[Federal Register Volume 78, Number 145 (Monday, July 29, 2013)]
[Notices]
[Pages 45584-45586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-18074]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70027; File No. SR-CBOE-2013-076]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Continuing Education

July 23, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on July 22, 2013, the Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') 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 
Exchange. The Exchange filed the proposal as a ``non-controversial'' 
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder,\4\ 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 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 Exchange Rule 9.3A regarding 
continuing education for registered persons. The text of the proposed 
rule change is available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's 
Office of the Secretary, 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 Exchange is proposing to amend Rule 9.3A to specify the 
different Continuing Education (``CE'') requirements for registered 
persons based upon their registration with the Exchange. This change 
will authorize the Exchange to administer different CE programs to 
differently registered individuals while bringing clarity to Trading 
Permit Holders (``TPHs'') about what CE requirement they must fulfill. 
More specifically, the Exchange is proposing to: (1) Enumerate the 
required Regulatory Element programs, (2) add language to Rule 9.3A 
that would outline which program Exchange registered persons engaging 
in proprietary trading must take, and (3) add language to 9.3A(c) 
specifying that registered persons with a Series 56 registration must 
complete the Firm Element of the CE requirement.

Background

    Currently, Exchange Rule 3.6A.04 states that that each individual 
registered with the Exchange shall ``satisfy the continuing education 
requirements set forth in Rule 9.3A.'' \5\ Exchange Rule 9.3A specifies 
the CE requirements for registered persons subsequent to their initial 
qualification and registration with the Exchange. The requirements 
consist of a Regulatory Element and a Firm Element.\6\ The Regulatory 
Element is a computer-based education program administered by the 
Financial Industry Regulatory Authority (``FINRA'') to help ensure that 
registered persons are kept up to date on regulatory, compliance and 
sales practice matters in the industry.\7\ Currently, there are three 
Regulatory Element programs: the S201 Supervisor Program for registered 
principals and supervisors; the S106 Series 6 Program for Series 6 
registered persons; and the S101 General Program for Series 7 and all 
other registered persons. The Exchange is proposing to enumerate these 
programs in the Exchange Rulebook along with adding the S501 Series 56 
Proprietary Trader Continuing Education Program for Series 56 
registered persons.
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    \5\ See Exchange Rule 3.6A.04.
    \6\ Currently, the Firm Element of the CE Program applies to any 
person registered with a CBOE member firm who has direct contact 
with customers in the conduct of the member's securities sales, 
trading and investment banking activities, and to the immediate 
supervisors of such persons (collectively called ``covered 
registered persons''). The requirement stipulates that each member 
firm must maintain a continuing education program for its covered 
registered persons to enhance their securities knowledge, skill and 
professionalism. Each firm has the requirement to annually conduct a 
training needs analysis, develop a written training plan, and 
implement the plan.
    \7\ Rule 9.3A permits a member firm to deliver the Regulatory 
Element to registered persons on firm premises (``In-Firm 
Delivery'') as an option to having persons take the training at a 
designated center provided that firms comply with specific 
requirements relating to supervision, delivery site(s), technology, 
administration, and proctoring. In addition, Rule 9.3A requires that 
persons serving as proctors for the purposes of In-Firm Delivery 
must be registered.
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Introduction of the Proprietary Trading Continuing Education Program

    The Exchange is proposing to introduce a new CE Program for 
Proprietary Traders registered with the Exchange who have successfully 
completed the Proprietary Traders Examination (``Series 56'') and who 
have no other registrations. Exchange Rule 3.6A.08 outlines the 
registration and qualification requirements (including prerequisite 
examinations) for TPHs and TPH organizations conducting proprietary 
trading, market-making and/or effecting transactions on behalf of other 
broker dealers.\8\ An

[[Page 45585]]

individual TPH and/or individual associated person who is engaged in 
the securities business of a TPH (as described in Interpretation and 
Policy .06 to Rule 3.6A) is required to register as a Proprietary 
Trader in CRD and pass the related qualification examination, the 
Series 56.\9\
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    \8\ See Exchange Rule 3.6A.08 which outlines the qualification 
requirements for each of the required registration categories on the 
Exchange: (1) Proprietary Trader, Proprietary Trader Principal, and 
Proprietary Trader Compliance Officer.
    \9\ See Exchange Rule 3.6A.06.
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    The Proprietary Trader Continuing Education Program (S501) is a 
computer-based education program developed by many of the self-
regulatory organizations (``Participating SROs'') \10\ and administered 
by FINRA to ensure that registered persons are kept current on 
regulatory, compliance and trading practice matters in the industry. 
Unlike the other offered CE Programs, the Proprietary Trader Continuing 
Education Program is not part of the Uniform Continuing Education 
Program, which is developed and maintained by the Securities Industry 
Regulatory Council on Continuing Education.
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    \10\ The Participating SROs that have assisted with the 
development of, and plan to administer, the Series 56 and S501 are 
the Exchange, C2 Options Exchange, Incorporated (``C2''), the 
Chicago Stock Exchange, Inc. (``CHX''), the New York Stock Exchange, 
LLC (``NYSE''), NYSE Arca, Inc. (``Arca''), NYSE Amex, LLC 
(``Amex''), the NASDAQ Stock Market LLC (``NASDAQ''), the National 
Stock Exchange, Inc. (``NSX''), NASDAQ OMX BX, Inc. (``BX''), NASDAQ 
OMX PHLX, LLC. (``PHLX''), BATS Y-Exchange, Inc.(``BATS Y''), BATS 
Exchange, Inc. (``BATS''), EDGA Exchange, Inc. (``EDGA''), EDGX 
Exchange, Inc. (``EDGX''), International Securities Exchange, LLC 
(``ISE''), and BOX Options Exchange, LLC (``BOX'').
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    The Proprietary Trader Continuing Education Program will 
logistically operate as the currently offered CE Programs do. 
Specifically, registered persons will be required, through CRD, to 
complete the Regulatory Element of the CE on the second anniversary of 
the base date and then every three years thereafter. While creating the 
S501, the Participating SROs believe that the current procedures of the 
other CE programs work well. The Securities Industry Regulatory Council 
on Continuing Education has tailored the process of the other CE 
Programs since its inception to a process that has been successful. 
Thus, as proposed, the S501 will work in the same manner. In addition, 
consistency between the different programs will avoid creating 
confusion amongst the registered persons and FINRA.
    The Proprietary Trader Continuing Education Program (S501) is 
required for those registrants who registered as Proprietary Traders 
(``Series 56'') and do not maintain any other registration through 
CRD.\11\ Individuals that are registered under any other registration 
are required to maintain the CE obligations associated with those 
registrations. For example, an individual that is registered as a 
Proprietary Trader with the Exchange yet continues to maintain a Series 
7 registration will be required to continue taking the Series 7 
Continuing Education Program (S101).\12\ Though such individual may be 
engaging in the same capacity as one registered as a Proprietary 
Trader, because the Series 7 Examination is a more comprehensive exam 
of topics not covered on the Series 56, the Exchange believes that this 
individual continuing to maintain a Series 7 registration should 
complete a CE that covers all aspects of his or her registration.
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    \11\ Any registered person who receives a waiver of the Series 
56 under Exchange Rule 3.6A.05, and does not maintain any other 
registrations in CRD, will be required to complete the Proprietary 
Trader Continuing Education Program (S501). Such individuals will 
also be required to complete the Firm Element which is currently 
described in Exchange Rule 9.3A(b).
    \12\ See footnote 11, supra. If a registered person has received 
a Series 56 waiver under Exchange Rule 3.6A.05 but continues to 
maintain a Series 7 registration (that predates the introduction of 
the Series 56 on the Exchange) that registered individual will only 
be required to continue taking the Series 7 CE Program (S101). 
Through CRD, FINRA will recognize the Series 56 as waived while 
still requiring the Series 7 CE completion.
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    As part of the new Proprietary Trader CE, registered persons will 
also be required to complete the Firm Element outlined in Exchange Rule 
9.3A(c). Though proprietary traders with a Series 56 registration do 
not interact with the public, the Exchange believes this requirement is 
appropriate as it ensures these registered persons continue to enhance 
their securities knowledge, skill and professionalism. As stated in 
Exchange Rule 9.3A(c)(ii), the program should be tailored to fit the 
business of the Trading Permit Holder or TPH organization. Thus, the 
Exchange believes it is appropriate that these individuals also 
complete the Firm Element.
    The introduction of the Proprietary Trader Continuing Education 
Program allows the Exchange to tailor its CE requirements more closely 
to those registered individuals who are registered as Series 56. More 
specifically, the Exchange believes allowing individuals engaging in 
proprietary trading and registered under the Series 56 to complete a 
separate CE Program than those maintaining a Series 7 registration is 
appropriate as all individuals have the option of taking either test. 
In comparison to the Series 7, the Series 56 Examination is more 
closely tailored to the practice of proprietary trading while the 
Series 7 is more comprehensive. As such, the Exchange believes a Series 
56 CE Program should be tailored as well. At the same time, if an 
individual would like to remain registered as a Series 7, the Exchange 
believes it is appropriate they continue to be required to complete the 
broader CE program. As stated above, though an individual maintaining a 
Series 7 registration may be engaging in the same capacity as one one 
[sic] registered as a Proprietary Trader, because the Series 7 
Examination is a more comprehensive exam of topics not covered on the 
Series 56, the Exchange believes that such individual that continues to 
maintain a Series 7 registration should complete a CE that covers all 
aspects of his or her registration.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(c) of the 
Act,\13\ in general, and furthers the objectives of Section 6(c)(3) 
\14\ of the Act, which authorizes the Exchange to prescribe standards 
of training, experience and competence for persons associated with the 
Exchange TPHs, in that the proposed rule codifies the existing 
requirements for Exchange TPHs and TPH organizations. The proposed rule 
also introduces a new CE program which merely prescribes a standard for 
Series 56 registered persons. The Exchange believes the proposed 
changes are reasonable and set forth the appropriate CE requirements 
for an individual Trading Permit Holder or individual associated person 
who is required to register under Exchange Rule 3.6A.
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    \13\ 15 U.S.C. 78f(c).
    \14\ 15 U.S.C. 78f(c)(3).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE 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. Specifically, the Exchange does 
not believe the administrative changes being made nor the introduction 
of the Proprietary Trader Continuing Education Program (S501) will 
affect intermarket competition as the Exchange believes all Exchanges 
offering the same CE requirements will file similar rules addressing 
those CE Programs. In addition, the Exchange does not believe the 
proposed changes will affect intramarket competition because all 
similarly situated registered persons, e.g. registered persons 
maintaining the same registrations, are required to

[[Page 45586]]

complete the same CE requirements. For example, all individuals 
maintaining a Series 7 registration will be required to complete the 
Series 7 CE while all individuals maintaining a Series 56 registration 
(and no other registrations) will be required to complete the new 
Series 56 CE.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    The Exchange neither solicited nor received comments on 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, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The rule change specifies that proprietary traders who 
have qualified by taking the Series 56 exam or receiving a waiver of 
the Series 56 examination requirement, must take the S 501 continuing 
education program. The Exchange has represented that the S 501 
continuing education will be available on August 19, 2013. Waiver of 
the operative delay will enable those registered persons required to 
take the S 501 continuing education to do so as soon as the program 
becomes available, enabling them to comply with their continuing 
education requirements in a timely manner, and thus is consistent with 
the protection of investors and the public interest. Therefore, the 
Commission designates the proposal operative upon filing.\16\
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of this 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 will institute proceedings to 
determine whether the proposed rule change 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 email to [email protected]. Please include 
File Number SR-CBOE-2013-076 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-CBOE-2013-076. 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 Room, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
such filing also will be available for inspection and copying at the 
principal office of the CBOE. 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-CBOE-2013-076 and should be submitted on or before 
August 19, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-18074 Filed 7-26-13; 8:45 am]
BILLING CODE 8011-01-P