
[Federal Register Volume 76, Number 121 (Thursday, June 23, 2011)]
[Notices]
[Pages 36945-36947]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15670]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64699; File No. SR-CBOE-2011-056]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Adopt the Selection Specifications and Content Outline 
for the Proprietary Traders Examination Program (Series 56)

June 17, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on June 16, 
2011, Chicago Board Options Exchange, Incorporated (``CBOE'' or the 
``Exchange'') 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 CBOE. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (the ``Act''),\1\ the Exchange is filing with the 
Commission the content outline and selection specifications for the 
Proprietary Traders Qualification Examination (``Series 56'') program. 
CBOE is not proposing any textual changes to the Rules of CBOE. The 
text of the proposed rule change is available on the Exchange's Web 
site (http://www.cboe.org/legal), at the Exchange's Office of the 
Secretary and at the Commission.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, CBOE 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. CBOE 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, Proposed Rule Change

1. Purpose
    Pursuant to Rule 15b7-1,\2\ promulgated under the Exchange Act,\3\ 
``No registered broker or dealer shall effect any transaction in * * * 
any security unless any natural person associated with such broker or 
dealer who effects or is involved in effecting such transaction is 
registered or approved in accordance with the standards of training, 
experience, competence, and other qualification standards * * * 
established by the rules of any national securities exchange * * *'' 
CBOE Rule 3.6A sets forth the requirements for registration and 
qualification of individual Trading Permit Holders and individual 
associated persons. Specifically, CBOE Rule 3.6A provides that 
individual Trading Permit Holders and individual associated persons 
that are ``engaged or to be engaged in the securities business of a 
Trading Permit Holder or TPH organization shall be registered with the 
Exchange in the category of registration appropriate to the function to 
be performed as prescribed by the Exchange.'' Further, Rule 3.6A 
requires, among other things, that an individual Trading Permit Holder 
or individual associated person submit an application for registration 
and pass the appropriate qualification examination before the 
registration can become effective.
---------------------------------------------------------------------------

    \2\ 17 C.F.R. [sic] 240.15b7-1.
    \3\ 15 U.S.C. 78a et seq.
---------------------------------------------------------------------------

    In accordance with Interpretation and Policy .06 to Rule 3.6A, 
those individuals shall be considered to be ``engaged in the securities 
business of a Trading Permit Holder or TPH organization'' and subject 
to the registration requirements and successful completion of Series 56 
if (i) the individual Trading Permit Holder or associated person 
conducts proprietary trading, acts as a market-maker, effects 
transactions on behalf of a broker-dealer account, supervises or 
monitors proprietary trading, market-making or brokerage activities on 
behalf of the broker-dealer, supervises or conducts training for those 
engaged in proprietary trading, market-making or brokerage activities 
on behalf of a broker-dealer account; or (ii) the individual Trading 
Permit Holder or associated person engages in the management of any 
individual Trading Permit Holder or individual associated person 
identified in (i) above as an officer, partner or director.\4\
---------------------------------------------------------------------------

    \4\ In accordance with Rule 3.6A, an individual Trading Permit 
Holder or individual associated person that is engaged in the 
supervision or monitoring of proprietary trading, market-making or 
brokerage activities and/or that is engaged in the supervision or 
training of those engaged in proprietary trading, market-making or 
brokerage activities with respect to those activities will be 
subject to heightened qualification requirements, as prescribed by 
the Exchange.
---------------------------------------------------------------------------

    The Series 56 examination tests a candidate's knowledge of 
proprietary trading generally and the industry rules applicable to 
trading of equity securities and listed options contracts. The Series 
56 examination covers, among other things, recordkeeping and recording 
requirements, types and characteristics of securities and investments, 
trading practices and display execution and trading systems. While the 
examination is primarily dedicated to topics related to proprietary 
trading, the Series 56 examination also covers a few general concepts 
relating to customers.\5\
---------------------------------------------------------------------------

    \5\ The Commission notes that proprietary trading firms do not 
have customers.
---------------------------------------------------------------------------

    The Series 56 examination program is shared by CBOE and the 
following Self-Regulatory Organizations (``SROs''): Boston Options 
Exchange; C2 Options Exchange, Incorporated; Chicago Stock Exchange, 
Incorporated; International Securities Exchange, LLC; NASDAQ OMX, BX; 
NASDAQ OMX, PHLX; NASDAQ Stock Market LLC; National Stock Exchange, 
Incorporated; New York Stock Exchange, LLC; NYSE AMEX, Incorporated; 
and NYSE ARCA, Incorporated.
    Upon request by the SROs referenced above, FINRA staff convened a 
committee of industry representatives, CBOE staff and staff from the 
other SROs referenced above, to develop the criteria for the Series 56 
examination program. As a result, CBOE is proposing to set forth the 
content of the examination. The qualification examination consists of 
100 multiple choice questions. Candidates will have 150 minutes to 
complete the exam. The content outline describes the following topical 
sections comprising the examination: Personnel, Business Conduct and 
Recordkeeping and Reporting Requirements, 9 questions; Markets, Market 
Participants, Exchanges, and Self Regulatory Organizations, 8 
questions; Types and Characteristics of Securities and Investments, 20 
questions; Trading Practices and Prohibited Acts, 50

[[Page 36946]]

questions; and Display, Execution and Trading Systems, 13 questions. 
Representatives from the applicable self-regulatory organizations shall 
meet on a periodic basis to evaluate and, as necessary, update, the 
Series 56 examination program.
    CBOE understands that the other applicable SROs will also file with 
the Commission similar filings regarding the Series 56 examination 
program. CBOE proposes to implement the Series 56 examination program 
upon availability in WebCRD. The Exchange shall announce all relevant 
dates with respect to the Series 56 examination program through a 
Regulatory Circular. The selection specifications for the Series 56 
examination, which CBOE has submitted under separate cover to the 
Commission with a request for confidential treatment pursuant to the 
Commission's confidential treatment procedures under the Freedom of 
Information Act,\6\ describe additional confidential information 
regarding the examination.
---------------------------------------------------------------------------

    \6\ 17 C.F.R. [sic] 200.83.
---------------------------------------------------------------------------

    As noted in Item 2 of this filing, CBOE is filing the proposed rule 
change for immediate effectiveness. CBOE will announce the 
implementation date of the proposed rule change in a Regulatory 
Circular. The implementation date of the proposed rule change will 
coincide with a new release of the WebCRD.\7\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 63314 (November 12, 
2010), 75 FR 70957 (November 19, 2010) (SR-CBOE-2010-084).
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\8\ in general, and furthers the objectives of Section 6(b)(1) \9\ 
of the Act in particular, in that it is designed to enforce compliance 
by Exchange members and persons associated with its members with the 
rules of the Exchange. The Exchange also believes the proposed rule 
change furthers the objectives of Section 6(c)(3) \10\ of the Act, 
which authorizes CBOE to prescribe standards of training, experience 
and competence for persons associated with CBOE members, in that this 
filing comprises the content outline and relevant specifications for 
the Series 56 examination program. CBOE believes the Series 56 
examination program establishes the appropriate qualifications for an 
individual Trading Permit Holder and individual associated person that 
is required to register as a Proprietary Trader under Exchange Rule 
3.6A, including, but not limited to, Market-Makers, proprietary traders 
and individuals effecting transactions on behalf of other broker-
dealers. The Series 56 addresses industry topics that establish the 
foundation for the regulatory and procedural knowledge necessary for 
individuals required to register as a Proprietary Trader. CBOE will 
continue to educate its Trading Permit Holders and nominees of 
requirements that are unique to CBOE through its Trading Permit Holder 
orientation program.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(1).
    \10\ 15 U.S.C. 78f(c)(3).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of purposes of the Act.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule 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 if consistent with the protection of 
investors and the public interest, provided that the self-regulatory 
organization has given 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 proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act\11\ and Rule 19b-
4(f)(6) thereunder.\12\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 C.F.R. [sic] 240.19b-4(f)(6).
---------------------------------------------------------------------------

    The Commission believes it is consistent with the protection of 
investors and the public interest to waive the 30-day operative delay. 
The Series 56 exam will be available as of June 20, 2011, so waiver of 
the 30-day operative delay will enable associated persons of CBOE firms 
to take the exam as soon as it becomes available. For these reasons, 
the Commission hereby waives the 30-day operative delay.\13\
---------------------------------------------------------------------------

    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    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.

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2011-056 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2011-056. This file 
number should be included on the subject line if e-mail 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 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and

[[Page 36947]]

copying at the principal office of CBOE. 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-2011-056 and should be submitted on 
or before July 14, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-15670 Filed 6-22-11; 8:45 am]
BILLING CODE 8011-01-P


