
[Federal Register Volume 80, Number 250 (Wednesday, December 30, 2015)]
[Notices]
[Pages 81645-81648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32825]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76758; File No. SR-BATS-2015-118]


Self-Regulatory Organizations; BATS 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 Exchange, Inc. (the ``Exchange'' or 
``BATS'') 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 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

[[Page 81646]]

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.
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

[[Page 81647]]

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 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 BATS 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 rule-comments@sec.gov. Please include 
File No. SR-BATS-2015-118 on the subject line.

[[Page 81648]]

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-BATS-2015-118. 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-BATS-2015-118 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. 2015-32825 Filed 12-29-15; 8:45 am]
BILLING CODE 8011-01-P


