[Federal Register Volume 76, Number 155 (Thursday, August 11, 2011)]
[Notices]
[Pages 49807-49809]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20357]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65042; File No. SR-BX-2011-051]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Proprietary Trader Examination

August 5, 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 August 2, 2011, NASDAQ OMX BX, Inc. (``Exchange'' or ``BX'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and 
II, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    BX is filing with the Commission a proposed rule change 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. BX will implement the proposal 
upon notice to its membership.
    The text of the proposed rule change is available at http:/
nasdaqomxbx.cchwallstreet.com, at BX'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 BX 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. A 
``Representative'' means an Associated Person \3\ 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 BX members are required to be registered 
with the Exchange, and Representatives that are so registered are 
referred to as ``Registered Representatives.''
---------------------------------------------------------------------------

    \3\ Pursuant to Rule 1011(b), the term ``Associated Person'' 
means any partner, officer, director, or branch manager of a BX 
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 BX 
member or Applicant, or any employee of such BX member or Applicant, 
except that any person associated with a BX member or Applicant 
whose functions are solely clerical or ministerial shall not be 
included in the meaning of such term for purposes of the BX Equity 
Rules.
---------------------------------------------------------------------------

    BX has been working with FINRA and certain other exchanges, many of 
which have recently enhanced their registration requirements to require 
the registration of associated persons,\4\ 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; \5\ BX expects to file the 
content outline with the Commission as well and make it available upon 
availability in WebCRD. Accordingly, BX is amending its rules to 
recognize the new registration category ``Proprietary Trader'' and, 
separately, the new examination, the Series 56.
---------------------------------------------------------------------------

    \4\ See e.g., 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).
    \5\ One exchange has thus far filed a proposed rule change 
respecting the Series 56 content outline, which has become 
effective. See Securities Exchange Act Release No. 64699 (June 17, 
2011), 76 FR 36945 (June 23, 2011)(SR-CBOE-2011-056).
---------------------------------------------------------------------------

    Specifically, BX proposes to adopt new subparagraph (b) to Rule 
1032 to recognize the ``Proprietary Trader'' category of registration. 
The new Proprietary Trader category would be limited to persons 
performing the functions specified in new Rule 1032(b), which is 
proprietary trading. Persons who deal with the public do not fit in 
this registration category and must continue to register as General 
Securities Representatives. BX 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 applicable 
to firms and persons conducting a public business. As stated above, BX 
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.\6\ In addition, 
the process for registering continues to be covered by Rule 1140, which 
provides that WebCRD must be used.
---------------------------------------------------------------------------

    \6\ See BX Rule 1120(a)(5).
---------------------------------------------------------------------------

    Today, because BX rules require it, persons associated with BX 
members are already registered as General Securities Representatives 
and have passed the Series 7 examination.\7\ 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 BX 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

[[Page 49808]]

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.
---------------------------------------------------------------------------

    \7\ See BX Rule 1031.
---------------------------------------------------------------------------

    BX expects that new members might consider the new category when 
applying for BX membership, once the new category and examination 
become available to BX members in WebCRD. Accordingly, BX believes that 
the new category should be helpful to attracting new members to BX, 
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 those persons 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. 
They are not eligible for the new registration category and 
examination.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \8\ in general, and furthers the objectives of: (1) 
Section 6(c)(3)(B) of the Act,\9\ 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,\10\ 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 certain associated 
persons of BX 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78(c)(3)(B) [sic].
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    BX 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

    Pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) \12\ thereunder, the Exchange has designated this proposal as 
one that effects a change that: (i) Does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) by its terms, does not 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest. Rule 19b-4(f)(6) \13\ 
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.
    Under Rule 19b-4(f)(6) of the Act,\14\ a proposal does not become 
operative for 30 days after the date of its filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest. The Exchange requests that the 
Commission waive the 30 day operative period for this filing so that it 
may become effective and operative upon filing with the Commission 
pursuant to Section 19(b)(3)(A) \15\ of the Act and subparagraph (f)(6) 
thereunder. The Exchange believes waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest as 
the waiver will allow the Exchange to make the new registration 
category available near the same time as other exchanges.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ Id.
    \14\ Id.
    \15\ 15 U.S.C. 78s(b)(3)(A).
---------------------------------------------------------------------------

    For the reason stated above, the Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest and designates the proposal as 
operative upon filing.\16\
---------------------------------------------------------------------------

    \16\ For purposes only of waiving the operative delay of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f). See also 17 CFR 200.30-3(a)(59).
---------------------------------------------------------------------------

    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.

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-BX-2011-051 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-BX-2011-051. 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

[[Page 49809]]

a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of BX. 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-BX-2011-051 and should be 
submitted on or before September 1, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-20357 Filed 8-10-11; 8:45 am]
BILLING CODE 8011-01-P