Document ID: SEC-2015-1932-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2015-11-17T05:00Z

[Federal Register Volume 80, Number 221 (Tuesday, November 17, 2015)]
[Notices]
[Pages 71847-71850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29225]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76409; File No. SR-BX-2015-066]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Establish 
the Securities Trader and Securities Trader Principal Registration 
Categories

November 10, 2015.
    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 November 4, 2015, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III, 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.
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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

    The Exchange proposes to establish the Securities Trader and 
Securities Trader Principal registration categories and to retire the 
Limited Representative--Proprietary Trader and Limited Principal--
Proprietary Trader registration categories. The Exchange is also 
amending its rules to establish the Series 57 examination as the 
appropriate qualification examination for Securities Traders and 
deleting the rule referring to the S501 continuing education program 
currently applicable to Proprietary Traders.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxbx.cchwallstreet.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 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
    The Exchange is proposing to replace the Proprietary Trader 
registration category (the ``Proprietary Trader'' registration 
category) and Proprietary Trader qualification examination (Series 56) 
with the Securities Trader registration category and Securities Trader 
qualification examination (Series 57) in its registration rules 
relating to securities trading activity. Similarly, the Exchange 
proposes to replace the Limited Principal--Proprietary Trader 
registration category (the ``Proprietary Trader Principal'' 
registration category) with the Securities Trader Principal 
registration category.
    This filing is, in all material respects, based upon SR-FINRA-2015-
017, which was recently approved by the Commission.\3\
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    \3\ See Securities Exchange Act Release No. 75783 (August 28, 
2015), 80 FR 53369 (September 3, 2015) (approving SR-FINRA-2015-017) 
(the ``FINRA Amendments'').
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I. Securities Trader Registration Category
    Today, BX Rule 1032(a) requires each person associated with a 
member who is included within the definition of a

[[Page 71848]]

Representative \4\ to register with the Exchange as a General 
Securities Representative and to pass an appropriate Qualification 
Examination before such registration may become effective unless his or 
her activities are so limited as to qualify him for one or more limited 
categories of representative registration specified in Rule 1032. 
Subparagraph (b) to Rule 1032 sets forth the Proprietary Trader 
category of registration limited to persons who are associated with a 
proprietary trading firm \5\ and whose activities in the investment 
banking or securities business are limited solely to proprietary 
trading. Persons who deal with the public do not fit in this 
registration category and must continue to register as General 
Securities Representatives.\6\
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    \4\ ``Representative'' is defined in Rule 1011 as an Associated 
Person of a registered broker or dealer who is engaged in the 
investment banking or securities business for the member including 
the functions of supervision, solicitation or conduct of business in 
securities or who is engaged in the training of persons associated 
with a broker or dealer for any of these functions are designated as 
representatives. As provided in Rule 1031, all Representatives of BX 
members are required to be registered with the Exchange, and 
Representatives that are so registered are referred to as 
``Registered Representatives''.
    \5\ ``Proprietary trading firm'' is defined in Rule 1011 as an 
Applicant with the following characteristics: (1) The Applicant is 
not required by Section 15(b)(8) of the Act to become a FINRA member 
but is a member of another registered securities exchange not 
registered solely under Section 6(g) of the Act; (2) all funds used 
or proposed to be used by the Applicant for trading are the 
Applicant's own capital, traded through the Applicant's own 
accounts; (3) the Applicant does not, and will not have 
``customers,'' as that term is defined in Equity Rule 0120(g); 
and(4) all Principals and Representatives of the Applicant acting or 
to be acting in the capacity of a trader must be owners of, 
employees of, or contractors to the Applicant.
    \6\ Persons who are registered as General Securities 
Representatives and have passed the Series 7 may perform the 
functions of a Proprietary Trader. Associated persons may register 
as General Securities Representatives upon passing the Series 7 
examination and then function as a Proprietary Trader.
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    The Exchange is proposing to retire the Proprietary Trader 
registration category by deleting current Rule 1032(b) and adopting 
proposed Rule 1032(b) establishing the new Securities Trader 
registration category. Proposed Rule 1032(b) requires that each person 
associated with a member who is included within the definition of a 
representative as defined in Rule 1011 must register with the Exchange 
as a Securities Trader if, with respect to transactions in equity, 
preferred or convertible debt securities, or foreign currency options 
on the Exchange, such person is engaged in proprietary trading, the 
execution of transactions on an agency basis, or the direct supervision 
of such activities, other than any person associated with a member 
whose trading activities are conducted principally on behalf of an 
investment company that is registered with the Commission pursuant to 
the Investment Company Act of 1940 and that controls, is controlled by 
or is under common control, with the member (an ``investment company 
firm''). The proposed language requires applicants to pass an 
appropriate Qualification Examination for Securities Trader (the Series 
57 examination) before registering in the new Securities Trader 
category. It also provides that a person registered as a Securities 
Trader shall not be qualified to function in any other registration 
category, unless he or she is also qualified and registered in such 
other registration category.
    A person registered as a Proprietary Trader in the Central 
Registration Depository (CRD[supreg]) system on the effective date of 
the proposed rule change will be grandfathered as a Securities Trader 
without having to take any additional examinations and without having 
to take any other actions. In addition, individuals who were registered 
as a Proprietary Trader in the CRD system prior to the effective date 
of the proposed rule change will be eligible to register as Securities 
Traders without having to take any additional examinations, provided 
that no more than two years have passed between the date they were last 
registered as a representative and the date they register as a 
Securities Trader.
    Persons registered in the new category would be subject to the 
continuing education requirements of Rule 1120. The Exchange proposes 
to amend Rule 1120(a) by removing the option for Series 56 registered 
persons to participate in the S501 Series 56 Proprietary Trader 
continuing education program in order to satisfy the Regulatory 
Element. The S501 Series 56 Proprietary Trader continuing education 
program is being phased out along with the Series 56 Proprietary Trader 
qualification examination. As a result, effective January 4, 2016, the 
S501 Series 56 Proprietary Trader continuing education program for 
Series 56 registered persons will cease to exist. In place of the S501 
Series 56 Proprietary Trader continuing education program for Series 56 
registered persons, the Exchange proposes that Series 57 registered 
persons be permitted to enroll in the S101 General Program for Series 7 
and all other registered persons.\7\
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    \7\ The Commission notes that amended Rule 1120(a)(1) would 
require Series 57 registered persons to take the S101 General 
Program. See Rule 1120(a)(1).
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II. Securities Trader Principal Registration Category
    Currently, Exchange Rule 1021 requires all persons engaged or to be 
engaged in the investment banking or securities business of a member 
who are to function as principals to be registered as such with the 
Exchange in the category of registration appropriate to the function to 
be performed as specified in Rule 1022.\8\ Before their registration 
can become effective, they are required to pass a Qualification 
Examination for Principals appropriate to the category of registration 
as specified by the Exchange Board. Pursuant to Rule 1021(b), persons 
associated with a member as sole proprietor, officer, partner, manager 
of office of supervisory jurisdiction or corporate director, who are 
actively engaged in the management of the member's investment banking 
or securities business, including supervision, solicitation, conduct of 
business or the training of persons associated with a member for any of 
these functions, are designated as Principals.
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    \8\ Additionally, Rule 1021(e), Requirement of Two Registered 
Principals for Members, establishes that an Exchange member, except 
a sole proprietorship, shall have at least two officers or partners 
who are registered as principals with respect to each aspect of the 
member's investment banking and securities business pursuant to the 
applicable provisions of Rule 1022; provided, however, that a 
proprietary trading firm with 25 or fewer registered representatives 
shall only be required to have one officer or partner who is 
registered as a principal.
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    Rule 1022 lists the categories of principal registration. In 
addition to ``General Securities Principal,'' which is the broadest 
category, there are three limited categories of principal registration: 
Financial and Operations, General Securities Sales Supervisor, and 
Proprietary Trader. Pursuant to Rule 1022(h), the Proprietary Trader 
Principal category is available for persons whose supervisory 
responsibilities in the investment banking and securities business are 
limited to the activities of a member that involve proprietary trading. 
Currently, Rule 1022 requires that such persons be registered pursuant 
to Exchange rules as a Proprietary Trader, be qualified to be so 
registered by passing the Series 24 examination (the same qualification 
required for registration as a General Securities Principal), and not 
function in a principal capacity with responsibility over any area of 
business activity other than proprietary trading. Under Exchange Rule 
1032(b)(1)(B), the prerequisite examination for the

[[Page 71849]]

Proprietary Trader Principal category is the Series 56 examination.
    In consultation with FINRA and other exchanges, the Exchange is now 
proposing to retire the Proprietary Trader Principal category. 
Accordingly, it is deleting Rule 1022(h) in its entirety. In its place 
the Exchange is adopting new Rule 1022(h), which adds a new Securities 
Trader Principal registration category. Under the proposed rule each 
person associated with a member who is included within the definition 
of principal in Rule 1021 and who will have supervisory responsibility 
over the securities trading activities described in Rule 1032(b) must 
become qualified and registered as a Securities Trader Principal. The 
proposed rule change should allow BX to more easily track principals 
with supervisory responsibility over securities trading activities.
    To qualify for registration as a Securities Trader Principal, a 
candidate would first be required to qualify and register as a 
Securities Trader under Rule 1032(b) and pass the General Securities 
Principal qualification examination. A person who is qualified and 
registered as a Securities Trader Principal under the new rule would 
only have supervisory responsibility over the securities trading 
activities specified in Rule 1032(b), unless such person were 
separately qualified and registered in another appropriate principal 
registration category, such as the General Securities Principal 
registration category. Finally, a registered General Securities 
Principal would not be qualified to supervise the securities trading 
activities described in Rule 1032(b), unless such person also qualified 
and registered as a Securities Trader under Rule 1032(b) by passing the 
Securities Trader qualification examination and registered as a 
Securities Trader Principal.
    A person registered as a Proprietary Trader Principal in the CRD 
system on the effective date of the proposed rule change will be 
eligible to register as a Securities Trader Principal without having to 
take any additional examinations. An individual who was registered as a 
Proprietary Trader Principal in the CRD system prior to the effective 
date of the proposed rule change will also be eligible to register as a 
Securities Trader Principal without having to take any additional 
examinations, provided that no more than two years have passed between 
the date they [sic] were last registered as a principal and the date 
they [sic] register as a Securities Trader Principal. Members, however, 
will be required to affirmatively register persons transitioning to the 
proposed registration category as Securities Trader Principals on or 
after the effective date of the proposed rule change.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \10\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest. The Exchange believes that the requirements of the Securities 
Trader and Securities Trader Principal registration categories, as well 
as the new Securities Trader qualification examination, should help 
ensure that proprietary traders and the principals who supervise 
proprietary traders and proprietary trading are, and will continue to 
be, properly trained and qualified to perform their functions which 
should protect investors and the public interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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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 not necessary or appropriate in 
furtherance of the purposes of the Act. Implementation of the proposed 
changes to BX's registration rules in coordination with the FINRA 
Amendments does not present any competitive issues, but rather is 
designed to provide less burdensome and more efficient regulatory 
compliance for members and enhance the ability of the Exchange to 
fairly and efficiently regulate members, which will further enhance 
competition. Additionally, the proposed rule change should not affect 
intramarket competition because all similarly situated representatives 
and principals will be required to complete the same qualification 
examinations and maintain the same registrations. Finally, the proposed 
rule change does not impose any additional examination burdens on 
persons who are already registered. There is no obligation to take the 
proposed Series 57 examination in order to continue in their present 
duties, so the proposed rule change is not expected to disadvantage 
current registered persons relative to new entrants in this regard.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \11\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BX-2015-066 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2015-066. This file

[[Page 71850]]

number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
    Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for Web site viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE., Washington, 
DC 20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly.
    All submissions should refer to File Number SR-BX-2015-066 and 
should be submitted on or before December 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-29225 Filed 11-16-15; 8:45 am]
 BILLING CODE 8011-01-P