Notice2026-11682
Self-Regulatory Organizations; Texas Stock Exchange LLC; Notice of Filing of a Proposed Rule Change To Amend Rule 13.003 Related to Proxy Voting
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
June 11, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 112 (Thursday, June 11, 2026)</title>
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[Federal Register Volume 91, Number 112 (Thursday, June 11, 2026)]
[Notices]
[Pages 35593-35600]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-11682]
[[Page 35593]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105623; File No. SR-TXSE-2026-008]
Self-Regulatory Organizations; Texas Stock Exchange LLC; Notice
of Filing of a Proposed Rule Change To Amend Rule 13.003 Related to
Proxy Voting
June 8, 2026.
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 May 28, 2026, Texas Stock Exchange LLC (the ``Exchange'' or
``TXSE'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I, II,
and III below, which Items have been 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 Exchange filed a proposal to amend Rule 13.003 related to proxy
voting, as further described below.
The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is available on the
Commission's website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>) at the
Exchange's website (<a href="https://txse.com/rule-filings">https://txse.com/rule-filings</a>), and at the
principal office of the Exchange.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The Exchange proposes to amend Rule 13.003 to establish a mandatory
process for the proportional allocation and voting of uninstructed
shares held by Members of the Exchange on behalf of beneficial owners
of TXSE-listed equity securities.\3\ Specifically, the proposed rule
would require a Member to vote uninstructed shares at shareholder
meetings and to allocate votes on each proposal in proportion to voting
instructions received from beneficial owners for whom such Member holds
shares in the applicable TXSE-listed security, subject to the
exclusions and methodology set forth in the proposed rule.
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\3\ As provided in proposed Rule 13.003(c), any reference to
securities or companies listed on TXSE in this proposal is referring
to securities or companies with their primary listing on TXSE and is
not referring to a dually-listed security with its primary listing
on another national securities exchange.
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The proposed rule reflects the principle that voting outcomes on
matters up for a vote at TXSE-listed companies should be determined by
the voting instructions of participating beneficial owners, with such
instructions applied uniformly to the voting of uninstructed shares for
every matter submitted to a shareholder vote. By replacing broker
discretionary voting with a formula-driven allocation tied to
instructions actually submitted, the proposed rule eliminates the
exercise of broker discretion over shares in which the broker has no
economic interest and also eliminates the inconsistent and proposal-
dependent treatment of uninstructed shares produced by the framework
currently in place in the market, while preserving all existing
shareholder voting rights.
Overview
Existing TXSE Rule 13.003(b) established the baseline rule that a
Member may not give a proxy to vote stock registered in its name unless
the Member is the (i) beneficial owner of such stock; (ii) such proxy
is given pursuant to the written instructions of the beneficial owner;
or (iii) such proxy is given pursuant to the rules of any national
securities exchange or association of which it is a member provided
that the records of the Member clearly indicate the procedure it is
follow. Existing TXSE Rule 13.003(c) separately prohibits discretionary
voting on director elections (except for uncontested director elections
of any investment company registered under the Investment Company Act
of 1940), executive compensation, and other significant matters.
Accordingly, for matters outside the prohibition of 13.003(c), the
treatment of uninstructed shares under existing TXSE rules is generally
informed by the rules of other national securities exchanges or
associations the Member is permitted to follow, including NYSE Rule
452.
NYSE Rule 452 enumerates specific instances in which a NYSE member
organization may not vote without customer instructions and lays out
factors for determining whether a matter is one in which a NYSE member
organization may vote without customer instructions. For matters not
specifically enumerated, NYSE Regulation determines whether broker
discretionary voting is permitted on a case-by-case basis. In practice,
these categories are generally referred to as ``routine'' (where the
member organization may vote without customer instructions) and ``non-
routine'' (where the member organization may not vote without customer
instructions).
The Commission has previously determined that voting outcomes
should be determined by parties with an economic interest in the issuer
and approved limits on broker discretionary voting. In 2009, the
Commission approved amendments to NYSE Rule 452 that eliminated broker
discretionary voting in the election of directors, whether contested or
uncontested.\4\ The Commission reasoned that the election of directors
is ``not a `routine' issue for either the corporation or the
shareholders'' but rather ``a key event in the operation and direction
of the corporation and the shareholders' exercise of their rights and
interests as the owners of the corporation,'' and that voting on
matters as critical as the election of directors should be ``determined
by those with an economic interest in the company . . . rather than the
broker who has no such economic interest.'' \5\ The 2009 amendments
were further extended in 2010, when the NYSE codified the prohibition
on broker discretionary voting for matters relating to executive
compensation in order to implement Section 957 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act.\6\
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\4\ See Exchange Act Release No. 60215 (July 1, 2009), 74 FR
33293 (July 10, 2009) (SR-NYSE-2006-92). (``2009 NYSE Approval
Order'').
\5\ See 2009 NYSE Approval Order, 74 FR at 33300.
\6\ See Exchange Act Release No. 62874 (Sept. 9, 2010), 75 FR
56152 (Sept. 15, 2010) (SR-NYSE-2010-59).
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Notwithstanding these reforms, NYSE Rule 452's underlying routine/
non-routine framework remains in place for matters outside the scope of
the 2009 and 2010 amendments. Uninstructed shares, which commonly
include a significant retail component, can be voted at the discretion
of brokers on routine matters, treated as broker non-votes on non-
routine matters, or not represented at the meeting at all in certain
circumstances.\7\ The treatment of a given uninstructed share depends
on which matters happen to appear on the ballot and how each is
classified. This structure can affect quorum determinations, the
ability to achieve approval thresholds, and a lower relative influence
of beneficial owners who hold shares in a manner that are subject to
NYSE Rule 452.
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\7\ For example, where a broker submits a proxy for a routine
matter but lacks authority to vote uninstructed shares on a non-
routine matter at the same meeting, those uninstructed shares may be
counted for quorum but not voted on the non-routine matter. Where no
routine matter is presented, uninstructed shares may not be
represented at the meeting, creating uncertainty as to whether an
issuer will attain a quorum.
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[[Page 35594]]
The Exchange proposes to replace this framework for TXSE-listed
securities with a uniform process for the proportional allocation of
uninstructed shares. Under the proposed rule, a Member would submit
uninstructed shares and allocate votes on each proposal in proportion
to the voting instructions received from beneficial owners for whom the
Member holds shares in the applicable TXSE-listed security. The
allocation operates the same way for every matter submitted to a vote,
regardless of who proposes the matter.
This approach has two structural consequences that distinguish it
from the existing framework. First, the proposed rule eliminates broker
discretionary voting entirely. The Member does not vote uninstructed
shares according to its own judgment, the recommendations of
management, or any other external input (other than how participating
beneficial owners have instructed the Covered Member); the Covered
Member applies a prescribed formula based exclusively on instructions
submitted by participating beneficial owners. In 2009, the Commission
expressed its view that voting outcomes should be determined by parties
with an economic interest in the issuer, not by brokers who have no
such interest. The proposed rule applies that principle to every matter
submitted to a shareholder vote at TXSE-listed companies. Second, the
proposed rule eliminates the inconsistent and proposal-dependent
treatment of uninstructed shares produced by NYSE Rule 452's routine/
non-routine framework. Every matter on every ballot is treated the same
way, ensuring that the treatment of uninstructed shares depends on the
preferences of participating beneficial owners rather than the
incidental composition of the meeting agenda.
As further described below, the proposed rule would not alter any
beneficial owner's right to vote, abstain, withhold where applicable,
or otherwise provide voting instructions. It is neutral as to voting
choice: it does not favor management, opposition, or any shareholder
proponent; it applies the same formula based solely on the voting
instructions submitted by participating beneficial owners.
Existing TXSE Rule 13.003
TXSE Rule 13.003(b) currently prohibits a Member from giving a
proxy to vote stock registered in its name, unless: (i) the Member is
the beneficial owner of such stock; (ii) the proxy is given pursuant to
the written instructions of the beneficial owner; or (iii) the proxy is
given pursuant to the rules of any national securities exchange or
association of which it is a member provided that the records of the
Member clearly indicate the procedure it is following. As such, the
treatment of uninstructed shares under the current framework generally
turns on the discretionary voting rules applicable to the Member,
including NYSE Rule 452.\8\
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\8\ FINRA Rule 2251 similarly limits the circumstances under
which FINRA members may vote proxies without instructions from
beneficial owners and permits a member to give a proxy pursuant to
the rules of a national securities exchange of which it is a member.
Nasdaq General 9, Section 6 provides that Nasdaq members shall
comply with FINRA Rule 2251 as if it were part of Nasdaq's rules.
See FINRA Rule 2251(b)(3); Nasdaq General 9, Section 6(a).
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Existing Rule 13.003(c) separately prohibits a Member that is not
the beneficial owner of a security from granting a proxy to vote the
security in connection with a shareholder vote on the election of a
member of the board of directors (other than for a vote with respect to
uncontested election of a member of the board of directors of any
investment company registered under the Investment Company Act of
1940), executive compensation, or any other significant matter unless
the beneficial owner of the security has instructed the Member to vote
the proxy in accordance with the voting instructions of the beneficial
owner. The proposed rule retains the restriction on discretionary
voting in existing Rule 13.003(c), while requiring the ministerial
proportional allocation outlined in the proposed rule.
Description of the Proposed Rule
Proposed Rule 13.003(c) would apply to a Member that holds shares
of an equity security, with a primary listing on the Exchange, on
behalf of a beneficial owner and has not received voting instructions
from that beneficial owner as of the applicable instruction cutoff,
referred to in the proposed rule as the ``Calculation Date,'' subject
to the exclusions set forth in the proposed rule. A Member subject to
proposed Rule 13.003(c) is referred to in the proposed rule as a
``Covered Member.'' The proposed rule would require the Covered Member
to vote uninstructed shares at the shareholder meeting and to allocate
votes on each proposal in the same proportion as the instructions
received from participating beneficial owners for whom the Member holds
shares in the applicable security.
Proposed Rule 13.003(c)(1) provides that the Covered Member shall
submit a proxy designating the Uninstructed Shares as present at such
meeting, regardless of whether any matter on the ballot for such
meeting would otherwise qualify as a routine matter permitting
discretionary voting under the rules of any other national securities
exchange or association of which such Covered Member is a member.
Submission of a proxy for purposes of representation at the meeting
shall not be deemed the exercise of discretionary voting authority.
Proposed Rule 13.003(c)(2) provides that a Covered Member shall
vote uninstructed shares on each proposal by casting votes FOR,
AGAINST, and ABSTAINING, or such other voting categories as are
available for the applicable proposal, in the same proportion as the
aggregate voting instructions received by the Covered Member from
beneficial owners of shares of such issuer held by the Covered Member
who have submitted voting instructions with respect to such proposal.
Proposed Rule 13.003(c)(2)(A) provides that if the Covered Member has
received no voting instructions from any beneficial owner with respect
to a particular proposal, the Covered Member shall vote all
Uninstructed Shares as ABSTAINING, or in the applicable non-directional
category available for such proposal, such as WITHHOLD.
Proposed Rule 13.003(c)(2)(B) provides that the proposed
proportional allocation requirement would not apply to shares held or
voted by a Covered Member in any capacity described in Rule 13.003(e),
including shares voted by a Covered Member acting as an executor,
administrator, guardian, trustee, or in a similar fiduciary capacity.
The proposed requirement also would not apply to shares voted by a
named ERISA Plan investment manager or by a designated investment
adviser pursuant to Rule 13.003(e). Such shares also would be excluded
from the calculation of the instructed vote distribution.
Existing Rule 13.003(c) would be re-lettered as Rule 13.003(d). The
Exchange proposes to retain the existing prohibition on a Member that
is not the beneficial owner of a Section 12 security granting a proxy
to vote the security in connection with director elections, executive
compensation, or any other significant matter determined by the
Commission unless the beneficial owner has instructed the Member to
vote the proxy in accordance with the beneficial owner's instructions.
This prohibition would continue to apply to securities and accounts
outside the scope of proposed Rule 13.003(c), including securities not
listed on the Exchange and shares otherwise excluded from the proposed
proportional allocation requirement. Proposed Rule 13.003(d)
[[Page 35595]]
would also clarify that the mandatory proportional allocation required
under proposed Rule 13.003(c) does not constitute the giving of a proxy
to vote at the Member's discretion in violation of paragraphs (b) or
(d) of this TXSE Rule or Exchange Act Section 6(b)(10) because the
Covered Member exercises no judgment, preference, or discretion in
determining the votes cast for the Uninstructed Shares.
Proposed Rule 13.003(c)(3) provides that the proportional
allocation required under paragraph (c)(2) of this TXSE Rule
constitutes a mandatory ministerial obligation of the Covered Member.
In executing such allocation, the Covered Member exercises no judgment,
preference, or discretion as to how Uninstructed Shares are voted; the
allocation is determined solely by application of the formula
prescribed by such paragraph (c)(2) and Interpretation and Policy .02
to this TXSE Rule without modification or substitution by the Covered
Member. The proportional allocation obligation under this paragraph (c)
does not constitute the giving of a proxy to vote at the Member's
discretion in violation of paragraphs (b) or (d) of this TXSE Rule or
Exchange Act Section 6(b)(10).
Proposed Rule 13.003(c)(4) would require a Covered Member to
maintain records of the proportional allocation methodology applied
pursuant to proposed Rule 13.003(c)(2) in accordance with Exchange Act
Rule 17a-4.
Proposed Interpretation and Policy .02 (a) would add the following
definitions: (1) ``Calculation Date'' means the date and time by which
the Covered Member customarily closes receipt of voting instructions
from beneficial owners in connection with a shareholder meeting of the
applicable issuer, in accordance with the Covered Member's standard
proxy processing practices as applied to meetings of other issuers
whose securities the Covered Member holds in the same capacity. The
Calculation Date shall be no later than the date the Covered Member
submits its final vote tally to the meeting tabulator. If a shareholder
meeting is adjourned and reconvened, a new Calculation Date shall apply
based on the reconvened meeting date in accordance with the same
standard practices; (2) ``Category Percentage'' means, for each
available voting category on a proposal, the quotient obtained by
dividing the number of Total Instructed Shares allocated to such
category by the Total Instructed Shares; (3) ``Covered Member'' has the
meaning set forth in Rule 13.003(c) of this TXSE Rule; (4) ``Instructed
Vote Distribution'' has the meaning set forth in Rule 13.003(c)(2) of
this TXSE Rule; (5) ``Total Instructed Shares'' means, for a given
proposal, the aggregate number of shares of the applicable issuer held
in the Covered Member's custody for which voting instructions have been
received and allocated to a voting category as of the Calculation Date,
excluding shares described in Rule 13.003(c)(2)(B); and (6)
``Uninstructed Shares'' has the meaning set forth in Rule 13.003(c) of
this TXSE Rule.
Proposed Interpretation and Policy .02 (b) would establish the
methodology for calculating the proportional allocation of uninstructed
shares. The calculation would be performed separately for each proposal
on the ballot. A beneficial owner that provides voting instructions on
one proposal but not another would be included in the instructed vote
distribution only for the proposal on which instructions were received,
and the shares would be treated as Uninstructed Shares for each
proposal where voting instructions were not submitted. Any fractional
allocation resulting from the allocation formula would be rounded down
to the nearest whole share, and any remainder shares would be allocated
to ABSTAINING.
Proposed Interpretation and Policy .02 (c) provides that the
Instructed Vote Distribution and Total Instructed Shares shall be
calculated separately for each proposal on the ballot. A beneficial
owner who has submitted voting instructions with respect to one or more
proposals but not all proposals shall be included in the Total
Instructed Shares for each proposal on which instructions were
received, and the shares held for such beneficial owner shall be
treated as Uninstructed Shares for each proposal on which no
instructions were received.
Proposed Interpretation and Policy .02 (d) provides that Where the
voting options for a proposal include WITHHOLD AUTHORITY in lieu of, or
in addition to, AGAINST, including in connection with director
elections conducted under a plurality voting standard, the proportional
allocation described in paragraph (b) of this Interpretation and Policy
shall be applied to each available voting category in the same manner,
substituting WITHHOLD AUTHORITY for AGAINST, where applicable. Any
remainder shares shall be allocated to ABSTAINING, or to WITHHOLD
AUTHORITY if ABSTAINING is not an available voting category for such
proposal.
The Exchange is also proposing to make certain corresponding
numbering changes to Rule 13.003 in order to accommodate the proposed
changes.
Examples
The following examples illustrate the operation of proposed Rule
13.003(c) and proposed Interpretation and Policy .02.
Example 1: A Covered Member holds 100 shares of an Exchange-listed
security on behalf of beneficial owners. As of the Calculation Date,
the Covered Member has received voting instructions for 60 shares and
has received no voting instructions for the remaining 40 shares. The
allocation would be calculated as follows:
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Allocated
Voting category Instructed Instructed vote uninstructed
shares distribution (%) shares
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FOR......................................................... 36 60 24
AGAINST..................................................... 18 30 12
ABSTAINING.................................................. 6 10 4
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Total................................................... 60 100 40
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Example 2: A Covered Member holds 100 shares of an Exchange-listed
security on behalf of beneficial owners. As of the Calculation Date,
the Covered Member has received voting instructions for 3 shares and
has received no voting instructions for the remaining 97 shares. The
allocation would be calculated as follows:
[[Page 35596]]
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Initial
Instructed Instructed vote allocation of Rounded
Voting category shares distribution (%) uninstructed allocation
shares
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FOR........................................ 1 33.33 32.33 32
AGAINST.................................... 1 33.33 32.33 32
ABSTAINING................................. 1 33.33 32.33 33
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Total.................................. 3 100 97 97
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Background and History of Broker Discretionary Voting
The proposed rule should be understood against the historical
development of broker discretionary voting and the modern street-name
holding system. The Commission has described NYSE's broker-
discretionary voting rule as dating back to 1937, reflecting a long-
standing accommodation to the intermediated ownership structure. In the
street-name holding system, the broker, bank, or nominee generally
appears as the shareholder of record, while the underlying investor
with economic ownership is the beneficial owner.\9\
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\9\ See 2009 NYSE Approval Order, 74 FR at 33293-33294.
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Broker discretionary voting predates the modern street-name
ownership system, but its practical significance increased as share
ownership became increasingly intermediated. In the 2009 NYSE Approval
Order, the Commission cited data indicating that in 1976, approximately
71 percent of securities were held directly by record holders and
approximately 29 percent through securities intermediaries. By
contrast, the Commission cited data showing that, by the end of 2002,
DTC had on deposit approximately 84 percent of shares issued by
domestic NYSE-listed companies and approximately 88 percent of shares
issued by domestic Nasdaq-listed companies.\10\ As the proportion of
street-name holdings increased, the treatment of uninstructed shares by
intermediaries became more significant to shareholder meeting
mechanics. At the same time, the scope of matters treated as eligible
for broker discretionary voting continued to narrow.
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\10\ See 2009 NYSE Approval Order, 74 FR at 33294 n.11 (citing
Securities Exchange Act Release No. 50758 (November 30, 2004), 69 FR
70852 (December 7, 2004)) (noting that at the end of 2002, DTC had
on deposit approximately 84% of shares issued by domestic NYSE-
listed companies and approximately 88% of shares issued by domestic
Nasdaq-listed companies).
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The modern narrowing of broker discretionary voting began when NYSE
established its Proxy Working Group in 2005 to review the NYSE rules
regulating the proxy voting process, with a focus on NYSE Rule 452. The
Proxy Working Group recommended that director elections should no
longer be treated as routine and that brokers should no longer be
permitted to vote shares for beneficial owners who did not provide
specific voting instructions. In making that recommendation, the Proxy
Working Group also recognized that the proposed change could
significantly affect the director election process, including by
increasing the costs of uncontested elections and potentially
increasing the influence of proxy advisory firms, special-interest
groups or others with a particular agenda to challenge an incumbent
board at the expense of smaller shareholders.\11\
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\11\ See Securities Exchange Act Release No. 59464 (February 26,
2009), 74 FR 9864 (March 6, 2009) (SR-NYSE-2006-92) (summarizing the
Proxy Working Group report).
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NYSE filed SR-NYSE-2006-92 in October 2006. After several
amendments, the Commission approved the proposed rule change in the
2009 NYSE Approval Order, eliminating broker discretionary voting for
director elections at shareholder meetings held on or after January 1,
2010, subject to the investment company exception. The Commission
received 153 comment letters from 137 commenters on the proposal.\12\
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\12\ See 2009 NYSE Approval Order, 74 FR at 33293 (noting the
Commission received 153 comment letters from 137 commenters).
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The Commission's approval order emphasized the importance of
shareholder enfranchisement and the relationship between voting
authority and economic interest. In approving the NYSE proposal, the
Commission stated that having shareholders with an economic interest in
the company vote the shares furthers the goal of enfranchising
shareholders as opposed to brokers without such economic interest.\13\
At the same time, the comment record reflected concerns regarding
quorum, solicitation costs, retail participation, proxy-advisor
influence, and related aspects of the broader proxy voting process.\14\
Two Commissioners dissented, based in part on their concerns that
eliminating broker discretionary voting could affect retail shareholder
participation, quorum, solicitation costs, and the relative influence
of third parties.\15\
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\13\ See 2009 NYSE Approval Order, 74 FR at 33296 (noting that
voting should be connected to those with economic interest).
\14\ See 2009 NYSE Approval Order, 74 FR at 33296-33298
(summarizing comment record concerns regarding quorum, solicitation
costs, retail participation, and the influence of third parties).
\15\ See Statement of Commissioner Troy A. Paredes at Open
Meeting, Statement at SEC Open Meeting (July 1, 2009) (``Paredes
Statement''), available at <a href="https://www.sec.gov/news/speech/2009/spch070109tap.htm">https://www.sec.gov/news/speech/2009/spch070109tap.htm</a>; Statement of Commissioner Kathleen L. Casey at
Open Meeting, Statement at SEC Open Meeting (July 1, 2009) (``Casey
Statement''), available at <a href="https://www.sec.gov/news/speech/2009/spch070109klc.htm">https://www.sec.gov/news/speech/2009/spch070109klc.htm</a>.
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2009 NYSE Rule 452 Comment Record on Proportional Voting
The comment file for the 2009 NYSE Rule 452 amendments also
demonstrates that proportional voting was a known and seriously
discussed alternative to both broker discretionary voting and the
complete exclusion of uninstructed shares. For example, the NYSE Proxy
Working Group stated in its 2009 comment letter that it had discussed
and considered proportional voting and that, following publication of
its 2006 report, the Securities Industry and Financial Markets
Association (``SIFMA'') issued a best-practices memo suggesting
uninstructed retail shares be voted in proportion to shares voted by
other retail shareholders rather than at the broker's discretion.\16\
The PWG Comment Letter further acknowledged that Broadridge data
suggested proportional voting had a significant impact on companies'
ability to attain a quorum, even if it had a limited impact on the
outcome of director elections.
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\16\ Letter from Larry W. Sonsini, Chairman, Proxy Working Group
of the New York Stock Exchange, to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission, dated March 25, 2009, SR-NYSE-
2006-92 (``PWG Comment Letter''), available at <a href="https://www.sec.gov/comments/sr-nyse-2006-92/nyse200692-66.pdf">https://www.sec.gov/comments/sr-nyse-2006-92/nyse200692-66.pdf</a>.
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Other commenters also addressed proportional voting, with several
commenters supporting proportional voting as an alternative to the NYSE
proposal, arguing that it could better
[[Page 35597]]
reflect retail shareholder sentiment and reduce concerns about quorum
and solicitation.\17\ Other commenters opposed proportional voting,
raising concerns about vote integrity, disproportionate influence, and
inconsistency with the principle commonly described as ``one share, one
vote.'' \18\
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\17\ See, e.g., 2009 NYSE Approval Order, 74 FR at 33305 nn.115-
116 (noting commenters that endorsed proportional voting in general
or supported it as an alternative to the NYSE proposal, including
the comment letter from R. Scott McMillen of the Charels Schwab
Corporation (the ``Schwab Letter'') available: <a href="https://www.sec.gov/comments/sr-nyse-2006-92/nyse200692-120.pdf">https://www.sec.gov/comments/sr-nyse-2006-92/nyse200692-120.pdf</a> (stating proportional
voting is ``a better first step'' than eliminating discretionary
broker voting), the PWG Comment Letter (expressing no objection to
SIFMA members implementing proportional voting), and the Broadridge
Letter); see also id. at 33305 n.119 (noting commenters that stated
proportional voting could provide a more accurate reflection of
retail shareholder sentiment than eliminating broker discretionary
voting).
\18\ See, e.g., 2009 NYSE Approval Order, 74 FR at 33305-33306
nn.123-127 (noting commenters opposing proportional voting on
grounds including vote integrity, disproportionate influence, and
inconsistency with the principle commonly described as ``one share,
one vote'').
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In its approval of the 2009 NYSE Approval Order, the Commission
also acknowledged concerns that proportional voting could have a
distortive impact depending on how it was implemented, including
whether the calculation reflected retail-only votes or a broader pool
of account holders. At the same time, the Commission did not conclude
that proportional voting was categorically inconsistent with the Act.
Rather, the Commission stated that the existence of other reasonable
alternatives did not render the NYSE proposal inconsistent with Section
6(b)(5).\19\
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\19\ See 2009 NYSE Approval Order, 74 FR at 33302 (stating that
``proportional voting could have a distortive impact, depending on
how it is implemented'' and that ``the fact that there may be other
reasonable alternatives does not mean that the rule change proposed
by the NYSE is inconsistent with Section 6(b)(5) of the Act''); see
also id. at 33302 n.129 (noting the Commission's specific
implementation concern that proportional voting calculations varied
depending on whether they reflected retail-only votes or a broader
pool of account holders).
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The Exchange's proposal to amend Rule 13.003 addresses the
implementation concerns reflected in the 2009 NYSE Approval Order.
Unlike voluntary or broker-specific proportional voting practices
discussed in 2009, proposed Rule 13.003(c) would prescribe a uniform
methodology, apply on a proposal-by-proposal basis, exclude shares held
or voted pursuant to fiduciary, advisory, ERISA, or other discretionary
authority, and require records of the proportional allocation
methodology.
Dodd-Frank Section 957 and Exchange Act Section 6(b)(10)
Following the 2009 amendments, the scope of broker discretionary
voting continued to narrow. Section 957 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act directed national securities
exchanges to adopt rules prohibiting members from voting uninstructed
shares in connection with director elections, executive compensation,
and other significant matters as determined by the Commission.\20\
Existing Rule 13.003(c) of the Exchange's rules reflects this
prohibition and is retained in the proposed rule change, re-lettered as
Rule 13.003(d).
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\20\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 957, 124 Stat. 1376, 1906 (2010), codified
at Exchange Act Section 6(b)(10), 15 U.S.C. 78f(b)(10).
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The Senate Report accompanying Section 957 framed the relevant
policy as preventing broker preferences from affecting the outcome of
votes. The report states that final vote tallies should reflect the
wishes of the beneficial owners of the stock, not those of the broker
holding the shares.\21\
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\21\ S. Rep. No. 111-176, at 136 (2010) (``Senate Report'').
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The Commission repeated that principle in approving the rule
changes that NYSE and Nasdaq proposed to address Section 957 of the
Dodd-Frank Act. In those orders, the Commission quoted the Senate
Report and concluded that NYSE's and Nasdaq's proposals furthered
investor protection and the public interest by assuring that votes on
matters covered by Section 6(b)(10) are made by those with an economic
interest in the company, rather than by a broker without such economic
interest.\22\
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\22\ See Securities Exchange Act Release No. 62874 (September 9,
2010), 75 FR 56154-57 (SR-NYSE-2010-59) (``NYSE Dodd-Frank Order'')
(approving NYSE's conforming amendment to Rule 452 to implement
Section 6(b)(10)); Securities Exchange Act Release No. 62992
(September 24, 2010), 75 FR 60844-46 (October 1, 2010) (SR-Nasdaq-
2010-114) (``Nasdaq Dodd-Frank Order'') (approving Nasdaq Rule 2251
conforming amendment, stating that ``the proposal will further
investor protection and the public interest by assuring that
shareholder votes on the election of the board of directors of an
issuer . . . and on executive compensation matters are made by those
with an economic interest in the company, rather than by a broker
that has no such economic interest, which should enhance corporate
governance and accountability to shareholders'').
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The Exchange recognizes that Section 6(b)(10) of the Exchange Act
requires the rules of a national securities exchange to prohibit any
member that is not the beneficial owner of a security registered under
Section 12 from granting a proxy to vote the security in connection
with a shareholder vote on specified matters, unless the beneficial
owner of the security has instructed the member to vote the proxy in
accordance with the voting instructions of the beneficial owner. The
proposed rule is designed to address that statutory concern by
eliminating Member discretion. A Covered Member would not select a
voting outcome, apply a house voting policy, follow management, or
follow a third-party recommendation. Instead, the Covered Member would
be required to apply a mandatory formula derived solely from voting
instructions submitted by participating beneficial owners.
Existing Rule 13.003(b)(iii) permits a Member to give a proxy
pursuant to the rules of another national securities exchange or
association of which the Member is a member. Proposed Rule 13.003(c)
would create a TXSE-specific requirement for covered Exchange-listed
securities and therefore applies notwithstanding Rule 13.003(b)(iii).
The Exchange is not proposing to eliminate Rule 13.003(b)(iii), as that
provision would continue to apply outside the scope of proposed Rule
13.003(c). Existing Rule 13.003(c), re-lettered as Rule 13.003(d),
would retain the Exchange's prohibition on discretionary voting for
matters covered by Exchange Act Section 6(b)(10). The proposed
amendment to re-lettered Rule 13.003(d) clarifies that the mandatory
proportional allocation required by proposed Rule 13.003(c) is not an
exercise of Member discretion.
This history informs the proposed rule. The proposed rule would
replace Member discretion with a mandatory, formula-driven allocation
based on voting instructions submitted by participating beneficial
owners. In doing so, the proposed rule is designed to reaffirm the
policy that vote treatment should be derived from beneficial-owner
preferences and not from Member judgment or preference.
Policy Considerations
The Exchange believes the proposed rule advances the policy
objectives underlying the Act and is consistent with both the
principles articulated by the Commission in the 2009 NYSE Approval
Order and by Congress in Section 957 of the Dodd-Frank Act. Depending
on the proposals on the ballot and their classification under NYSE Rule
452, the absence of voting instructions from a beneficial owner may
affect the determination of a quorum, increase the effective approval
threshold for a proposal, reduce the relative influence of beneficial
owners who submit voting instructions, or result in shares not being
represented at the meeting at all. The treatment of an
[[Page 35598]]
uninstructed share is therefore not neutral, it is determined by the
incidental composition of the meeting agenda and by classification
decisions made by another self-regulatory organization on a case-by-
case basis. Compounding this concern, the routine/non-routine
classification does not consistently track the practical or economic
significance of the proposal to beneficial owners and matters with
meaningful economic consequences, including reverse stock splits and
increases in authorized common stock for general corporate purposes,
some of which may be treated as routine and therefore subject to broker
discretionary voting.
The proposed rule addresses these concerns by replacing proposal-
dependent treatment with a uniform methodology that applies the same
formula to every matter submitted to a shareholder vote and that is
derived solely from the voting instructions submitted by participating
beneficial owners. In doing so, the proposed rule eliminates Member
discretion in the voting of uninstructed shares. Rather than voting in
accordance with its own judgment, the recommendations of the issuer's
management, the recommendations of any third party, or any house voting
policy, a Covered Member would apply a prescribed formula derived
solely from voting instructions submitted by participating beneficial
owners. In this respect, the proposed rule advances the principle that
the outcome of shareholder votes should be determined by the beneficial
owners rather than by intermediaries. The proposed rule applies that
principle uniformly to every matter submitted to a shareholder vote on
TXSE-listed securities, including matters that remain eligible for
broker discretionary voting under the current framework, and reflects
an approach that is not novel: proportional voting was identified as a
known alternative in the 2009 NYSE Rule 452 comment record, and certain
broker-dealers have voluntarily applied proportional methodologies when
exercising discretionary authority on routine matters.\23\
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\23\ See Schwab Letter.
---------------------------------------------------------------------------
The proposed rule is neutral as to voting choice. It does not favor
management, opposition, or any shareholder proponent, and does not
guarantee support for, or opposition to, any board recommendation. The
Exchange acknowledges that the proposed rule will have some effect on
voting outcomes, as any rule governing the treatment of uninstructed
shares necessarily does. The proposed rule is, however, structurally
neutral as among the parties seeking to influence those outcomes. Nor
does the proposed rule impair the rights of any shareholder or
shareholder proponent: it does not limit the ability of any shareholder
to vote, abstain, withhold, or otherwise provide voting instructions,
and it does not eliminate or restrict shareholder proposals or the
rights of any party to present matters to a vote. The proposed rule
preserves the distinction between affirmative silence (an instruction
to abstain or, in the case of director elections, to withhold) and non-
response, treating the former as an instruction reflected in the
allocation calculation in the same manner as a vote FOR or AGAINST, and
thereby prevents the dilution of the influence of beneficial owners who
have engaged with the proxy materials.
The proposed rule is also consistent with the policy reflected in
Section 957 of the Dodd-Frank Act, which directed national securities
exchanges to adopt rules prohibiting members from voting uninstructed
shares in connection with director elections, executive compensation,
and other significant matters as determined by the Commission. The
Senate Report accompanying Section 957 framed the relevant policy as
ensuring that final vote tallies reflect the wishes of the beneficial
owners of the stock rather than those of the broker holding the shares.
The proposed rule reaffirms that policy and extends its underlying
principle to the matters that remain eligible for broker discretionary
voting under the current framework, including ratification of auditors,
certain stock splits and reverse stock splits, increases in authorized
common stock, adjournments, and a limited number of other matters. The
Exchange notes that Section 957 does not prescribe how uninstructed
shares should or should not be treated outside those covered matters,
and notwithstanding the scope of its specific prohibitions, the
proposed rule operates within the latitude left by the statute. By
eliminating the variation in voluntary proportional voting practices
that has developed under the current framework and reducing reliance on
proposal-by-proposal classification determinations by another self-
regulatory organization, the proposed rule provides a uniform,
transparent, and consistently applied approach to the treatment of
uninstructed shares in TXSE-listed securities.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\24\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\25\ in particular, in that it
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 market
system, and, in general, to protect investors and the public interest.
The Exchange also believes that the proposed rule change is consistent
with Section 6(b)(10) of the Act,\26\ which addresses the voting of
proxies on behalf of beneficial owners by members of national
securities exchanges.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78f(b).
\25\ 15 U.S.C. 78f(b)(5).
\26\ 15 U.S.C. 78f(b)(10).
---------------------------------------------------------------------------
The Exchange believes the proposed rule is consistent with Section
6(b)(5) because it replaces a proposal-dependent framework for the
treatment of uninstructed shares with a uniform methodology that
applies the same formula to every matter submitted to a shareholder
vote. Under the current framework, the absence of voting instructions
from a beneficial owner may, depending on the proposals on the ballot
and their classification under NYSE Rule 452, affect the determination
of a quorum, increase the effective approval threshold for a proposal,
reduce the relative influence of beneficial owners who submit voting
instructions, or result in shares not being represented at the meeting
at all. The proposed rule removes these proposal-dependent effects by
prescribing a single methodology that applies to every matter submitted
to a vote and that is derived solely from the voting instructions
submitted by participating beneficial owners. The Exchange believes
that this uniform treatment promotes just and equitable principles of
trade and removes impediments to a free and open market by ensuring
that the treatment of uninstructed shares is determined by a
transparent and consistently applied formula rather than by the
composition of the meeting agenda and the classification decisions of
another self-regulatory organization.
The Exchange further believes the proposed rule is consistent with
Section 6(b)(5) because it protects investors and the public interest
by eliminating a Covered Member discretion in the voting of
uninstructed shares and by
[[Page 35599]]
ensuring that the voting instructions of participating beneficial
owners are the only inputs to the allocation of a Covered Member. A
Covered Member would not vote in accordance with its own judgment, the
recommendations of the issuer's management, the recommendations of any
third party, or any house voting policy. The Covered Member would apply
a prescribed formula derived solely from voting instructions submitted
by participating beneficial owners. In this respect, the proposed rule
advances the principle, articulated by the Commission in the 2009 NYSE
Approval Order, that the outcome of shareholder votes should be
determined by those with an economic interest in the issuer rather than
by intermediaries without such an interest, and applies that principle
uniformly to every matter submitted to a vote, including matters that
remain eligible for broker discretionary voting under the current
framework. The proposed rule is also neutral as to voting direction. It
does not favor management, opposition, or any shareholder proponent,
and does not guarantee support for, or opposition to, any board
recommendation, rather, the allocation moves in the direction of the
instructions submitted by participating beneficial owners. The proposed
rule does not impair the rights of any shareholder or shareholder
proponent, as it does not limit the ability of any shareholder to vote,
abstain, withhold, or otherwise provide voting instructions, nor does
it eliminate or restrict shareholder proposals or the rights of any
party to present matters to a vote. The proposed rule preserves the
distinction between affirmative silence (an instruction to abstain or,
in the case of director elections, to withhold) and non-response,
treating the former as an instruction reflected in the allocation
calculation in the same manner as a vote FOR or AGAINST, and thereby
prevents the dilution of the influence of beneficial owners who have
engaged with the proxy materials.
The Exchange believes the proposed rule is consistent with Section
6(b)(10) because it does not authorize Members that are not beneficial
owners to exercise discretionary voting authority on the matters
covered by that provision in the absence of beneficial-owner
instructions. The Exchange is retaining the existing prohibition
required by Section 6(b)(10) in re-lettered Rule 13.003(d), which
carries forward the substance of existing Rule 13.003(c) without
modification of its scope. The mandatory proportional allocation
required by proposed Rule 13.003(c) is consistent with Section 6(b)(10)
because it does not involve the exercise of Member discretion. A
Covered Member would not select a voting outcome, apply a house voting
policy, follow management, or follow a third-party recommendation, but
would instead apply a mandatory formula derived exclusively from voting
instructions submitted by participating beneficial owners.\27\ The
proposed rule expressly clarifies in re-lettered Rule 13.003(d) that
the mandatory proportional allocation required under proposed Rule
13.003(c) does not constitute the granting of a proxy to vote at the
Member's discretion because the Covered Member exercises no judgment,
preference, or discretion in determining the votes cast for the
uninstructed shares.
---------------------------------------------------------------------------
\27\ The Exchange notes that the Commission has previously
approved proportional voting for auction rate preferred securities.
See Securities Exchange Act Release No. 37015 (March 22, 1996), 61
FR 14183 (March 29, 1996) (SR-NYSE-96-02).
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The Exchange further believes the proposed rule is consistent with
the policy reflected in Section 957 of the Dodd-Frank Act, which
directed national securities exchanges to adopt rules prohibiting
members from voting uninstructed shares in connection with director
elections, executive compensation, and other significant matters as
determined by the Commission. The Senate Report accompanying Section
957 framed the relevant policy as ensuring that final vote tallies
reflect the wishes of the beneficial owners of the stock rather than
those of the broker holding the shares, and the Commission reiterated
this principle in approving the NYSE and Nasdaq conforming rule
amendments. The proposed rule reaffirms that policy and extends its
underlying principle to the matters that remain eligible for broker
discretionary voting under the current framework, including
ratification of auditors, certain stock splits and reverse stock
splits, increases in authorized common stock, adjournments, and a
limited number of other matters. The Exchange notes that Section 957
does not prescribe how uninstructed shares should or should not be
treated outside the scope of its specific prohibitions, and the
proposed rule operates within the latitude left by the statute.
The Exchange acknowledges that the Commission considered
proportional voting in the 2009 NYSE Rule 452 proceeding and did not
adopt it at that time. The Commission did not, however, conclude that
proportional voting was categorically inconsistent with the Act;
rather, the Commission stated that the existence of other reasonable
alternatives did not render the NYSE proposal inconsistent with Section
6(b)(5). The Exchange believes the proposed rule addresses the
implementation concerns reflected in the comment record of that
proceeding. Unlike the voluntary or broker-specific proportional voting
practices discussed in 2009, proposed Rule 13.003(c) prescribes a
uniform methodology, applies on a proposal-by-proposal basis, excludes
shares held or voted pursuant to fiduciary, advisory, ERISA, or other
discretionary authority, requires Covered Members to maintain records
of the proportional allocation methodology applied, and operates within
the prohibitions of Section 6(b)(10) by eliminating Member discretion
entirely.
Finally, the Exchange believes that the proposed corresponding
numbering changes are consistent with the Act because they make the
Exchange's Rules more clear and understandable.
For these reasons, the Exchange believes that the proposed changes
are consistent with the Act.
(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.
The proposed rule applies uniformly to all Members that hold shares
of TXSE-listed equity securities on behalf of beneficial owners. All
Covered Members are subject to the same proportional allocation
methodology and the same recordkeeping requirements. The proposed rule
does not advantage any Member or class of Members relative to any
other, and it does not impose differential obligations based on Member
size, business model, or customer composition. Accordingly, the
Exchange does not believe the proposed rule imposes any burden on
intramarket competition.
The proposed rule also does not impose any burden on intermarket
competition. The proposed rule governs the conduct of TXSE Members in
connection with the voting of uninstructed shares of TXSE-listed equity
securities. Other exchanges may at any time choose to adopt this
proposal, retain existing rules, or otherwise modify its own rules in
this area. To the extent the proposed rule reflects a different
approach to the treatment of uninstructed shares than the approach
adopted by other national securities exchanges, the Exchange believes
that such differentiation is consistent with the purposes of the Act
[[Page 35600]]
and reflects appropriate competition among self-regulatory
organizations in establishing the rules applicable to securities listed
on their respective markets.
The Exchange does not believe the proposed rule imposes any burden
on competition among issuers. The proposed rule applies uniformly to
all TXSE-listed equity securities subject to its scope and does not
distinguish among issuers based on size, industry, capital structure,
or any other characteristic. The proposed rule does not alter the
substantive rights of issuers, shareholders, or shareholder proponents,
and does not affect the ability of any issuer to submit any matter to a
shareholder vote or the ability of any shareholder to vote, abstain,
withhold, or otherwise provide voting instructions on any such matter.
For the foregoing reasons, 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
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate 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 or disapprove such proposed rule change; or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3f4d4a535a125c5052525a514b4c7f4c5a5c11585049"><span class="__cf_email__" data-cfemail="5725223b327a34383a3a323923241724323479303821">[email protected]</span></a>. Please include
file number SR-TXSE-2026-008 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-TXSE-2026-008. This file
number should be included on the subject line if email 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 website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-TXSE-2026-008 and should be submitted on
or before July 2, 2026.
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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Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-11682 Filed 6-10-26; 8:45 am]
BILLING CODE 8011-01-P
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