11(a)(iii)(D),
2.11(a)(iii)(F), 2.11(c)(ii), 2.11(c)(iii), 2.11(c)(vi) and
2.11(a)(iii)(B).
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\7\ See, e.g., CboeBZX Notice, supra note 3, at 86053-54.
\8\ Id.
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The SROs propose to amend Section 2.11(a)(iii)(C) to clarify the
information a stockholder is required to disclose relating to
arrangements between the stockholder, a Stockholder Associated Person,
and any other stockholder, and to eliminate disclosures on performance
related fees to which such stockholder or Stockholder Associated Person
may be entitled as a result of any increase or decrease in the stock of
the CGM, and the prospectus or similar document of the stockholder
providing notice or any Stockholder Associated Person. The SROs state
that while the current provisions in Section 2.11(a)(iii)(C) provide
valuable information, the proposal should help ensure the objectives of
the provisions are met without burdening stockholders with potentially
overbroad requests for information.\9\
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\9\ See, e.g. C2 Notice, supra note 3, at 86063.
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Section 2.11(a)(iii)(D) of the CGM Bylaws currently sets forth
representations to be made by a stockholder regarding whether such
stockholder is part of a group which intends to deliver or solicit
proxies from stockholders when bringing business or a Stockholder
Nominee before a stockholder meeting. The SROs state they are proposing
changes to make this provision more consistent with the universal proxy
rules provided for in
[[Page 96697]]
Rule 14a-19 of the Act.\10\ The SROs also propose requiring the
stockholder to confirm whether it intends, or is part of a group which
intends, to engage in a solicitation (within the meaning of Rule 14a-
1(1) of the Act) with respect to the nomination of any proposed nominee
or proposed business to be considered at the meeting. The SROs state
that any stockholder providing notice that they intend to solicit
proxies in support of a proposed nominee must do so in accordance with
Rule 14a-19 of the Exchange Act.\11\
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\10\ See, e.g. CboeEDGA Notice, supra note 3, at 86049.
\11\ See, e.g. id.
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Section 2.11(a)(iii)(F) of the CGM Bylaws currently requires that a
Stockholder Nominee provide any information that is required to
determine the qualifications of such Stockholder Nominee to serve as a
director of CGM. The SROs propose to add language clarifying that any
required information must be consistent with the parameters set forth
in CGM's Corporate Governance Guidelines or the CGM Board's past
practice for assessing potential director nominees.
Existing Section 2.11(c)(ii) of the CGM Bylaws requires a
stockholder providing notice to notify the CGM Secretary of any
inaccuracy or change in any information submitted pursuant to Section
2.11. The SROs propose to modify this requirement by narrowing the
scope to require the stockholder to provide notice of any material
inaccuracies or changes to information that they previously provided.
For Section 2.11(c)(iii) of the CGM Bylaws, the SROs propose that
any stockholder or Stockholder Associated Person providing notice with
respect to any Stockholder Nominee is required to do so in a manner
consistent with the requirements for universal proxy rules pursuant to
Rule 14a-19 of the Exchange Act.
The SROs propose to amend Section 2.11(c)(vi) of the CGM Bylaws to
add specificity to the definition of ``Stockholder Associated Person,''
limit which individuals may be determined to be a Stockholder
Associated Person and make other clarifying changes. The SROs state
that these changes to reflect recent developments in Delaware law and
to provide clarifications should help prevent confusion.\12\
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\12\ Id.
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The SROs further propose to add a note to Section 2.11(a)(ii) that
any proposed business for a stockholder meeting must be a proper matter
for stockholder action. Additionally, the SROs propose to amend Section
2.11(a)(iii)(B) to state that a Stockholder Nominee's written consent
must be included in the CGM's proxy statement before they may be
brought before a meeting, and that a Stockholder Nominee will not enter
into any commitment to vote in a certain manner if nominated to the CGM
Board. The SROs state that these proposals add specificity with regard
to the CGM.\13\ The SROs also propose to amend this section to require
that a Stockholder Nominee not omit facts that are necessary to ensure
statements made are not misleading in any material respect, which adds
a materiality threshold to the current provision.
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\13\ Id.
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Fourth, the SROs propose to make changes to Section 3.10 of the CGM
Bylaws. Current Section 3.10 allows, among other things, for the Chair
of the Board or the Chief Executive Officer to call a special meeting
of the CGM Board. The proposal would additionally allow the Lead
Director of CGM to call a special meeting of the CGM Board. The SROs
state that revising this section to allow the Lead Director to call a
special meeting of the CGM Board addresses a potential scenario in
which the Chair of the Board and the Chief Executive Officer positions
are jointly held by one individual and a special meeting of the CGM
Board is not able to be called by individual independent directors.\14\
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\14\ See, e.g., CBOE Notice, supra note 3, at 86022.
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III. Discussion and Commission's Findings
After careful review, the Commission finds that the Proposals are
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\15\ In particular, the Commission finds that the Proposals
are consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\16\ Specifically, the Commission believes that the Proposals
are consistent with Section 6(b) of the Act \17\ in general, and with
Section 6(b)(1) \18\ in particular, in that it enables the SROs to be
so organized as to have the capacity to be able to carry out the
purposes of the Act and to comply, and to enforce compliance by its
exchange members and persons associated with its exchange members, with
the provisions of the Act, the rules and regulations thereunder, and
the rules of the SROs.
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\15\ Additionally, in approving the Proposals, the Commission
has considered the proposed rules' impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\16\ Certain provisions of the CGM Bylaws are considered rules
of the SROs if they are stated policies, practices, or
interpretations, as defined in Rule 19b-4 under the Act, and
therefore, must be filed with the Commission pursuant to Section
19(b) of the Act and Rule 19b-4 thereunder. 15 U.S.C. 78s(b); 17 CFR
240.19b-4.
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(1).
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The SROs assert that the Proposals would strengthen the corporate
governance of CGM by now permitting stockholders to bring business or
Stockholder Nominees before CGM via a special meeting of the
stockholders.\19\ Under the current text of Section 2.3(a) of the CGM
Bylaws, special meetings of CGM stockholders may only be called by the
Chairman of the CGM Board, the Chief Executive Officer of CGM, the
President of CGM or the CGM Board of Directors. Under the Proposals,
only the CGM Board of Directors or a group of stockholders that meets
the Requisite Percentage may call a special meeting of stockholders
pursuant to revised Section 2.3(a).
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\19\ See, e.g., CboeBYX Notice, supra note 3, at 6002.
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Furthermore, the SROs propose to expand the provisions of Section
2.3 of the CGM Bylaws to set forth detailed provisions regarding, among
other things, the procedural requirements for CGM stockholders to call
a special meeting of stockholders, the duties and deadlines of the CGM
Secretary upon receiving a request for a special meeting of
stockholders, and a process for cancelling a special meeting called by
the Requisite Percentage of stockholders should those stockholder
subsequently call below the requisite percentage. The SROs assert that
these provisions will ensure both timely notices of special meeting
requests and the ability of stockholders to adequately assess the
proposed business for a given special meeting of stockholders.\20\ The
Commission believes that the proposed changes to Section 2.3(a)--
coupled with the aforementioned procedural requirements and limitations
set forth in new subsections (b)-(h) of Section 2.3 of the CGM Bylaws--
are reasonably designed to comply with the requirements under Section
6(b)(1) \21\ of Act in that they allow the Exchange to carry out the
purposes of the Exchange Act and to comply, and to enforce compliance
by its exchange members and persons associated with its exchange
members, with the provisions of the Act, the rules and regulations
thereunder, and the rules of the SROs.
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\20\ See, e.g., CBOE Notice, supra note 3, at 86020.
\21\ 15 U.S.C. 78f(b)(1).
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[[Page 96698]]
As outlined above,\22\ the SROs also propose to amend Section 2.11
of the CGM Bylaws, which are the advance notice bylaws, to reflect what
the SROs assess and represent are recent developments in Delaware
Law.\23\ Among other things, the SROs aim to ensure the objectives of
the advance notice bylaws are met without burdening stockholders with
potentially overbroad requests for information in a manner that is
consistent with what the SROs represent and assess are recent
developments in Delaware Law.\24\ The Commission believes that these
proposed changes are also reasonably designed to comply with the
requirements under Section 6(b)(1) \25\ of Act in that they allow the
Exchange to carry out the purposes of the Exchange Act and to comply,
and to enforce compliance by its exchange members and persons
associated with its exchange members, with the provisions of the Act,
the rules and regulations thereunder, and the rules of the SROs.
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\22\ See supra notes 9-14 and accompanying text.
\23\ See, e.g., CboeBZX Notice, supra note 3, at 86053-54.
\24\ Id.
\25\ 15 U.S.C. 78f(b)(1).
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Finally, SROs proposed to revise revisions to Sections 2.9 and 3.10
of the CGM Bylaws to address proxy card color categorization and to
allow the Lead Director to call a special meeting of the board in order
to mitigate circumstances in which the CGM Bylaws would not otherwise
empower a second Independent Director to call a special meeting,
respectively. The Commission believes that these changes are reasonably
designed to facilitate more efficient and effective corporate
governance of CGM in accordance with the requirements of Section
6(b)(1) \26\ of Act.
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\26\ 15 U.S.C. 78f(b)(1).
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IV. Conclusion
For the foregoing reasons, the Commission finds that the Proposals
are consistent with the Act and the rules and regulations thereunder
applicable to a national securities exchange.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\27\ that the Proposals (SR-CBOE-2024-041; SR-C2-2024-016; SR-
CboeBZX-2024-087; SR-CboeBYX-2024-034; SR-CboeEDGX-2024-059; SR-
CboeEDGA-2024-037) be, and hereby are, approved.
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\27\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-28427 Filed 12-4-24; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on December 5, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.