Document ID: SEC-2013-1591-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, LLC
Posted Date: 2013-09-11T04:00Z

[Federal Register Volume 78, Number 176 (Wednesday, September 11, 2013)]
[Notices]
[Pages 55766-55769]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22058]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70327; File No. SR-Phlx-2013-85]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 640, Continuing Education for Registered Persons and Adopt a 
Corresponding Fee

September 5, 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, NASDAQ OMX PHLX LLC (``Phlx'' or ``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. Phlx 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. 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)(iii).
    \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

    The Exchange proposes to amend Rule 640, Continuing Education for 
Registered Persons, 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.
* * * * *
    Rule 640. Continuing Education for Registered Persons
    (a) Regulatory Element
    (1) Requirements--No member organization 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

[[Page 55767]]

continuing education requirements of paragraph (a) of this Rule.
    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 the Exchange. 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.
    Content. The content of the Regulatory Element of the program shall 
be determined by the Exchange for each registration category of persons 
subject to the Rule. The following Regulatory Elements administered by 
FINRA shall be required:
    Persons registered solely as Proprietary Traders pursuant to Rule 
613(f) must complete the S501.
    Persons registered as General Securities Representatives pursuant 
to Rule 613(e) must complete the S101.
    Persons registered in a supervisory capacity pursuant to Rules 611 
and 612 must complete the S201.
* * * * *
NASDAQ OMX PHLX LLC \1\ PRICING SCHEDULE
    ALL BILLING DISPUTES MUST BE SUBMITTED TO THE EXCHANGE IN WRITING 
AND MUST BE ACCOMPANIED BY SUPPORTING DOCUMENTATION. ALL DISPUTES MUST 
BE SUBMITTED NO LATER THAN SIXTY (60) DAYS AFTER RECEIPT OF A BILLING 
INVOICE, EXCEPT FOR DISPUTES CONCERNING NASDAQ OMX PSX FEES, 
PROPRIETARY DATA FEED FEES AND CO-LOCATION SERVICES FEES. AS OF JANUARY 
3, 2011, THE EXCHANGE WILL CALCULATE FEES ON A TRADE DATE BASIS
* * * * *
VII. OTHER MEMBER FEES
A. OPTION TRADING FLOOR FEES

    No change.

B. PORT FEES

    No change.

C. FINRA Fees

    Continuing Education Fees [$75.00]

     The Continuing Education Fee will be assessed as to each 
individual who is required to complete the Regulatory Element of the 
Continuing Education Requirements pursuant to Exchange Rule 640. This 
fee is paid directly to FINRA.
    $60.00 for each individual who is required to complete the 
Proprietary Trader Regulatory Element (S501).
    $100.00 for each individual who is required to complete the S101 or 
S201.
    FINRA, on behalf of the Exchange, will bill and collect these fees
    The following fees will be collected and retained by FINRA via the 
Web CRD registration system for the registration of associated persons 
of Exchange members that are not also FINRA members:
    (b)-(c) 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 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 purpose of the proposed rule change is to codify in Rule 640 
the specific continuing education requirements that currently apply and 
to adopt a continuing education requirement for persons registered as 
Proprietary Traders. The Exchange also proposes to adopt a fee for the 
new continuing education program applicable to Proprietary Traders.
    The Exchange adopted the Proprietary Trader \5\ registration in 
2012, working with various other exchanges and Financial Industry 
Regulatory Authority (``FINRA''). At that time, the Exchange stated 
that, as a result of the new registration requirements, additional 
persons will become subject to the Exchange's continuing education 
requirements in Rule 640. The Exchange stated that it would announce to 
the membership when these new requirements will be implemented and 
available for member organizations to access.\6\
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    \5\ A Proprietary Trader is a person who is engaged solely in 
proprietary trading, market making or effecting transactions on 
behalf of a broker-dealer account. Phlx Rule 613(f).
    \6\ See Securities Exchange Act Release No. 66840 (April 20, 
2012), 77 FR 25003 (April 26, 2012) (SR-Phlx-2012-23).
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    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 on behalf of the Exchange to help ensure 
that registered persons are kept current on regulatory, compliance and 
trading practice matters in the industry.
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    \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. 66645 (March 22, 
2012), 77 FR 19042 (March 29, 2012) (SR-Phlx-2012-37).
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    The Exchange proposes to amend Rule 640(a) to specify the required 
Regulatory Element for each category of registered persons. Currently, 
Rule 640(a) provides that no member organization 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).\8\ Each registered person shall complete the Regulatory Element of 
the continuing education program on the occurrence of their [sic] 
second registration anniversary date(s), and every three years 
thereafter or as otherwise prescribed by the Exchange. 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

[[Page 55768]]

Rule. This applies to persons registered as Proprietary Traders as 
well.
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    \8\ Rule 640.01 exempts most floor persons from this 
requirement. Nevertheless, pursuant to Rule 625, Phlx requires 
periodic mandatory training. Training topics include, but are not 
limited to, training related to that person's function at the 
Exchange, changes in existing automated systems or any new 
technology that is utilized by the Exchange, compliance with 
Exchange Rules and federal securities laws, and issues related to 
conduct, health and safety on the trading floor. In addition, floor 
members shall complete mandatory training programs, on at least a 
semi-annual basis, that address compliance with the federal 
securities laws and the Exchange's Rules in place to prevent and 
deter unlawful trading by floor members.
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    The Rule further provides that the content of the Regulatory 
Element of the program shall be determined by the Exchange for each 
registration category of persons subject to the Rule. The Exchange now 
proposes to make this a separate ``Content'' section and 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). The following Regulatory Elements 
administered by FINRA shall be required:

    Persons registered solely as Proprietary Traders pursuant to 
Rule 613(f) must complete the S501.
    Persons registered as General Securities Representatives 
pursuant to Rule 613(e) must complete the S101.
    Persons registered in a supervisory capacity pursuant to Rules 
611 and 612 must complete the S201.

    The Exchange believes that specifying the applicable Regulatory 
Element in the Rule should be helpful to members and member 
organizations 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.\9\ This proposal does not change the registration 
requirements.
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    \9\ 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.
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    The Exchange 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.\10\ The Exchange proposes 
to adopt a $60.00 fee for the S501. FINRA administers these programs on 
behalf of the exchanges and therefore the fees are payable directly to 
FINRA.\11\ 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.
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    \10\ The Exchange's fee schedule incorrectly states that the fee 
is $75.00; the Exchange is proposing to correct this.
    \11\ 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.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \12\ in general, and furthers the objectives of: (1) 
Section 6(c)(3)(B) of the Act,\13\ 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,\14\ in that it is designed, among other things, to 
prevent fraudulent and manipulative acts and practices, 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, by 
requiring registered persons to complete the applicable continuing 
education program. The Exchange believes that a strong continuing 
education program should bolster the integrity of the Exchange 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 be [sic] complete the S501 would be confusing 
and difficult to monitor.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78(c)(3)(B).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange also believes that the proposal furthers the 
objectives of Section 6(b)(4) of the Act,\15\ 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 Exchange 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, the Exchange believes that the lower fee ($60 
rather than $100) is reasonable.\16\ The proposed fee is equitable, 
because it applies equally to all persons registered solely as 
Proprietary Traders.
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    \15\ 15 U.S.C. 78f(b)(4).
    \16\ The Commission notes that in the Purpose section of this 
filing, Phlx accurately states that the $100 fee for the S101 covers 
the costs associated with both development and administration of the 
continuing education program, while the $60 fee for the S501 only 
covers the cost of administration.
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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. Because the Regulatory Element 
is administered by FINRA, the fees are paid to FINRA, which does not 
raise competition issues. All of the exchanges that recognize the 
Proprietary Trader registration category are expected to adopt the same 
continuing education fee. 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

    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)(ii) of the Act \17\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \18\ 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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[[Page 55769]]

    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.\19\
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    \19\ 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: (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 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-Phlx-2013-85 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-Phlx-2013-85. 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 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-Phlx-2013-85 and 
should be submitted on or before October 2, 2013.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Kevin M O'Neill,
Deputy Secretary.
[FR Doc. 2013-22058 Filed 9-10-13; 8:45 am]
BILLING CODE 8011-01-P