Document ID: SEC-2013-1587-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market, LLC
Posted Date: 2013-09-10T04:00Z

[Federal Register Volume 78, Number 175 (Tuesday, September 10, 2013)]
[Notices]
[Pages 55302-55305]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-21934]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70316; File No. SR-NASDAQ-2013-108]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 1120 and To Adopt a Corresponding Fee

September 4, 2013.
    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 August 22, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. NASDAQ has 
designated the proposed rule change as constituting a non-controversial 
rule change under Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders the proposal effective upon filing 
with the Commission. Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ is proposing to amend Rule 1120 as described below, and to 
adopt a corresponding fee.
    The text of the proposed rule change is below. Proposed new 
language is italicized; proposed deletions are in brackets.
* * * * *
1120. Continuing Education Requirements
    This Rule prescribes requirements regarding the continuing 
education of certain registered persons subsequent to their initial 
qualification and registration with Nasdaq. The requirements shall 
consist of a Regulatory Element and a Firm Element as set forth below.
(a) Regulatory Element
(1) Requirements
    No member shall permit any registered person to continue to, and no 
registered person shall continue to, perform duties as a registered 
person unless such person has complied with the requirements of 
paragraph (a) hereof.
    Each registered person shall complete the Regulatory Element on the 
occurrence of their second registration anniversary date and every 
three years thereafter, or as otherwise prescribed by Nasdaq. On each 
occasion, the Regulatory Element must be completed within 120 days 
after the person's registration anniversary date. A person's initial 
registration date, also known as the ``base date,'' shall establish the 
cycle of anniversary dates for purposes of this Rule. The content of 
the Regulatory Element shall be determined by Nasdaq and shall be 
appropriate to either the registered representative or principal status 
of the person subject to the Rule. The following Regulatory Elements 
administered by FINRA shall be required:
    Persons registered solely as Proprietary Traders pursuant to Rule 
1032(c) must complete the S501.
    Persons registered as General Securities Representatives pursuant 
to Rule 1032(a) must complete the S101.
    Persons registered in a supervisory capacity pursuant to Rules 1021 
and 1022 must complete the S201.
* * * * *

[[Page 55303]]

7003. Registration and Processing Fees
    (a) The following fees will be collected and retained by FINRA via 
the Web CRD registration system for the registration of associated 
persons of Nasdaq members that are not also FINRA members:
    (1)-(6) No change
    (7) a $[75]100 session fee for each individual who is required to 
complete the Regulatory Element of the Continuing Education 
Requirements pursuant to Nasdaq Rule 1120 (S101 and S201) and a $60 
session fee for each individual who is required to complete the 
Proprietary Trader Regulatory Element (S501).
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASDAQ 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 codify in Rule 1120 
the specific continuing education requirements that currently apply and 
to adopt a continuing education requirement for persons registered as 
Proprietary Traders. NASDAQ also proposes to adopt a fee in Rule 7003 
for the new continuing education program applicable to Proprietary 
Traders.
    NASDAQ adopted the Proprietary Trader \5\ registration in 2011,\6\ 
working with various other exchanges and Financial Industry Regulatory 
Authority (``FINRA''). At that time, NASDAQ stated that persons 
registered in the new category would be subject to its continuing 
education requirements in Rule 1120.
---------------------------------------------------------------------------

    \5\ A Proprietary Trader is a person whose activities in the 
investment banking and securities business are limited solely to 
proprietary trading. NASDAQ Rule 1032(c).
    \6\ See Securities Exchange Act Release No. 64958 (July 25, 
2011), 76 FR 45629 (July 29, 2011) (SR-NASDAQ-2011-095).
---------------------------------------------------------------------------

    At this time, the new continuing education program for Proprietary 
Traders will soon become available and will be administered by FINRA. 
The new program, the S501, is intended to address the specific 
continuing education of Proprietary Traders, based on the content 
outline for the Series 56 exam, which covers the main categories of 
rules and regulations generally applicable to such persons.\7\ The 
Continuing Education Regulatory Element is a computer-based education 
program administered by FINRA to help ensure that registered persons 
are kept current on regulatory, compliance and trading practice matters 
in the industry.
---------------------------------------------------------------------------

    \7\ These generally include recordkeeping and recording 
requirements, types and characteristics of securities and 
investments, trading practices and display execution and trading 
systems. See Securities Exchange Act Release No. 65040 (August 5, 
2011), 76 FR 49809 (August 11, 2011) (SR-NASDAQ-2011-108).
---------------------------------------------------------------------------

    NASDAQ proposes to amend Rule 1120(a)(1) to specify the required 
Regulatory Element for each category of registered persons. Currently, 
Rule 1120(a)(1) provides that no member shall permit any registered 
person to continue to, and no registered person shall continue to, 
perform duties as a registered person, unless such person has complied 
with the continuing education requirements of paragraph (a). Each 
registered person shall complete the Regulatory Element of the 
continuing education program on the occurrence of their second 
registration anniversary date(s), and every three years thereafter or 
as otherwise prescribed by NASDAQ. On each occasion, the Regulatory 
Element must be completed within 120 days after the person's 
registration anniversary date. A person's initial registration date, 
also known as the ``base date,'' shall establish the cycle of 
anniversary dates for purposes of this Rule. This applies to persons 
registered as Proprietary Traders as well.
    The Rule further provides that the content of the Regulatory 
Element of the program shall be determined by NASDAQ for each 
registration category of persons subject to the Rule. NASDAQ now 
proposes to make clear which specific programs are required, including 
both existing programs (S101 and S201) as well as the new Proprietary 
Trader continuing education program (S501). NASDAQ has determined that 
the following Regulatory Elements administered by FINRA shall be 
required:
     Persons registered solely as Proprietary Traders pursuant 
to Rule 1032(b) [sic] must complete the S501.
     Persons registered as General Securities Representatives 
pursuant to Rule 1032(a) must complete the S101.
     Persons registered in a supervisory capacity pursuant to 
Rules 1021 and 1022 must complete the S201.
    NASDAQ believes that specifying the applicable Regulatory Element 
in the Rule should be helpful to members in complying with the Rule. 
Only one Regulatory Element is required. For example, members 
registered as supervisors are subject to the S201 only; they do not 
also have to complete the Regulatory Element applicable to their 
prerequisite registration, such as the S501 or the S101.\8\ This 
proposal does not change the registration requirements.
---------------------------------------------------------------------------

    \8\ In the event that a person is registered both as a 
Proprietary Trader and a General Securities Representative, only one 
Regulatory Element is required--the ``higher'' of the two, which is 
the S101.
---------------------------------------------------------------------------

    NASDAQ also proposes to adopt a fee applicable to Proprietary 
Trader Regulatory Element. Currently, the applicable fee for the 
Regulatory Element (S101 and S201) is $100.\9\ NASDAQ proposes to adopt 
a $60 fee for the S501. FINRA administers these programs on behalf of 
the exchanges and therefore the fees are payable directly to FINRA.\10\ 
The $60 fee will only be used for the administration of the S501 versus 
the S101 which utilizes the $100 fee for both development and 
administration. The costs associated with the development of the S501 
are included in the examination fee.
---------------------------------------------------------------------------

    \9\ The Commission notes that the Exchange is correcting its fee 
schedule to reflect the $100 fee for the S101 and the S201 
continuing education.
    \10\ The S501 was established for those registrants who have 
passed the Series 56 Qualification Exam as reflected in WebCRD. 
WebCRD is the central licensing and registration system for the U.S. 
securities industry. The CRD system enables individuals and firms 
seeking registration with multiple states and self-regulatory 
organizations to do so by submitting a single form, fingerprint card 
and a combined payment of fees to FINRA. Through the CRD system, 
FINRA maintains the qualification, employment and disciplinary 
histories of registered associated persons of broker-dealers.
---------------------------------------------------------------------------

2. Statutory Basis
    NASDAQ believes that its proposal is consistent with Section 6(b) 
of the Act \11\ in general, and furthers the objectives of: (1) Section 
6(c)(3)(B) of the Act,\12\ pursuant to which a national securities 
exchange prescribes standards of training, experience and competence 
for members and their associated persons; and (2) Section 6(b)(5) of 
the Act,\13\ in that it is designed, among other things, to prevent 
fraudulent and manipulative acts and practices, to promote just and

[[Page 55304]]

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, by requiring 
registered persons to complete the applicable continuing education 
program. NASDAQ believes that a strong continuing education program 
should bolster the integrity of NASDAQ by helping to ensure that all 
associated persons engaged in a securities business are, and will 
continue to be, properly trained and qualified to perform their 
functions. The Exchange does not believe that the proposal is unfairly 
discriminatory with respect to persons registered as a General 
Securities Representative who function in their current job as a 
Proprietary Trader, even though these persons are subject to the more 
stringent S101 rather than the S501; such persons are registered and 
qualified (Series 7) in a ``higher'' capacity and are therefore 
qualified to function in a capacity other than a Proprietary Trader, 
whether they choose to or not. Accordingly, requiring the S101 for such 
persons is appropriate and facilitates them being able to maintain 
their ``higher'' registration. The Exchange also believes that 
permitting General Securities Representatives functioning as 
Proprietary Traders to complete the S501 would be confusing and 
difficult to monitor.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78(c)(3)(B).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    NASDAQ also believes that the proposal furthers the objectives of 
Section 6(b)(4) of the Act,\14\ in that it provides for an equitable 
allocation of reasonable fees and other charges among exchange members 
and other persons using its facilities. Specifically, the new $60 fee 
is applicable to persons registered as a Proprietary Trader, which is a 
limited registration under NASDAQ rules. Accordingly, the proposed S501 
Regulatory Element specifically correlates to the rules and obligations 
applicable to Proprietary Traders, which are fewer than those 
applicable to persons registered in other categories. Thus, the S501 is 
a more limited form of continuing education. Therefore, NASDAQ believes 
that the lower fee ($60 rather than $100) is reasonable.\15\ The 
proposed fee is equitable, because it applies equally to all persons 
registered solely as Proprietary Traders.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b)(4).
    \15\ The Commission notes that in the Purpose section of this 
filing, NASDAQ correctly represents that the $100 fee for the S101 
covers costs associated with both development and administration of 
the program, but the $60 fee for the S501 covers only the cost to 
administer the continuing education.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ 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. All of the exchanges that recognize the 
Proprietary Trader registration category are expected to adopt the same 
continuing education fee and all Proprietary Traders, regardless of 
where they are registered, will be subject to same continuing education 
requirements and the same continuing education fees. Thus, the proposal 
treats similarly situated persons in the same way.

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

    Written comments were neither solicited nor received.

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

    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, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\16\ and Rule 19b-4(f)(6) thereunder.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
---------------------------------------------------------------------------

    The Exchange has requested that the Commission waive the 30-day 
operative delay. The proposed rule change: specifies the continuing 
education requirements that currently apply to registered persons; 
adopts a continuing education requirement, the S501, and a related fee 
for persons registered as Proprietary Traders; and corrects the 
Exchange's fee schedule to reflect the proper fee, $100 rather than 
$75, for the S101 and S201. Waiver of the operative delay would allow 
the Exchange to clarify and correct its rules and implement the 
proposed rule change at once, enabling its members to comply with their 
continuing education requirements in a timely manner, and thus is 
consistent with the protection of investors and the public interest. 
Therefore, the Commission designates the proposal operative upon 
filing.\17\
---------------------------------------------------------------------------

    \17\ 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).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of this proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

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-NASDAQ-2013-108 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-NASDAQ-2013-108. 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 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for

[[Page 55305]]

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-NASDAQ-2013-108 and should 
be submitted on or before October 1, 2013

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Kevin M. O'Neill,
Deputy Secretary.
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2013-21934 Filed 9-9-13; 8:45 am]
BILLING CODE 8011-01-P