[Federal Register Volume 80, Number 209 (Thursday, October 29, 2015)]
[Notices]
[Pages 66605-66608]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27517]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76247; File No. SR-CBOE-2015-094]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating To Qualification and Registration of 
Trading Permit Holders and Associated Persons

October 23, 2015.
    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 October 9, 2015, 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, II, and III 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\ 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 Interpretation and Policy .08 to 
Rule 3.6A (Qualifications and Registration of Trading Permit Holders 
and Associated Persons) regarding the categories of registration and 
respective qualification examinations required for Trading Permit 
Holders (``TPHs'') and associated persons that engage in trading 
activities on the Exchange. Specifically, the Exchange proposes to 
replace the Proprietary Trader registration category and the Series 56 
Proprietary Trader registration qualification examination for 
Proprietary Traders with the Securities Trader category of registration 
and the Series 57 Securities Trader

[[Page 66606]]

registration qualification examination for Securities Traders 
respectively. 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 proposes to amend Interpretation and Policy .08 to 
Rule 3.6A (Qualification and Registration of Trading Permit Holders and 
Associated Persons) to replace the Proprietary Trader (PT) registration 
category and qualification examination (Series 56) with the Securities 
Trader (TD) registration category and qualification examination (Series 
57). In addition, the Exchange proposes to replace the Proprietary 
Trader Principal (TP) registration category with a Securities Trader 
Principal (TP) registration category for individual TPHs or associated 
person [sic] who either: (i) Supervise or monitor proprietary trading, 
market-making and/or brokerage activities for broker-dealers; (ii) 
supervise or train those engaged in proprietary trading, market-making 
and/or effecting transactions on behalf of a broker-dealer, with 
respect to those activities; and/or (iii) are officers, partners or 
directors of a TPH or TPH organization, as described in paragraph 
(a)(2)(i) of current Interpretation and Policy .08 to Rule 3.6A. The 
Exchange also proposes to replace the Proprietary Trader Compliance 
Officer (CT) registration category with the Securities Trader 
Compliance Officer (CT) registration category for Chief Compliance 
Officers (or individuals performing similar functions) of a TPH or TPH 
organization. This filing is, in all material respects, based upon SR-
FINRA-2015-017, which was recently approved by the Securities and 
Exchange Commission (``SEC'' or ``Commission'').\5\
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    \5\ See Securities Exchange Act Release No. 75783 (August 28, 
2015) (Order Approving a Proposed Rule Change to Establish the 
Securities Trader and Securities Trader Principal Registration 
Categories) (SR-FINRA-2015-017).
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    Rule 3.6A sets forth various qualification and registration 
requirements that individual TPHs and associated persons must satisfy 
in order to transact business on the Exchange. Among the qualification 
and registration requirements set forth in Rule 3.6A, Interpretation 
and Policy .08 provides that individual TPHs and associated persons 
that engage in proprietary trading, market-making, or effect 
transactions on behalf of a broker-dealer must register and qualify as 
a Proprietary Trader in WebCRD.\6\ To qualify as a Proprietary Trader, 
individual TPHs and associated persons must either pass the Series 56 
Proprietary Trader qualification examination \7\ or Series 7 General 
Securities Representative qualification examination.\8\ Several 
exchanges, including CBOE currently use the Series 56 examination as a 
qualification standard.\9\
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    \6\ WebCRD is a secure registration and licensing system 
operated by FINRA and is the central licensing and registration 
system for the U.S. securities industry and its regulators. The 
system contains the registration records of more than 6,500 
registered broker-dealers, and the qualification, employment and 
disclosure histories of more than 650,000 active registered 
individuals. In addition, Web CRD facilitates the processing and 
payment of FINRA registration-related fees such as form filings, 
fingerprint submissions, qualification exams and continuing 
education sessions.
    \7\ The Series 56 Proprietary Trader Examination is a two hour 
and thirty minute exam, consisting of 100 scored multiple-choice 
questions. The Series 56 examination is administered by FINRA, but 
is not recognized by FINRA as an acceptable qualification 
examination for associated persons engaged in securities trading. 
Under FINRA rules, associated persons of FINRA members that engage 
in over-the-counter securities trading are required to pass the 
Series 55 Equity Trader Exam. Nevertheless, as FINRA has recognized, 
because the Series 55 and Series 56 are intended to test the core 
knowledge required of individuals engaged in trading activities as 
well as self-regulatory organization (``SRO'') rules, including 
trading rules that are common across all SROs, there is significant 
overlap in the content of the Series 55 and Series 56 qualification 
examinations.
    \8\ See Interpretation and Policy .08 to Rule 3.6A.
    \9\ See, e.g., BATS Exchange, Inc. (``BATS'') Interpretation and 
Policy .01 to Rule 2.5 (Proficiency Examinations); Miami 
International Securities Exchange, LLC (``MIAX'') Rule 1302 
(Registration of Representatives). See also Interpretation and 
Policy .08 to Rule 3.6A.
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    Interpretation and Policy .08 to Rule 3.6A further requires that 
individual TPHs and associated persons with supervisory responsibility 
over proprietary trading activities and officers, partners, and 
directors of a TPH or TPH organization qualify and register as a 
Proprietary Trader Principal. Specifically, under paragraph (a)(2) of 
Interpretation and Policy .08 to Rule 3.6A, an individual TPH or 
associated person who either: (i) Supervises or monitors proprietary 
trading, market-making and/or brokerage activities for broker-dealers; 
(ii) supervises or trains those engaged in proprietary trading, market-
making and/or effecting transactions on behalf of a broker-dealer, with 
respect to those activities; and/or (iii) is an officer, partner or 
director of a TPH or TPH organization must register and qualify as a 
Proprietary Trader Principal in WebCRD and satisfy prerequisite [sic] 
registration and qualification requirements, including, but not limited 
to passing the Series 24 General Securities Principal Examination or an 
acceptable alternative qualification examination.\10\ An individual TPH 
or associated person who is a Chief Compliance Officer (or performs 
similar functions) for a TPH or TPH organization that engages in 
proprietary trading, market-making, or effecting transactions on behalf 
of a broker-dealer is also required to register and qualify as a 
Proprietary Trader Compliance Officer in WebCRD and satisfy the 
prerequisite [sic] registration and qualification requirements, 
including, but not limited to passing the Series 14 Compliance Official 
Examination.\11\
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    \10\ Under current Interpretation and Policy .08 to Rule 3.6A, 
the Series 9 and 10 General Securities Sales Supervisor Examination 
and Series 23 General Securities Principal Exam--Sales Supervisor 
Module are acceptable alternative qualification examinations to the 
Series 24 General Securities Principal Examination. Because the 
Series 23 is not available in WebCRD, however, each applicant that 
chooses to take the Series 23 module as an alternative to the Series 
24 qualification examination must provide documentation of a valid 
Series 23 license to the Registration Services Department upon 
request for proof of licensure.
    \11\ Under current Interpretation and Policy .08 to Rule 3.6A, 
the Series 24 General Securities Principal Examination is considered 
an acceptable alternative qualification examination for the Series 
14 Compliance Official Examination and registered General Securities 
Principals may register as Proprietary Trader Compliance Officers 
subject to applicable provisions under the Rules. See Interpretation 
and Policy .08(b) to Rule 3.6A.
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    The Exchange proposes to replace the Series 56 qualification 
examination with the Series 57 qualification examination for those 
registration categories where the Series 56 is currently an acceptable 
qualification standard.\12\ Specifically, with respect to the 
Proprietary Trader registration categories identified in Interpretation 
and Policy .08 to Rule 3.6A, the Exchange proposes to replace

[[Page 66607]]

the Proprietary Trader (PT) registration category with the Securities 
Trader (TD) registration category as well as eliminate the current 
Series 56 Proprietary Trader Exam prerequisite [sic] and, instead, 
include a Series 57 Securities Trader qualification examination in its 
place.\13\ The Proprietary Trader Principal and Proprietary Trader 
Compliance Officer registration categories would be replaced with the 
renamed registration categories of Securities Trader Principal and 
Securities Trader Compliance Officer respectively.\14\
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    \12\ See Interpretation and Policy .08 to Rule 3.6A.
    \13\ Neither the Exchange's current Rules nor the proposed rule 
would require that a Proprietary Trader or Securities Trader work 
at, or be associated with, a ``proprietary trading firm.'' Rather, 
both the current Rules and the proposed rule would require that 
individual TPHs and associated persons that engage in proprietary 
trading, market-making, or effect transactions on behalf of a 
broker-dealer register to qualify and register as a Proprietary 
Trader (or Securities Trader) in WebCRD. Whereas the current rule 
allows individual TPHs and associated persons to qualify as a 
Proprietary Trader by either passing the Series 56 Proprietary 
Trader qualification examination or Series 7 General Securities 
Representative qualification examination, the proposed rule would 
require individual TPHs and associated persons to pass the Series 57 
Securities Trader qualification examination in order to qualify as a 
Securities Trader after the effective date of the proposed rule 
change.
    \14\ As is the case under the current Rules, under the proposed 
rule, only individuals qualified and registered as a Proprietary 
Trader Principal (Securities Trader Principal) would be permitted to 
supervise a Proprietary Trader (Securities Trader).
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    The Exchange will announce the effective date of the proposed rule 
change in a Regulatory Circular. Currently, the Exchange intends for 
the effective date to be January 4, 2016. Under the proposed rule, 
individual TPHs and associated persons who have passed the Proprietary 
Trader (Series 56) qualification examination and who have registered as 
Proprietary Trader (PT) [sic] in WebCRD on or before the effective date 
of the proposed rule change and individual TPHs and associated persons 
who have passed the General Securities Representative (Series 7) 
qualification examination and who have registered as Proprietary 
Traders (PT) in WebCRD on or before the effective date of the proposed 
rule change would be grandfathered as Securities Traders (TDs) without 
having to take any additional examinations and without having to take 
any other action), provided that the individual TPH's or associated 
person's registration has not been revoked by the Exchange as a 
disciplinary sanction and no more than two years have passed between 
the date that the individual TPH or associated person last registered 
as a Proprietary Trader (PT) and the effective date. After the 
effective date, an individual TPH or associated person would need to 
pass the new Series 57 Securities Trader qualification examination and 
register as a Securities Trader in WebCRD.
    In addition, individual TPHs and associated persons who have either 
passed the Proprietary Trader (PT) qualification examination or the 
General Securities Representative (Series 7) qualification examination 
and who have registered as Proprietary Traders (PT) in WebCRD on or 
before the effective date of the proposed rule change and who have also 
passed the General Securities Principal (Series 24) qualification 
examination (or have completed any of the alternative acceptable 
qualifications requirements as defined in current Interpretation and 
Policy .08(b) to Rule 3.6A) and who have also registered as Proprietary 
Trader Principals (TP) in WebCRD on or before the effective date of the 
proposed rule change would be eligible to register as Securities Trader 
Principals (TPs), provided that the individual TPH's or associated 
person's registration has not been revoked by the Exchange as a 
disciplinary sanction and no more than two years have passed between 
the date that the individual TPH or associated person last registered 
as a Proprietary Trader Principal (TP) and the date they register as a 
Securities Trader Principal (TP).\15\ After the effective date, a 
Securities Trader Principal would need to pass the Securities Trader 
(Series 57) qualification examination and the General Securities 
Principal (Series 24) qualification examination (or have completed any 
of the alternative acceptable qualifications as defined in current 
Interpretation and Policy .08(b) to Rule 3.6A) and be registered as 
such in order to register as a Securities Trader Principal (TP).\16\
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    \15\ See Rule 3.6A(e) (Requirement for Examination on Lapse of 
Registration).
    \16\ The Exchange also proposes to add text to Interpretation 
and Policy .08(b) to Rule 3.6A regarding the supervisory 
responsibilities of the Securities Trader Principals, which would 
limit Securities Trader Principals' supervisory responsibilities to 
supervision of the securities trading functions of TPHs as described 
in paragraph (a)(2)(i) of Interpretation and Policy .08 to Rule 
3.6A, and the activities of officers, partners, and directors of 
TPHs or TPH organizations.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\17\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \18\ requirements that the rules 
of an exchange be designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \19\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ Id.
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    In particular, the Exchange believes that adoption of the 
Securities Trader registration category and Series 57 Securities Trader 
qualification examination registration requirement is consistent with 
the Act. FINRA has indicated that the Series 57 qualification 
examination is being developed in an effort to adopt a more tailored 
examination. The Exchange believes that a more tailored qualification 
examination for individual TPHs and associated persons engaged in 
trading activities is a measure designed to help ensure professionalism 
among market participants, prevent fraudulent and manipulative 
practices, and promote just and equitable principles of trade. The 
Exchange also believes that it is in the interests of investors and the 
general public to develop a more tailored qualification examination for 
proprietary traders and that a more uniform qualification standard may 
help ensure fair and orderly markets. Furthermore, the Exchange 
believes that it is in the interests of all market participants to 
provide consistent qualification and registration requirements across 
markets. The Exchange believes that harmonizing the Exchange's 
qualification and registration requirements with those of FINRA and the 
other national securities exchanges would further such interests.

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. The Exchange believes that 
the proposed rule change relating to Securities Traders, which is, in 
all material respects, based upon and substantially similar to, recent 
rule changes adopted

[[Page 66608]]

by FINRA and which is being filed in conjunction with similar filings 
by the other national securities exchanges, will reduce the regulatory 
burden placed on market participants engaged in trading activities 
across different markets. The Exchange believes that the harmonization 
of these registration requirements across the various markets will 
reduce burdens on competition by removing impediments to participation 
in the national market system and promoting competition among 
participants across the multiple national securities exchanges.

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 written 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 change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \20\ and 
Rule 19b-4(f)(6) \21\ thereunder. 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 will institute proceedings to determine whether the proposed 
rule change should be approved or disapproved.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6).
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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-2015-094 on the subject line..

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2015-094. 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 the 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-CBOE-2015-094 and should be 
submitted on or before November 19, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Robert W. Errett,
Deputy Secretary.
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    \22\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-27517 Filed 10-28-15; 8:45 am]
 BILLING CODE 8011-01-P