[Federal Register Volume 80, Number 221 (Tuesday, November 17, 2015)]
[Notices]
[Pages 71887-71890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29230]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76410; File No. SR-NASDAQ-2015-138]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish the Securities Trader and Securities Trader Principal 
Registration Categories and To Retire Other Registration Categories

November 10, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 4, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') 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

    The Exchange proposes to a proposal [sic] to retire the Limited 
Representative --Equity Trader, Limited Representative--Proprietary 
Trader and Limited Principal--Proprietary Trader registration 
categories and to establish the Securities Trader and Securities Trader 
Principal registration categories. The Exchange is also amending its 
rules to establish the Series 57 examination as the appropriate 
qualification examination for Securities Traders and deleting the rule 
referring to the S501 continuing education program currently applicable 
to Proprietary Traders.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.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 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 herein to replace the Series 56 with the 
Series 57 examination, and to make additional changes to its 
registration rules. Specifically, in response to the FINRA Amendments 
(defined below), the Exchange is proposing to retire the Limited 
Representative--Equity Trader (``Equity Trader'') \3\ and the Limited 
Representative--Proprietary Trader (``Proprietary Trader'') \4\ 
registration categories from its own registration rules relating to 
securities trading activity. It is also therefore retiring its Limited 
Principal--Proprietary Trader (``Proprietary Trader Principal'') \5\ 
registration category. To take the place of the retired registration 
categories, Nasdaq is establishing new Securities Trader and Securities 
Trader Principal registration categories. This filing is, in all 
material respects, based upon SR-FINRA-2015-017, which was recently 
approved by the Commission.\6\
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    \3\ Rule 1032(f).
    \4\ Rule 1032(c).
    \5\ Rule 1022(h).
    \6\ See Securities Exchange Act Release No. 75783 (August 28, 
2015), 80 FR 53369 (September 3, 2015) (approving SR-FINRA-2015-017) 
referred to herein as the ``FINRA Amendments''. According to the 
release, FINRA's expected effective date for the FINRA Amendments is 
January 4, 2016.
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New Nasdaq Securities Trader Registration Category
    Currently, under Nasdaq Rule 1032(a)(1), each person associated 
with a member who is included within the definition of a 
``representative'' \7\ in Rule 1011 is required to register with Nasdaq 
as a General Securities Representative and to pass an appropriate 
qualification examination before such registration may become 
effective, unless his or her activities are so limited as to qualify 
him for one or more limited categories of representative registration 
also set forth in Rule 1032. The appropriate qualification examination 
for General Securities Representative is the Series 7 examination.
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    \7\ The term ``representative'' is defined in Exchange Rule 
1011.
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    Nasdaq Rule 1032(f) currently also requires each person associated 
with a member who is included within the definition of a representative 
to register with Nasdaq as an Equity Trader if, with respect to 
transactions in equity, preferred or convertible debt securities on 
Nasdaq, such person is engaged in proprietary trading, the execution of 
transactions on an agency basis, or the direct supervision of such 
activities (collectively, ``Nasdaq equities trading''), other than any 
person associated with (A) a member whose trading activities are 
conducted principally on behalf of an investment company that is 
registered with the Commission pursuant to the Investment Company Act 
of 1940 and that controls, is controlled by or is under common control, 
with the member (an ``investment company firm''), or (B) a proprietary 
trading firm. Therefore,

[[Page 71888]]

under current Nasdaq rules, a representative engaged in Nasdaq equities 
trading who is not associated with a proprietary trading firm or an 
investment company firm must register as an Equity Trader, after 
passing the appropriate qualification examination (the Series 55 
examination). Additionally, before such registration may become 
effective, the individual must be registered either as a General 
Securities Representative (after passing the Series 7 examination) or 
as a Limited Representative--Corporate Securities Representative (after 
passing the Series 62 examination).
    Additionally, Nasdaq Rule 1032(c) currently provides that each 
person associated with a member who is included within the definition 
of a representative may register with Nasdaq as a Proprietary Trader if 
(A) his activities in the investment banking or securities business are 
limited solely to proprietary trading, (B) he passes an appropriate 
qualification examination (the Series 56) and (C) he is an associated 
person of a proprietary trading firm.\8\ Therefore, pursuant to Nasdaq 
Rules 1032(a) and (c), a representative associated with a proprietary 
trading firm who limits his trading activity to proprietary trading as 
specified in Rule 1032(c) has the opportunity to register in the 
Proprietary Trader category after passing the Series 56 examination 
rather than as a General Securities Representative after passing the 
Series 7 examination.
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    \8\ The term ``proprietary trading firm'' is defined in Rule 
1011(o).
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    In consultation with FINRA and other exchanges, and in order to 
harmonize for individuals engaged in trading activities, the Exchange 
is now proposing to retire the Proprietary Trader registration 
category. Accordingly, it is deleting all rule text in section (c) of 
Rule 1032 and replacing it with the word ``Reserved''. Similarly, the 
Exchange is retiring the Equity Trader registration category in Rule 
1032(f) and revising that rule to adopt a new Securities Trader 
registration category.
    Under Rule 1032(f), as revised, each person associated with a 
member who is included within the definition of a representative will 
be required to register as a Securities Trader if engaged in Nasdaq 
equities trading or foreign currency options trading on Nasdaq other 
than any person associated with an investment company firm. There is no 
exclusion from the new Securities Trader registration requirement for 
representatives of proprietary trading firms. Therefore, 
representatives who previously would have been required to register as 
Equity Traders, as well as those who previously qualified for 
Proprietary Trader registration, will be required to register as 
Securities Traders. In order to register as a Securities Trader, an 
applicant would be required to pass the new Securities Trader 
qualification examination (Series 57). However, unlike today's Equity 
Trader registrants, an applicant would be able to register as a 
Securities Trader without first registering as a General Securities 
Representative or a Limited Representative--Corporate Securities.\9\ 
New Nasdaq Rule 1032(f)(3) will prohibit a person registered as a 
Securities Trader from functioning in any other registration category, 
unless he or she is also qualified and registered in such other 
registration category.\10\
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    \9\ FINRA has stated in its filing proposing the FINRA 
amendments that the Series 57 examination will include the core 
knowledge portion of the General Securities Representative 
examination (Series 7).
    \10\ For instance, a person registered as a Securities Trader 
will not be able to engage in any retail or institutional sales 
activities, unless he or she is qualified and registered in the 
appropriate registration category, such as a General Securities 
Representative. See NASDAQ Rule 1032(a) which requires each 
representative associated with a member to register with Nasdaq as a 
General Securities Representative unless his or her activities are 
so limited as to qualify him for one or more of the limited 
categories of representative registration specified in Rule 1032. 
Like the Proprietary Trader category that is being retired (but 
unlike the Equity Trader category which is also being retired) the 
Securities Trader registration category is a limited category of 
representative registration.
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    A person registered as an Equity Trader or a Proprietary Trader in 
the Central Registration Depository (CRD[supreg]) system on the 
effective date of the proposed rule change will be grandfathered as a 
Securities Trader without having to take any additional examinations 
and without having to take any other actions. In addition, individuals 
who were registered as an Equity Trader or a Proprietary Trader in the 
CRD system prior to the effective date of the proposed rule change will 
be eligible to register as Securities Traders without having to take 
any additional examinations, provided that no more than two years have 
passed between the date they were last registered as a representative 
and the date they register as a Securities Trader.
    Persons registered in the new category would be subject to the 
continuing education requirements of Rule 1120. The Exchange proposes 
to amend Rule 1120(a) by removing the option for Series 56 registered 
persons to participate in the S501 Series 56 Proprietary Trader 
continuing education program in order to satisfy the Regulatory 
Element. The S501 Series 56 Proprietary Trader continuing education 
program is being phased out along with the Series 56 Proprietary Trader 
qualification examination. As a result, effective January 4, 2016, the 
S501 Series 56 Proprietary Trader continuing education program for 
Series 56 registered persons will cease to exist. In place of the S501 
Series 56 Proprietary Trader continuing education program for Series 56 
registered persons, the Exchange proposes that Series 57 registered 
persons be required to take the S101 General Program for Series 7 and 
all other registered persons.

II. New NASDAQ Securities Trader Principal Registration Category

    Currently, under NASDAQ Rule 1022(a), each person associated with a 
member who is included within the definition of ``principal'' \11\ and 
each person designated as a Chief Compliance Officer on Schedule A of 
Form BD must register with Nasdaq as a General Securities Principal and 
pass an appropriate qualification examination before such registration 
may become effective, unless such person's activities are so limited as 
to qualify such person for one or more of the limited categories of 
principal registration specified in Rule 1022.\12\ Currently, under 
Nasdaq Rule 1032(f)(1), an associated person with direct supervisory 
responsibility over the securities trading activities set forth in 
Nasdaq Rule 1032(f) is required to qualify and register as an Equity 
Trader. However, Nasdaq rules do not expressly require such persons to 
register in a specific principal registration category.\13\ Under Rule 
1022(h) a principal may register under the Proprietary Trader Principal 
category if, among other things, he or she is registered as a 
Proprietary Trader and passes the Series 24 examination.
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    \11\ ``Principal'' is defined in Rule 1021.
    \12\ Rule 1022 lists the categories of principal registration. 
In addition to ``General Securities Principal,'' which is the 
broadest category, there are a number of limited categories of 
principal registration including Financial and Operations, General 
Securities Sales Supervisor, and Limited Principal--Proprietary 
Trader.
    \13\ In general, a General Securities Principal with supervisory 
responsibility over securities trading activities is currently 
required to qualify and register as an Equity Trader.
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    Like the Proprietary Trader category discussed above, the 
Proprietary Trader Principal registration category is being retired. 
The Exchange is therefore deleting Rule 1022(h). The Exchange is 
establishing a Securities Trader Principal category in new Rule 
1022(a)(5). Nasdaq has been working with other exchanges and FINRA to 
develop this new principal registration

[[Page 71889]]

category and believes that it is an appropriate corollary to the new 
Securities Trader representative registration category. The new rule 
requires each principal who will have supervisory responsibility over 
the securities trading activities described in Rule 1032(f)(1) to 
become qualified and registered as a Securities Trader Principal. To 
qualify for registration as a Securities Trader Principal, an applicant 
must become qualified and registered as a Securities Trader under Rule 
1032(f) and pass the General Securities Principal qualification 
examination (Series 24). A person who is qualified and registered as a 
Securities Trader Principal would only be permitted to have supervisory 
responsibility over the activities specified in Rule 1032(f)(1), unless 
such person were separately qualified and registered in another 
appropriate principal registration category, such as the General 
Securities Principal registration category. A person who registers as a 
General Securities Principal would not be qualified to supervise the 
trading activities described in Rule 1032(f)(1), unless such person 
also qualified and registered as a Securities Trader under Rule 1032(f) 
by passing the Securities Trader qualification examination, and became 
registered as a Securities Trader Principal. This aspect of the 
proposed rule change will also allow Nasdaq to more easily track 
principals with supervisory responsibility over securities trading 
activities.
    A person registered as a General Securities Principal and an Equity 
Trader or as a Proprietary Trader Principal in the CRD system on the 
effective date of the proposed rule change will be eligible to register 
as a Securities Trader Principal without having to take any additional 
examinations. An individual who was registered as a General Securities 
Principal and an Equity Trader, or as a Proprietary Trader Principal in 
the CRD system prior to the effective date of the proposed rule change 
will also be eligible to register as a Securities Trader Principal 
without having to take any additional examinations, provided that no 
more than two years have passed between the date they [sic] were last 
registered as a principal and the date they [sic] register as a 
Securities Trader Principal. Members, however, will be required to 
affirmatively register persons transitioning to the proposed 
registration category as Securities Trader Principals on or after the 
effective date of the proposed rule change.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \14\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \15\ in particular, in that it is designed 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. The Exchange believes that the requirements of the Securities 
Trader and Securities Trader Principal registration categories, as well 
as the new Securities Trader qualification examination, should help 
ensure that proprietary traders and the principals who supervise 
proprietary traders and proprietary trading are, and will continue to 
be, properly trained and qualified to perform their functions which 
should protect investors and the public interest.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 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. Implementation of the proposed 
changes to Nasdaq's registration rules in coordination with the FINRA 
Amendments does not present any competitive issues, but rather is 
designed to provide less burdensome and more efficient regulatory 
compliance for members and enhance the ability of the Exchange to 
fairly and efficiently regulate members, which will further enhance 
competition. Additionally, the proposed rule change should not affect 
intramarket competition because all similarly situated representatives 
and principals will be required to complete the same qualification 
examinations and maintain the same registrations.

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 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)(iii) of the Act \16\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \17\ 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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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 email to [email protected]. Please include 
File Number SR-NASDAQ-2015-138 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2015-138. 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

[[Page 71890]]

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-NASDAQ-2015-138 and 
should be submitted on or before December 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-29230 Filed 11-16-15; 8:45 am]
 BILLING CODE 8011-01-P