[Federal Register Volume 77, Number 40 (Wednesday, February 29, 2012)]
[Notices]
[Pages 12347-12350]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-4765]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66452; File No. SR-NYSEARCA-2012-15]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending
Registration Requirements for Traders and Removing Obsolete References
to Paper Registration Submissions
February 23, 2012.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on February 9, 2012, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \4\ and Rule 19b-4(f)(6) thereunder,\5\
which renders the proposal effective upon filing with the Commission.
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\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ 15 U.S.C. 78s(b)(3)(A)(iii).
\5\ 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
The Exchange proposes to amend its registration requirements for
traders and
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remove references to paper registration submissions that are no longer
used. The text of the proposed rule change is available at the
Exchange, the Commission's Public Reference Room, and www.nyse.com.
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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its registration requirements for
traders and remove references to paper registration submissions that
are no longer used.\6\ Specifically, NYSE Arca proposes to amend its
rules in order to (1) relocate and revise the registration requirements
for traders currently found in NYSE Arca Options Rule 2.5(b)(10)(A),
(2) remove a provision that limits those registration requirements to
traders of member organizations for which the Exchange is the
Designated Examining Authority (``DEA''), (3) adopt an alternative
Proprietary Trader registration category for those individuals who are
associated with OTP Holders and OTP Firms \7\ and who solely conduct a
business in proprietary trading, (4) remove references in NYSE Arca
Options Rule 2.23 to paper registration submissions that are no longer
used, and (5) make certain technical and conforming changes.
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\6\ The Exchange's affiliate, NYSE Amex LLC (``NYSE Amex''), has
submitted a substantially similar rule filing concerning trader
registration requirements. See SR-NYSEAmex-2012-11.
\7\ Pursuant to NYSE Arca Options Rule 1.1(q)-(r), OTP Holders
and OTP Firms have status as ``members'' of the Exchange as that
term is defined in Section 3 of the Securities Exchange Act of 1934,
as amended (the ``Act'').
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Registration of Traders
NYSE Arca Options Rule 2.5 generally concerns the denial of or
conditions to trading privileges under an Options Trading Permit. NYSE
Arca Options Rule 2.5(b)(10)(A) requires that all traders of member
organizations for which the Exchange is the DEA must successfully
complete the General Securities Registered Representative Examination
(``Series 7'') unless an exemption applies. The Exchange proposes to
move the text of NYSE Arca Options Rule 2.5(b)(10)(A) to NYSE Arca
Options Rule 2.23, which concerns the registration of employees of OTP
Firms, and which the Exchange believes is a more logical location for
the rule text.
NYSE Arca also proposes to amend that rule text by removing the
provision that limits examination requirements to traders of member
organizations for which the Exchange is the DEA and to make a
conforming change by deleting current NYSE Arca Options Rule 2.23(b)(i)
and (ii). Under proposed NYSE Arca Options Rule 2.23(b), all traders
associated with OTP Holders and OTP Firms, registered with the Exchange
will now be required to pass an applicable examination. This expanded
examination requirement should help ensure that all registered traders
on NYSE Arca, will continue to be, properly registered, trained and
qualified to perform their functions.
A requirement that all traders of member organizations register and
be subject to an applicable examination, not just those for which an
exchange is the DEA, would be consistent with the registration
requirements of other self-regulatory organizations (``SROs''),
including The Chicago Board Options Exchange (``CBOE'') and NYSE
Amex.\8\
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\8\ See CBOE Rule 3.6A Commentary .06 and NYSE Amex Rule 341(a).
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Proprietary Trader Registration
NYSE Arca Options Rule 2.5(b)(10)(A) currently provides that
certain traders are exempted from the requirement to successfully
complete the Series 7, namely (i) An individual registered as a Market
Maker or Market Maker Authorized Trader, (ii) an individual registered
as a Floor Broker, and (iii) an individual registered with the Exchange
as a Floor Clerk. The Exchange proposes to move the first two
exemptions to proposed NYSE Arca Options Rule 2.23(b)(2) and add an
exemption for Proprietary Traders.\9\
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\9\ The Exchange is not moving the reference to Floor Clerks
[sic] because they are not traders. Floor Clerks are subject to
registration on Web CRD but not subject to an examination
requirement.
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NYSE Arca has been working with other SROs, some of which have
recently enhanced their registration requirements for associated
persons,\10\ to develop the content outline and the qualification
examination, the Series 56, which would be applicable to Proprietary
Traders. Certain exchanges have submitted filings to the Commission to
utilize the Series 56.\11\ NYSE Arca expects to describe the Series 56
in detail and submit the content outline for it to the Commission in a
separate filing, as well as make the examination and alternative
registration category available in Web CRD.\12\ Accordingly, NYSE Arca
is amending its rules to recognize the Proprietary Trader registration
category and the Series 56.
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\10\ See Securities Exchange Act Release Nos. 63843 (Feb. 4,
2011), 76 FR 7884 (Feb. 11, 2011) (SR-ISE-2010-115), and 63314 (Nov.
12, 2010), 75 FR 70957 (Nov. 19, 2010) (SR-CBOE-2010-084).
\11\ See e.g., Securities Exchange Act Release Nos. 64699 (June
17, 2011), 76 FR 36945 (June 23, 2011) (SR-CBOE-2011-056), and 65054
(August 8, 2011), 76 FR 50277 (August 12, 2011) (SR-ISE-2011-36).
\12\ Web CRD is the central licensing and registration system
for the U.S. securities industry and its regulators.
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Under proposed NYSE Arca Options Rule 2.23(b)(2), the Exchange
would recognize a Proprietary Trader registration category for an
individual engaged in the purchase or sale of securities or other
similar instruments for the account of a member or member organization
with which he or she is associated, as an employee or otherwise, and
who does not transact any business with the public.\13\ A Proprietary
Trader would be required to be registered as such on Web CRD and pass
the Series 56 examination described above, but would not be permitted
to function in an agency capacity or otherwise conduct a public
business in securities.
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\13\ This is the same definition that NYSE Amex currently uses
for securities traders, and would not cover individuals who are
required to register as Market Makers or Market Maker Authorized
Traders. See Commentary .01 to NYSE Amex Options Rule 341. NYSE Amex
is proposing to redefine this category as ``Proprietary Trader'' and
recognize the Series 56 along with other exchanges. See supra note
6.
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NYSE Arca believes that the alternative limited registration
category and the qualification examination are appropriate because they
are tailored to proprietary trading functions. Presently, persons
engaged in proprietary trading on NYSE Arca at a firm for which the
Exchange is the DEA are required to pass the Series 7, unless an
exception applies. The Exchange believes that the Series 7 covers a
great deal of material that is not relevant to proprietary trading
functions. Instead, the Series 56 covers both equities and options
trading rules, but not all of the rules that are applicable to firms
and persons conducting a public business.
Many persons associated with OTP Holders and OTP Firms have
previously passed the Series 7. The proposed rule change would not
require those individuals currently engaged in proprietary trading who
have already
[[Page 12349]]
passed the Series 7 to register under the new category as Proprietary
Traders or to pass the Series 56 because the Exchange believes this
would be redundant. Persons who have passed the Series 7 may, of
course, engage in proprietary trading because the new Proprietary
Trader registration category is a limited registration category. Thus,
the proposal would not preclude associated persons from registering as
General Securities Representatives and passing the Series 7 examination
and then engaging in proprietary trading.
NYSE Arca expects that individuals might consider the category when
applying as an OTP Holder or OTP Firm once the category and examination
become available for use by NYSE Arca on Web CRD. Accordingly, the
Exchange believes that the category should be helpful to registering
those individuals conducting a business in proprietary trading, while
at the same time preserving the important goals of appropriate
registration and qualification for persons in the securities business.
Additionally, OTP Holders and OTP Firms who hire new associated persons
might choose to register them in the category.
The proposed rule change is not intended to replace the Series 7
requirement for all traders, but simply to offer an alternative to that
requirement for those qualified individuals who solely conduct a
business in proprietary trading and have shown their proficiency by
successfully passing the Series 56.
Paper Registration Submissions
NYSE Arca Options Rule 2.23(a) states that for registration
categories (e.g. Floor Clerk) not available electronically on CRD,
individuals must file directly with the Exchange a Form U4, any
required amendments, or registration documentation prescribed by the
Exchange. Because all NYSE Arca registration categories are now
available electronically on CRD, the Exchange proposes to delete this
text.
Technical and Conforming Changes
The Exchange proposes non-substantive technical changes, for
example, to delete the word ``Test'' as it is redundant and to reformat
some of the rule text simply for stylistic purposes. The Exchange also
proposes a conforming change to Commentary .01 of NYSE Arca Options
Rule 2.23 to correct a cross-reference to rule text that is being moved
from NYSE Arca Options Rule 2.5(b)(10)(A).\14\
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\14\ Commentary .01 currently provides that Market Makers,
Market Maker Authorized Traders, Floor Brokers, and Floor Clerks are
not subject to continuing education requirements; the Exchange is
not proposing any substantive change to this provision at this time.
However, Proprietary Traders will be subject to continuing education
requirements. The Exchange intends to add continuing education
requirements for Market Makers, Market Maker Authorized Traders,
Floor Brokers, and Floor Clerks in a separate filing in the future.
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Compliance Date
Following effectiveness of the proposed rule change, the Exchange
will issue a Regulatory Bulletin announcing the compliance date within
30 days from the operative date of the rule change.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \15\ in general, and furthers the objectives of (1)
Section 6(c)(3)(B) of the Act,\16\ 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,\17\ 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. The
Exchange believes that removing provisions that limit the registration
requirements to traders of member organizations for which the Exchange
is the DEA and instead requiring all traders associated with OTP
Holders and OTP Firms to be registered with the Exchange would allow
the Exchange to better monitor and regulate the activities of OTP
Holders and OTP Firms. The Exchange also believes that offering an
alternative limited registration category for Proprietary Traders
should help ensure that all associated persons engaged in a securities
business are, and will continue to be, properly registered, trained and
qualified to perform their functions, and will make NYSE Arca rules
consistent with other exchanges. The Exchange also notes that
relocating rule text to a more logical place in its rules and removing
outdated references to paper submissions that are no longer used will
add clarity to the Exchange's rules.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(c)(3)(B).
\17\ 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 that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule does not (i) Significantly
affect the protection of investors or the public interest; (ii) impose
any significant burden on competition; and (iii) become operative for
30 days from the date on which it was filed, or such shorter time as
the Commission may designate if consistent with the protection of
investors and the public interest, provided that the self-regulatory
organization has given 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 proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \18\ and Rule 19b-
4(f)(6) thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6).
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The Commission believes it is consistent with the protection of
investors and the public interest to waive the 30-day operative delay.
Waiver of the 30-day operative delay will enable associated persons of
Exchange firms to avail themselves of the limited Proprietary Trader
registration category, and qualify by taking the Series 56, as soon as
it becomes available. For these reasons, the Commission hereby waives
the operative delay.\20\
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\20\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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At any time within 60 days of the filing of such 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,
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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 email to [email protected]. Please include
File Number SR-NYSEARCA-2012-15 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-NYSEARCA-2012-15. 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 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 Section, 100 F Street
NE., Washington, DC 20549 on official business days between 10 a.m. and
3 p.m. Copies of the filing will also be available for inspection and
copying at the NYSE's principal office and on its Internet Web site at
www.nyse.com. 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-
NYSEARCA-2012-15 and should be submitted on or before March 21, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-4765 Filed 2-28-12; 8:45 am]
BILLING CODE 8011-01-P