[Federal Register Volume 78, Number 183 (Friday, September 20, 2013)]
[Notices]
[Pages 57907-57909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-22881]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70417; File No. SR-ISE-2013-48]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend Rule 604, Continuing Education for Registered Persons, 
and To Adopt a Corresponding Fee

September 16, 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 September 13, 2013, the International Securities Exchange, LLC 
(the ``Exchange'' or the ``ISE'') filed with the Securities and 
Exchange Commission (``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.
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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

    The Exchange is proposing to amend Rule 604 to clarify the current 
continuing education requirements for registered persons based upon 
their registration with the Exchange, and to adopt a new continuing 
education requirement for Series 56 registered persons, including a 
corresponding fee.
    The text of the proposed rule change is available on the Exchange's 
Internet Web site at http://www.ise.com, at the principal office of the 
Exchange, 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 self-regulatory organization 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 clarify the current 
continuing education requirements for registered persons based upon 
their registration with the Exchange, and to adopt a new continuing 
education requirement for Series 56 registered persons (``Proprietary 
Traders''). The Exchange also proposes to adopt a fee for the new 
continuing education program applicable to Proprietary Traders.
    The Exchange adopted the Proprietary Trader registration in 2011, 
working with various other exchanges and the Financial Industry 
Regulatory Authority (``FINRA''). At this time, the Exchange is 
proposing a new Proprietary Trader continuing education program which 
will be administered by FINRA. The new program, the S501, is intended 
to address the specific continuing education of Proprietary Traders, 
based on the content outline for the Series 56 exam, which covers the 
main categories of rules and regulations generally applicable to such 
persons.\3\
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    \3\ These generally include recordkeeping and recording 
requirements, types and characteristics of securities and 
investments, trading practices and display execution and trading 
systems. See Securities Exchange Act Release No. 65054 (Aug. 8, 
2011), 76 FR 50277 (Aug. 12, 2011) (SR-ISE-2011-36).
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    The S501 is required for persons who are registered as Proprietary 
Traders and do not maintain any other registration. Individuals that 
are registered under any other registration are required to maintain 
the continuing educations [sic] obligations associated with such 
registrations. For example, an individual that engages solely in 
proprietary trading activities but has passed the Series 7 and is 
registered as a General Securities Representative will be required to 
continue taking the Series 7 continuing education program (S101). 
Although such an individual may be engaging in the same activities as 
an individual registered as a Proprietary Trader, the Series 7 
examination is more comprehensive and covers topics that the Series 56 
does not. Thus, the Exchange believes that this individual should 
complete the continuing education associated with the Series 7 because 
this covers all aspects of the individual's registration.
    The introduction of the S501 allows the Exchange to tailor its 
continuing education requirements more closely to the duties of 
individuals who have registered with the Exchange as Proprietary 
Traders after passing the Series 56. More specifically, the Exchange 
believes allowing individuals engaging solely in proprietary trading 
who take the Series 56 and register as Proprietary Traders to complete 
a separate continuing education program than those Proprietary Traders 
who passed the Series 7 and maintain a General Securities 
Representative registration is appropriate given that all individuals 
who engage solely in proprietary trading have the option of taking 
either test. In comparison to the more comprehensive Series 7, the 
Series 56 examination is more closely tailored to the practice of 
proprietary trading. As such, the Exchange believes a Series 56 
continuing education program should be tailored as well. At the same 
time, if an individual who has passed the Series 7 would like to retain 
a General Securities Representative registration, the Exchange believes 
it is appropriate they [sic] continue to be required to complete the 
broader continuing education program, which covers all aspects of this 
registration.
    The Exchange also proposes to amend Rule 604(a) to specify the 
required Regulatory Element for each category of registered persons. 
Currently, Rule 604(a) provides that no Member shall permit any 
registered person to continue to, and no registered person shall 
continue to, perform duties as a registered person, unless such person 
has complied with the continuing education requirements of paragraph 
(a). Each registered person shall complete the Regulatory Element of 
the continuing education program on the occurrence of their [sic] 
second registration anniversary date(s), and every three years 
thereafter or as otherwise prescribed by the Exchange. On each 
occasion, the Regulatory

[[Page 57908]]

Element must be completed within 120 days after the person's 
registration anniversary date. A person's initial registration date, 
also known as the ``base date,'' shall establish the cycle of 
anniversary dates for purposes of this Rule. This applies to persons 
registered as Proprietary Traders as well.
    The Rule further provides that the content of the Regulatory 
Element of the program shall be determined by the Exchange for each 
registration category of persons subject to the Rule. The Exchange now 
proposes to make clear which specific programs are required, including 
both existing programs (S101 and S201) as well as the new Proprietary 
Trader continuing education program (S501). The following Regulatory 
Elements administered by FINRA shall be required:
    The S201 Supervisor Program for registered principals and 
supervisors;
    The S501 Series 56 Proprietary Trader Continuing Education Program 
for Series 56 registered persons; and
    The S101 General Program for Series 7 and all other registered 
persons.
    The Exchange believes that specifying the applicable Regulatory 
Element in the Rule should be helpful to Members in complying with the 
Rule. Only one Regulatory Element is required. For example, members 
registered as supervisors are subject to the S201 only; they do not 
also have to complete the Regulatory Element applicable to their 
prerequisite registration, such as the S501 or the S101.\4\ This 
proposal does not change the registration requirements.
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    \4\ As stated above, in the event that a person is registered 
both as a Proprietary Trader (Series 56) and a General Securities 
Representative (Series 7), only one Regulatory Element is required--
the ``higher'' of the two, which is the S101.
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    The Exchange also proposes to adopt a $60 fee for the S501 
continuing education program, which will be used for the administration 
of the S501. FINRA administers this program on behalf of the exchanges 
and therefore the fees are payable directly to FINRA.\5\ The Exchange 
expects that the exchanges that recognize the Proprietary Trader 
registration either have or will adopt the same fee for continuing 
education.
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    \5\ The S501 was established for those registrants who have 
passed the Series 56 Qualification Exam as reflected in WebCRD. 
WebCRD is the central licensing and registration system for the U.S. 
securities industry. The CRD system enables individuals and firms 
seeking registration with multiple states and self-regulatory 
organizations to do so by submitting a single form, fingerprint card 
and a combined payment of fees to FINRA. Through the CRD system, 
FINRA maintains the qualification, employment and disciplinary 
histories of registered associated persons of broker-dealers.
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    The Exchange's Schedule of Fees does not currently set forth the 
session fees for other continuing education programs required by the 
Exchange because these programs are within the jurisdiction of the 
Financial Industry Regulatory Authority (``FINRA''), which collects 
these session fees from its members. The Series 56, however, applies to 
ISE Members that are not required by Section 15(b)(8) \6\ of the Act to 
become members of FINRA. Therefore, the Exchange believes it is 
appropriate to include the Series 56 continuing education fee within 
the Exchange's Schedule of Fees to make the cost of this program clear 
to ISE Members.
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    \6\ 15 U.S.C. 78o(b)(8).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of: (1) 
Section 6(c)(3)(B) of the Act,\8\ 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,\9\ 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 
requiring registered persons to complete the applicable continuing 
education program. The Exchange believes that a strong continuing 
education program should bolster the integrity of the Exchange by 
helping to ensure that all associated persons engaged in a securities 
business are, and will continue to be, properly trained and qualified 
to perform their functions.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78(c)(3)(B).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange does not believe that the proposal is unfairly 
discriminatory with respect to persons registered as a General 
Securities Representative who function in their current job as a 
Proprietary Trader, even though these persons are subject to the more 
stringent S101 rather than the S501. Such persons are registered and 
qualified (Series 7) in a ``higher'' capacity and are therefore 
qualified to function in a capacity other than a Proprietary Trader, 
whether they choose to or not. Accordingly, requiring the S101 for such 
persons is appropriate and facilitates them being able to maintain 
their ``higher'' registration. Moreover, the Exchange believes that 
permitting General Securities Representatives functioning as 
Proprietary Traders to complete the S501 would be confusing and 
difficult to monitor.
    The Exchange also believes that the proposal furthers the 
objectives of Section 6(b)(4) of the Act,\10\ in that it provides for 
an equitable allocation of reasonable fees and other charges among 
Exchange Members and other persons using its facilities. The proposed 
fee is equitable, because it applies equally to all persons registered 
solely as Proprietary Traders. The Exchange notes that it will not 
invoice or collect funds from Members that are subject to these fees 
because these fees will be paid directly to FINRA as administrator of 
the continuing education program. The proposed fees are reasonably 
designed to allow FINRA to cover its cost of administering the Series 
56 continuing education program on behalf of the Exchange, and the 
Exchange believes it is reasonable and equitable to include these fees 
in its Schedule of Fees to make the costs of the Series 56 continuing 
education requirement clear to Members. Moreover, the Exchange believes 
other exchanges will be assessing the same fees for this continuing 
education program.
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    \10\ 15 U.S.C. 78f(b)(4).
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. All Proprietary Traders, 
regardless of where they are registered, will be subject to same 
continuing education requirements and fees. Thus, the proposal treats 
similarly situated persons in the same way. In addition, all of the 
exchanges that recognize the Proprietary Trader registration category 
are expected to adopt the same continuing education requirements \11\ 
and fee.\12\
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    \11\ See e.g. Securities Exchange Act Release Nos. 70237 (Aug. 
20, 2013), 78 FR 52814 (Aug. 26, 2013) (SR-BATS-2013-046); 70027 
(July 23, 2013), 78 FR 45584 (July 29, 2013) (SR-CBOE-2013-076); 
70327 (Sept. 5, 2013), 78 FR 55766 (Sept. 11, 2013) (SR-Phlx-2013-
85).
    \12\ See e.g. Securities Exchange Act Release Nos. 70257 (Aug. 
26, 2013), 78 FR 53814 (Aug. 30, 2013) (SR-BATS-2013-047); 70064 
(July 30, 2013), 78 FR 47469 (Aug. 5, 2013) (SR-CBOE-2013-078); 
70194 (Aug. 14, 2013) 78 FR 51259 (Aug. 20, 2013) (SR-C2-2013-030); 
70327 (Sept. 5, 2013), 78 FR 55766 (Sept. 11, 2013) (SR-Phlx-2013-
85).
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    The proposed rule change will merely align Exchange Rules with 
those of other exchanges. The Exchange does not believe that these 
proposed rule changes

[[Page 57909]]

will affect intermarket competition because the Exchange believes that 
all exchanges that impose the same continuing education requirements 
will file similar rule changes addressing these continuing education 
programs. Furthermore, the Exchange does not believe the proposed 
change will affect intramarket competition because all similarly 
situated registered persons (e.g. registered persons maintaining the 
same registrations) are required to complete the same continuing 
education requirements. For example, all individuals maintaining a 
Series 7 registration as a General Securities Representative will be 
required to complete the S101 continuing education program, while all 
individuals maintaining a Series 56 registration (and no other 
registrations) will be required to complete the new S501 continuing 
education program.

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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

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 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 
\13\ and Rule 19b-4(f)(6) thereunder.
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    \13\ 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 proposed rule change specifies the continuing 
education requirements that currently apply to registered persons, and 
adopts a continuing education requirement, the S501, and a related fee 
for persons registered as Proprietary Traders. Waiver of the operative 
delay would allow the Exchange to clarify its rules and implement the 
proposed rule change at once, enabling its members to clearly 
understand which continuing education program applies to their 
registered persons and to comply with the 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.\14\
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    \14\ 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-ISE-2013-48 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-ISE-2013-48. 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, 100 F Street NE., 
Washington, DC 20549, 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 Exchange. 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-ISE-2013-48 and should be 
submitted on or before October 11, 2013.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-22881 Filed 9-19-13; 8:45 am]
BILLING CODE 8011-01-P