[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62911-62915]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24552]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70598; File No. SR-NYSEARCA-2013-96]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending Rule 2.23
to Specify Applicable Continuing Education Requirements, Amending the
NYSE Arca Options Fee Schedule to Specify Corresponding CE Fees and to
Specify Fees for the Series 56 Examination
October 2, 2013.
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 September 19, 2013, 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. NYSE ARCA has designated the proposed rule change as
constituting a non-controversial rule change under Section
19(b)(3)(A)(iii) \4\ of the Act and Rule 19b-4(f)(6) \5\ thereunder,
which renders the filing 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 Rule 2.23 to specify applicable
continuing education (``CE'') requirements, (ii) [sic] amend the NYSE
Arca Options Fee Schedule (``Fee Schedule'') to specify corresponding
CE fees, and (iii) amend the Fee Schedule to specify fees for the
Series 56 examination. The text of the proposed rule change is
available on the Exchange's Web site at www.nyse.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
[[Page 62912]]
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 (i) amend Rule 2.23 to specify applicable
CE requirements, (ii) amend the Fee Schedule to specify corresponding
CE fees, and (iii) amend the Fee Schedule to specify fees for the
Series 56 examination.
CE Requirements
Rule 2.23(d) states that no OTP Firm or OTP Holder may permit any
registered person to continue to, and no registered person may continue
to, perform duties as a registered person unless such person has
complied with the CE requirements of the rule. Rule 2.23(d) specifies
the CE requirements for registered persons subsequent to their initial
qualification and registration. The requirements consist of a
Regulatory Element and a Firm Element.\6\ The Regulatory Element is a
computer-based education program administered by the Financial Industry
Regulatory Authority, Inc. (``FINRA''), on behalf of the Securities
Industry Council on Continuing Education, to help ensure that
registered persons are kept up to date on regulatory, compliance, and
sales practice matters in the industry.
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\6\ Currently, the Firm Element applies to any registered person
who has direct contact with customers in the conduct of the OTP
Firm's or OTP Holder's securities sales, trading or investment
banking activities, and to the immediate supervisors of such persons
(collectively called ``covered registered persons''). See Rule
2.23(d)(2)(A). The requirement stipulates that each OTP Firm and OTP
Holder must maintain a continuing and current education program for
its covered registered persons to enhance their securities
knowledge, skills, and professionalism. Each OTP Firm and OTP Holder
has the requirement to annually evaluate and prioritize its training
needs and develop a written training plan. See Rule
2.23(d)(2)(B)(i).
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There are currently three existing Regulatory Element programs: (1)
The S201 (``S201 CE Program'') for registered principals (e.g., General
Securities Principals and Limited Principals) and supervisors; (2) the
S106 (``S106 CE Program'') for persons registered only as Investment
Company Products/Variable Contracts Limited Representatives; and (3)
the S101 (``S101 CE Program'') for all other registered persons (e.g.,
General Securities Representatives). The Exchange proposes to enumerate
these existing programs in subsection (A) of Rule 2.23(d)(1).\7\
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\7\ Rule 2.23(d)(1)(A) is currently ``reserved,'' but would
reflect the proposed new rule text as a result of this proposed rule
change.
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The Exchange also proposes to specify the new S501 (``S501 CE
Program,'' and together with the S201, S106 and S101 CE Programs, ``CE
Programs'') for persons registered only as Proprietary Traders.\8\ This
would include registered Proprietary Traders who have successfully
completed the Proprietary Traders Examination (``Series 56
Examination'') \9\ as well as registered Proprietary Traders who have
completed the General Securities Registered Representative Examination
(``Series 7 Examination''), but who have only registered as Proprietary
Traders.\10\ Individuals who maintain any other registration would be
subject to the CE Program associated with such other registration.
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\8\ A Proprietary Trader is any person 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. The term ``Proprietary Trader'' does
not include a person who is required to be registered as a Market
Maker in accordance with Rule 6.33 or a Market Maker Authorized
Trader in accordance with Rule 6.34A. See Rule 2.23(b)(2)(C).
\9\ The Exchange previously amended its rules to prescribe the
Series 56 Examination as the qualifying examination for registered
Proprietary Traders. See Securities Exchange Act Release No. 66452
(February 23, 2012), 77 FR 12347 (February 29, 2012) (SR-NYSEArca-
2012-15). The Exchange stated in that proposal that it intended to
submit a separate filing in the future to apply CE requirements to
such persons. See id. at 12349, note 14.
\10\ For purposes of this filing, ``registration'' refers to the
operational/functional registration status in FINRA's Central
Registration Depository (``CRD[supreg]'') (e.g., Proprietary Trader
or General Securities Representative), not the qualification
examination(s) that a registered person has completed (e.g., the
Series 56 Examination or the Series 7 Examination).
All traders of OTP Holders and OTP Firms must successfully
complete the Series 7 Examination, except as provided in Rule
2.23(b)(2). See Rule 2.23(b)(1). However, an individual who has
successfully completed the Series 7 Examination who does not conduct
business with the public is permitted to register as a Proprietary
Trader, either exclusively or concurrently with registration as a
General Securities Representative, without successfully completing
the Series 56 Examination, which would be redundant.
If a person initially qualified as a Proprietary Trader by
taking the Series 7 Examination or otherwise previously maintained
both Series 7 and Series 56 qualifications, but was only maintaining
a Proprietary Trader registration when the CE requirement became
due, then completion of the S501 CE Program by such person would
satisfy his or her then-applicable CE requirement. However, upon re-
registering thereafter as a General Securities Representative, such
individual would be required to complete the S101 CE Program the
next time he or she became subject to CE.
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The S501 CE Program is a computer-based education program developed
by many of the self-regulatory organizations (``Participating SROs'')
\11\ and administered by FINRA to ensure that registered persons are
kept current on regulatory, compliance, and trading practice matters in
the industry. Unlike the other CE Programs, the S501 CE Program is not
part of the Uniform Continuing Education Program, which is developed
and maintained by the Securities Industry Regulatory Council on
Continuing Education. However, the S501 CE Program would logistically
operate as the current CE Programs do. Specifically, registered persons
would be required, through CRD, to complete the Regulatory Element of
the S501 CE Program on the second anniversary of the base date and then
every three years thereafter. In creating the S501 CE Program, the
Participating SROs determined that the current procedures of the other
CE Programs work well. The Securities Industry Regulatory Council on
Continuing Education has tailored the process of the other CE Programs
since their inception in a manner that has been successful. Thus, as
proposed, the S501 CE Program would work in the same manner. In
addition, consistency between the different programs would avoid
creating confusion among the registered persons and FINRA.
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\11\ The Participating SROs that have assisted with the
development of, and plan to administer, the Series 56 Examination
and S501 CE Program are the Exchange; C2 Options Exchange,
Incorporated (``C2''); Chicago Board Options Exchange, Incorporated
(``CBOE''); Chicago Stock Exchange, Inc. (``CHX''); New York Stock
Exchange LLC (``NYSE''); NYSE MKT LLC (``NYSE MKT''); The NASDAQ
Stock Market LLC (``NASDAQ''); National Stock Exchange, Inc.
(``NSX''); NASDAQ OMX BX, Inc. (``BX''); NASDAQ OMX PHLX LLC
(``PHLX''); BATS Y-Exchange, Inc. (``BATS Y''); BATS Exchange, Inc.
(``BATS''); EDGA Exchange, Inc. (``EDGA''); EDGX Exchange, Inc.
(``EDGX''); International Securities Exchange, LLC (``ISE''); BOX
Options Exchange, LLC (``BOX''); and Miami International Securities
Exchange LLC (``MIAX'').
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As proposed, registered Proprietary Traders would also be required
to complete the Firm Element outlined in Rule 2.23(d)(2). Although
registered Proprietary Traders, including those who have passed the
Series 56 Examination, do not interact with the public, the Exchange
believes that this
[[Page 62913]]
requirement is appropriate because it ensures that these registered
Proprietary Traders continue to enhance their securities knowledge,
skill, and professionalism. As stated in Rule 2.23(d)(2)(B)(ii), the
program should be tailored to fit the business of the OTP Holder or OTP
Firm. Thus, the Exchange believes that it is appropriate that
registered Proprietary Traders also complete the Firm Element.
The introduction of the S501 CE Program would allow the Exchange to
tailor its CE requirements more closely to those individuals who are
registered only as Proprietary Traders. More specifically, the Exchange
believes that the proposed rule change would allow persons registered
only as Proprietary Traders to complete a CE Program separate from
persons maintaining other registrations. For example, in comparison to
the Series 7 Examination, the Series 56 Examination is more closely
tailored to the practice of proprietary trading while the Series 7
Examination is more comprehensive. As such, the Exchange believes that
the S501 CE Program should also be closely tailored to proprietary
trading. If an individual remains registered in another capacity, such
as a General Securities Representative, the Exchange believes that it
is appropriate that such individual continue to be required to complete
the more comprehensive CE Program (i.e., the S101 CE Program). The
Exchange anticipates that the other Participating SROs will similarly
adopt, or have adopted, rules requiring completion of the S501 CE
Program for registered Proprietary Traders.\12\
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\12\ See, e.g., Securities Exchange Act Release No. 70027 (July
23, 2013), 78 FR 45584 (July 29, 2013) (SR-CBOE-2013-076).
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CE Fees
The Exchange proposes to amend the Fee Schedule to specify the CRD
session fees for the CE Programs described above, including the
existing CE Programs and the proposed new S501 CE Program.
Specifically, the Exchange proposes to specify the existing $100
session fee associated with the existing CE Programs (i.e., the S201,
S106 and S101 CE Programs) and a new $60 session fee associated with
the new S501 CE Program.\13\ The Exchange anticipates that other
exchanges requiring completion of the S501 CE Program will similarly
implement corresponding fees. As with existing CE Program session fees,
only one $60 session fee would be charged through CRD for a registered
person completing the S501 CE Program, even if such registered person's
firm was a member of multiple exchanges.
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\13\ ``Session'' refers to a registered person sitting for the
actual computer-based CE training. FINRA administers the CE Programs
on behalf of the Exchange. OTP Holders and OTP Firms pay the related
fees directly to FINRA through CRD.
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The Exchange has determined that the $60 session fee is necessary
to administer the S501 CE Program. Specifically, the $60 session fee
will be used to fund the S501 CE Program administered to persons
registered only as Proprietary Traders who are required to complete the
S501 CE Program. The $60 session fee is less than the existing $100
session fee currently charged by FINRA through CRD for the existing CE
Programs, including the S101 CE Program, because the fees associated
with the existing CE Programs are utilized for both development and
administration, whereas the $60 session fee for the S501 CE Program
would only be used for the administration of the program. The costs
associated with the development of the S501 CE Program are included in
the Series 56 Examination fee. The Exchange anticipates that the other
Participating SROs will adopt, or have adopted, the same $60 session
fee applicable to completion of the S501 CE Program.\14\
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\14\ See, e.g., Securities Exchange Act Release No. 70064 (July
30, 2013), 78 FR 47469 (August 5, 2013) (SR-CBOE-2013-078).
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Series 56 Examination Fees
The Exchange previously amended its rules to prescribe the Series
56 Examination as the qualifying examination for registered Proprietary
Traders.\15\ The Exchange hereby proposes to amend the Fee Schedule to
specify a fee of $195 per registered person that chooses to complete
the Series 56 Examination.
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\15\ See supra note 12.
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The Fee Schedule does not currently set forth the examination fees
for other qualification examinations required or accepted by the
Exchange because these programs are within FINRA's jurisdiction. The
Series 56 Examination, however, is a limited registration category that
is not recognized by FINRA under its registration rules. However, as
with existing non-FINRA examinations, FINRA administers the Series 56
Examination and collects the $195 fee through CRD on behalf of the SROs
that developed and maintain the exam. Additionally, only one $195 fee
would be charged through CRD for a registered person completing the
Series 56 Examination, even if such registered person's firm was a
member of multiple exchanges. The Exchange anticipates that the other
Participating SROs will adopt, or have adopted, the same $195 fee
applicable to completion of the Series 56 Examination.\16\
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\16\ See, e.g., Securities Exchange Act Release No. 70163
(August 12, 2013), 78 FR 50120 (August 16, 2013) (SR-EDGA-2013-24).
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The proposed change is not otherwise intended to address any other
issues relating to CE or related fees and the Exchange is not aware of
any problems that OTP Holders, OTP Firms or their registered persons
would have in complying with the proposed change.
2. Statutory Basis
The proposed rule change is consistent with Section 6(c) of the
Act,\17\ in general, and furthers the objectives of Section 6(c)(3) of
the Act,\18\ in particular, which authorizes the Exchange to prescribe
standards of training, experience and competence for registered persons
of OTP Holders and OTP Firms. The proposed rule change would specify
the existing CE requirements for registered persons of OTP Holders and
OTP Firms while also specifying the new S501 CE Program requirement for
registered Proprietary Traders of OTP Holders and OTP Firms. The
Exchange believes that the proposed rule change is reasonable and sets
forth the applicable CE requirements for individuals required to
register under Rule 2.23 and will therefore contribute to ensuring that
registered persons of OTP Holders and OTP Firms are properly trained.
In this regard, the Exchange believes that the S501 CE Program is the
appropriate CE Program for persons registered only as Proprietary
Traders because the S501 CE Program is specifically tailored toward
proprietary trading. Individuals who maintain any other registration
would be required to complete the CE Program associated with such other
registration, even if simultaneously registered as Proprietary Traders,
because such other CE Program would be more comprehensive and
correspond to the other, more comprehensive registration category. The
Exchange also believes that the proposed rule change is reasonable
because the other Participating SROs are anticipated to adopt, or have
adopted, rules requiring completion of the S501 CE Program for
registered Proprietary Traders.\19\
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\17\ 15 U.S.C. 78f(c).
\18\ 15 U.S.C. 78f(c)(3).
\19\ See supra note 10.
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The Exchange also believes that the proposed rule change is
consistent with Section 6(b) of the Act,\20\ in general, and furthers
the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\21\ in
[[Page 62914]]
particular, because it provides for the equitable allocation of
reasonable dues, fees, and other charges among its members, issuers and
other persons using its facilities and does not unfairly discriminate
between customers, issuers, brokers or dealers. The Exchange believes
that the proposed $60 session fee is reasonable. While it is less than
the existing $100 session fee currently charged by FINRA through CRD
for the existing CE Programs, including the S101 CE Program, the fees
associated with the existing CE Programs are utilized for both
development and administration, whereas the $60 session fee for the
S501 CE Program would only be used for the administration of the
program. The costs associated with the development of the S501 CE
Program are included in the Series 56 Examination fee. The Exchange
also believes that the fee is reasonable because the other
Participating SROs are anticipated to adopt, or have adopted, the same
$60 session fee applicable to completion of the S501 CE Program.\22\
The Exchange also believes that the proposed rule change is reasonable
because it will specify the existing $100 session fee applicable to
registered persons of OTP Holders and OTP Firms who are subject to CE
requirements, which is collected by FINRA through CRD. Finally, the
Exchange believes that the proposed rule change is equitable and not
unfairly discriminatory because all registered persons of OTP Holders
and OTP Firms that are subject to CE requirements would be treated the
same, as is currently the case. Therefore, any registered person of an
OTP Holder or OTP Firm that is required to complete the S501 CE Program
would be subject to the corresponding $60 session fee.
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\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(4) and (5).
\22\ See supra note 14.
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The Exchange believes that it is reasonable to include the Series
56 Examination fee within the Fee Schedule to make the cost of this
examination clear to OTP Holders and OTP Firms. The proposed fee is
reasonably designed to allow FINRA to cover its cost of administering
the Series 56 Examination on behalf of the Exchange. The Exchange
believes that the proposed $195 Series 56 Examination fee is also
reasonable because it is designed to reflect the costs of maintaining
and developing the Series 56 Examination, as well as the development of
the S501 CE Program, and to ensure that the examination's content is,
and continues to be, adequate for testing the competence and knowledge
generally applicable to proprietary trading. The Exchange also believes
that the fee is reasonable because the Exchange anticipates that the
other Participating SROs will adopt, or have adopted, the same $195 fee
applicable to completion of the Series 56 Examination.\23\ Finally, the
Exchange believes that the proposed rule change is equitable and not
unfairly discriminatory because all registered persons of ATP Holders
that wish to be registered as Proprietary Traders would be treated the
same, as is currently the case.
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\23\ See supra note 16.
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For these reasons, the Exchange believes that the proposal is
consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\24\ 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. Specifically, the Exchange does not believe
that the proposed administrative changes (i.e., specifying the existing
CE Programs and related fees), the introduction of the S501 CE Program
and related fee, or the introduction of the Series 56 Examination fee
will affect intermarket competition because the Exchange anticipates
that the other Participating SROs will similarly adopt, or have
adopted, rules requiring completion of the S501 CE Program for
registered Proprietary Traders, the same $60 session fee applicable to
completion of the S501 CE Program and the same $195 fee applicable to
completion of the Series 56 Examination.\25\ In addition, the Exchange
does not believe that the proposed rule change will affect intramarket
competition because all similarly situated registered persons of OTP
Holders and OTP Firms, e.g., registered persons maintaining the same
categories of registration, are required to complete the same CE
Programs, the same qualification examinations, and are subject to the
same fees.
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\24\ 15 U.S.C. 78f(b)(8).
\25\ See supra notes 12, 14 and 16.
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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 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 \26\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\27\
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\26\ 15 U.S.C. 78s(b)(3)(a)(ii).
\27\ 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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The Exchange has requested that the Commission waive the 30-day
operative delay. Waiver of the operative delay would allow the Exchange
to modify 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.\28\
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\28\ 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
[[Page 62915]]
Send an email to [email protected]. Please include
File Number SR-NYSEArca-2013-96 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-2013-96. 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-NYSEArca-2013-96 and
should be submitted on or before November 12, 2013.
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\29\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24552 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P