Document ID: SEC-2012-0337-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-02-29T05:00Z

[Federal Register Volume 77, Number 40 (Wednesday, February 29, 2012)]
[Notices]
[Pages 12347-12350]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-4765]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66452; File No. SR-NYSEARCA-2012-15]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending 
Registration Requirements for Traders and Removing Obsolete References 
to Paper Registration Submissions

February 23, 2012.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on February 9, 2012, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``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)(iii) of the Act \4\ and Rule 19b-4(f)(6) thereunder,\5\ 
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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 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 its registration requirements for 
traders and

[[Page 12348]]

remove references to paper registration submissions that are no longer 
used. The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room, and www.nyse.com.

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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its registration requirements for 
traders and remove references to paper registration submissions that 
are no longer used.\6\ Specifically, NYSE Arca proposes to amend its 
rules in order to (1) relocate and revise the registration requirements 
for traders currently found in NYSE Arca Options Rule 2.5(b)(10)(A), 
(2) remove a provision that limits those registration requirements to 
traders of member organizations for which the Exchange is the 
Designated Examining Authority (``DEA''), (3) adopt an alternative 
Proprietary Trader registration category for those individuals who are 
associated with OTP Holders and OTP Firms \7\ and who solely conduct a 
business in proprietary trading, (4) remove references in NYSE Arca 
Options Rule 2.23 to paper registration submissions that are no longer 
used, and (5) make certain technical and conforming changes.
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    \6\ The Exchange's affiliate, NYSE Amex LLC (``NYSE Amex''), has 
submitted a substantially similar rule filing concerning trader 
registration requirements. See SR-NYSEAmex-2012-11.
    \7\ Pursuant to NYSE Arca Options Rule 1.1(q)-(r), OTP Holders 
and OTP Firms have status as ``members'' of the Exchange as that 
term is defined in Section 3 of the Securities Exchange Act of 1934, 
as amended (the ``Act'').
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Registration of Traders

    NYSE Arca Options Rule 2.5 generally concerns the denial of or 
conditions to trading privileges under an Options Trading Permit. NYSE 
Arca Options Rule 2.5(b)(10)(A) requires that all traders of member 
organizations for which the Exchange is the DEA must successfully 
complete the General Securities Registered Representative Examination 
(``Series 7'') unless an exemption applies. The Exchange proposes to 
move the text of NYSE Arca Options Rule 2.5(b)(10)(A) to NYSE Arca 
Options Rule 2.23, which concerns the registration of employees of OTP 
Firms, and which the Exchange believes is a more logical location for 
the rule text.
    NYSE Arca also proposes to amend that rule text by removing the 
provision that limits examination requirements to traders of member 
organizations for which the Exchange is the DEA and to make a 
conforming change by deleting current NYSE Arca Options Rule 2.23(b)(i) 
and (ii). Under proposed NYSE Arca Options Rule 2.23(b), all traders 
associated with OTP Holders and OTP Firms, registered with the Exchange 
will now be required to pass an applicable examination. This expanded 
examination requirement should help ensure that all registered traders 
on NYSE Arca, will continue to be, properly registered, trained and 
qualified to perform their functions.
    A requirement that all traders of member organizations register and 
be subject to an applicable examination, not just those for which an 
exchange is the DEA, would be consistent with the registration 
requirements of other self-regulatory organizations (``SROs''), 
including The Chicago Board Options Exchange (``CBOE'') and NYSE 
Amex.\8\
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    \8\ See CBOE Rule 3.6A Commentary .06 and NYSE Amex Rule 341(a).
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Proprietary Trader Registration

    NYSE Arca Options Rule 2.5(b)(10)(A) currently provides that 
certain traders are exempted from the requirement to successfully 
complete the Series 7, namely (i) An individual registered as a Market 
Maker or Market Maker Authorized Trader, (ii) an individual registered 
as a Floor Broker, and (iii) an individual registered with the Exchange 
as a Floor Clerk. The Exchange proposes to move the first two 
exemptions to proposed NYSE Arca Options Rule 2.23(b)(2) and add an 
exemption for Proprietary Traders.\9\
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    \9\ The Exchange is not moving the reference to Floor Clerks 
[sic] because they are not traders. Floor Clerks are subject to 
registration on Web CRD but not subject to an examination 
requirement.
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    NYSE Arca has been working with other SROs, some of which have 
recently enhanced their registration requirements for associated 
persons,\10\ to develop the content outline and the qualification 
examination, the Series 56, which would be applicable to Proprietary 
Traders. Certain exchanges have submitted filings to the Commission to 
utilize the Series 56.\11\ NYSE Arca expects to describe the Series 56 
in detail and submit the content outline for it to the Commission in a 
separate filing, as well as make the examination and alternative 
registration category available in Web CRD.\12\ Accordingly, NYSE Arca 
is amending its rules to recognize the Proprietary Trader registration 
category and the Series 56.
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    \10\ See Securities Exchange Act Release Nos. 63843 (Feb. 4, 
2011), 76 FR 7884 (Feb. 11, 2011) (SR-ISE-2010-115), and 63314 (Nov. 
12, 2010), 75 FR 70957 (Nov. 19, 2010) (SR-CBOE-2010-084).
    \11\ See e.g., Securities Exchange Act Release Nos. 64699 (June 
17, 2011), 76 FR 36945 (June 23, 2011) (SR-CBOE-2011-056), and 65054 
(August 8, 2011), 76 FR 50277 (August 12, 2011) (SR-ISE-2011-36).
    \12\ Web CRD is the central licensing and registration system 
for the U.S. securities industry and its regulators.
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    Under proposed NYSE Arca Options Rule 2.23(b)(2), the Exchange 
would recognize a Proprietary Trader registration category for an 
individual engaged in the purchase or sale of securities or other 
similar instruments for the account of a member or member organization 
with which he or she is associated, as an employee or otherwise, and 
who does not transact any business with the public.\13\ A Proprietary 
Trader would be required to be registered as such on Web CRD and pass 
the Series 56 examination described above, but would not be permitted 
to function in an agency capacity or otherwise conduct a public 
business in securities.
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    \13\ This is the same definition that NYSE Amex currently uses 
for securities traders, and would not cover individuals who are 
required to register as Market Makers or Market Maker Authorized 
Traders. See Commentary .01 to NYSE Amex Options Rule 341. NYSE Amex 
is proposing to redefine this category as ``Proprietary Trader'' and 
recognize the Series 56 along with other exchanges. See supra note 
6.
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    NYSE Arca believes that the alternative limited registration 
category and the qualification examination are appropriate because they 
are tailored to proprietary trading functions. Presently, persons 
engaged in proprietary trading on NYSE Arca at a firm for which the 
Exchange is the DEA are required to pass the Series 7, unless an 
exception applies. The Exchange believes that the Series 7 covers a 
great deal of material that is not relevant to proprietary trading 
functions. Instead, the Series 56 covers both equities and options 
trading rules, but not all of the rules that are applicable to firms 
and persons conducting a public business.
    Many persons associated with OTP Holders and OTP Firms have 
previously passed the Series 7. The proposed rule change would not 
require those individuals currently engaged in proprietary trading who 
have already

[[Page 12349]]

passed the Series 7 to register under the new category as Proprietary 
Traders or to pass the Series 56 because the Exchange believes this 
would be redundant. Persons who have passed the Series 7 may, of 
course, engage in proprietary trading because the new Proprietary 
Trader registration category is a limited registration category. Thus, 
the proposal would not preclude associated persons from registering as 
General Securities Representatives and passing the Series 7 examination 
and then engaging in proprietary trading.
    NYSE Arca expects that individuals might consider the category when 
applying as an OTP Holder or OTP Firm once the category and examination 
become available for use by NYSE Arca on Web CRD. Accordingly, the 
Exchange believes that the category should be helpful to registering 
those individuals conducting a business in proprietary trading, while 
at the same time preserving the important goals of appropriate 
registration and qualification for persons in the securities business. 
Additionally, OTP Holders and OTP Firms who hire new associated persons 
might choose to register them in the category.
    The proposed rule change is not intended to replace the Series 7 
requirement for all traders, but simply to offer an alternative to that 
requirement for those qualified individuals who solely conduct a 
business in proprietary trading and have shown their proficiency by 
successfully passing the Series 56.

Paper Registration Submissions

    NYSE Arca Options Rule 2.23(a) states that for registration 
categories (e.g. Floor Clerk) not available electronically on CRD, 
individuals must file directly with the Exchange a Form U4, any 
required amendments, or registration documentation prescribed by the 
Exchange. Because all NYSE Arca registration categories are now 
available electronically on CRD, the Exchange proposes to delete this 
text.

Technical and Conforming Changes

    The Exchange proposes non-substantive technical changes, for 
example, to delete the word ``Test'' as it is redundant and to reformat 
some of the rule text simply for stylistic purposes. The Exchange also 
proposes a conforming change to Commentary .01 of NYSE Arca Options 
Rule 2.23 to correct a cross-reference to rule text that is being moved 
from NYSE Arca Options Rule 2.5(b)(10)(A).\14\
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    \14\ Commentary .01 currently provides that Market Makers, 
Market Maker Authorized Traders, Floor Brokers, and Floor Clerks are 
not subject to continuing education requirements; the Exchange is 
not proposing any substantive change to this provision at this time. 
However, Proprietary Traders will be subject to continuing education 
requirements. The Exchange intends to add continuing education 
requirements for Market Makers, Market Maker Authorized Traders, 
Floor Brokers, and Floor Clerks in a separate filing in the future.
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Compliance Date

    Following effectiveness of the proposed rule change, the Exchange 
will issue a Regulatory Bulletin announcing the compliance date within 
30 days from the operative date of the rule change.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \15\ in general, and furthers the objectives of (1) 
Section 6(c)(3)(B) of the Act,\16\ 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,\17\ 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. The 
Exchange believes that removing provisions that limit the registration 
requirements to traders of member organizations for which the Exchange 
is the DEA and instead requiring all traders associated with OTP 
Holders and OTP Firms to be registered with the Exchange would allow 
the Exchange to better monitor and regulate the activities of OTP 
Holders and OTP Firms. The Exchange also believes that offering an 
alternative limited registration category for Proprietary Traders 
should help ensure that all associated persons engaged in a securities 
business are, and will continue to be, properly registered, trained and 
qualified to perform their functions, and will make NYSE Arca rules 
consistent with other exchanges. The Exchange also notes that 
relocating rule text to a more logical place in its rules and removing 
outdated references to paper submissions that are no longer used will 
add clarity to the Exchange's rules.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(c)(3)(B).
    \17\ 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 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Because the foregoing proposed rule 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 if consistent with the protection of 
investors and the public interest, provided that the self-regulatory 
organization has given 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 proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \18\ and Rule 19b-
4(f)(6) thereunder.\19\
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6).
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    The Commission believes it is consistent with the protection of 
investors and the public interest to waive the 30-day operative delay. 
Waiver of the 30-day operative delay will enable associated persons of 
Exchange firms to avail themselves of the limited Proprietary Trader 
registration category, and qualify by taking the Series 56, as soon as 
it becomes available. For these reasons, the Commission hereby waives 
the operative delay.\20\
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    \20\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of such 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,

[[Page 12350]]

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-NYSEARCA-2012-15 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-NYSEARCA-2012-15. 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 Section, 100 F Street 
NE., Washington, DC 20549 on official business days between 10 a.m. and 
3 p.m. Copies of the filing will also be available for inspection and 
copying at the NYSE's principal office and on its Internet Web site at 
www.nyse.com. 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-
NYSEARCA-2012-15 and should be submitted on or before March 21, 2012.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-4765 Filed 2-28-12; 8:45 am]
BILLING CODE 8011-01-P