Document ID: SEC-2011-1768-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2011-11-17T05:00Z

[Federal Register Volume 76, Number 222 (Thursday, November 17, 2011)]
[Notices]
[Pages 71398-71399]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-29677]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65731; File No. SR-ISE-2011-74]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Remove the Requirement That its Members Pass the DTR 
Examination Prior To Registering

November 10, 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 October 28, 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 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.
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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,\3\ the 
Exchange is filing a proposed rule change to remove the requirement 
that Designated Trading Representatives (``DTRs'') pass an examination 
administered by the ISE before they can be approved by the Exchange to 
enter quotations and orders on behalf of market makers.
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    \3\ 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, Proposed Rule Change

1. Purpose
    The Exchange rules governing registration, examination, and 
continuing education requirements for ISE members previously only 
applied to associated persons who conducted a public customer business. 
Such persons were required, in part, to pass the General Securities 
Representative examination (``Series 7'') and the ISE's Designated 
Trading Representative examination (``DTR Exam'') to function as 
representatives if accepting orders from non-member customers.\4\ ISE 
members whose business was limited to proprietary securities trading 
(``Prop Traders'') were only required to pass the DTR exam prior to 
receiving approval to enter quotations and orders on the Exchange.
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    \4\ See ISE Rule 602.
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    The ISE recently amended its rules governing registration, 
examination, and continuing education to require members, regardless of 
whether they conduct a public business or proprietary securities 
business, to register, qualify and comply with continuing education 
requirements.\5\ To address the gap in registration and examination 
requirements related to Prop Traders, the ISE, in conjunction with 
other SROs,\6\ implemented a new examination for Prop Traders (``Series 
56'') that is administered by the Financial Industry Regulatory 
Authority on behalf of the SROs.\7\
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    \5\ See Securities Exchange Act Release No. 63843 (February 4, 
2011), 76 FR 7885 (February 11, 2011) (SR-ISE-2010-115).
    \6\ The Series 56 examination program is shared by the ISE, 
Boston Options Exchange, Inc., Chicago Board Options Exchange, Inc., 
C2 Options Exchange, Inc., Chicago Stock Exchange, Inc., NASDAQ OMX, 
BX, NASDAQ OMX, PHLX, NASDAQ Stock Market LLC, National Stock 
Exchange, Inc., New York Stock Exchange, LLC, and NYSE Amex, 
Incorporated.
    \7\ 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. The Series 56 
examination became available to ISE members on August 1, 2011.
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    Because the ISE now requires all Prop Traders to pass the Series 56 
examination prior to being approved for membership, the Exchange 
believes that it is no longer necessary to administer its own exam. 
Likewise, the associated persons who are required to pass the Series 7 
examination prior to receiving approval to enter quotations and orders 
on the Exchange, should no longer be required to also pass the DTR Exam 
because the Series 7 is a much more comprehensive examination and tests 
the candidate's knowledge of the subject matter applicable to 
proprietary trading. Accordingly, the Exchange proposes to delete the 
requirement that Designated Trading Representatives take the DTR Exam. 
Such individuals will continue to be subject to the Exchange's 
registration and other requirements specific [sic] Designated Trading 
Representatives.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\8\ in general, and furthers the objectives of Section 6(b)(1) \9\ 
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) \10\ of the Act, 
which authorizes ISE to prescribe standards of training, experience and 
competence for persons associated with ISE members, in that this filing 
establishes that ISE members must take and pass the Series 56 
examination, which is being adopted by other SROs so as to create 
market-wide consistency in the examination process, instead of 
administering an ISE specific examination. ISE believes the Series 56 
examination program establishes the appropriate

[[Page 71399]]

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 Exchange 
believes the Series 56 addresses industry topics that establish the 
foundation for the regulatory and procedural knowledge necessary for 
individuals required to register as Designated Trading Representatives 
under ISE Rule 801.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(1).
    \10\ 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

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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) \11\ of the Act and Rule 19b-
4(f)(6) \12\ thereunder. The Exchange provided the Commission with 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at least 
five business days prior to the date of filing the proposed rule 
change.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    The Exchange has requested that the Commission waive the 30-day 
operative delay so that the proposed rule change may become effective 
and operative upon filing with the Commission. The Commission believes 
that such waiver will allow the Exchange to decommission the use of its 
own examination for registration purposes in conjunction with the 
Exchange's deadline for its membership to have taken and passed the 
Series 56 examination. Waiver of the operative delay will help to 
streamline the exam procedures, while simultaneously protecting 
investors and the public interest. Therefore, the Commission designates 
the proposal to be operative upon filing.\13\
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    \13\ 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 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 email to rule-comments@sec.gov. Please include 
File Number SR-ISE-2011-74 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-2011-74. 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 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-2011-74 and should be 
submitted on or before December 8, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-29677 Filed 11-16-11; 8:45 am]
BILLING CODE 8011-01-P