[Federal Register Volume 76, Number 156 (Friday, August 12, 2011)]
[Notices]
[Pages 50281-50283]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20579]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65055; File No. SR-NASDAQ-2011-106]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt a Limited Category of Principal Registration for Proprietary
Traders
August 8, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\, and Rule 19b-4\2\ thereunder, notice is hereby given that
on August 1, 2011, The NASDAQ Stock Market LLC (the ``Exchange'' or
``NASDAQ'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)
thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ is filing with the Commission a proposal to amend NASDAQ
Rule 1022, Categories of Principal Registration, to adopt a new limited
category of principal registration for proprietary traders, as
described further below. NASDAQ will implement the proposal upon notice
to its membership.
The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at NASDAQ's principal office, and at the
Commission's Public Reference Room.
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
The purpose of the proposed rule change is to recognize a new
category of limited principal registration. Specifically, NASDAQ
proposes to recognize the new Proprietary Trader Principal category as
a limited principal category in Rule 1022(h). Currently, NASDAQ Rule
1021 requires all persons engaged or to be engaged in the investment
banking or securities business of a member who are to function as
principals shall be registered as such with NASDAQ in the category of
registration appropriate to the function to be performed as specified
in Rule 1022. Before their registration can become effective, they
shall pass a Qualification Examination for Principals appropriate to
the category of registration as specified by the NASDAQ Board. Pursuant
to Rule 1021(b), persons associated with a member, enumerated in
subparagraphs (1) through (5) hereafter, who are actively engaged in
the management of
[[Page 50282]]
the member's investment banking or securities business, including
supervision, solicitation, conduct of business or the training of
persons associated with a member for any of these functions are
designated as principals. Such persons shall include: (1) Sole
Proprietors; (2) Officers; (3) Partners; (4) Managers of Offices of
Supervisory Jurisdiction; and (5) Directors of Corporations.
Rule 1021(e), Requirement of Two Registered Principals for Members,
spells out that a NASDAQ member, except a sole proprietorship, shall
have at least two officers or partners who are registered as principals
with respect to each aspect of the member's investment banking and
securities business pursuant to the applicable provisions of Rule 1022;
provided, however, that a proprietary trading firm with 25 or fewer
registered representatives shall only be required to have one officer
or partner who is registered as a principal.
Rule 1022 lists the categories of principal registration. In
addition to ``General Securities Principal,'' which is the broadest
category, there are three [sic] limited categories of principal
registration: Financial and Operations, Introducing Broker/Dealer
Financial and Operations, Investment Company and Variable Contracts
Products, and General Securities Sales Supervisor.
NASDAQ proposes to add another category of limited principal. The
new Proprietary Trader Principal category would be available for
persons whose supervisory responsibilities in the investment banking
and securities business are limited solely to the activities of a
member that involve proprietary trading. Furthermore, it would require
that he or she be registered pursuant to NASDAQ rules as a Proprietary
Trader,\5\ be qualified to be so registered by passing the Series 24
examination, and not function in a principal capacity with
responsibility over any area of business activity other than
proprietary trading.
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\5\ See NASDAQ Rule 1032(c).
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NASDAQ has been working with other exchanges and the Financial
Industry Regulatory Authority (``FINRA'') to develop this registration
category. This category is in lieu of registration as a General
Securities Principal, for which the prerequisite qualification
examination is the Series 7. The appropriate qualification examination
for the proposed new registration category of Proprietary Trader
Principal is the Series 24, which is the same qualification required
for registration as a General Securities Principal; no new examination
has been developed. However, the prerequisite examination for the new
Proprietary Trader Principal category is the new Series 56.
Accordingly, a person who has passed the Series 56 can register as a
Proprietary Trader Principal and take the Series 24 examination, under
this proposal, but cannot register as a General Securities Principal
without first qualifying as a General Securities Representative and
passing the Series 7. Thus, although the Series 24 will now be the
appropriate qualification examination for both categories (General
Securities Principal and Proprietary Trader Principal), different
prerequisites apply and different registration categories result.
NASDAQ believes that the new principal registration category is an
appropriate corollary to the new Proprietary Trader representative
registration category, filed separately, and reflects a substantial
joint-exchange effort to develop a registration framework specific to
principals supervising persons engaged in proprietary trading, market
making and effecting transactions on behalf of broker-dealers.
Furthermore, NASDAQ believes that the Series 24 is the appropriate
examination for Proprietary Trader Principals, because it tests
knowledge and understanding of supervision-related rules.
The Proprietary Trader Principal registration counts towards the
two principal requirements in Rule 1021(e). The Exchange believes that
this is appropriate because the same comprehensive qualification
examination, the Series 24, is required.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \6\ in general, and furthers the objectives of: (1)
Section 6(c)(3)(B) of the Act,\7\ pursuant to which a national
securities exchange prescribes standards of training, experience and
competence for members and their associated persons; and (2) Section
6(b)(5) of the Act,\8\ in that it is designed, among other things, to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, 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, by
offering a new, limited principal registration category to NASDAQ
members. NASDAQ believes that the requirements of this new category
should help ensure that principals who supervise proprietary traders
and proprietary trading are, and will continue to be, properly trained
and qualified to perform their functions, because the new Proprietary
Trader Principal category is limited and tailored to persons
supervising proprietary trading functions.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78(c)(3)(B) [sic].
\8\ 15 U.S.C. 78f(b)(5).
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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 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
Pursuant to Section 19(b)(3)(A) of the Act\9\ and Rule 19b-4(f)(6)
\10\ thereunder, the Exchange has designated this proposal as one that
effects a change that: (i) Does not significantly affect the protection
of investors or the public interest; (ii) does not impose any
significant burden on competition; and (iii) by its terms, does not
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest. Rule 19b-4(f)(6) \11\
requires a self-regulatory organization to give the Commission written
notice of its intent to file the proposed rule change at least five
business days prior to the date of filing of the proposed rule change,
or such shorter time as designated by the Commission. The Exchange has
satisfied this requirement.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6).
\11\ Id.
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Under Rule 19b-4(f)(6) of the Act,\12\ a proposal does not become
operative for 30 days after the date of its filing, or such shorter
time as the Commission may designate if consistent with the protection
of investors and the public interest. NASDAQ requests a waiver of the
30-day operative delay in order to make the new registration available
near the same time as other exchanges. The Commission is waiving the
30-day operative period for this filing so that it
[[Page 50283]]
will become operative upon filing.\13\ The Commission believes waiving
the 30-day operative delay is consistent with the protection of
investors and the public interest as the waiver will allow the Exchange
to make the new registration category available near the same time as
other exchanges. The Commission, therefore, designates the proposed
rule change to be operative upon filing with the Commission.
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\12\ Id.
\13\ For purposes only of waiving the operative delay of this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f). See also 17 CFR 200.30-3(a)(59).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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 protected]. Please include
File Number SR-NASDAQ-2011-106 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2011-106. 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 Web site viewing and printing 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-NASDAQ-2011-106 and
should be submitted on or before September 2, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-20579 Filed 8-11-11; 8:45 am]
BILLING CODE 8011-01-P