[Federal Register Volume 63, Number 47 (Wednesday, March 11, 1998)]
[Notices]
[Pages 11941-11942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6177]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39721; File No. SR-CHX-98-04]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 to the Proposed Rule Change by the Chicago 
Stock Exchange, Inc. Relating to Examination Requirements for 
Securities Traders

March 4, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 18, 1998, the 
Chicago Stock Exchange, Inc. (``CHX'' 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 CHX.\2\ 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\ On March 3, 1998, the CHX amended its proposal to correct a 
legal reference in the CHX's discussion of the statutory basis for 
the proposed rule change. See Letter from Joseph M. Klauke, Foley & 
Lardner, to Yvonne Fraticelli, Division of Market Regulation, 
Commission, dated March 3, 1998 (``Amendment No. 1''). Specifically, 
Amendment No. 1 replaces a reference to Section 6(c)(3)(8) under the 
Act with a reference to Section 6(c)(3)(B) under the Act.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The CHX proposes to amend Rule 3, ``Training and Examination of 
Registrants,'' or Article VI, ``Restrictions and Requirements,'' of the 
CHX's rules by adopting Interpretation and Policy .02, ``Persons off 
the floor,'' which will establish examination requirements for certain 
associated persons of CHX members for which the CHX is the Designated 
Examining Authority (``DEA'') \3\ Specifically, proposed Interpretation 
and Policy .02 will require associated persons at applicable firms who 
execute, make trading decisions with respect to, or otherwise engage in 
proprietary or agency trading of equities, preferred securities, or 
convertible debt securities to successfully complete the Uniform 
Registered Representative Exam, Series 7. Proposed Interpretation and 
Policy .02 will not apply to any associated person who is subject to 
the examination requirements of Interpretation and Policy .01, ``Floor 
Member Organizations,'' of CHX Article VI, Rule 3.\4\ To accommodate 
the proposed change, the CHX also will revise the text of CHX Article 
VI, Rule 3, to provide that the CHX may require that associated persons 
of members must successfully complete a training course or examination, 
or both, in connection with registration.
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    \3\ The proposal is limited to associated persons of members for 
which CHX is the DEA because associated persons of members with a 
DEA other than the CHX already are subject to the examination 
requirements of the self-regulatory organization which is the DEA 
for the member firm. According to the CHX, the proposal is designed 
to close a loophole in examination requirements that exists 
currently for off-floor associated persons of CHX members for which 
the CHX is the DEA. Telephone conversation between Patricia Levy, 
General Counsel, CHX, and Yvonne Fraticelli, Attorney, Office of 
Market Supervision, Division of Market Regulation, Commission, on 
February 25, 1998.
    \4\ Interpretation and Policy .01 establishes examination 
requirements for persons on the CHX floor, including floor brokers, 
market makers, and co-specialists.
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    Copies of the proposed rule change are available at the CHX and at 
the Commission.

[[Page 11942]]

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 CHX 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 CHX 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 CHX proposes to add interpretation .02 to Article VI, Rule 3 of 
the CHX's rules to establish examination requirements for securities 
traders not located on the floor of the Exchange.
    Article VI, Rule 3 of the Exchange's rules permits the CHX to adopt 
appropriate examination requirements. Pursuant to this rule, the CHX 
has adopted examination requirements for various persons on the CHX 
floor, such as floor brokers, market makers, and co-specialists. These 
examination requirements are specified in interpretation .01 to CHX 
Article VI, Rule 3. No similar examination requirement currently exists 
for persons that conduct trading activities off the floor. The purpose 
of the proposed rule change is to add examination requirements for off-
floor securities traders and certain other associated persons of 
members who are not covered by the current requirements.
    Specifically, the CHX seeks to require associated persons of 
members for which the Exchange is the DEA that engage in proprietary or 
agency trading of equities, preferred securities or convertible debt 
securities, including, but not limited to, persons who execute such 
trades or make trading decisions with respect to such trades, and who 
are not subject to the currently existing examination requirements 
(``Securities Traders''), to successfully complete the Series 7 
examination.
    According to the CHX, the proposal, which is not based on the 
specific rule filing of any other exchange, will bring the CHX's 
examination requirements in line with those of the major securities 
exchanges and enhance the consistency of exam requirements across the 
exchanges.
    The new exam requirement for Securities Traders will be phased in 
over a six-month period. Associated persons who currently fit the 
definition of Securities Traders will have to register to take the 
Series 7 exam within 30 days of the Exchange's publication of the order 
approving the effectiveness of this requirement in a Notice to Members 
and must promptly notify the Exchange that they have so registered. 
Securities Traders will have six months from the date of such Notice to 
Members in which to pass the Series 7 exam. Securities Traders who 
become associated with members after notice of this requirement is 
published by the CHX in a Notice to Members must successfully complete 
the Series 7 exam before conducting securities trading activities for 
which an exam is required under the new interpretation.
2. Statutory Basis
    The CHX believes that the proposed rule change is consistent with 
Section 6 of the Act, in general, and furthers the objectives of 
Section 6(c)(3)(A) and Section 6(c)(3)(B),\5\ in particular, in that it 
is designed to prescribe appropriate standards of training, experience, 
and competence for brokers and dealers in order to protect investors 
and the public. The CHX believes that the proposed rule change also is 
consistent with Section 6(b)(5) of the Act, in general, in that it is 
designed to perfect the mechanism of a free and open market and a 
national market system, and to protect investors and the public 
interest.
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    \5\ See Amendment No. 1, supra note 2.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The CHX believes that no burden will be placed on competition as a 
result of the proposed rule change.

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.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will by 
order approve such proposed rule change, or institute proceedings to 
determine whether the proposed rule change should be 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
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. Sec. 552, will be available for inspection and copying in 
the Commission's Public Reference Room. Copies of such filing will also 
be available for inspection and copying at the principal office of the 
CHX. All submissions should refer to file number SR-CHX-98-04 and 
should be submitted by April 1, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12)
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-6177 Filed 3-10-98; 8:45 am]
BILLING CODE 8010-01-M