[Federal Register Volume 80, Number 208 (Wednesday, October 28, 2015)]
[Notices]
[Pages 66072-66074]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27355]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76235; File No. SR-CBOE-2015-095]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to Revisions to the Registered Options
Principal Examination
October 22, 2015.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 16, 2015, Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule change as described
in Items I, II, and III below, which Items have been prepared by the
CBOE. CBOE has designated the proposed rule change as ``constituting a
stated policy, practice, or interpretation with respect to the meaning,
administration, or enforcement of an existing rule'' under Section
19(b)(3)(A)(i) of the Act \3\ and Rule19b-4(f)(1) thereunder,\4\ which
renders the proposal effective upon receipt of this filing by the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(i).
\4\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CBOE is filing revisions to the content outline and selection
specifications for the Registered Options Principal (Series 4)
examination program.\5\ The proposed revisions update the material to
reflect changes to the laws, rules and regulations covered by the
examination and to incorporate the functions and associated tasks
currently performed by a Registered Options Principal. In addition,
CBOE is proposing to make changes to the format of the content outline.
CBOE is not proposing any textual changes to the By-Laws, Schedules to
the By-Laws or Rules of CBOE. CBOE is proposing these revisions to
adopt the revised Series 4 examination program of the Financial
Industry Regulatory Authority, Inc. (``FINRA''). FINRA currently
administers Series 4 examinations on behalf of CBOE.
---------------------------------------------------------------------------
\5\ CBOE is also proposing corresponding revisions to the Series
4 question bank. CBOE is submitting this filing for immediate
effectiveness pursuant to Section 19(b)(3)(A) of the act and Rule
19b-4(f)(1) thereunder.
---------------------------------------------------------------------------
The revised content outline is attached.\6\ The Series 4 selection
specifications were submitted to the Commission under separate cover by
FINRA. FINRA submitted the Series 4 selection specifications in
connection with a FINRA filing to revise its Series 4 Examination
Program.\7\ CBOE is in agreement with the selection specifications
submitted by FINRA.
---------------------------------------------------------------------------
\6\ The Commission notes that the revised content outline is
attached to the filing, not to this Notice. The content outline is
available as part of the filing on CBOE's Web site.
\7\ See Securities Exchange Act Release No. 75246 (June 18,
2015), 80 FR 36388 (June 24, 2015) (SR-FINRA-2015-018).
---------------------------------------------------------------------------
The text of the [sic] proposed rule change is available on the
Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, 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
Section 6(c)(3) of the Act \8\ authorizes CBOE to prescribe
standards of training, experience, and competence for persons
associated with CBOE Trading Permit Holders (``TPH''). In accordance
with that provision, CBOE has developed examinations that are designed
to establish that persons associated with CBOE TPHs have attained
specified levels of competence and knowledge, consistent with
applicable registration requirements under CBOE rules. CBOE
periodically reviews the content of the examinations to determine
whether revisions are necessary or appropriate in view of changes
pertaining to the subject matter covered by the examinations.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(c)(3).
---------------------------------------------------------------------------
CBOE Rule 9.2 states that no TPH organization shall be approved to
transact options business with the public until those persons
associated with it who are designated as Options Principals have been
approved by and registered with the Exchange. Rule 9.2 states that
persons engaged in the supervision of options sales practices or a
person to who the designated general partner or executive officer or
another Registered Options Principal delegates the authority to
supervise options sales practices shall be designated as Options
Principals. CBOE Rule 9.2 further requires successful completion of an
examination prescribed by the Exchange in order to qualify for
registration as an Options Principal. The Series 4 examination, an
industry-wide examination, has been designed for this purpose, and
tests a candidate's knowledge of options trading generally, the
industry rules applicable to trading of option contracts, and the rules
of registered clearing agencies for options. The Series 4 examination
covers, among other things, equity options, foreign currency options,
and index options.
In consultation with a committee of industry representatives,
including representatives from CBOE, FINRA recently undertook a review
of the Series 4 examination program. As a result of this review, FINRA
filed revisions to the content outline to reflect changes to the laws,
rules and regulations covered by the examination and to incorporate the
functions and associated tasks currently performed by a Registered
Options Principal. FINRA also made changes to the format of the content
outline.\9\ CBOE is filing these changes to adopt FINRA's revised
Series 4 examination program.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 75246 (June 18,
2015), 80 FR 36388 (June 24, 2015) (SR-FINRA-2015-018).
---------------------------------------------------------------------------
Current Content Outline
The current content outline is divided into three sections. The
following are the three sections and the number of questions associated
with each of the
[[Page 66073]]
sections, denoted Section 1 through Section 3:
1. Options Investment Strategies, 34 questions;
2. Supervision of Sales Activities and Trading Practices, 75
questions; and
3. Supervision of Employees, Business Conduct, and Recordkeeping
and Reporting Requirements, 16 questions.
Each section also includes the applicable laws, rules and
regulations associated with that section. The current content outline
also includes a preface (addressing, among other things, the purpose,
administration and scoring of the examination), sample questions and
reference materials.
Proposed Revisions
CBOE is proposing to divide the content outline into six major job
functions that are performed by a Registered Options Principal. The
following are the six major job functions, denoted Function 1 through
Function 6, with the associated number of questions:
Function 1: Supervise the Opening of New Options Accounts, 21
questions;
Function 2: Supervise Options Account Activities, 25 questions;
Function 3: Supervise General Options Trading, 30 questions;
Function 4: Supervise Options Communications, 9 questions;
Function 5: Implement Practices and Adhere to Regulatory
Requirements, 12 questions; and
Function 6: Supervise Associated Persons and Personnel Management
Activities, 28 questions.
CBOE is proposing to adjust the number of questions assigned to
each major job function to ensure that the overall examination better
reflects the key tasks performed by a Registered Options Principal. The
questions on the revised Series 4 examination will place greater
emphasis on key tasks such as supervision of registered persons, sales
practices and compliance.
Each function also includes specific tasks describing activities
associated with performing that function. There are four tasks (1.1-
1.4) associated with Function 1; four tasks (2.1-2.4) associated with
Function 2; four tasks (3.1-3.4) associated with Function 3; four tasks
(4.1-4.4) associated with Function 4; two tasks (5.1-5.2) associated
with Function 5; and four tasks (6.1-6.4) associated with Function
6.\10\ By way of example, one such task (Task 4.2) is review options
retail communications and determine appropriate approval.\11\ Further,
the content outline lists the knowledge required to perform each
function and associated tasks (e.g., types of retail communications,
required approvals).\12\ In addition, where applicable, the content
outline lists the laws, rules and regulations a candidate is expected
to know to perform each function and associated tasks. These include
the applicable FINRA Rules (e.g. FINRA Rule 2220), NASD Rules (e.g.,
NASD Rule 2711(i)), CBOE Rules (e.g., CBOE Rule 9.21) and SEC rules
(e.g., SEA Rule 135a).\13\ FINRA conducted a job analysis study of
Registered Options Principals, which included the use of a survey, in
developing each function and associated tasks and updating the required
knowledge set forth in the revised content outline. The functions and
associated tasks, which appear in the revised content outline for the
first time, reflect the day-to-day activities of a Registered Options
Principal.
---------------------------------------------------------------------------
\10\ See Exhibit 3, Outline Pages 6-22. The Commission notes
that Exhibit 3 is an exhibit to the filing, not to this Notice.
\11\ See Exhibit 3, Outline Page 15.
\12\ See Exhibit 3, Outline Page 15.
\13\ See Exhibit 3, Outline Page 15.
---------------------------------------------------------------------------
As noted above, CBOE also is proposing to revise the content
outline to reflect changes to the laws, rules and regulations covered
by the examination. Among other revisions, CBOE is proposing to revise
the content outline to reflect the adoption of rules in the CBOE
rulebook (for example CBOE Rule 3.6 (Persons Associated with TPH
Organizations; CBOE Rule 4.24 (Supervision); CBOE Rule 6.25
(Nullification and Adjustment of Options Transactions including Obvious
Errors) and CBOE Rule 12.4 (Portfolio Margin)
CBOE is proposing similar changes to the Series 4 selection
specifications and question bank.
Finally, CBOE is proposing to make changes to the format of the
content outline, including the preface, sample questions and reference
materials. Among other changes, CBOE is proposing to: (1) Add a table
of contents; \14\ (2) provide more details regarding the purpose of the
examination; \15\ (3) provide more details on the application
procedures; \16\ (4) provide more details on the development and
maintenance of the content outline and examination; \17\ (5) explain
that the passing scores are established by FINRA staff, in consultation
with a committee of industry representatives, using a standard setting
procedure, and that a statistical adjustment process known as equating
is used in scoring exams; \18\ and (6) note that each candidate will
receive a score report at the end of the test session, which will
indicate a pass or fail status and include a score profile listing the
candidate's performance on each major content area covered on the
examination.\19\
---------------------------------------------------------------------------
\14\ See Exhibit 3, Outline Page 2.
\15\ See Exhibit 3, Outline Page 3.
\16\ See Exhibit 3, Outline Page 3.
\17\ See Exhibit 3, Outline Page 4.
\18\ See Exhibit 3, Outline Page 5.
\19\ See Exhibit 3, Outline Page 5.
---------------------------------------------------------------------------
The number of questions on the Series 4 examination will remain at
125 multiple-choice questions,\20\ and candidates will have 195 minutes
to complete the examination. The test time will change from 180 minutes
to 195 minutes because pretest items increased from 5 items to 10
items. Currently, a score of 70 percent is required to pass the
examination. The passing score will change to 72 percent with the
revised Series 4 examination program.
---------------------------------------------------------------------------
\20\ Consistent with FINRA's practice of including ``pretest''
items on certain qualification examinations, which is designed to
ensure that new examination items meet acceptable testing standards
prior to use for scoring purposes, the examination includes 10
additional, unidentified pretest items that do not contribute
towards the candidate's score. Therefore, the examination actually
consists of 135 items, 125 of which are scored. The 10 pretest items
are randomly distributed throughout the examination.
---------------------------------------------------------------------------
Availability of Content Outline
The revised Series 4 content outline is available on FINRA's Web
site, at www.finra.org/brokerqualifications/exams.
CBOE is filing the proposed rule change for immediate
effectiveness. CBOE will announce the proposed rule change in a
Regulatory Circular.
2. Statutory Basis
CBOE believes that the proposed revisions to the Series 4
examination program are consistent with the provisions of Section
6(b)(5) of the Act,\21\ which requires, among other things, that CBOE
rules must be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest, and Section
6(c)(3) of the Act,\22\ which authorizes CBOE to prescribe standards of
training, experience, and competence for persons associated with CBOE
TPHs. CBOE believes that the proposed revisions will further these
purposes by updating the examination program to reflect changes to the
laws, rules and regulations covered by the examination and to
incorporate the functions and
[[Page 66074]]
associated tasks currently performed by a Registered Options Principal.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78f(b)(5).
\22\ 15 U.S.C. 78f(c)(3).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The updated examination aligns
with the functions and associated tasks currently performed by a
Registered Options Principal and tests knowledge of the most current
laws, rules, regulations and skills relevant to those functions and
associated tasks. As such, the proposed revisions would make the
examination more efficient and effective.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \23\ and paragraph (f)(1) of Rule 19b-4
thereunder.\24\ 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. If
the Commission takes such action, the Commission will institute
proceedings to determine whether the proposed rule change should be
approved or disapproved.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------
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-CBOE-2015-095 on the subject line.
Paper Comments
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-CBOE-2015-095. 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
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-CBOE-2015-095 and should be
submitted on or before November 18, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
---------------------------------------------------------------------------
\25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Brent J. Fields,
Secretary.
[FR Doc. 2015-27355 Filed 10-27-15; 8:45 am]
BILLING CODE 8011-01-P