[Federal Register Volume 81, Number 6 (Monday, January 11, 2016)]
[Notices]
[Pages 1245-1249]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00248]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76835; File No. SR-ISE-2015-44]


Self-Regulatory Organizations; International Securities Exchange; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish the Securities Trader and Securities Trader Principal 
Registration Categories

January 5, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\

[[Page 1246]]

notice is hereby given that on December 23, 2015, the International 
Securities Exchange, LLC (the ``Exchange'' or the ``ISE'') filed with 
the Securities and Exchange Commission the proposed rule change as 
described in Items I, II, and III below, of which Items I and II have 
been prepared by the self-regulatory organization. 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

    ISE proposes to codify, in the Supplementary Material to Rule 313 
Registration Requirements, the categories of registration and 
respective qualification examinations required for individual 
associated persons (``associated persons'') that engage in the 
securities activities of members on the Exchange. Specifically, the 
Exchange proposes to (1) replace the Proprietary Trader registration 
category and the Series 56 Proprietary Trader registration 
qualification examination with the newly codified Securities Trader 
category of registration and the Series 57 Securities Trader 
registration qualification examination for Securities Traders 
respectively and (2) replace the Proprietary Trader Principal 
registration category with the newly codified registration category of 
Securities Trader Principal and require Securities Trader Principals to 
take the Series 57 qualification examination in addition to the Series 
24 qualification examination. The Exchange also proposes to amend Rule 
604, Continuing Education for Registered Persons, by deleting the rule 
text referring to the S501 continuing education program currently 
applicable to Proprietary Traders and replacing it with the S101, and 
replacing a reference to the Series 56 with the 57. Specifically, the 
Exchange proposes that Series 57 registered persons take the S101 
General Program for Series 7 and all other registered persons. Finally, 
the Exchange proposes to amend Rule 604 to provide for Web-based 
delivery of the continuing education regulatory element for registered 
persons. The text of the proposed rule change is available on the 
Exchange's Web site at 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 self-regulatory organization 
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 Rule 313 Registration Requirements. 
This amendment will replace the Proprietary Trader (PT) registration 
category and qualification examination (Series 56) with the newly 
codified 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 the 
newly codified Securities Trader Principal (TP) registration category 
for associated persons 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 member, as described in paragraph in proposed paragraph 
(a) to .08 of Supplementary Material to Rule 313. The Exchange also 
proposes to replace the Proprietary Trader Compliance Officer (CT) 
registration category with the newly codified Securities Trader 
Compliance Officer (CT) registration category for Chief Compliance 
Officers (or individuals performing similar functions) of a member or 
member organization. This filing is, in all material respects, based 
upon SR-FINRA-2015-015 and 2015-017, and SR-C2-2015-027.\3\
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    \3\ See Securities Exchange Act Release No. 75581 (July 31, 
2015), 80 FR 47018 (August 6, 2015) (SR-FINRA-2015-015); Securities 
Exchange Act Release No. 75783 (August 28, 2015), 80 FR 53369 
(September 3, 2015) (SR-FINRA-2015-017); and Securities Exchange Act 
Release No. 76408 (November 10, 2015) (SR-C2-2015-027).
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    Currently, Rule 313 requires, among other things, an associated 
person engaged or to be engaged in the securities business of a member 
to register with the Exchange in the category of registration 
appropriate to the function to be performed and to pass the 
qualification examination appropriate to the category of registration 
as prescribed by the Exchange. Among the qualification and registration 
requirements set forth by the Exchange, an associated person who 
engages in proprietary trading, market-making, or effecting 
transactions on behalf of a broker-dealer must register and qualify as 
a Proprietary Trader (PT) in WebCRD.\4\ To qualify as a Proprietary 
Trader, an associated person must either pass the Series 56 Proprietary 
Trader qualification examination \5\ or Series 7 General Securities 
Representative qualification examination. Several exchanges, including 
ISE currently use the Series 56 examination as a qualification 
standard.\6\
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    \4\ 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 
associated persons. 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.
    \5\ 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 associated persons 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. See Securities Exchange Act Release No. 
75394 (July 8, 2015), 80 FR 41119 (Notice of Filing of a Proposed 
Rule Change to Establish the Securities Trader and Securities Trader 
Principal Registration Categories) (SR-FINRA-2015-017).
    \6\ 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).
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    .07 of Supplementary Material to Rule 313 further requires that an 
associated person with supervisory responsibility over proprietary 
trading activities or who is an (i) officer; (ii) partner; (iii) 
director; (iv) supervisor of proprietary trading, market-making or 
brokerage activities; and/or (v) supervisor of those engaged in 
proprietary trading, market-making or brokerage activities with respect 
to those activities is required to register and qualify as a 
Proprietary Trader Principal (TP) in WebCRD and satisfy prerequisite 
registration and qualification requirements, including, but not limited 
to passing the Series 24 General Securities Principal

[[Page 1247]]

Examination or an acceptable alternative qualification examination. An 
associated person who is a Chief Compliance Officer (or performs 
similar functions) for a member 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 (CT) in WebCRD and satisfy the prerequisite 
registration and qualification requirements, including, but not limited 
to passing the Series 14 Compliance Official Examination or an 
acceptable alternative qualification exam.
Codification of Examination and Registration Requirements
    The Exchange proposes to replace the Series 56 qualification 
examination with the newly codified Series 57 qualification examination 
for those registration categories where the Series 56 is currently an 
acceptable qualification standard. Specifically, with respect to the 
Proprietary Trader registration, the Exchange proposes to replace the 
Proprietary Trader (PT) registration category with the newly codified 
Securities Trader (TD) registration category as well as eliminate the 
current Series 56 Proprietary Trader Exam prerequisite and, instead, 
include a Series 57 Securities Trader qualification examination in its 
place.\7\ The Proprietary Trader Principal (PT) and Proprietary Trader 
Compliance Officer (CT) registration categories would be replaced with 
the newly codified renamed registration categories of Securities Trader 
Principal (TP) and Securities Trader Compliance Officer respectively 
(CT).\8\
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    \7\ Neither the Exchange's current Rules nor the proposal 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 proposal would require that an associated 
person that engages in proprietary trading, market-making, or 
effecting transactions on behalf of a broker-dealer qualify and 
register as a Proprietary Trader (or Securities Trader) in WebCRD. 
Whereas the current rule allows an associated person to qualify and 
register as a Proprietary Trader by either passing the Series 56 
Proprietary Trader qualification examination or Series 7 General 
Securities Representative qualification examination, the proposal 
would require an associated person to pass the Series 57 Securities 
Trader qualification examination in order to qualify as a Securities 
Trader after the effective date of the proposal.
    \8\ As is the case under the current Rules, under the proposed 
rule, only individuals qualified and registered as a Proprietary 
Trader Principal (TP) (Securities Trader Principal TP)) would be 
permitted to supervise a Proprietary Trader (PT) (Securities Trader 
(TD)).
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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, 
associated persons who have passed the Proprietary Trader (Series 56) 
qualification examination and who have registered as a Proprietary 
Trader (PT) in WebCRD on or before the effective date of the proposed 
rule change, 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 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 associated person last registered as a 
Proprietary Trader (PT) and the effective date. After the effective 
date, an associated person would need to pass the new Series 57 
Securities Trader qualification examination and register as a 
Securities Trader (TD).
    In addition, 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 new .08 of Supplementary Material to Rule 
313) 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 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 associated person last registered 
as a Proprietary Trader Principal (TP) and the date they register as a 
Securities Trader Principal (TP).\9\ After the effective date, a 
Securities Trader Principal (TP) 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 new .08 of 
Supplementary Material to Rule 313) and be registered as such in order 
to register as a Securities Trader Principal (TP).\10\
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    \9\ See Rule 313(e) (Requirement for Examination on Lapse of 
Registration).
    \10\ As part of codifying this rule, the Exchange will include 
text .08 of Supplementary Material to Rule 313 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 members as described in paragraph (a)(2) of .08 of Supplementary 
Material to Rule 313, and the activities of officers, partners, and 
directors of members.
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Continuing Education Requirements
    Persons registered in the new category would be subject to the 
continuing education requirements of Rule 604 Continuing Education for 
Registered Persons. The Exchange proposes to amend Rule 604 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 permitted to enroll in the S101 General 
Program for Series 7 and all other registered persons.
Delivery of Regulatory Element
    The Exchange further proposes to provide for Web-based delivery of 
the Continuing Education Regulatory Element for registered persons. As 
proposed, Rule 604 would specify that the Continuing Education 
Regulatory Element set forth in the rule will be administered through 
Web-based delivery or such other technological manner and format as 
specified by the Exchange from and after January 4, 2016. Most 
registered persons currently complete the Regulatory Element in a test 
center and the remainder do so in-house. Given the advances in Web-
based technology, the Exchange believes that there is diminishing 
utility in the test center and in-house Continuing Education delivery 
methods. The Exchange notes that the Web-based format will include 
safeguards to authenticate the identity of the Continuing Education 
Candidate. Moreover, according to FINRA, registered persons have raised 
concerns with the current test center delivery

[[Page 1248]]

method because of the travel involved, the limited time currently 
available to complete a Regulatory Element session, and the use of 
rigorous security measures at test centers, which are appropriate for 
taking qualification examinations, but onerous for a Continuing 
Education program.\11\ Also, according to FINRA, the test center is 
expensive to operate.\12\
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    \11\ See supra, note 1.
    \12\ Id.
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2. Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \13\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \14\ 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.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange further believes its proposed rule change is 
consistent with Section 6(c) of the Act,\15\ and in particular furthers 
the objectives of Section 6(c)(3) of the Act,\16\ which authorizes the 
Exchange to prescribe standards of training, experience, and competence 
for associated persons. The Exchange believes that the requirements of 
the Securities Trader and Securities Trader Principal registration 
categories, the new Securities Trader qualification and continuing 
education requirement, as well as Web-based delivery of the continuing 
education requirement, 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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    \15\ 15 U.S.C. 78f(c).
    \16\ 15 U.S.C. 78f(c)(3).
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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 ISE'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 associated persons and enhance the ability of the 
Exchange to fairly and efficiently regulate associated persons, 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. Finally, the proposed rule change does not impose any 
additional examination burdens on persons who are already registered. 
There is no obligation to take the proposed Series 57 examination in 
order to continue in their present duties, so the proposed rule change 
is not expected to disadvantage current registered persons relative to 
new entrants in this regard.

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 
this proposed rule change. The Exchange has not received any 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 significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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 \17\ and Rule 19b-
4(f)(6) thereunder.\18\ The Exchange provided the Commission with 
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 the proposed rule 
change, or such shorter time as designated by the Commission, as 
required by Rule 19b-4(f)(6).
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
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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 Commission believes that waiving the thirty day delay is 
consistent with the protection of investors and the public interest, as 
it will enable the Exchange 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.\19\
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    \19\ 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 such 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 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 No. SR-ISE-2015-44 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-ISE-2015-44. 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 Commissions 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. Copies of such filing

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also will be available for inspection and copying at the principal 
office of the ISE. 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-
2015-44 and should be submitted by February 1, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-00248 Filed 1-8-16; 8:45 am]
 BILLING CODE 8011-01-P