[Federal Register Volume 78, Number 176 (Wednesday, September 11, 2013)]
[Notices]
[Pages 55766-55769]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-22058]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70327; File No. SR-Phlx-2013-85]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 640, Continuing Education for Registered Persons and Adopt a
Corresponding Fee
September 5, 2013.
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 August 22, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed rule change as described in Items I and II, below, which Items
have been prepared by the Exchange. Phlx has designated the proposed
rule change as constituting a non-controversial rule change under
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6)
thereunder,\4\ 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\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\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
The Exchange proposes to amend Rule 640, Continuing Education for
Registered Persons, as described below, and to adopt a corresponding
fee.
The text of the proposed rule change is below; proposed new
language is italicized; proposed deletions are in brackets.
* * * * *
Rule 640. Continuing Education for Registered Persons
(a) Regulatory Element
(1) Requirements--No member organization shall permit any
registered person to continue to, and no registered person shall
continue to, perform duties as a registered person, unless such person
has complied with the
[[Page 55767]]
continuing education requirements of paragraph (a) of this Rule.
Each registered person shall complete the Regulatory Element of the
continuing education program on the occurrence of their second
registration anniversary date(s), and every three years thereafter or
as otherwise prescribed by the Exchange. On each occasion, the
Regulatory Element must be completed within 120 days after the person's
registration anniversary date. A person's initial registration date,
also known as the ``base date,'' shall establish the cycle of
anniversary dates for purposes of this Rule.
Content. The content of the Regulatory Element of the program shall
be determined by the Exchange for each registration category of persons
subject to the Rule. The following Regulatory Elements administered by
FINRA shall be required:
Persons registered solely as Proprietary Traders pursuant to Rule
613(f) must complete the S501.
Persons registered as General Securities Representatives pursuant
to Rule 613(e) must complete the S101.
Persons registered in a supervisory capacity pursuant to Rules 611
and 612 must complete the S201.
* * * * *
NASDAQ OMX PHLX LLC \1\ PRICING SCHEDULE
ALL BILLING DISPUTES MUST BE SUBMITTED TO THE EXCHANGE IN WRITING
AND MUST BE ACCOMPANIED BY SUPPORTING DOCUMENTATION. ALL DISPUTES MUST
BE SUBMITTED NO LATER THAN SIXTY (60) DAYS AFTER RECEIPT OF A BILLING
INVOICE, EXCEPT FOR DISPUTES CONCERNING NASDAQ OMX PSX FEES,
PROPRIETARY DATA FEED FEES AND CO-LOCATION SERVICES FEES. AS OF JANUARY
3, 2011, THE EXCHANGE WILL CALCULATE FEES ON A TRADE DATE BASIS
* * * * *
VII. OTHER MEMBER FEES
A. OPTION TRADING FLOOR FEES
No change.
B. PORT FEES
No change.
C. FINRA Fees
Continuing Education Fees [$75.00]
The Continuing Education Fee will be assessed as to each
individual who is required to complete the Regulatory Element of the
Continuing Education Requirements pursuant to Exchange Rule 640. This
fee is paid directly to FINRA.
$60.00 for each individual who is required to complete the
Proprietary Trader Regulatory Element (S501).
$100.00 for each individual who is required to complete the S101 or
S201.
FINRA, on behalf of the Exchange, will bill and collect these fees
The following fees will be collected and retained by FINRA via the
Web CRD registration system for the registration of associated persons
of Exchange members that are not also FINRA members:
(b)-(c) No change.
* * * * *
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 codify in Rule 640
the specific continuing education requirements that currently apply and
to adopt a continuing education requirement for persons registered as
Proprietary Traders. The Exchange also proposes to adopt a fee for the
new continuing education program applicable to Proprietary Traders.
The Exchange adopted the Proprietary Trader \5\ registration in
2012, working with various other exchanges and Financial Industry
Regulatory Authority (``FINRA''). At that time, the Exchange stated
that, as a result of the new registration requirements, additional
persons will become subject to the Exchange's continuing education
requirements in Rule 640. The Exchange stated that it would announce to
the membership when these new requirements will be implemented and
available for member organizations to access.\6\
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\5\ A Proprietary Trader is a person who is engaged solely in
proprietary trading, market making or effecting transactions on
behalf of a broker-dealer account. Phlx Rule 613(f).
\6\ See Securities Exchange Act Release No. 66840 (April 20,
2012), 77 FR 25003 (April 26, 2012) (SR-Phlx-2012-23).
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At this time, the new continuing education program for Proprietary
Traders will soon become available and will be administered by FINRA.
The new program, the S501, is intended to address the specific
continuing education of Proprietary Traders, based on the content
outline for the Series 56 exam, which covers the main categories of
rules and regulations generally applicable to such persons.\7\ The
Continuing Education Regulatory Element is a computer-based education
program administered by FINRA on behalf of the Exchange to help ensure
that registered persons are kept current on regulatory, compliance and
trading practice matters in the industry.
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\7\ These generally include recordkeeping and recording
requirements, types and characteristics of securities and
investments, trading practices and display execution and trading
systems. See Securities Exchange Act Release No. 66645 (March 22,
2012), 77 FR 19042 (March 29, 2012) (SR-Phlx-2012-37).
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The Exchange proposes to amend Rule 640(a) to specify the required
Regulatory Element for each category of registered persons. Currently,
Rule 640(a) provides that no member organization shall permit any
registered person to continue to, and no registered person shall
continue to perform duties as a registered person, unless such person
has complied with the continuing education requirements of paragraph
(a).\8\ Each registered person shall complete the Regulatory Element of
the continuing education program on the occurrence of their [sic]
second registration anniversary date(s), and every three years
thereafter or as otherwise prescribed by the Exchange. On each
occasion, the Regulatory Element must be completed within 120 days
after the person's registration anniversary date. A person's initial
registration date, also known as the ``base date,'' shall establish the
cycle of anniversary dates for purposes of this
[[Page 55768]]
Rule. This applies to persons registered as Proprietary Traders as
well.
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\8\ Rule 640.01 exempts most floor persons from this
requirement. Nevertheless, pursuant to Rule 625, Phlx requires
periodic mandatory training. Training topics include, but are not
limited to, training related to that person's function at the
Exchange, changes in existing automated systems or any new
technology that is utilized by the Exchange, compliance with
Exchange Rules and federal securities laws, and issues related to
conduct, health and safety on the trading floor. In addition, floor
members shall complete mandatory training programs, on at least a
semi-annual basis, that address compliance with the federal
securities laws and the Exchange's Rules in place to prevent and
deter unlawful trading by floor members.
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The Rule further provides that the content of the Regulatory
Element of the program shall be determined by the Exchange for each
registration category of persons subject to the Rule. The Exchange now
proposes to make this a separate ``Content'' section and to make clear
which specific programs are required, including both existing programs
(S101 and S201) as well as the new Proprietary Trader continuing
education program (S501). The following Regulatory Elements
administered by FINRA shall be required:
Persons registered solely as Proprietary Traders pursuant to
Rule 613(f) must complete the S501.
Persons registered as General Securities Representatives
pursuant to Rule 613(e) must complete the S101.
Persons registered in a supervisory capacity pursuant to Rules
611 and 612 must complete the S201.
The Exchange believes that specifying the applicable Regulatory
Element in the Rule should be helpful to members and member
organizations in complying with the Rule. Only one Regulatory Element
is required. For example, members registered as supervisors are subject
to the S201 only; they do not also have to complete the Regulatory
Element applicable to their prerequisite registration, such as the S501
or the S101.\9\ This proposal does not change the registration
requirements.
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\9\ In the event that a person is registered both as a
Proprietary Trader and a General Securities Representative, only one
Regulatory Element is required--the ``higher'' of the two, which is
the S101.
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The Exchange also proposes to adopt a fee applicable to Proprietary
Trader Regulatory Element. Currently, the applicable fee for the
Regulatory Element (S101 and S201) is $100.\10\ The Exchange proposes
to adopt a $60.00 fee for the S501. FINRA administers these programs on
behalf of the exchanges and therefore the fees are payable directly to
FINRA.\11\ The $60 fee will only be used for the administration of the
S501 versus the S101 which utilizes the $100 fee for both development
and administration. The costs associated with the development of the
S501 are included in the examination fee.
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\10\ The Exchange's fee schedule incorrectly states that the fee
is $75.00; the Exchange is proposing to correct this.
\11\ The S501 was established for those registrants who have
passed the Series 56 Qualification Exam as reflected in WebCRD.
WebCRD is the central licensing and registration system for the U.S.
securities industry. The CRD system enables individuals and firms
seeking registration with multiple states and self-regulatory
organizations to do so by submitting a single form, fingerprint card
and a combined payment of fees to FINRA. Through the CRD system,
FINRA maintains the qualification, employment and disciplinary
histories of registered associated persons of broker-dealers.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \12\ in general, and furthers the objectives of: (1)
Section 6(c)(3)(B) of the Act,\13\ 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,\14\ 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
requiring registered persons to complete the applicable continuing
education program. The Exchange believes that a strong continuing
education program should bolster the integrity of the Exchange by
helping to ensure that all associated persons engaged in a securities
business are, and will continue to be, properly trained and qualified
to perform their functions. The Exchange does not believe that the
proposal is unfairly discriminatory with respect to persons registered
as a General Securities Representative who function in their current
job as a Proprietary Trader, even though these persons are subject to
the more stringent S101 rather than the S501; such persons are
registered and qualified (Series 7) in a ``higher'' capacity and are
therefore qualified to function in a capacity other than a Proprietary
Trader, whether they choose to or not. Accordingly, requiring the S101
for such persons is appropriate and facilitates them being able to
maintain their ``higher'' registration. The Exchange also believes that
permitting General Securities Representatives functioning as
Proprietary Traders to be [sic] complete the S501 would be confusing
and difficult to monitor.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78(c)(3)(B).
\14\ 15 U.S.C. 78f(b)(5).
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The Exchange also believes that the proposal furthers the
objectives of Section 6(b)(4) of the Act,\15\ in that it provides for
an equitable allocation of reasonable fees and other charges among
Exchange members and other persons using its facilities. Specifically,
the new $60 fee is applicable to persons registered as a Proprietary
Trader, which is a limited registration under Exchange rules.
Accordingly, the proposed S501 Regulatory Element specifically
correlates to the rules and obligations applicable to Proprietary
Traders, which are fewer than those applicable to persons registered in
other categories. Thus, the S501 is a more limited form of continuing
education. Therefore, the Exchange believes that the lower fee ($60
rather than $100) is reasonable.\16\ The proposed fee is equitable,
because it applies equally to all persons registered solely as
Proprietary Traders.
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\15\ 15 U.S.C. 78f(b)(4).
\16\ The Commission notes that in the Purpose section of this
filing, Phlx accurately states that the $100 fee for the S101 covers
the costs associated with both development and administration of the
continuing education program, while the $60 fee for the S501 only
covers the cost of administration.
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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. Because the Regulatory Element
is administered by FINRA, the fees are paid to FINRA, which does not
raise competition issues. All of the exchanges that recognize the
Proprietary Trader registration category are expected to adopt the same
continuing education fee. All Proprietary Traders, regardless of where
they are registered, will be subject to same continuing education
requirements and the same continuing education fees. Thus, the proposal
treats similarly situated persons in the same way.
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
Because the foregoing proposed rule change 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, it has become
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \17\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\18\
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\17\ 15 U.S.C. 78s(b)(3)(a)(ii).
\18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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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[[Page 55769]]
The Exchange has requested that the Commission waive the 30-day
operative delay. The proposed rule change: Specifies the continuing
education requirements that currently apply to registered persons;
adopts a continuing education requirement, the S501, and a related fee
for persons registered as Proprietary Traders; and corrects the
Exchange's fee schedule to reflect the proper fee, $100 rather than
$75, for the S101 and S201. Waiver of the operative delay would allow
the Exchange to clarify and correct its rules and implement the
proposed rule change at once, enabling its Members to comply with their
continuing education requirements in a timely manner, and thus is
consistent with the protection of investors and the public interest.
Therefore, the Commission designates the proposal operative upon
filing.\19\
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\19\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission will institute proceedings to determine whether the proposed
rule change should be approved or 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
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-Phlx-2013-85 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-Phlx-2013-85. 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 Room, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly.
All submissions should refer to File Number SR-Phlx-2013-85 and
should be submitted on or before October 2, 2013.
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\20\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Kevin M O'Neill,
Deputy Secretary.
[FR Doc. 2013-22058 Filed 9-10-13; 8:45 am]
BILLING CODE 8011-01-P