80 FR 71873 - Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Qualification and Registration of Permit Holders

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 221 (November 17, 2015)

[Federal Register Volume 80, Number 221 (Tuesday, November 17, 2015)]
[Notices]
[Pages 71873-71876]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-29224]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76408; File No. SR-C2-2015-027]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to Qualification and Registration of Permit Holders

November 10, 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 November 2, 2015, C2 Options Exchange, Incorporated (the 
``Exchange'' or ``C2'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III below, which Items have been prepared by the 
Exchange. 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

    The Exchange proposes to amend Interpretation and Policy .07 to 
Rule 3.4 (Qualification and Registration) regarding the categories of 
registration and respective qualification examinations required for 
individual Permit Holder [sic] and associated persons of Permit Holders 
that engage in the securities activities of the Permit Holder on the 
Exchange. Specifically, the Exchange proposes to replace the 
Proprietary Trader registration category and the Series 56 Proprietary 
Trader registration qualification examination for Proprietary Traders 
with the Securities Trader category of registration and the Series 57 
Securities Trader registration qualification examination for Securities 
Traders respectively. The text of the proposed rule change is available 
on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, 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 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 Interpretation and Policy .07 to 
Rule 3.4 (Qualification and Registration) to replace the Proprietary 
Trader (PT) registration category and qualification examination (Series 
56) with the 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 a Securities Trader Principal (TP) registration category 
for individual TPHs or associated person [sic] 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 
Permit Holder, as described in paragraph (a)(2) of Interpretation and 
Policy .07 to Rule 3.4. The Exchange also proposes to replace the 
Proprietary Trader Compliance Officer (CT) registration category with 
the Securities Trader Compliance Officer (CT) registration category for 
Chief Compliance Officers (or individuals performing similar functions) 
of a TPH or TPH organization. This filing is, in all material respects, 
based upon SR-FINRA-2015-017, which was recently approved by the 
Securities and Exchange Commission (``SEC'' or ``Commission'').\3\
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    \3\ See Securities Exchange Act Release No. 75783 (August 28, 
2015) (Order Approving a Proposed Rule Change To Establish the 
Securities Trader and Securities Trader Principal Registration 
Categories) (SR-FINRA-2015-017).
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    Rule 3.4 sets forth various qualification and registration 
requirements that individual Permit Holders and associated persons must 
satisfy in order to transact business on the Exchange. Among the 
qualification and registration requirements set forth in Rule 3.4, 
Interpretation and Policy .07 provides that individual Permit Holders 
and associated persons that engage in proprietary trading, market-
making, or effect transactions on behalf of a broker-dealer must 
register and qualify as a Proprietary Trader (TP) in WebCRD.\4\ To 
qualify as a Proprietary

[[Page 71874]]

Trader, individual Permit Holders and associated persons must either 
pass the Series 56 Proprietary Trader qualification examination \5\ or 
Series 7 General Securities Representative qualification 
examination.\6\ Several exchanges, including C2 currently use the 
Series 56 examination as a qualification standard.\7\
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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 
individuals. 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 individuals 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 Interpretation and Policy .08 to Rule 3.6A.
    \7\ 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). See also Interpretation and 
Policy .07 to Rule 3.4.
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    Interpretation and Policy .07 to Rule 3.4 further requires that 
individual Permit Holders and associated persons with supervisory 
responsibility over proprietary trading activities or who is [sic] an 
officer, partner, or director of a Permit Holder or Permit Holder 
organization qualify and register as a Proprietary Trader Principal. 
Specifically, under paragraph (a)(2) of Interpretation and Policy .07 
to Rule 3.4, an individual Permit Holder or associated person who 
either: (i) Supervises or monitors proprietary trading, market-making 
and/or brokerage activities for broker-dealers; (ii) supervises or 
trains 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) is an officer, partner or director of a 
Permit Holder is required 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 Examination or an acceptable 
alternative qualification examination.\8\ An individual Permit Holder 
or associated person who is a Chief Compliance Officer (or performs 
similar functions) for a Permit Holder 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.\9\
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    \8\ Under current Interpretation and Policy .07 to Rule 3.4, the 
Series 9/10 General Securities Sales Supervisor Examination and 
Series 23 General Securities Principal Exam--Sales Supervisor Module 
are acceptable alternative qualification examinations to the Series 
24 General Securities Principal Examination. Because the Series 23 
is not available in WebCRD, however, each applicant that chooses to 
take the Series 23 module as an alternative to the Series 24 
qualification examination must provide documentation of a valid 
Series 23 license to the Registration Services Department upon 
request for proof of licensure.
    \9\ Under current Interpretation and Policy .07 to Rule 3.4, the 
Series 24 General Securities Principal Examination is considered an 
acceptable alternative qualification examination for the Series 14 
Compliance Official Examination and registered General Securities 
Principals may register as Proprietary Trader Compliance Officers 
subject to applicable provisions under the Rules. See Interpretation 
and Policy .07(b) to Rule 3.4.
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    The Exchange proposes to replace the Series 56 qualification 
examination with the Series 57 qualification examination for those 
registration categories where the Series 56 is currently an acceptable 
qualification standard.\10\ Specifically, with respect to the 
Proprietary Trader registration categories identified in Interpretation 
and Policy .07 to Rule 3.4, the Exchange proposes to replace the 
Proprietary Trader (PT) registration category with the 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.\11\ 
The Proprietary Trader Principal (PT) and Proprietary Trader Compliance 
Officer (CT) registration categories would be replaced with the renamed 
registration categories of Securities Trader Principal (PT) and 
Securities Trader Compliance Officer respectively (CT).\12\
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    \10\ See Interpretation and Policy .07 to Rule 3.4.
    \11\ Neither the Exchange's current Rules nor the proposed rule 
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 proposed rule would require that 
individual Permit Holders and associated persons that engage in 
proprietary trading, market-making, or effect transactions on behalf 
of a broker-dealer to [sic] qualify and register as a [sic] 
Proprietary Trader (or Securities Trader) in WebCRD. Whereas the 
current rule allows individual Permit Holders and associated persons 
to qualify and register as a [sic] Proprietary Trader by either 
passing the Series 56 Proprietary Trader qualification examination 
or Series 7 General Securities Representative qualification 
examination, the proposed rule would require individual Permit 
Holders and associated persons to pass the Series 57 Securities 
Trader qualification examination in order to qualify as a [sic] 
Securities Trader after the effective date of the proposed rule 
change.
    \12\ As is the case under the current Rules, under the proposed 
rule, only individuals qualified and registered as a [sic] 
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, 
individual Permit Holders and associated persons who have passed the 
Proprietary Trader (Series 56) qualification examination and who have 
registered as Proprietary Trader [sic] (PT) in WebCRD on or before the 
effective date of the proposed rule change and individual Permit 
Holders 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 individual TPH's or 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 individual Permit Holder or 
associated person last registered as a Proprietary Trader (PT) and the 
effective date. After the effective date, an individual Permit Holder 
or associated person would need to pass the new Series 57 Securities 
Trader qualification examination and register as a Securities Trader 
(TD).
    In addition, individual Permit Holders and 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

[[Page 71875]]

as defined in current Interpretation and Policy .07(b) to Rule 3.4) 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 individual Permit Holders or 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 individual Permit Holder or associated person last registered as a 
Proprietary Trader Principal (TP) and the date they [sic] register as a 
Securities Trader Principal (TP).\13\ 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 current 
Interpretation and Policy .07(b) to Rule 3.4) and be registered as such 
in order to register as a Securities Trader Principal (TP).\14\
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    \13\ See Rule 3.4(e) (Requirement for Examination on Lapse of 
Registration).
    \14\ The Exchange also proposes to add text to Interpretation 
and Policy .07(b) to Rule 3.4 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 Permit Holders as 
described in paragraph (a)(2) of Interpretation and Policy .07 to 
Rule 3.4, and the activities of officers, partners, and directors of 
Permit Holders.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\15\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \16\ requirements that the rules 
of an exchange 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 regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \17\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ Id.
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    In particular, the Exchange believes that adoption of the 
Securities Trader registration category and Series 57 Securities Trader 
qualification examination registration requirement is consistent with 
the Act. FINRA has indicated that the Series 57 qualification 
examination is being developed in an effort to adopt a more tailored 
examination. The Exchange believes that a more tailored qualification 
examination for individual Permit Holders and associated persons 
engaged in trading activities is a measure designed to help ensure 
professionalism among market participants, prevent fraudulent and 
manipulative practices, and promote just and equitable principles of 
trade. The Exchange also believes that it is in the interests of 
investors and the general public to develop a more tailored 
qualification examination for proprietary traders and that a more 
uniform qualification standard may help ensure fair and orderly 
markets. Furthermore, the Exchange believes that it is in the interests 
of all market participants to provide consistent qualification and 
registration requirements across markets. The Exchange believes that 
harmonizing the Exchange's qualification and registration requirements 
with those of FINRA and the other national securities exchanges would 
further such interests.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
the proposed rule change relating to Securities Traders, which is, in 
all material respects, based upon and substantially similar to, recent 
rule changes adopted by FINRA and which is being filed in conjunction 
with similar filings by the other national securities exchanges, will 
reduce the regulatory burden placed on market participants engaged in 
trading activities across different markets. The Exchange believes that 
the harmonization of these registration requirements across the various 
markets will reduce burdens on competition by removing impediments to 
participation in the national market system and promoting competition 
among participants across the multiple national securities exchanges.

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

    The Exchange 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. 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 \18\ and 
Rule 19b-4(f)(6) \19\ thereunder. 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 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 will institute proceedings to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6).
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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 Number SR-C2-2015-027 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-C2-2015-027. This file 
number should be included on the

[[Page 71876]]

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 
the filing also will 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-C2-2015-027 and should be submitted on or before 
December 8, 2015.

    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. 2015-29224 Filed 11-16-15; 8:45 am]
 BILLING CODE 8011-01-P