[Federal Register Volume 76, Number 146 (Friday, July 29, 2011)]
[Notices]
[Pages 45629-45631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-19191]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64958; File No. SR-NASDAQ-2011-095]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to the Proprietary Trader Examination
July 25, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on July 12, 2011, The NASDAQ Stock Market LLC (the ``Exchange'' or
``NASDAQ'') 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 Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ is filing with the Securities and Exchange Commission
(``Commission'') a proposal for the NASDAQ Options Market (``NOM'') to
amend its Rule 1032, Categories of Representative Registration, to
adopt a new limited category of representative registration for
proprietary traders, as described further below. NASDAQ intends to
implement the proposal upon Commission approval \3\ and availability in
WebCRD; NASDAQ will communicate the applicable dates to NASDAQ members.
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\3\ The Commission notes that this filing is effective on
filing.
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The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at NASDAQ's principal office, and at the
Commission's Public Reference Room.
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 recognize a new
category of limited representative registration for proprietary
traders. Currently, under NASDAQ rules, persons performing proprietary
trading functions fall within the definition of representative in Rule
1011, because Rule 1011 includes persons who are engaged in the
investment banking or securities business of a member. Specifically, a
``Representative'' means an Associated Person \4\ of a registered
broker or dealer who is engaged in the investment banking or securities
business for the member including the functions of supervision,
solicitation or conduct of business in securities or who is engaged in
the training of persons associated with a broker or dealer for any of
these functions are designated as representatives. As provided in Rule
1031, all Representatives of NASDAQ Members are required to be
registered with NASDAQ, and Representatives that are so registered are
referred to as ``Registered Representatives.''
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\4\ Pursuant to Rule 1011(b), the term ``Associated Person''
means any partner, officer, director, or branch manager of a NASDAQ
member or Applicant (or person occupying a similar status or
performing similar functions), any person directly or indirectly
controlling, controlled by, or under common control with such NASDAQ
member or Applicant, or any employee of such NASDAQ member or
Applicant, except that any person associated with a NASDAQ member or
Applicant whose functions are solely clerical or ministerial shall
not be included in the meaning of such term for purposes of the
NASDAQ Rules.
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NASDAQ has been working with FINRA and certain other exchanges,
many of which have recently enhanced their registration requirements to
[[Page 45630]]
require the registration of associated persons,\5\ to develop the
content outline and qualification examination that would be applicable
to proprietary traders. This new qualification examination, the Series
56, was recently filed with the Commission; \6\ NASDAQ expects to file
the content outline with the Commission as well and make it available
upon availability in WebCRD. Accordingly, NASDAQ is amending its rules
to recognize the new registration category ``Proprietary Trader'' and
the new examination, the Series 56.
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\5\ See Securities Exchange Act Release Nos. 63843 (February 4,
2011), 76 FR 7884 (February 11, 2011) (SR-ISE-2010-115); and 63314
(November 12, 2010), 75 FR 70957 (November 19, 2010) (SR-CBOE-2010-
084).
\6\ One exchange has thus far filed a proposed rule change
respecting the Series 56, which has become effective. See Securities
Exchange Act Release No. 64699 (June 17, 2011) (SR-CBOE-2011-056).
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Specifically, NASDAQ proposes to adopt new subparagraph (c) to Rule
1032 to recognize the ``Proprietary Trader'' category of registration.
Like other categories of limited representative registration currently
available, the new Proprietary Trader category would be limited to
persons performing the functions specified in new Rule 1032(c), which
is proprietary trading. The proposed rule expressly provides that such
person's activities in the investment banking or securities business
are limited solely to proprietary trading, that he passes the Series 56
and that he is an associated person of a proprietary trading firm as
defined in Rule 1011(o).\7\
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\7\ Rule 1011(o) defines a proprietary trading firm as an
Applicant with the following characteristics: (1) The Applicant is
not required by Section 15(b)(8) of the Act to become a FINRA member
but is a member of another registered securities exchange not
registered solely under Section 6(g) of the Act; (2) all funds used
or proposed to be used by the Applicant for trading are the
Applicant's own capital, traded through the Applicant's own
accounts; (3) the Applicant does not, and will not have
``customers,'' as that term is defined in Nasdaq Rule 0120(g); and
(4) all Principals and Representatives of the Applicant acting or to
be acting in the capacity of a trader must be owners of, employees
of, or contractors to the Applicant. ``Applicant'' is defined in
Rule 1011(a).
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Persons who deal with the public do not fit in this registration
category and must continue to register as General Securities
Representatives. NASDAQ believes that the new limited registration
category and qualification examination are appropriate, because they
are tailored to proprietary trading functions. Today, these persons are
required to register as a General Securities Representative and pass
the Series 7 examination, which the Exchange believes 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. As stated above, NASDAQ will describe the
Series 56 in greater detail in a separate proposed rule change.
Of course, persons registered in the new category would be subject
to the continuing education requirements of Rule 1120. In addition, the
process for registering continues to be covered by Rule 1140, which
provides that WebCRD must be used.
Today, because NASDAQ rules require it, persons associated with
NASDAQ members are already registered as General Securities
Representatives and have passed the Series 7 examination. This proposal
does not require proprietary traders who have already registered as
General Securities Representatives and have passed the Series 7
examination to register under the new category as Proprietary Traders
or to pass the Series 56, because NASDAQ believes this would be
redundant. Persons who are registered as General Securities
Representatives and have passed the Series 7 may, of course, perform
the functions of a Proprietary Trader, because the new Proprietary
Trader registration category is a limited registration category. This
proposal does not preclude associated persons from registering as
General Securities Representatives and passing the Series 7 examination
and then functioning as a Proprietary Trader.
NASDAQ expects that new members might consider the new category
when applying for NASDAQ membership, once the new category and
examination become available to NASDAQ members in WebCRD. Accordingly,
NASDAQ believes that the new category should be helpful to attracting
new members to NASDAQ, while at the same time preserving the important
goals of appropriate registration and qualification for persons in the
securities business. Additionally, members who hire new associated
persons might choose to register in the new category.
Unlike the associated persons of proprietary trading firms covered
by this proposal, associated persons of firms that are NOT proprietary
trading firms continue to be subject to registration as General
Securities Representatives and have to pass the Series 7
examination.\8\ They are not eligible for the new registration category
and examination.
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\8\ Such persons may also be subject to registration as an
Equity Trader pursuant to Rule 1032(f), which requires successful
completion of the Series 55 exam (for which the prerequisite is the
Series 7 examination).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \9\ in general, and furthers the objectives of: (1)
Section 6(c)(3)(B) of the Act,\10\ 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,\11\ 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
offering a new, limited registration category to NASDAQ members. The
Exchange believes that these new requirements should help ensure that
all associated persons engaged in a securities business are, and will
continue to be, properly trained and qualified to perform their
functions, because the new category and examination are limited and
tailored to persons performing proprietary trading functions.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78(c)(3)(B).
\11\ 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 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 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 after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A)
[[Page 45631]]
of the Act \12\ and Rule 19b-4(f)(6) \13\ thereunder.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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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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 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 shall institute proceedings to
determine whether the proposed rule 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 e-mail to [email protected]. Please include
File Number SR-NASDAQ-2011-095 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-2011-095. This
file number should be included on the subject line if e-mail 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 a.m. and 3 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of NASDAQ.
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 publicly
available. All submissions should refer to File Number SR-NASDAQ-2011-
095 and should be submitted on or before August 19, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-19191 Filed 7-28-11; 8:45 am]
BILLING CODE 8011-01-P