[Federal Register Volume 80, Number 250 (Wednesday, December 30, 2015)]
[Notices]
[Pages 81606-81609]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32814]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76755; File No. SR-BYX-2015-52]
Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Proprietary Trader and Proprietary Trader Principal Registration
Categories, Securities Trader and Securities Trader Principal
Registration Categories, and Establishing the Series 57 Examination
December 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 December 22, 2015, BATS Y-Exchange, Inc. (the ``Exchange'' or
``BYX'') 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 Exchange
has designated this proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A) of the
[[Page 81607]]
Act \3\ and Rule 19b-4(f)(6)(iii) thereunder,\4\ which renders it
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).
\4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to retire the Proprietary Trader and
Proprietary Trader Principal 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 Exchange will announce the effective date of the proposed
rule change in a circular distributed to Members.
The text of the proposed rule change is available at the Exchange's
Web site at www.batstrading.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 parts 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 various related changes to its
registration rules. Specifically, in response to the FINRA Amendments
(defined below), the Exchange is proposing to retire the Proprietary
Trader \5\ registration categories from its own registration rules
relating to securities trading activity. It is also therefore retiring
its Proprietary Trader Principal \6\ registration category. To take the
place of the retired registration categories, the Exchange is
establishing new Securities Trader and Securities Trader Principal
registration categories. This filing is based upon and in response to
SR-FINRA-2015-017, which was recently approved by the Commission.\7\
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\5\ Rule 2.5, Interpretation and Policy .01(f).
\6\ Rule 2.5, Interpretation and Policy .01(d).
\7\ 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 Securities Trader Registration Category
Currently, under Exchange Rule 11.4(e), each person associated with
a member who is included within the definition of an ``Authorized
Trader'' in Rule 1.5(d) is required to register with the Exchange and
to pass an appropriate qualification examination before such
registration may become effective. The Exchange recognizes the
following qualification examinations as acceptable for purposes of
registration as an Authorized Trader: Series 7, Series 56, or one of
several foreign securities examination modules.
Interpretation and Policy .01(f) of Exchange Rule 2.5 currently
provides that a person may register with the Exchange as a Proprietary
Trader if such person engages solely in proprietary trading, passes the
Series 56 examination and is an associated person of a proprietary
trading firm as defined in Interpretation and Policy .01(g) of Exchange
Rule 2.5. Therefore, pursuant to Interpretation and Policy .01 to
Exchange Rule 2.5, an individual meeting these criteria may 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 or equivalent foreign securities examination
module.
In consultation with FINRA and other exchanges, and in order to
harmonize the requirements for individuals engaged in trading
activities, the Exchange is now proposing to retire the Proprietary
Trader registration category. Similarly, the Exchange is proposing to
adopt a new Securities Trader registration category.
Under Exchange Rules, as revised, each person associated with a
member who is included within the definition of Authorized Trader will
be required to register as a Securities Trader unless they instead
qualify based on the Series 7 examination or an equivalent foreign
securities examination module. Therefore, representatives who
previously qualified for Proprietary Trader registration will be
required to register as Securities Traders. Accordingly, the Exchange
is proposing to modify paragraph (f) of Interpretation and Policy .01
to reflect the new Securities Trader qualification as a permissible
registration for Authorized Traders of Members that engage solely in
trading on the Exchange on either an agency or principal basis. In
order to register as a Securities Trader, an applicant would be
required to have passed the new Securities Trader qualification
examination (Series 57) or a predecessor examination (i.e., the Series
56, as described below).
A person registered as 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 Proprietary Traders 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 Interpretation and Policy .02(e)
to Rule 2.5. The Exchange proposes to amend Interpretation and Policy
.02(e) 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.
[[Page 81608]]
New Securities Trader Principal Registration Category
Currently, under Interpretation and Policy .01(d), the Exchange
requires each Member to register ``Principals'' \8\ with the Exchange.
The Exchange requires the Series 24 examination to register as
Principal. The Exchange will also accept the New York Stock Exchange
Series 14 Compliance Official Examination in lieu of the Series 24 to
satisfy the Principal examination requirement for any person designated
as a Chief Compliance Officer. Further, in addition to the Series 24 or
Series 14, in order to supervise the activities of General Securities
Representatives a Principal generally must complete the Series 7 or an
equivalent foreign examination module as a prerequisite to the Series
24 or Series 14. However, the Exchange currently permits the Series 56
as a prerequisite to the Series 24 or Series 14 for those Principals
whose supervisory responsibilities are limited to overseeing the
activities of proprietary traders, as described above. Like the
Proprietary Trader category discussed above, the Proprietary Trader
Principal registration category is being retired. Accordingly, the
Exchange proposes to modify the references in the Rule regarding the
prerequisite to the Series 24 or 14 for an individual that will
supervise Series 57 qualified traders to correspond with the new
Securities Trader exam. The Exchange proposes to establish the
Securities Trader Principal category in Interpretation and Policy
.01(d).
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\8\ Pursuant to Interpretation and Policy .01(d) to Rule 2.5, a
Principal is ``any individual responsible for supervising the
activities of a Member's Authorized Traders and each person
designated as a Chief Compliance Officer on Schedule A of Form BD.''
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The Exchange has been working with other exchanges and FINRA to
develop this new principal registration category and believes that it
is an appropriate corollary to the new Securities Trader representative
registration category. To qualify for registration as a Securities
Trader Principal, an applicant must become qualified and registered as
a Securities Trader under proposed Interpretation and Policy .01(c) and
pass either the Series 24 or Series 14 examination. A person who is
qualified and registered as a Securities Trader Principal would only be
permitted to have supervisory responsibility over the activities of
Securities Traders, unless such person were separately qualified and
registered in another appropriate principal registration category, such
as the General Securities Principal registration category. Conversely,
the proposed rule change clarifies that each principal who will have
supervisory responsibility over registered Securities Traders is
required to become qualified and registered as a Securities Trader
Principal.
A person registered as a General Securities Principal and 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 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 were last registered as a principal and the date they
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.
Other Changes
In order to accomplish the changes proposed above, the Exchange has
proposed modifications throughout Interpretation and Policy .01 and .02
to Rule 2.5 as well as Rule 11.4(e) to eliminate references to
Proprietary Trader, Proprietary Trader Principal, and Series 56
examination and to replace such references with Securities Trader,
Securities Trader Principal and Series 57 examination. The Exchange
also proposes to modify Rule 11.6, which sets forth the registration
requirements applicable to Market Maker Authorized Traders, or MMATs,
to cross-reference Interpretation and Policy .01 and .02. Although Rule
11.6 currently requires an MMAT to qualify by taking the Series 7
examination, the Exchange does not intend to impose different
registration or continuing education requirements on MMATs than are
required of Authorized Traders generally. In addition to these changes,
the Exchange proposes to delete paragraph (h) to Interpretation .01,
which currently states that: ``Principals responsible for supervising
the activities of General Securities Representatives must successfully
complete the Series 7 or an equivalent foreign examination module in
addition to the Series 24.'' The Exchange proposes to eliminate this
provision as duplicative with existing language in Interpretation and
Policy .01, including paragraph (d), which states that ``[i]ndividuals
that supervise the activities of General Securities Representatives
must successfully complete the Series 7 or an equivalent foreign
examination module as a prerequisite to the Series 24 or Series 14 and
shall be referred to as General Securities Principals.'' The Exchange
also proposes to modify a reference in Interpretation and Policy .01(e)
from ``General Securities Representative Principal'' to ``General
Securities Principal.'' In addition, the Exchange proposes to eliminate
the fees applicable to the Series 56 examination as well as the fees
associated with the continuing education necessary to maintain
registration after passing the Series 56 examination. Consistent with
all other examinations recognized by the Exchange, FINRA will
administer the Series 57 examination and the continuing education
requirements related thereto, and the Exchange will not be separately
charging and collecting any fees in order to take such examination or
participate in applicable continuing education. Finally, in order to
continue to align the Exchange's rules with the rules of its affiliated
exchanges, the Exchange proposes to adopt descriptive headings in
Interpretation and Policy .02 to Rule 2.5 based on Interpretation and
Policy .02 to Rule 2.5 of the rules of EDGA Exchange, Inc. and EDGX
Exchange, Inc. and to modify the language, but not the substance, of
Rule 11.4(e).
2. Statutory Basis
The Exchange believes that proposed rule change is consistent with
Section 6(b)(5) of the Act,\9\ which requires, among other things, that
the Exchange's rules 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
facilitating transactions in securities, and to remove impediments to
and perfect the mechanism of a free and open market and a national
market system. 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
[[Page 81609]]
which should protect investors and the public interest.
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\9\ 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 the Exchange'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
The Exchange has 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) by
its terms, 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 \10\ and
paragraph (f)(6) of Rule 19b-4 thereunder,\11\ the Exchange has
designated this rule filing as non-controversial. The Exchange has
given the Commission written notice of its intent to file the proposed
rule change, along with a brief description and text of 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.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4.
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The Exchange has requested that the Commission waive the thirty-day
operative delay so that the proposal may become operative as of January
4, 2016. The Exchange states that waiving the thirty-day delay would
allow the Exchange to eliminate the Proprietary Trader and Proprietary
Trader Principal registration categories and adopt the Securities
Trader and Securities Trader Principal registration categories at the
same time as FINRA and the other national securities exchanges. The
Commission believes that waiving the thirty day delay is consistent
with the protection of investors and the public interest, as it will
enable BYX to have the new requirements in effect at the same time as
the other SROs . Therefore, the Commission hereby waives the thirty-day
operative delay and designates the proposal operative as of January 4,
2016.\12\
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\12\ For purposes 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 the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (1)
Necessary or appropriate in the public interest; (2) for the protection
of investors; or (3) 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 proposal 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 No. SR-BYX-2015-52 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 No. SR-BYX-2015-52. 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 will also 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 No. SR-BYX-2015-52 and should be
submitted on or before January 20, 2016.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Brent J. Fields,
Secretary.
[FR Doc. 2015-32814 Filed 12-29-15; 8:45 am]
BILLING CODE 8011-01-P