[Federal Register Volume 65, Number 147 (Monday, July 31, 2000)]
[Notices]
[Pages 46754-46755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-19230]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43062; File No. SR-CHX-00-07]


Self Regulatory Organizations; Order Approving Proposed Rule 
Change by the Chicago Stock Exchange, Inc. Relating to Examination 
Requirements for Floor Clerks Who May Accept Orders From Professional 
Customers for Execution on the Exchange's Trading Floor

July 21, 2000.

I. Introduction

    On March 17, 2000, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(10 of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4, 
thereunder,\2\ a proposed rule change relating to the qualification 
requirements for Exchange floor clerks who may, among other functions, 
accept orders from professional customers \3\ for execution on the 
Exchange's trading floor. The proposed rule change was published for 
comment in the Federal Register on June 12, 2000.\4\ On June 30, 2000, 
the CHX filed Amendment No. 1 to the proposal.\5\ No comments were 
received on the proposal. This order approves the proposed rule change, 
as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The proposed rule change defines the term ``professional 
customer'' to include a bank; trust company; insurance company; 
investment trust; a state or political subdivision thereof; a 
charitable or nonprofit education institution regulated under the 
laws of the United States, or any state; a pension or profit sharing 
plan subject to ERISA, or of any agency of the United States or of a 
state or political subdivision thereof; or any person (other than a 
natural person) who has, or who has under management, net tangible 
assets of at least sixteen million dollars.
    \4\ Securities Exchange Act Release No. 42891 (June 1, 2000), 65 
FR 36857.
    \5\ Letter from Kathleen M. Boege, Associate General Counsel, 
CHX, to Nancy Sanow, Assistant Director, Division of Market 
Regulation (``Division''), Commission (June 30, 2000) (``Amendment 
No. 1''). In response to comments from Commission staff, the 
Exchange submitted Amendment No. 1 to make a grammatical correction 
to the language of the proposed rule. Amendment No. 1 also adds 
Section 6(c)(3)(B) of the Act to the Statutory basis of the proposed 
rule change. 15 U.S.C. 78f(c)(3)(B). Finally, Amendment No. 1 
clarifies Item 8 of Form 19b-4 to reflect that the proposed rule 
change is based on a recent New York Stock Exchange, Inc. (``NYSE'') 
proposal. See Securities Exchange Act Release No. 42092 (November 2, 
1999), 64 FR 61375 (November 10, 1999) (order approving the 
elimination of the Series 7B Qualification Examination (``Series 7B 
Examination'') and establishing the Series 7A Qualification 
Examination (``Series 7A Examination'') as the appropriate 
qualification examination for NYSE floor clerks). This amendment is 
technical and therefore is not required to be published for notice 
and comment.
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II. Description of the Proposal

    Under Exchange rules, a floor clerk of a qualified floor member may 
accept orders from professional customers for execution on the 
Exchange's trading floor, so long as the floor clerk has successfully 
completed either the General Securities Registered Representative 
Examination (``Series 7 Examination'') or the Series 7B Examination.\6\ 
The Exchange proposes to amend Interpretation .01(d) of CHX Article VI, 
Rule 3 by requiring Exchange floor clerks who may, among other 
functions, accept orders from professional customers for execution on 
the Exchange's trading floor, to successfully complete the Exchange's 
Floor Membership Examination \7\ and either the Series 7 Examination or 
the Series 7A Examination.\8\ The proposal

[[Page 46755]]

would eliminate the Series 7B Examination as an alternate requirement 
for floor clerks. The CHX's Floor Membership Examination addresses the 
rules and practices of other Exchange's trading floor but has broader 
coverage than the Series 7B Examination.\9\
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    \6\ The NYSE implemented the Series 7B Examination in 1994 to 
serve as an alternative qualification examination to the Series 7 
Examination. See Securities Exchange Act Release No. 34334 (July 8, 
1994), 59 FR 35964 (July 14, 1994).
    \7\ The Exchange adopted the Floor Membership Exam in 1996. See 
Securities Exchange Act Release No. 37690 (September 17, 1996), 61 
FR 49803 (September 23, 1996).
    \8\ The NYSE implemented the Series 7A Examination in 1993 to 
serve as an alternative qualification exam to the Series 7 
Examination. See Securities Exchange Act Release No. 32698 (July 29, 
1993), 58 FR 41539 (August 4, 1993). The Series 7A Examination and 
Series 7B Examination are identical except for an additional 25 
questions on the Series 7B Examination that address floor rules and 
policies.
    \9\ Telephone conversation between Michael Cardin, Market 
Regulation Department, CHX and Susie Cho, Attorney, Division, 
Commission, on April 5, 2000.
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III. Discussion

    The Commission finds that the Exchange's proposal is consistent 
with the requirements of Section 6 of the Act,\10\ and particularly 
Sections 6(c)(3)(A) and (B) \11\ thereunder. Section 6(c)(3)(A) of the 
Act \12\ provides that a national securities exchange may deny 
membership to, or condition the membership of, registered broker-dealer 
if any natural persons associated with such broker or dealer do not 
meet such standards of training, experience and competence as are 
prescribed by the rules of the exchange.\13\
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    \10\ In approving this rule, the Commission has considered the 
proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(c)(3)(A) and (B).
    \12\ 15 U.S.C. 78d(c)(3)(A).
    \13\ Under Section 15(b)(8) of the Act, all registered brokers 
or dealers must be members of an SRO--either a securities 
association or a national securities exchange. 15 U.S.C. 78o(b)(8).
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    Under Section 6(c)(3)(B) of the Act,\14\ a national securities 
exchange may bar a natural person from becoming associated with a 
member if the person does not meet the exchange's standards of 
training, experience, or competence, or if the person has engaged and 
there is a reasonable likelihood the person will engage again in acts 
or practices inconsistent with just and equitable principles of trade. 
Under these statutory provisions, the various national securities 
exchange, including the CHX, are empowered to implement rules 
establishing the prerequisites to qualify and approve persons 
associated with members to engage in securities activities.
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    \14\ 15 U.S.C. 78f(c)(3)(B).
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    The Commission finds that the proposed rule change is consistent 
with the Act because the proposed rule change will help the Exchange to 
ensure that floor clerks satisfy prescribed standards of training, 
experience, and competence. Although the proposed rule change would 
eliminate the Series 7B Examination for floor clerks who may accept 
orders from professional customers for execution on the Exchange's 
trading floor, the subject matter included in the Series 7B Examination 
is covered, in part, by the recently implemented CHX Floor Membership 
Examination. The Commission believes that successful completion of the 
Floor Membership Examination and Series 7A Examination would help to 
ensure that floor clerks who may accept orders from professional 
customers for execution on the Exchange's trading floor are 
sufficiently familiar with the rules and practices of the Exchange's 
trading floor.
    Moreover, the Commission previously approved a virtually identical 
proposal by the NYSE.\15\ The NYSE recently eliminated the Series 7B 
Examination and now requires its floor clerks to pass a new Trading 
Assistant Examination (``Series 25 Examination'') \16\ and either the 
Series 7 Examination or the Series 7A Examination before becoming 
eligible to accept professional orders.\17\ Like the CHX's Floor 
Membership Examination, the NYSE's new Trading Assistant Examination 
contains questions relating to its floor rules and policies and, 
according to the NYSE, has broader coverage than the questions formerly 
included in the Series 7B Examination.
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    \15\ See Securities Exchange Act Release No. 42092 (November 2, 
1999), 64 FR 61375 (November 10, 1999).
    \16\ See Securities Exchange Act Release No. 40943 (January 13, 
1999), 64 FR 3330 (January 21, 1999) (order approving the Series 25 
Examination).
    \17\ See Securities Exchange Act Release No. 42092 (November 2, 
1999), 64 FR 61375 (November 10, 1999) (order approving the 
elimination of the Series 7B Examination and establishing the Series 
7A Examination as the appropriate qualification examination for NYSE 
floor clerks).
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IV. Conclusion

    For the reasons discussed above, the Commission finds that the 
proposal is consistent with the Act and the rules and regulations 
thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\18\ that the proposed rule change, SR-CHX-00-07, as amended, be 
and hereby is approved.
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    \18\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 00-19230 Filed 7-28-00; 8:45 am]
BILLING CODE 8010-01-M