Document ID: SEC-2011-1170-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2011-08-12T04:00Z

[Federal Register Volume 76, Number 156 (Friday, August 12, 2011)]
[Notices]
[Pages 50277-50279]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20578]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65054; File No. SR-ISE-2011-36]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Adopt the Content Outline for the Proprietary Traders 
Examination (Series 56)

 August 8, 2011.
    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 August 1, 2011, the International Securities Exchange, LLC (the 
``Exchange'' or the ``ISE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which items have been prepared by the self-
regulatory organization. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) of the Act,\5\ the 
Exchange is filing with the Commission the content outline for the 
Proprietary Traders Qualification Examination (``Series 56'') program. 
ISE is not proposing any textual changes to the Rules of ISE.
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    \5\ 15 U.S.C. 78s(b)(1).
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    The text of the proposed rule change is available on the Exchange's 
Internet Web site at http://www.ise.com, at the principal office of the 
Exchange, 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 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
    Pursuant to Rule 15b7-1,\6\ promulgated under the Exchange Act,\7\ 
``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 * * * '' 
ISE Rule 313 sets forth the requirements for registration and 
qualification of associated persons. Specifically, ISE Rule 313 
provides that

[[Page 50278]]

individual associated persons that are ``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.'' \8\ Further, Rule 313 
requires, among other things, that an individual associated person 
submit an application for registration and pass the appropriate 
qualification examination, as prescribed by the Exchange, before the 
registration can become effective.
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    \6\ 17 CFR 240.15b7-1.
    \7\ 15 U.S.C. 78a et seq.
    \8\ Under ISE's rules, anyone functioning as a principal must 
register as such with the Exchange. The new examination will serve 
as a prerequisite to the Series 24 and the Series 9/10 examinations 
for principals who are engaged solely in proprietary trading. 
(Generally, all principals must qualify as representatives before 
qualifying as principals.) See Securities and [sic] Exchange Act 
Release No. 63843 (February 4, 2011), 76 FR 7884 (SR-ISE-2010-115).
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    In accordance with .06 of the Supplementary Material to Rule 313, 
those individuals shall be considered to be ``engaged in the securities 
business of a Member'' and subject to the registration requirements if 
(i) The individual associated person conducts proprietary trading, acts 
as a market-maker, effects transactions on behalf of a broker-dealer 
account, supervises or monitors proprietary trading, market-making 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 one 
or more activities identified in (i) above as an officer, partner or 
director.\9\
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    \9\ In accordance with Rule 313, 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, as prescribed by the Exchange.
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    The Series 56 examination tests a candidate's knowledge of 
proprietary trading generally and the industry rules applicable to 
trading of equity securities and listed options contracts. The Series 
56 examination covers, among other things, recordkeeping and recording 
requirements, types and characteristics of securities and investments, 
trading practices and display execution and trading systems. While the 
examination is primarily dedicated to topics related to proprietary 
trading, the Series 56 examination also covers a few general concepts 
relating to customers.\10\
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    \10\ The Commission notes that proprietary trading firms do not 
have customers.
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    The Series 56 examination program is shared by ISE and the 
following Self-Regulatory Organizations (``SROs''): Boston Options 
Exchange; Chicago Board Options Exchange, Inc. (``CBOE''); C2 Options 
Exchange, Incorporated; Chicago Stock Exchange, Incorporated; NASDAQ 
OMX, BX; NASDAQ OMX, PHLX; NASDAQ Stock Market LLC; National Stock 
Exchange, Incorporated; New York Stock Exchange, LLC; NYSE AMEX, 
Incorporated; and NYSE ARCA, Incorporated.
    Upon request by the SROs referenced above, FINRA staff convened a 
committee of industry representatives, ISE staff and staff from the 
other SROs referenced above, to develop the criteria for the Series 56 
examination program. As a result, ISE is proposing to set forth the 
content of the examination. The qualification examination consists of 
100 multiple choice questions. Candidates will have 150 minutes to 
complete the exam. The content outline describes the following topical 
sections comprising the examination: Personnel, Business Conduct and 
Recordkeeping and Reporting Requirements, 9 questions; Markets, Market 
Participants, Exchanges, and SROs, 8 questions; Types and 
Characteristics of Securities and Investments, 20 questions; Trading 
Practices and Prohibited Acts, 50 questions; and Display, Execution and 
Trading Systems, 13 questions. Representatives from the applicable SROs 
shall meet on a periodic basis to evaluate and, as necessary, update, 
the Series 56 examination program.
    CBOE filed a similar filing with the Commission regarding the 
Series 56 examination program \11\ and ISE understands that the other 
applicable SROs will also file similar filings with the Commission. ISE 
proposes to implement the Series 56 examination program when this 
filing becomes effective.\12\ The Exchange will announce all relevant 
dates with respect to the Series 56 examination program through a 
Regulatory Information Circular.
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    \11\ See Securities and Exchange Commission [sic] Release No. 
64699 (June 17, 2011), 76 FR 36945 (June 23, 2011) (SR-CBOE-2011-
056).
    \12\ The Series 56 examination became available in WebCRD for 
ISE members on June 20, 2011.
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2. Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\13\ in general, and furthers the objectives of Section 6(b)(1) 
\14\ of the Act in particular, in that it is designed to enforce 
compliance by Exchange members and persons associated with its members 
with the rules of the Exchange. The Exchange also believes the proposed 
rule change furthers the objectives of Section 6(c)(3) \15\ of the Act, 
which authorizes ISE to prescribe standards of training, experience and 
competence for persons associated with ISE members, in that this filing 
comprises the content outline and relevant specifications for the 
Series 56 examination program. ISE believes the Series 56 examination 
program establishes the appropriate qualifications for an individual 
associated person that is required to register as a Proprietary Trader 
under Exchange Rule 313, including, but not limited to, Market-Makers, 
proprietary traders and individuals effecting transactions on behalf of 
other broker-dealers. The Series 56 addresses industry topics that 
establish the foundation for the regulatory and procedural knowledge 
necessary for individuals required to register as a Proprietary Trader.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(1).
    \15\ 15 U.S.C. 78f(c)(3).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The 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

    Pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) \17\ thereunder, the Exchange has designated this proposal as 
one that effects a change that: (i) Does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) by its terms, does not 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest. Rule 19b-4(f)(6) \18\ 
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

[[Page 50279]]

of the proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
    Under Rule 19b-4(f)(6) of the Act,\19\ a proposal does not become 
operative for 30 days after the date of its filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest. The Commission is waiving the 30-
day operative period for this filing so that it may become effective 
and operative upon filing.\20\ The Commission believes waiving the 30-
day operative delay is consistent with the protection of investors and 
the public interest as the waiver will allow the Exchange to adopt the 
content outline, and provide notice of having done so to associated 
persons of its members, near the same time as other exchanges. The 
Commission, therefore, designates the proposed rule change to be 
operative upon filing with the Commission.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ Id.
    \19\ Id.
    \20\ For purposes only of waiving the operative delay of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f). See also 17 CFR 200.30-3(a)(59).
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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 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 rule-comments@sec.gov. Please include 
File No. SR-ISE-2011-36 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-2011-36. 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 Commissions 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. Copies of such filing also will 
be available for inspection and copying at the principal office of the 
ISE. 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-ISE-
2011-36 and should be submitted by September 2, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-20578 Filed 8-11-11; 8:45 am]
BILLING CODE 8011-01-P