Federal Register / Vol. 75, No. 244 / Tuesday, December 21, 2010 / Notices 80091 

5 15 U.S.C. 78s(b)(3)(A). 

6 17 CFR 240.19b–4(f)(2). 

7 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

to all similarly situated Exchange 

participants. 

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 

The foregoing rule change is effective 

upon filing pursuant to Section 

19(b)(3)(A) of the Act 5 and 

subparagraph (f)(2) of Rule 19b–4 

thereunder,6 because it establishes a 

due, fee, or other charge imposed by 

NYSE Amex. 

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 rulecomments@sec.gov. Please include File 

Number SR–NYSEAmex–2010–119 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–NYSEAmex–2010–119. 

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– 

NYSEAmex–2010–119 and should be 

submitted on or before January 11, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–31950 Filed 12–20–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63554; File No. SR–ISE– 

2010–115] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing of Proposed Rule 

Change Regarding Registration and 

Qualification Requirements for 

Associated Persons 

December 15, 2010. 

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 December 

1, 2010, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) filed with the Securities and 

Exchange Commission the proposed 

rule change, as described in Items I and 

II below, which items have been 

prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The ISE proposes to amend its rules 

to amend its rules [sic] regarding the 

registration of associated persons. The 

text of the proposed rule change is 

provided below (italics indicate 

additions; [brackets] indicate deletions): 

Rule 313. Registration Requirements 

(a) Registration of Individual 

Associated Persons Engaged in the 

Securities Business. 

(1) Individual associated persons 

engaged or to be engaged in the 

securities business of a Member shall be 

registered with the Exchange in the 

category of registration appropriate to 

the function to be performed as 

prescribed by the Exchange. Before the 

registration can become effective, the 

individual associated person shall 

submit the appropriate application for 

registration, pass a qualification 

examination appropriate to the category 

of registration as prescribed by the 

Exchange and submit any required 

registration and examination fees. A 

Member shall not maintain a 

registration with the Exchange for any 

person (1) who is no longer active in the 

Member’s securities business; (2) who is 

no longer functioning in the registered 

capacity; or (3) where the sole purpose 

is to avoid an examination requirement. 

A Member shall not make application 

for the registration of any person where 

there is no intent to employ that person 

in the Member’s securities business. A 

Member may, however, maintain or 

make application for the registration of 

an individual who performs legal, 

compliance, internal audit, back-office 

operations, or similar responsibilities for 

the Member, or a person who performs 

administrative support functions for 

registered personnel, or a person 

engaged in the securities business of a 

foreign securities affiliate or subsidiary 

of the Member. 

(2) Persons Exempt from Registration. 

The following individual associated 

persons of Members are exempt from 

the registration requirements set forth in 

paragraph (1): 

(A) individual associated persons 

whose functions are solely and 

exclusively clerical or ministerial; 


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80092 Federal Register / Vol. 75, No. 244 / Tuesday, December 21, 2010 / Notices 

(B) individual associated persons who 

are not actively engaged in the securities 

business; 

(C) individual associated persons 

whose functions are related solely and 

exclusively to the Member’s need for 

nominal corporate officers or for capital 

participation; 

(D) individual associated persons 

whose functions are related solely and 

exclusively to: 

(i) transactions in commodities; 

(ii) transactions in security futures; 

and/or 

(iii) effecting transactions on the floor 

of another national securities exchange 

and who are registered as floor members 

with such exchange. 

(b) Financial/Operations Principal. 

Each Member subject to Exchange Act 

Rule 15c3–1 shall designate a Financial/ 

Operations Principal. The duties of a 

Financial/Operations Principal shall 

include taking appropriate actions to 

assure that the Member complies with 

applicable financial and operational 

requirements under the Rules and the 

Exchange Act, including but not limited 

to those requirements relating to the 

submission of financial reports and the 

maintenance of books and records. Each 

Financial/Operations Principal is 

required to have successfully completed 

the Financial and Operations Principal 

Examination (Series 27 Exam). Each 

Financial/Operations Principal 

designated by a Trading Member shall 

be registered in that capacity with the 

Exchange as prescribed by the 

Exchange. A Financial/Operations 

Principal of a Member may be a fulltime employee, a part-time employee or 

independent contractor of the Member. 

(c) Chief Compliance Officer. Each 

Member shall designate a Chief 

Compliance Officer on Schedule A of 

Form BD. An individual designated as 

a Chief Compliance Officer is required 

to register with the Exchange and pass 

the appropriate heightened qualification 

examination(s) as prescribed by the 

Exchange. A person who has been 

designated as a Chief Compliance 

Officer on Schedule A of Form BD for 

at least two years immediately prior to 

January 1, 2002, and who has not been 

subject within the last ten years to any 

statutory disqualification as defined in 

Section 3(a)(39) of the Act; a 

suspension; or the imposition of a fine 

of $5,000 or more for a violation of any 

provision of any securities law or 

regulation, or any agreement with, rule 

or standard of conduct of any securities 

governmental agency, securities selfregulatory organization, or as imposed 

by any such regulatory or self-regulatory 

organization in connection with a 

disciplinary proceeding shall be 

required to register in the category of 

registration appropriate to the function 

to be performed as prescribed by the 

Exchange, but shall be exempt from the 

requirement to pass the heightened 

qualification examination as prescribed 

by the Exchange. 

(d) Registration Required Under 

Chapter 6. Individual associated 

persons of a Member that conduct a 

public customer business must also 

comply with the registration 

requirements set forth in Rule 601 and 

Rule 602. These additional registration 

categories include: (i) Registered 

Options Principal; and (ii) Registered 

Representative. 

(e) Requirement for Examination on 

Lapse of Registration. Any person whose 

registration has been revoked by the 

Exchange as a disciplinary sanction or 

whose most recent registration has been 

terminated for two or more years 

immediately preceding the date of 

receipt by the Exchange of a new 

application shall be required to pass a 

qualification examination appropriate 

to the category of registration as 

prescribed by the Exchange. 

Supplementary Material to Rule 313 

.01 Each individual required to 

register under this Rule shall 

electronically file a Uniform 

Application for Securities Industry 

Registration (‘‘Form U4’’) through the 

Central Registration Depository system 

(‘‘Web CRD’’) operated by the Financial 

Industry Regulatory Authority, 

Incorporated (‘‘FINRA’’). 

.02 Each individual required to 

register under this Rule shall 

electronically submit to Web CRD any 

required amendments to Form U4. 

.03 Any Member that discharges or 

terminates the employment or retention 

of an individual required to register 

under this Rule shall comply with the 

termination filing requirements set forth 

in Rule 601(c) and Rule 603, which 

include the filing of a Form U5. 

.04 Each individual required to 

register under this Rule is required to 

satisfy the continuing education 

requirements set forth in Rule 604 or 

any other applicable continuing 

education requirements as prescribed by 

the Exchange. 

.05 The Exchange may, in 

exceptional cases and where good cause 

is show, waive the applicable 

qualification examination and accept 

other standards as evidence of an 

applicant’s qualifications for 

registration. Advanced age or physical 

infirmity will not individually of 

themselves constitute sufficient grounds 

to waive a qualification examination. 

Experience in fields ancillary to the 

securities business may constitute 

sufficient grounds to waive a 

qualification examination. 

.06 For purposes of paragraph (a)(1) 

above, the Exchange shall consider an 

individual associated person to be 

engaged in the securities business of a 

Member if: 

(a) the individual associated person 

engages in one or more of the following 

activities on behalf of the Member: 

(1) proprietary trading; 

(2) market-making; 

(3) effecting transactions on behalf of 

a broker-dealer; 

(4) supervision or monitoring of 

proprietary trading, market-making, or 

brokerage activities; 

(5) supervision or training of those 

engaged in proprietary trading, marketmaking, or brokerage activities with 

respect to those activities; or 

(b) the individual associated person 

engages in the management of one or 

more of the activities enumerated in 

subparagraphs (1) through (5) above as 

an officer, partner or a director. 

.07 Each Member must register with 

the Exchange each individual acting in 

any of the following capacities: (i) 

officer; (ii) partner; (iii) director; (iv) 

supervisor of proprietary trading, 

market-making or brokerage activities; 

and/or (v) supervisor of those engaged 

in proprietary trading, market-making 

or brokerage activities with respect to 

those activities. Each Member must 

register with the Exchange at least two 

individuals acting in one or more of the 

capacities described in (i)–(v) above. 

The Exchange may waive this 

requirement if a Member demonstrates 

conclusively that only one individual 

acting in one or more of the capacities 

described in (i) through (v) above should 

be required to register. A Member that 

conducts proprietary trading only and 

has 25 or fewer registered persons shall 

only be required to have one officer or 

partner who is registered in this 

capacity. 

For purposes of this Supplementary 

Material .07 to Rule 313, a Member shall 

be considered to conduct only 

proprietary trading if the Member has 

the following characteristics: 

(a) The Member is not required by 

Section 15(b)(8) of the Exchange Act to 

become a FINRA member but is a 

member of another registered securities 

exchange not registered solely under 

Section 6(g) of the Exchange Act; 

(b) All funds used or proposed to be 

used by the Member are the Trading 

Member’s own capital, traded through 

the Member’s own accounts; 

(c) The Member does not, and will 

not, have customers; and 


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Federal Register / Vol. 75, No. 244 / Tuesday, December 21, 2010 / Notices 80093 

(d) All persons registered on behalf of 

the Member acting or to be acting in the 

capacity of a trader must be owners of, 

employees of, or contractors to the 

Member. 

Rule 601. Registration of Options 

Principals 

(a) No change. 

(b) In connection with their 

registration, Options Principals shall 

electronically file a Uniform 

Application for Securities Industry 

Registration or Transfer (‘‘Form U4’’) 

[with] through the Central Registration 

Depository system (‘‘Web CRD’’) 

[System] operated by the Financial 

Industry Regulatory Authority, 

Incorporated (‘‘FINRA’’), shall 

successfully complete an examination 

prescribed by the Exchange for the 

purpose of demonstrating an adequate 

knowledge of the options business and 

of the Rules of the Exchange, and shall 

further agree in the U4 filing to abide by 

the Constitution and Rules of the 

Exchange and the Rules of the Options 

Clearing Corporation. Any person 

required to complete Form U4 shall 

promptly electronically file any 

required amendments to Form U4 [with 

the] through Web CRD. 

(c) Termination of employment or 

affiliation of any Options Principal in 

such capacity shall be promptly 

electronically reported [to the] through 

Web CRD together with a brief statement 

of the reason for such termination on 

[Form U5] a Uniform Termination 

Notice for Securities Industry 

Registration (‘‘Form U5’’). 

(d) and (e) no change. 

Rule 602. Registration of 

Representatives 

(a) and (b) no change 

(c) In connection with their 

registration, Representatives shall 

electronically file a [Uniform 

Application for Securities Industry 

Registration or Transfer (Form U4) with 

the NASD’s] Form U4 through Web CRD 

[System] by appropriately checking the 

ISE as a requested registration on the 

electronic U4 filing, and shall 

successfully complete an examination 

for the purpose of demonstrating an 

adequate knowledge of the securities 

business, and shall further agree in the 

U4 filing to abide by the Constitution 

and Rules of the Exchange and the Rules 

of the Clearing Corporation. Any person 

required to complete Form U4 shall 

promptly electronically file any 

required amendments to Form U4 [with 

the NASD’s] through Web CRD 

[System]. 

(d) no change. 

Rule 603. Termination of Registered 

Persons 

(a) The discharge or termination of 

employment of any registered person, 

together with the reasons therefore, 

shall be electronically reported [to the 

NASD’s] through Web CRD [System], by 

a Member immediately following the 

date of termination, but in no event later 

than thirty (30) days following 

termination on Form U5 [a Uniform 

Termination Notice for Securities 

Industry Registration (Form U–5)]. A 

copy of said termination notice shall be 

provided concurrently to the person 

whose association has been terminated. 

(b) The Member shall electronically 

report [to the NASD’s] through Web 

CRD [System], by means of an 

amendment to the Form [U–5] U5 filed 

pursuant to paragraph (a) above, in the 

event that the Member learns of facts or 

circumstances causing any information 

set forth in the notice to become 

inaccurate or incomplete. Such 

amendment shall be provided 

concurrently to the person whose 

association has been terminated no later 

than thirty (30) days after the Member 

learns of the facts or circumstances 

giving rise to the amendment. 

Rule 604. Continuing Education for 

Registered Persons 

(a) no change. 

(b) In-house Delivery of Regulatory 

Element: Members will be permitted to 

administer the Regulatory Element of 

the Continuing Education program to 

their registered persons by instituting a 

firm program acceptable to the 

Exchange. The following procedures are 

required: 

(1) Senior Officer or Partner in 

Charge. The Member has designated a 

senior officer or partner to be 

responsible for the firm’s delivery of the 

Regulatory Element of the Continuing 

Education program. 

(2) Site Requirements. The location of 

all delivery sites will be under the 

control of the Member. Delivery of 

Regulatory Element continuing 

education will take place in an 

environment conducive to training (i.e., 

a training facility, conference room or 

other area dedicated to this type of 

purpose would be appropriate. 

Inappropriate locations would include a 

personal office or any location that is 

not or cannot be secured from traffic 

and interruptions). Where multiple 

delivery terminals are placed in a room, 

adequate separation between terminals 

will be maintained. 

(3) Technology Requirements. The 

communication links and firm delivery 

computer hardware must comply with 

standards defined by the Exchange or 

its designated vendor. 

(4) Supervision. The Member’s written 

supervisory procedures must contain 

the procedures implemented to comply 

with the requirements of its delivery of 

Regulatory Element continuing 

education. The Member’s written 

supervisory procedures must identify 

the senior officer or partner designated 

pursuant to paragraph (b)(1) above and 

contain a list of individuals authorized 

by the Member to serve as a proctor. 

Member locations for delivery of 

Regulatory Element continuing 

education will be specifically listed in 

the Member’s written supervisory 

procedures. 

(5) Proctors. All sessions will be 

proctored by an authorized person 

during the entire Regulatory Element 

continuing education session. Proctors 

must be present in the session room or 

must be able to view the person(s) sitting 

for Regulatory Element continuing 

education through a window or by video 

monitor. The individual responsible for 

proctoring at each administration will 

sign a certification that required 

procedures have been followed, that no 

material from Regulatory Element 

continuing education has been 

reproduced, and that no candidate 

received any assistance to complete the 

session. Such certification may be a part 

of the sign-in log required under 

paragraph (b)(6) below. Individuals 

serving as proctors must be individuals 

registered with the Exchange as 

‘‘proctors’’ and supervised by the 

designated senior officer/partner for 

purposes of Member delivery of 

Regulatory Element continuing 

education. Proctors will check and 

verify the identification of all 

individuals taking Regulatory Element 

continuing education. 

(6) Administration. All appointments 

will be scheduled in advance using the 

procedures and software specified by 

the Exchange, its agent or designated 

vendor to communicate with the Proctor 

system and the NASD’s CRD System. 

The Member/proctor will conduct each 

session in accordance with the 

administrative and appointment 

scheduling procedures required by the 

Exchange or its designated vendor. 

A sign-in log will be maintained at the 

delivery facility. Logs will contain the 

date of each session, the name and 

social security number of the individual 

taking the session, that required 

identification was checked, the sign-in 

time, the sign-out time, and the name of 

the individual proctoring the session. 

Such logs are required to be retained 

pursuant to Securities Exchange Act of 

1934 Rules 17a–3 and 17a–4. No 

material will be permitted to be utilized 

for the session nor may any sessionVerDate Mar<15>2010 20:40 Dec 20, 2010 Jkt 223001 PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 E:\FR\FM\21DEN1.SGM 21DEN1

srobinson on DSKHWCL6B1PROD with NOTICES
80094 Federal Register / Vol. 75, No. 244 / Tuesday, December 21, 2010 / Notices 

3Under ISE Rule 100(a)(3), the term ‘‘associated 

person’’ or ‘‘person associated with a Member’’ 

means any partner, officer, director or branch 

manager of Member (or any person occupying a 

similar status or performing similar functions), any 

person directly or indirectly controlling, controlled 

by, or under common control with a Member or any 

employee of a Member. This filing refers 

specifically to the classification of ‘‘individual 

associated persons’’ as an organization could fall 

within the scope of this definition, and it is not 

ISE’s intention to require registration by an 

organization. 

4 17 CFR 240.15b7–1. 

5 15 U.S.C. 78a et seq. 

6 17 CFR 240.15c3–1. 

7These proposed rule changes are consistent with 

those recently adopted by the Chicago Board of 

Options Exchange. Securities Exchange Act Release 

No. 62977 (Sept. 22, 2010), 75 FR 59773 (Sept. 28, 

2010) (‘‘CBOE Registration Proposal’’); Securities 

Exchange Act Release No. 63314 (November 12, 

2010), 75 FR 70957 (November 19, 2010) (‘‘CBOE 

Approval Order’’). 

8Proposed Rule 313 specifies that individual 

associated persons, including Registered Options 

Principals and Registered Representatives, are also 

subject to the registration requirements set forth in 

Chapter 6 of ISE’s Rules, which is generally 

applicable to Members that conduct a public 

customer business. 

related material be removed. Delivery 

sites will be made available for 

inspection by the SROs. Before 

commencing in-firm delivery of the 

Regulatory Element continuing 

education, Members are required to file 

with their Designated Examining 

Authority (‘‘DEA’’), a letter of attestation 

(as specified below) signed by a senior 

officer or partner, attesting to the 

establishment of required procedures 

addressing senior officer or partner incharge, supervision, site, technology, 

proctors, and administrative 

requirements. 

Letter of Attestation for In-Firm 

Delivery of Regulatory Element 

Continuing Education [Name of senior 

officer or partner] has established 

procedures for delivering Regulatory 

Element continuing education on its 

premises. I have determined that these 

procedures are reasonably designed to 

comply with SRO requirements 

pertaining to in-firm delivery of 

Regulatory Element continuing 

education, including that such 

procedures have been implemented to 

comply with senior officer or partner incharge, supervision, site, technology, 

proctors, and administrative 

requirements. 

lllllllllllllllllll

Signature 

lllllllllllllllllll

Printed name 

lllllllllllllllllll

Title [Must be signed by a Principal 

Executive Officer (or Executive 

Representative) of the firm] 

lllllllllllllllllll

Date 

(7) Annual Representation. Each 

Member will be required to represent to 

the Exchange, annually, that they have 

continued to maintain, and reasonably 

believe that they have complied with, all 

required procedures outlined in 

paragraphs (b)(1)-(b)(6) above for the 

previous year. Such attestation must be 

signed by a senior officer or partner. 

(8) Definition of Senior Officer/ 

Partner. For purposes of paragraph (b) 

of this rule, ‘‘senior officer or partner’’ 

means the chief executive officer or 

managing partner or either (A) any other 

officer or partner who is a member of 

the Member’s executive or management 

committee or its equivalent committee 

or group or (B) if the Member has no 

such committee or group, any officer or 

partner having senior executive or 

management responsibility who reports 

directly to the chief executive officer or 

managing partner. If the chief executive 

officer or managing partner does not 

sign the attestation, a copy of the 

attestation shall be provided to the chief 

executive officer or managing partner. 

[(b)] (c) Firm Element 

(1) through (3) no change. 

Supplementary Material to Rule 604 

.01 For purposes of this Rule, the 

term ‘‘registered person’’ means any 

Member, Representative or other person 

registered or required to be registered 

under the Rules[, but does not include 

any such person whose activities are 

limited solely to the transaction of 

business on the Exchange with Members 

or registered broker-dealers]. 

.02 through .04 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 

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 these statements may be examined at 

the places specified in Item IV below. 

The self-regulatory organization 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 

ISE is proposing to amend its rules 

regarding qualification, registration and 

continuing education of individual 

associated persons.3 Specifically, in 

response to a request by the Division of 

Trading and Markets of the U.S. 

Securities and Exchange Commission 

and in light of recent market events, the 

Exchange is proposing to expand its 

registration and qualification 

requirements to include additional 

types of individual associated persons. 

The Exchange believes the proposed 

rule changes are consistent with Rule 

15b7–1,4 promulgated under the 

Securities Exchange Act of 1934, as 

amended (‘‘Exchange Act’’),5 which 

provides: ‘‘No registered broker or dealer 

shall effect any transaction in* * *any 

security unless any natural person 

associated with such broker or dealer 

who effects or is involved in effecting 

such transaction is registered or 

approved in accordance with the 

standards of training, experience, 

competence, and other qualification 

standards* * *established by the rules 

of any national securities exchange 

***’’. 

Proposed Rule 313 establishes the 

qualification and registration 

requirements for associated persons of 

Members. This proposed rule also 

establishes registration requirements for 

a Chief Compliance Officer for each 

Member and for a Financial/Operations 

Principal for each Member subject to the 

Exchange Act Rule 15c3–1.6 Proposed 

Rule 313 also references the registration 

requirements set forth in Chapter 6 of 

the Exchange’s Rulebook for associated 

persons of Members that conduct a 

public customer business.7

Under the proposal, individual 

associated persons acting in the capacity 

of a sole proprietor, officer, partner, 

director or Chief Compliance Officer 

will be subject to heightened 

qualification requirements. In addition, 

an individual associated person that is 

engaged in the supervision or 

monitoring of proprietary trading, 

market-making or brokerage activities 

and/or that is engaged in the 

supervision or training of those engaged 

in proprietary trading, market-making or 

brokerage activities with respect to 

those activities will be subject to 

heightened qualification requirements. 

The Exchange believes that the 

heightened qualification requirements 

should enhance the supervisory 

structure for Members that do not 

conduct a public customer business.8

Specifically, the Exchange is 

proposing to require additional 

associated persons to submit the 

appropriate application for registration 

online through the Central Registration 


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Federal Register / Vol. 75, No. 244 / Tuesday, December 21, 2010 / Notices 80095 

9Under the proposal, each individual associated 

person subject to the registration requirements in 

Rule 313 will be required to electronically file a 

Uniform Application for Securities Industry 

Registration (‘‘Form U4’’) through Web CRD. 

10An individual with an indirect ownership 

interest in a Member that is engaged in the 

securities business of such Member is required to 

register under proposed Rule 313. 

11This requirement is consistent with FINRA’s 

registration requirement for ‘‘Principals’’ (as defined 

in NASD Rule 1021). ISE is declining to adopt the 

term ‘‘Principal’’ in the Exchange proposed rule 

change to avoid confusion with existing terms, such 

as ‘‘Option Principal.’’ 

12Web CRD has been enhanced by FINRA to 

allow for general registration of applicable 

associated persons. 

13The availability of the appropriate category on 

Web CRD for any new qualification examinations 

recognized by the Exchange may be subject to the 

timing for any required systems development on 

Web CRD. 

14 ISE intends to develop with other SROs, within 

six months of the approval date of this filing, an 

alternative qualification examination(s) that is 

appropriate for the additional individual associated 

persons required to register under the proposed 

rule. Once the development of this examination(s) 

has been completed, the implementation and 

effective date will be subject to approval by the 

Commission and any necessary systems 

development schedules to implement the 

examination. If an alternative examination(s) is not 

completed within six months of the approval date 

of this filing, the Exchange will establish a deadline 

for qualification based on the existing categories of 

registration and qualification examinations 

available on Web CRD, until such time as the 

development and implementation of an alternative 

examination(s) has been completed. The referenced 

categories of registration available on Web CRD 

include, but may not be limited to, the General 

Securities Representative (GS) and General 

Securities Principal (GP), as applicable to the type 

of business activities conducted. The accompanying 

qualification examination for the General Securities 

Representative is the Series 7 and the 

accompanying qualification examination for the 

General Securities Principal is the Series 24. 

15See NASD Rule 1070 (Qualification 

Examinations and Waiver of Requirements) and 

NYSE Rule 345 (Employees—Registration, 

Approval, Records). 

16The appropriate qualification examination for a 

Financial/Operations Principal is the Series 27 

exam. The appropriate qualification examination 

for a Chief Compliance Officer is the Series 14 

exam. ISE is working with FINRA to establish this 

category of registration and make the accompanying 

qualification examination available at ISE on Web 

CRD. 

17The duties of a Financial/Operations Principal 

include taking appropriate actions to assure that the 

Member complies with applicable financial and 

operational requirements under SRO rules and the 

Exchange Act. The Exchange notes that it is not the 

Designated Examining Authority for any of its 

Members, but for consistency with other SRO rules, 

the Exchange is proposing to include the 

designation of a Financial/Operations Principal in 

its Rules. 

18CBOE Registration Proposal, supra note 7. 

Depository system (‘‘Web CRD’’), which 

is operated by the Financial Industry 

Regulatory Authority, Incorporated 

(‘‘FINRA’’), successfully complete any 

qualification examination(s) as 

prescribed by the Exchange and submit 

any required registration and 

examination fees.9 Proposed Rule 313 

will require registration and 

qualification by individual associated 

persons engaged or to be engaged in the 

securities business of a Member.10 An 

individual associated person will be 

considered to be a person engaged in the 

securities business of a Member if (i) the 

individual associated person conducts 

proprietary trading, acts as a marketmaker, effects transactions on behalf of 

a broker-dealer account, supervises or 

monitors proprietary trading, marketmaking or brokerage activities on behalf 

of the broker-dealer, supervises or 

conducts training for those engaged in 

proprietary trading, market-making or 

brokerage activities on behalf of a 

broker-dealer account; or (ii) the 

individual associated person engages in 

the management of any individual 

associated person identified in (i) above 

as an officer, partner or director.11

ISE will require all associated persons 

required to register under proposed Rule 

313 that are not already registered in 

Web CRD to register (i.e., complete a 

Form U4) within 60 days of the 

approval date of this filing by the U.S. 

Securities and Exchange Commission.12

With respect to the examination 

requirement associated with the 

proposed rule,13 ISE is working with 

other self-regulatory organizations 

(‘‘SROs’’) to develop an additional 

examination for associated persons who 

previously may not have been required 

to register under applicable SRO rules 

(e.g., proprietary options traders) that 

may be used as an alternative to the 

existing categories of registration.14 The 

Exchange will notify its Members via 

regulatory circular what qualification 

examination(s) will be acceptable for 

compliance with the requirements 

proposed in Rule 313. 

The Exchange is proposing to identify 

in Rule 313 several categories of persons 

that are exempt from these additional 

registration requirements. The 

categories of individual associated 

persons that are exempt from the 

registration requirements include (i) 

Individual associated persons 

functioning solely and exclusively in a 

clerical or ministerial capacity; (ii) 

individual associated persons that are 

not actively engaged in the securities 

business, (iii) individual associated 

persons functioning solely and 

exclusively to meet a need for nominal 

corporate officers or for capital 

participation; and (iv) individual 

associated persons whose functions are 

solely and exclusively related to 

transactions in commodities, 

transactions in security futures and/or 

effecting transactions on the floor of 

another national securities exchange 

and who are registered as floor members 

with such exchange. The Exchange 

believes these registration exemptions 

are appropriate because ISE would not 

consider individuals that fall into the 

exemptions to be actively engaged in 

securities business unless they are 

registered as floor members on another 

national securities exchange, in which 

case, they are already registered as floor 

members and not required to register at 

ISE. ISE believes incorporating these 

exemptions into the rule provides 

additional clarity to individual 

associated persons as to who will or will 

not be required to register under the 

proposed rule. Any applicable FINRA 

registration requirements would 

continue to apply to Members that are 

also members of FINRA. 

Additionally, under the proposal, the 

Exchange may waive the qualification 

examination requirement where good 

cause is shown. Similar rules are in 

place at the New York Stock Exchange, 

Inc. (‘‘NYSE’’) and FINRA.15 In 

determining whether a waiver shall be 

granted, the Exchange shall consider, 

among other things, previous industry 

employment, training and/or the 

successful completion of similar 

qualification examinations of other selfregulatory organizations. Under the 

proposed Rule, individual associated 

persons whose activities are limited 

solely to the transaction of business on 

the floor of another exchange will be 

subject to the continuing education 

requirements set forth in Rule 604 or 

any other continuing education 

requirements as prescribed by the 

Exchange. 

The Exchange also is proposing to 

require the designation of a Financial/ 

Operations Principal by each member 

that is subject to Exchange Act Rule 

15c3–1, and the designation of a Chief 

Compliance Officer by each Member. 

Under the proposed rule, the Financial/ 

Operations Principal and Chief 

Compliance Officer are required to 

register and pass the appropriate 

qualification examination.16 The 

registration requirements for a 

Financial/Operations Principal are 

consistent with CBOE Rule 3.6A,17 and 

the requirements for a Chief Compliance 

Officer are consistent with proposed 

amendments to CBOE Rule 3.6A (which 

in turn are consistent with FINRA Rule 

3130 and NASD Rule 1022).18 The 

proposal includes a limited exemption 

from the requirement to pass the 

appropriate qualification examination 

by a Chief Compliance Officer. 

Specifically, a person that has been 


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80096 Federal Register / Vol. 75, No. 244 / Tuesday, December 21, 2010 / Notices 

19With the exception of its application to sole 

proprietors, this requirement is consistent with the 

registration requirement set forth in NASD Rule 

1021 addressing registration of two Principals (as 

defined in NASD Rule 1021). 

20See NASD Rule 1021(e). 21E.g., CBOE Rule 9.3A. 

22See CBOE Registration Proposal, supra note 7. 

23 15 U.S.C. 78f(b). 

24 15 U.S.C. 78f(b)(5). 

25 15 U.S.C. 78f(c). 

26 15 U.S.C. 78f(c)(3)(B). 

27 15 U.S.C. 78f(c)(3)(C). 

designated as a Chief Compliance 

Officer on Schedule A of Form BD for 

at least two years immediately prior to 

January 1, 2002, and who has not been 

subject within the last ten years to any 

statutory disqualification as defined in 

Section 3(a)(39) of the Act; a 

suspension; or the imposition of a 

$5,000 or more fine for a violation(s) of 

any provision of any securities law or 

regulation, or any agreement with, rule 

or standard of conduct of any securities 

governmental agency, securities selfregulatory organization, or as imposed 

by any such self-regulatory organization 

in connection with a disciplinary 

proceeding, shall be required to register 

in the category of registration 

appropriate to the function to be 

performed as prescribed by the 

Exchange, but shall be exempt from the 

requirement to pass the heightened 

qualification examination as prescribed 

by the Exchange. 

In addition, the Exchange is 

proposing to require registration and 

successful completion of a heightened 

qualification examination by at least 

two individuals that are each an officer, 

partner or director of each Member.19

However, the Exchange notes that all 

individuals who engage in supervisory 

functions of the Member’s securities 

business shall be required to register 

and pass the appropriate heightened 

qualification examination(s) relevant to 

the particular category of registration. 

Members that are sole proprietors are 

exempt from this requirement. In 

addition, the Exchange may waive the 

requirement to have two officers, 

partners and/or directors registered if a 

Member conclusively demonstrates that 

only one officer, partner or director 

should be required to register. For 

example, a Member could conclusively 

demonstrate that only one individual is 

required to register if such Member is 

owned by one individual (such as a 

single member limited liability 

company), such individual acts as the 

only trader on behalf of the Member, 

and the Member employs only one other 

individual who functions only in a 

clerical capacity. The ability to waive 

this registration requirement is 

consistent with similar FINRA rules 

regarding principal registration.20

ISE is also proposing to allow a 

Member that conducts proprietary 

trading only and has 25 or fewer 

registered persons to have only one 

officer or partner registered under this 

section rather than two. This exception 

is similar to that of several other 

exchanges and reflects that such 

Members do not necessitate the same 

level of supervisory structure as those 

Members that have customers or are 

larger in size. For purposes of this 

requirement, a Member is be [sic] 

considered to conduct only proprietary 

trading if it has the following 

characteristics: (i) The Member is not 

required by Section 15(b)(8) of the 

Exchange Act to become a FINRA 

member but is a member of another 

registered securities exchange not 

registered solely under Section 6(g) of 

the Exchange Act; (ii) all funds used or 

proposed to be used by the Member are 

the Member’s own capital, traded 

through the Member’s own accounts; 

(iii) the Member does not, and will not, 

have customers; and (iv) all persons 

registered on behalf of the Member 

acting or to be acting in the capacity of 

a trader must be owners of, employees 

of, or contractors to the Member. The 

description of what constitutes 

proprietary trading for purposes of this 

requirement is appropriate in that it 

provides additional clarity for 

associated persons to evaluate whether 

two individuals are required to register. 

Proposed Rule 313 also sets forth the 

requirements for examinations where 

there is a lapse in registration. 

Specifically, an individual associated 

person shall be required to pass the 

appropriate qualification examination 

for the category of registration if the 

individual associated person’s 

registration has been revoked by the 

Exchange as a disciplinary sanction or 

whose most recent registration has been 

terminated for a period of two or more 

years. 

Additionally, the Exchange proposes 

to update Rule 604 regarding continuing 

education requirements so that it is 

consistent with other SRO rules.21

Specifically, the Exchange proposes to 

add a provision detailing the procedures 

required for in-house delivery of the 

regulatory element. The required 

procedures address responsibly [sic] for 

the education program, site 

requirements, technology requirements, 

supervision requirements, and 

administration of the program. Members 

are required to file with their Designated 

Examining Authority, a letter of 

attestation signed by a senior officer or 

partner, attesting to the establishment of 

the required procedures, and must 

annually represent that they have 

continued to maintain all required 

procedures for the previous year. While 

the Exchange does not have a floor, for 

consistency with other SRO rules, the 

Exchange also proposes to delete 

language that excludes those people 

whose activities are limited solely to the 

transaction of business on a floor from 

the definition of ‘‘registered person’’ for 

purposes of the Rule 604.22

Finally, this filing proposes to make 

non-substantive changes to ISE Rule 601 

(Registration of Options Principals), 

Rule 602 (Registration of 

Representatives) and Rule 603 

(Termination of Registered Persons) to 

define and reference certain terms 

consistently within these rules and with 

proposed Rule 313. Specifically, these 

rules currently contain inconsistent 

references to the Central Registration 

Depository, and the registration and 

termination forms required to be filed 

under the rules. Additionally, these 

rules contain reference to the National 

Association of Securities Dealers or 

‘‘NASD’’ which is now known as the 

Financial Industry Regulatory Authority 

or ‘‘FINRA.’’ 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with Section 

6(b) of the Act,23 in general, and furthers 

the objectives of Section 6(b)(5) of the 

Act,24 which requires, among other 

things, that the Exchange’s rules be 

designed to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and protect investors and the 

public interest. Specifically, the 

enhanced registration and qualification 

requirements will provide additional 

protection to investors and further 

promote the public interest. 

In addition, the Exchange believes 

that the proposed rule change is 

consistent with Section 6(c) of the Act,25

in general, and furthers the objectives of 

Section 6(c)(3)(B) of the Act,26 which 

provides, among other things, that a 

national securities exchange may bar a 

natural person from becoming 

associated with a member if such 

natural person does not meet the 

standards of training, experience and 

competence as prescribed by the rules of 

the national securities exchange. The 

Exchange also believes that the 

proposed rule change furthers the 

objectives of Section 6(c)(3)(C) of the 

Act,27 which provides, among other 

things, that a national securities 

exchange may bar any person from 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 244 / Tuesday, December 21, 2010 / Notices 80097 

28 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

becoming associated with a member if 

such person does not agree to supply 

the exchange with such information 

with respect to its dealings with the 

member as may be specified by the rules 

of the exchange and to permit the 

examination of its books and records to 

verify the accuracy of any information 

so supplied. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

This proposed rule change does not 

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 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) by order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be 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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–ISE–2010–115 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–ISE–2010–115. 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 such 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 

publicly available. All submissions 

should refer to File Number SR–ISE– 

2010–115 and should be submitted on 

or before January 11, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–31951 Filed 12–20–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63552; File No. SR– 

NYSEAmex–2010–120] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NYSE 

Amex LLC Establishing Strike Price 

Intervals of $1 and Increasing Position 

and Exercise Limits With Respect to 

Options on the KBW Bank Index 

December 15, 2010. 

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 December 

14, 2010, NYSE Amex LLC (the 

‘‘Exchange’’ or ‘‘NYSE Amex’’) 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 Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

NYSE Amex Rules 903C and 904C with 

respect to options on the KBW Bank 

Index (‘‘BKX’’ or ‘‘Index’’) to (i) establish 

strike price intervals of $1.00 and (ii) 

increase the position and exercise limits 

applicable thereto. The text of the 

proposed rule change is available at the 

Exchange’s principal office, on the 

Commission’s Web site at http:// 

www.sec.gov, at the Commission’s 

Public Reference Room, and http:// 

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 

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 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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to amend NYSE Amex Rules 

903C and 904C with respect to options 

on BKX to (i) establish strike price 

intervals of $1.00 and (ii) increase the 

position and exercise limits applicable 

thereto. The proposed change would 

provide investors with greater flexibility 

with respect to trading options on BKX, 

which the Exchange intends on listing 

pursuant to the generic listing standards 

of Amex Rule 903C, by allowing them 

to establish positions that are better 

tailored to meet their investment 

objectives. 


srobinson on DSKHWCL6B1PROD with NOTICES