
[Federal Register Volume 79, Number 179 (Tuesday, September 16, 2014)]
[Notices]
[Pages 55521-55523]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-22002]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73068; File No. SR-NYSEArca-2014-98]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Rule 2.23 To Specify the Registration and Examination Requirements for 
Persons Engaged in Supervisory Activities

September 10, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on August 28, 2014, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend NYSE Arca Rule 2.23 to specify the 
registration and examination requirements for a [sic] persons engaged 
in supervisory activities.\4\ The text of the proposed rule change is 
available on the Exchange's Web site at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------

    \4\ The Rules of NYSE Arca govern NYSE Arca Options. Rule 
changes proposed in this filing are not applicable to NYSE Arca 
Equities.
---------------------------------------------------------------------------

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 those 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 2.23 to specify the 
registration and examination requirements for a person engaged in 
supervisory activities as described in Rule 11.18--Supervision.
    Rule 2.23 prescribes the registration and qualification 
requirements for individuals performing certain duties on behalf of an 
OTP Holder or OTP Firm \5\, including traders and Proprietary Traders. 
A ``trader'' is a person who is directly or indirectly compensated by 
an OTP Holder or OTP Firm and who trades, makes trading decisions with 
respect to, or otherwise engages in the proprietary or agency trading 
of securities. The General Securities Registered Representative 
Examination, (``Series 7'') is the qualifying examination for 
registered traders. A Proprietary Trader, which is a limited 
registration category, is any person engaged in the purchase or sale of 
securities or other similar instruments for the account of an OTP 
Holder or OTP Firm with which he or she is associated, as an employee 
or otherwise, and who does not transact any business with the 
public.\6\ The Proprietary Traders Examination (``Series 56'') is the

[[Page 55522]]

qualifying examination for Proprietary Traders.\7\
---------------------------------------------------------------------------

    \5\ See Rule 1.1(p). The term ``OTP'' shall refer to an Options 
Trading Permit issued by the Exchange for effecting approved 
securities transactions on the Exchange's Trading Facilities
    \6\ The term ``Proprietary Trader'' does not include a person 
who is required to be registered as a Market Maker in accordance 
with Rule 6.33 or a Market Maker Authorized Trader in accordance 
with Rule 6.34A. See Rule 2.23(b)(2)(C).
    \7\ See Securities Exchange Act Release No. 66452 (February 23, 
2012), 77 FR 12347 (February 29, 2012) (SR-NYSEArca-2012-15). An 
individual may also register as a Proprietary Trader by passing the 
General Securities Registered Representative Examination (``Series 7 
Examination'') without passing the Series 56 Examination.
---------------------------------------------------------------------------

    The Exchange proposes to set out within Rule 2.23(b)(3) the ways a 
person engaged in supervisory activities as described in Rule 11.18--
Supervision may register with the Exchange on Web CRD.\8\ The first way 
to qualify is to register as a General Securities Principal. A General 
Securities Principal must complete (a) the General Securities Principal 
Qualification Examination (``Series 24'') and (b) the Series 7. The 
Exchange presently requires persons acting in a supervisory capacity to 
be registered as a General Securities Principal and pass the Series 24 
and Series 7. This filing serves to codify the existing registration 
and examination requirements and does not impart any new obligations on 
individuals registered as a General Securities Principal. The proposed 
second way to register and qualify as a supervisor would be as a 
Proprietary Trader Principal. A Proprietary Trader Principal must (a) 
complete the Series 24 and (b) be registered as a Proprietary Trader 
pursuant to Exchange Rules as described above.
---------------------------------------------------------------------------

    \8\ Web CRD is the central licensing and registration system for 
the U.S. securities industry and its regulators operated by the 
Financial Industry Regulatory Authority (``FINRA'').
---------------------------------------------------------------------------

    Registration in the category of Proprietary Trader Principal would 
be a limited principal registration and would not authorize an 
individual to supervise non-Proprietary Traders. Therefore, the 
Exchange also proposes to specify within Rule 2.23(b)(3) that a 
Proprietary Trader Principal would not be qualified to function in a 
Principal or supervisory capacity with responsibility over any area of 
business or any registered person conducting such a business, other 
than that involving proprietary trading.
    The proposed change is not otherwise intended to address any other 
issues and the Exchange is not aware of any problems that OTP Holders 
or OTP Firms or their registered persons would have in complying with 
the proposed change.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(c) of the 
Act,\9\ in general, and furthers the objectives of Section 6(c)(3) of 
the Act,\10\ in particular, which authorizes the Exchange to prescribe 
standards of training, experience, and competence for registered 
persons of OTP Holders and OTP Firms. The Exchange believes that the 
proposed examination requirements for a General Securities Principal 
and a Proprietary Trader Principal will help to ensure that a 
registered supervisor is competent to perform such supervisory 
functions and the registration requirements will result in a General 
Securities Principal and a Proprietary Trader Principal being subject 
to ongoing training requirements under the Exchange's rules.\11\ The 
Exchange also believes that the proposed rule change is reasonable 
because the Proprietary Trader Principal category is limited and 
tailored to persons supervising proprietary trading functions and 
because other markets already recognize Proprietary Trader Principal 
registration and related examination requirements.\12\ The Exchange 
also believes that it is reasonable to prescribe the Series 24 
Examination as the appropriate examination for both the General 
Securities Principal and the Proprietary Trader Principal because the 
Series 24 Examination tests knowledge and understanding of supervision-
related rules, including but not limited to rules governing sales 
practices, books and records, account suitability, trade review and 
trade reporting requirements.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(c).
    \10\ 15 U.S.C. 78f(c)(3).
    \11\ Rule 2.23(d) specifies the continuing education 
requirements for registered persons subsequent to their initial 
qualification and registration, which consist of a Regulatory 
Element and a Firm Element. The S201 Regulatory Element Program is 
required for registered Supervisors/Principals.
    \12\ See, e.g., Commentary .08 to Chicago Board Options Exchange 
(``CBOE'') Rule 3.6A and Securities Exchange Act Release No. 67000 
(May 16, 2012), 77 FR 30338 (May 22, 2012) (SR-CBOE-2012-039). See 
also NASDAQ OMX BX (``BX'') Rule 1022(h) and Securities Exchange Act 
Release No. 65056 (August 8, 2011), 76 FR 50279 (August 12, 2011) 
(SR-BX-2011-053).
---------------------------------------------------------------------------

    The Exchange also believes that the proposed rule change 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, 
because it is 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 mechanisms of, a free and open market and a national market 
system and, in general, to protect investors and the public interest 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Exchange believes that the 
proposed rule change accomplishes these objectives by enabling 
individuals to qualify for registration with the Exchange by passing a 
qualification examination that specifically addresses industry topics 
that establish the foundation for the regulatory and procedural 
knowledge necessary for such persons electing to register as General 
Securities Principal or Proprietary Trader Principal.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\15\ 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. Specifically, the Exchange does not believe 
that registration requirements for a General Securities Principal or a 
Proprietary Trader Principal registration will affect intermarket 
competition because other markets have adopted similar rules requiring 
registration and examination requirements for registered persons 
engaged in supervisory activities.\16\ In addition, the Exchange does 
not believe that the proposed rule change will affect intramarket 
competition because all similarly situated registered persons of OTP 
Holders and OTP Firms, e.g., registered persons maintaining the same 
categories of registration, are required to complete the same 
qualification examinations and maintain the same registrations.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b)(8).
    \16\ See supra note 12.
---------------------------------------------------------------------------

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 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 prior to 
30 days from the date on which it was filed, or such shorter

[[Page 55523]]

time as the Commission may designate, if consistent with the protection 
of investors and the public interest, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act \17\ and 
Rule 19b-4(f)(6)(iii) thereunder.\18\
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
---------------------------------------------------------------------------

    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative upon filing. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest, as 
this proposed rule change will make NYSE Arca's rules consistent with 
those of the other markets which already have the Proprietary Trader 
Principal category of registration and its qualification requirements. 
Waiver of the operative delay would also allow the Exchange to 
implement the proposed rule change without delay, enabling associated 
persons of OTP Holders and OTP Firms who are engaged in supervisory 
activities to comply with the registration, examination and continuing 
education requirements associated with the Proprietary Trader Principal 
registration category in a timely manner, and thus is consistent with 
the protection of investors and the public interest.\19\ Therefore, the 
Commission designates the proposal operative upon filing.\20\
---------------------------------------------------------------------------

    \19\ The Commission notes that, with respect to the General 
Securities Principal registration category, NYSE Arca states that it 
is codifying an existing requirement.
    \20\ For purposes only 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).
---------------------------------------------------------------------------

    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 under 
Section 19(b)(2)(B) \21\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2014-98 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-NYSEArca-2014-98. 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 Number SR-NYSEArca-2014-98 and should 
be submitted on or before October 7, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-22002 Filed 9-15-14; 8:45 am]
BILLING CODE 8011-01-P


