81 FR 51513 - Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt the Securities Trader Registration Category and the Series 57 Securities Trader Examination Registration Requirement
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 150 (August 4, 2016)
Federal Register Volume 81, Issue 150 (August 4, 2016)
| Page Range | 51513-51517 | |
| FR Document | 2016-18472 |
[Federal Register Volume 81, Number 150 (Thursday, August 4, 2016)] [Notices] [Pages 51513-51517] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-18472] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78445; File No. SR-CHX-2016-11] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt the Securities Trader Registration Category and the Series 57 Securities Trader Examination Registration Requirement July 29, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given that on July 20, 2016, the Chicago Stock Exchange, Inc. (``CHX'' 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 the Exchange. 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\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CHX proposes to amend the Rules of the Exchange (``CHX Rules'') to adopt the Securities Trader registration [[Page 51514]] category and the Series 57 Securities Trader Examination registration requirement. CHX has designated this proposed rule change as non-controversial pursuant to Section 19(b)(3)(A) \3\ of the Act and Rule 19b-4(f)(6) \4\ thereunder and has provided the Commission with the notice required by Rule 19b-4(f)(6)(iii).\5\ --------------------------------------------------------------------------- \3\ 15 U.S.C. 78s(b)(3)(A). \4\ 17 CFR 240.19b-4(f)(6). \5\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- The text of this proposed rule change is available on the Exchange's Web site at (www.chx.com) and in 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 CHX included statements concerning the purpose of and basis for the proposed rule changes 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 CHX 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 various provisions under Article 6 to adopt the Securities Trader registration category and the Series 57 Securities Trader Examination registration requirement and to eliminate references to the Proprietary Trader registration category and the Series 56 Proprietary Trader Examination registration requirement. The Series 56 exam was discontinued by FINRA on January 4, 2016.\6\ Thus, the Exchange proposes the following amendments, as discussed in further detail below: --------------------------------------------------------------------------- \6\ See Securities Exchange Act Release No. 75783 (August 28, 2015), 80 FR 53369 (September 3, 2015) (Order Approving a Proposed Rule Change To Establish the Securities Trader and Securities Trader Principal Registration Categories) (SR-FINRA-2015-017). ---------------------------------------------------------------------------Amend Rule 3(a) and Rule 3(d) to replace references to the Proprietary Trader registration category and the Series 56 exam with the Securities Trader registration category and the Series 57 exam, respectively. Amend Article 6, Rule 3(a) to require any Representative \7\ that engages in securities trading activities, on either an agency or principal basis, for the Participant with which the Representative is associated, to register with the Exchange as a Securities Trader and to pass the Series 57 exam. The Series 7 General Securities Representative Examination will not be an acceptable qualification examination to register as a Securities Trader. --------------------------------------------------------------------------- \7\ CHX Article 6, Rule 2(b) defines ``Representatives'' as follows: Persons associated with a Participant who are engaged or will be engaged in the securities business of a Participant, or the management of such securities business, including the functions of supervision, solicitation, conduct of business or the training of persons associated with a Participant for any of these functions are Representatives. A ``Participant'' is a ``member'' of the Exchange for purposes of the Act. See CHX Article 1, Rule 1(s). --------------------------------------------------------------------------- Amend Article 6, Rule 3(b)(1) to modify the current Proprietary Trader Exception, which permits Chief Compliance Officers of Participants that engage solely in proprietary trading to maintain the Series 14, in lieu of the Series 24, as an expanded Securities Trading Exception for Participants that engage solely in securities trading activities, on either an agency or principal basis. Amend Article 6, Rule 2(c)(2) to replace the Limited Principal--Proprietary Trader registration category with the Securities Trader Principal registration category and update related requirements. Amend Article 6, Rule 11 to delete references to the S501 Series 56 Proprietary Trader Program for Series 56 registered persons and the Series 56 exam and, instead, require Securities Traders to take the S101 General Program to fulfill Regulatory Element requirements.\8\ --------------------------------------------------------------------------- \8\ Pursuant to CHX Article 6, Rule 11(a), each registered person shall complete the Regulatory Element of the continuing education program on the occurrence of their second registration anniversary date(s), and every three years thereafter or as otherwise prescribed by the Exchange. On each occasion, the Regulatory Element must be completed within 120 days after the person's registration anniversary date. A person's initial registration date, also known as the ``base date,'' shall establish the cycle of anniversary dates for purposes of this rule. --------------------------------------------------------------------------- This filing is similar to SR-FINRA-2015-017,\9\ which has been approved by the Commission. --------------------------------------------------------------------------- \9\ See supra note 6. --------------------------------------------------------------------------- Proposed Representative Registration Requirements Current CHX Rules provide that Representatives are required to be registered with the Exchange in the category of registration appropriate to the function to be performed.\10\ As CHX Rules have not yet been updated to reflect the new Securities Trader registration category and the Series 57 exam registration requirement, CHX Rules currently require the following: --------------------------------------------------------------------------- \10\ See current CHX Article 6, Rule 2(a). --------------------------------------------------------------------------- A Representative must register with the Exchange as a General Securities Representative (Series 7) or Proprietary Trader (Series 56) \11\ before such registration is effective.\12\ --------------------------------------------------------------------------- \11\ The Series 56 exam was discontinued on January 4, 2016. See supra note 6. \12\ See current CHX Article 6, Rule 3(a). --------------------------------------------------------------------------- Each Representative is required to register as a General Securities Representative and pass the Series 7 General Securities Representative Examination; provided that in the event a Representative's activities are confined to making trading decisions regarding, or otherwise engaging in, proprietary trading for the broker-dealer with which he or she is associated, the Representative may register as a Proprietary Trader without registering as a General Securities Representative.\13\ --------------------------------------------------------------------------- \13\ See id. --------------------------------------------------------------------------- In order to qualify as a Proprietary Trader, a Representative must pass either the Series 7 exam or Series 56 exam.\14\ --------------------------------------------------------------------------- \14\ See id.; see also Securities Exchange Act Release No. 70597 (October 2, 2013), 78 FR 62728 (October 22, 2013) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Registration, Qualification, Supervision, and Continuing Education of Individuals Associated with Participant Firms) (SR-CHX-2013-14). --------------------------------------------------------------------------- The Exchange now proposes to amend current Article 6, Rule 3(a). Specifically, the Exchange proposes to amend paragraph (a)(1) to provide that each Representative shall be required to register with the Exchange as a General Securities Representative and pass the Series 7 General Securities Representative Examination. However, a Representative that is engaged in securities trading activities, on either an agency or principal basis, for the Participant with which the Representative is associated, must register with the Exchange as a Securities Trader and pass the Series 57 Securities Trader Examination, subject to amended paragraph (a)(2). Amended paragraph (a)(2) \15\ provides that a Representative that is engaged solely in securities trading activities, on either an agency or principal basis, for the Participant with which the Representative is associated, shall not be required to register with the [[Page 51515]] Exchange as a General Securities Representative. Moreover, a Representative registered with the Exchange solely as a Securities Trader will not be qualified to function in any other registration category. --------------------------------------------------------------------------- \15\ The Exchange proposes to delete current Article 6, Rule 3(a)(2) in its entirety as it defines the Proprietary Trader registration category, which will be eliminated pursuant to this proposed rule change. --------------------------------------------------------------------------- Current Article 6, Rule 3(d) provides, among other things, that Institutional Broker Representatives \16\ at Participant Firms that do not hold customer accounts and that only execute orders from other brokers or dealers or engage in proprietary trading only may, in the alternative to passing the Series 7, pass the Series 56 Proprietary Trader Exam. The Exchange now proposes to replace all references under current Article 6, Rule 3(d) to the ``Series 56'' with the ``Series 57.'' The Exchange also proposes to replace the reference to the ``Proprietary Trader Exam'' with the ``Securities Trader Exam'' and the reference to the ``Proprietary Trader Exception'' under current Article 6, Rule 3(b)(1) with the proposed ``Securities Trading Exception'' under amended Article 6, Rule 3(b)(1), as described below. In addition, the Exchange proposes to capitalize the term ``Customer,'' as it is defined under CHX Rules.\17\ Moreover, the Exchange proposes to amend the third sentence under Rule 3(d) to provide that Institutional Broker Representatives at Participant Firms that do not carry Customers accounts and that only execute orders from other brokers or dealers or engage in proprietary trading must pass the Series 57 Securities Trader Exam. --------------------------------------------------------------------------- \16\ See CHX Article 1, Rule 1(gg) defining ``Institutional Broker Representative.'' \17\ See CHX Article [sic], Rule 1(hh) defining ``Customer.'' --------------------------------------------------------------------------- The Exchange also proposes to delete current Article 6, Rule 3(e) as it provides obsolete compliance dates.\18\ --------------------------------------------------------------------------- \18\ See supra note 14. --------------------------------------------------------------------------- Proposed Securities Trading Exception for Certain Chief Compliance Officers Current Article 6, Rule 3(b)(1) permits the Chief Compliance Officer of a Participant Firm to maintain the Series 14 Compliance Official qualification, in lieu of the Series 24 General Securities Principal qualification, if the Participant Firm engages solely in proprietary trading and otherwise meets the requirements listed under current Article 6, Rule 3(b) and Article 6, Rule 2(c)(1).\19\ The Exchange now proposes to conform the exception to apply to firms that engage solely in securities trading activities, on either an agency or principal basis. Thus, the Exchange proposes to amend Article 6, Rule 3(b) by replacing the term ``Proprietary Trading'' with the phrase ``securities trading activities, on either an agency or principal basis'' and rename the exception as the ``Securities Trading Exception.'' --------------------------------------------------------------------------- \19\ CHX Article 6, Rule 2(c)(1) provides as follows: Definition of Principals. Persons associated with a Participant, enumerated in subparagraphs (A) through (E) hereafter, who are actively engaged in the management of the Participants' securities business, including supervision, solicitation, conduct of business or the training of persons associated with a member for any of these functions are designated as Principals. Such persons shall include: (A) Sole Proprietors; (B) Officers; (C) Partners; (D) Branch office managers; and (E) Directors. --------------------------------------------------------------------------- Proposed Securities Trader Principal Current Article 6, Rule 2(c)(2) provides for a limited principal registration category called the ``Limited Principal--Proprietary Trader.'' Specifically, current subparagraph (A) provides that each person associated with a Participant who is included within the definition of a Principal \20\ may register with the Exchange as a Limited Principal--Proprietary Trader if: (i) His or her supervisory responsibilities in the securities business are limited solely to the activities of a Participant that involve proprietary trading; (ii) he or she is registered pursuant to Exchange Rules as a Proprietary Trader; and (iii) he or she is qualified to be so registered by passing the Series 24 examination. Current subparagraph (B) provides that a person registered in this category shall not be qualified to function in a Principal capacity with responsibility over any area of business activity not described in paragraph (c)(2)(A)(i) of this Rule. --------------------------------------------------------------------------- \20\ See id. --------------------------------------------------------------------------- The Exchange now proposes to amend Article 6, Rule 2(c)(2)(A) to provide that each Principal shall register with the Exchange as a Securities Trader Principal if such Principal supervises the securities trading activities of a Participant. Moreover, a Principal is required to pass the Series 57 exam as a prerequisite to registration as a Securities Trader Principal.\21\ --------------------------------------------------------------------------- \21\ All Principals are required to pass the Series 24 or Series 14 exam, as applicable, pursuant to current Article 6, Rule 3(b). --------------------------------------------------------------------------- The Exchange also proposes to amend Article 6, Rule 2(c)(2)(B) to provide that a person registered as a Securities Trader Principal shall only be qualified to supervise the securities trading activities of a Participant and shall not be qualified to supervise any other activities of a Participant. Moreover, a Principal shall not be qualified to supervise the trading activities of a Participant, unless such person is registered as a Securities Trader Principal. The Exchange also proposes to amend Article 6, Rule 2(c) to provide that all persons engaged or to be engaged in the securities business of a Participant who are to function as a Principal shall be registered with the Exchange as a General Securities Principal, unless the Principal meets the requirements under this Rule 2(c), so as to contemplate the proposed Securities Trader Principal registration requirement. Moreover, for the purpose of clarifying the examination requirements for all Principals, the Exchange proposes to amend the last sentence of current Rule 2(c) to provide that each Principal shall pass the Series 24 or Series 14 exam, as applicable, pursuant to Article 6, Rule 3(b).\22\ --------------------------------------------------------------------------- \22\ See id. --------------------------------------------------------------------------- Proposed Continuing Education Requirements Current Article 6, Rule 11 provides continuing education requirements for registered persons, including Proprietary Traders. The Exchange now proposes to amend Article 6, Rule 11(a)(3) to eliminate reference to the S501 Series 56 Proprietary Trader continuing education program for Series 56 registered persons, as the S501 Series 56 Proprietary Trader continuing education program was phased out along with the Series 56 exam on January 4, 2016.\23\ The Exchange now proposes to require Series 57 registered persons to take the S101 General Program to fulfill the Regulatory Element requirement. Thus, the Exchange proposes to replace current Article 6, Rule 11(a)(3) with new language that provides that the following sets forth the Regulatory Element appropriate for each registration category: --------------------------------------------------------------------------- \23\ See supra note 6. ------------------------------------------------------------------------ Catergory of registration Regulatory element ------------------------------------------------------------------------ General Securities Representative......... S101 General Program. Securities Trader......................... S101 General Program. General Securities Principal.............. S201 Supervisor Program. Securities Trader Principal............... S201 Supervisor Program. Financial and Operations Principal........ S201 Supervisor Program. ------------------------------------------------------------------------ The Exchange also proposes to replace a reference to ``Series 56'' with ``Series 57'' under the first sentence of [[Page 51516]] Article 6, Rule 11(b)(1), which describes persons subject to the Firm Element continuing education requirement. 2. Statutory Basis The Exchange believes that proposed rule change is consistent with Section 6(b) of the Act \24\ in general and Section 6(b)(5) of the Act \25\ in particular, 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, and, in general, protect investors and the public interest. Additionally, the Exchange believes that the proposed rule change is consistent with the Section 6(b)(5) requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78f(b). \25\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- In particular, the Exchange believes that adoption of the Securities Trader registration category and Series 57 exam registration requirement is consistent with the Act. FINRA indicated that the Series 57 exam was being developed in an effort to adopt a more tailored examination. The Exchange believes that adopting the Series 57 exam for Representatives engaging in trading activities will 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 adopt a tailored qualification examination for proprietary traders and that a 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 based upon and substantially similar to recent rule changes adopted by FINRA, which is similar to the filings of 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. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing 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 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) \26\ of the Act and Rule 19b- 4(f)(6) thereunder.\27\ --------------------------------------------------------------------------- \26\ 15 U.S.C. 78s(b)(3)(A). \27\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the Commission 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 satisfied this requirement. --------------------------------------------------------------------------- A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act \28\ normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii) \29\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative upon filing. According to the Exchange, the Series 57 exam has already replaced the Series 56 exam, which was discontinued by FINRA as of January 4, 2016, and the waiver of the operative delay would permit new Representatives to register with the Exchange under registration standards similar to those of FINRA and other national securities exchanges.\30\ Based on the foregoing, the Commission believes the waiver of the operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposal operative upon filing.\31\ --------------------------------------------------------------------------- \28\ 17 CFR 240.19b-4(f)(6). \29\ 17 CFR 240.19b-4(f)(6)(iii). \30\ See supra note 6. \31\ For purposes only of waiving the 30-day operative delay, the Commission has also 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 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 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-CHX-2016-11 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 No. SR-CHX-2016-11. 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 [[Page 51517]] 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 CHX. 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-CHX-2016-11 and should be submitted on or before August 25, 2016. --------------------------------------------------------------------------- \32\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\32\ Robert W. Errett, Deputy Secretary. [FR Doc. 2016-18472 Filed 8-3-16; 8:45 am] BILLING CODE 8011-01-P
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be issued unless the Commission orders continuous and comprehensive fairly intended by the policy and
a hearing. Interested persons may investment management services subject provisions of the Act. Applicants
request a hearing by writing to the to the supervision of, and policies believe that the requested relief meets
Commission’s Secretary and serving established by, each Subabvised SP this standard because, as further
applicants with a copy of the request, Series’ board of trustees (‘‘Board’’). The explained in the Application, the
personally or by mail. Hearing requests Investment Management Agreement Investment Management Agreements
should be received by the Commission permits the Adviser, subject to the will remain subject to shareholder
by 5:30 p.m. on August 22, 2016, and approval of the Board, to delegate to one approval, while the role of the Sub-
should be accompanied by proof of or more sub-advisers (each, a ‘‘Sub- Advisers is substantially similar to that
service on the applicants, in the form of Adviser’’ and collectively, the ‘‘Sub- of individual portfolio managers, so that
an affidavit or, for lawyers, a certificate Advisers’’) the responsibility to provide requiring shareholder approval of Sub-
of service. Pursuant to Rule 0–5 under the day-to-day portfolio investment Advisory Agreements would impose
the Act, hearing requests should state management of each Subabvised SP unnecessary delays and expenses on the
the nature of the writer’s interest, any Series, subject to the supervision and Subadvised SP Series. Applicants
facts bearing upon the desirability of a direction of the Adviser. The primary believe that the requested relief from the
hearing on the matter, the reason for the responsibility for managing the Disclosure Requirements meets this
request, and the issues contested. Subabvised SP Series will remain vested standard because it will improve the
Persons who wish to be notified of a in the Adviser. The Adviser will hire, Adviser’s ability to negotiate fees paid
hearing may request notification by evaluate, allocate assets to and oversee to the Sub-Advisers that are more
writing to the Commission’s Secretary. the Sub-Advisers, including advantageous for the Subadvised SP
ADDRESSES: Secretary, U.S. Securities determining whether a Sub-Adviser Series.
and Exchange Commission, 100 F Street should be terminated, at all times For the Commission, by the Division of
NE., Washington, DC 20549–1090. subject to the authority of the Board. Investment Management, under delegated
Applicants: Trust: c/o John K. Carter, 2. Applicants request an exemption to authority.
Esq., Law Office of John K. Carter, 9455 permit the Adviser, subject to Board Robert W. Errett,
approval, to hire certain Sub-Advisers Deputy Secretary.
Koger Blvd., Suite 102, St. Petersburg,
pursuant to Sub-Advisory Agreements
Florida 33702 and Adviser: Patrick [FR Doc. 2016–18466 Filed 8–3–16; 8:45 am]
and materially amend existing Sub-
Reinkemeyer, President, SilverPepper BILLING CODE 8011–01–P
Advisory Agreements without obtaining
LLC, 570 Oakwood Avenue, Lake
the shareholder approval required under
Forest, Illinois 60045.
Section 15(a) of the Act and Rule SECURITIES AND EXCHANGE
FOR FURTHER INFORMATION CONTACT: 18f–2 under the Act.2 Applicants also
Emerson Davis, Senior Counsel, at (202) COMMISSION
seek an exemption from the Disclosure
551–6868, or Daniele Marchesani, Requirements to permit a Subabvised SP [Release No. 34–78445; File No. SR–CHX–
Branch Chief, at (202) 551–6821 Series to disclose (as both a dollar 2016–11]
(Division of Investment Management, amount and a percentage of the
Chief Counsel’s Office). Self-Regulatory Organizations;
Subadvised SP Series’ net assets): (a)
SUPPLEMENTARY INFORMATION: The Chicago Stock Exchange, Inc.; Notice
The aggregate fees paid to the Adviser;
following is a summary of the of Filing and Immediate Effectiveness
and (b) the aggregate fees paid to Non-
application. The complete application of a Proposed Rule Change To Adopt
Affiliated Sub-Advisers; and (c) the fee
may be obtained via the Commission’s the Securities Trader Registration
paid to each Affiliated Sub-Adviser
Web site by searching for the file Category and the Series 57 Securities
(collectively, ‘‘Aggregate Fee
number, or an applicant using the Trader Examination Registration
Disclosure’’).
Company name box, at http:// 3. Applicants agree that any order Requirement
www.sec.gov/search/search.htm or by granting the requested relief will be July 29, 2016.
calling (202) 551–8090. subject to the terms and conditions Pursuant to Section 19(b)(1) of the
stated in the Application. Such terms Securities Exchange Act of 1934
Summary of the Application
and conditions provide for, among other (‘‘Act’’),1 and Rule 19b–4 2 thereunder,
1. The Adviser will serve as the safeguards, appropriate disclosure to notice is hereby given that on July 20,
investment adviser to the Subabvised SP Subadvised SP Series shareholders and 2016, the Chicago Stock Exchange, Inc.
Series pursuant to an investment notification about sub-advisory changes (‘‘CHX’’ or the ‘‘Exchange’’) filed with
advisory agreement with the Trust (the and enhanced Board oversight to protect the Securities and Exchange
‘‘Investment Management the interests of the Subadvised SP Commission (‘‘Commission’’) the
Agreement’’).1 The Adviser will provide Series’ shareholders. proposed rule change as described in
the Subabvised SP Series with 4. Section 6(c) of the Act provides that Items I and II below, which Items have
the Commission may exempt any been prepared by the Exchange. The
1 Applicants request relief with respect to any
person, security, or transaction or any Commission is publishing this notice to
existing and any future series of the Trust and any class or classes of persons, securities, or
other existing or future registered open-end solicit comments on the proposed rule
management company or series thereof that: (a) Is transactions from any provisions of the change from interested persons.
advised by the Adviser or its successor or by a Act, or any rule thereunder, if such
person controlling, controlled by, or under common relief is necessary or appropriate in the I. Self-Regulatory Organization’s
control with the Adviser or its successor (each, also Statement of the Terms of Substance of
sradovich on DSK3GMQ082PROD with NOTICES
public interest and consistent with the
an ‘‘Adviser’’); (b) uses the manager of managers the Proposed Rule Change
structure described in the application; and (c) protection of investors and purposes
complies with the terms and conditions of the CHX proposes to amend the Rules of
application (any such series, a ‘‘Subadvised SP 2 The requested relief will not extend to any sub-
the Exchange (‘‘CHX Rules’’) to adopt
Series’’ and collectively, the ‘‘Subadvised SP adviser that is an affiliated person, as defined in
Series’’). For purposes of the requested order, Section 2(a)(3) of the Act, of a Subadvised SP Series
the Securities Trader registration
‘‘successor’’ is limited to an entity that results from or the Adviser, other than by reason of serving as
1 15 U.S.C. 78s(b)(1).
a reorganization into another jurisdiction or a a sub-adviser to one or more of the Subadvised SP
change in the type of business organization. Series (‘‘Affiliated Sub-Adviser’’). 2 17 CFR 240.19b–4.
VerDate Sep<11>2014 18:12 Aug 03, 2016 Jkt 238001 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 E:\FR\FM\04AUN1.SGM 04AUN1](https://thefederalregister.org/doc/81_FR_51663/page/1.svg)
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Exchange as a General Securities conform the exception to apply to firms supervise the trading activities of a
Representative. Moreover, a that engage solely in securities trading Participant, unless such person is
Representative registered with the activities, on either an agency or registered as a Securities Trader
Exchange solely as a Securities Trader principal basis. Thus, the Exchange Principal.
will not be qualified to function in any proposes to amend Article 6, Rule 3(b) The Exchange also proposes to amend
other registration category. by replacing the term ‘‘Proprietary Article 6, Rule 2(c) to provide that all
Current Article 6, Rule 3(d) provides, Trading’’ with the phrase ‘‘securities persons engaged or to be engaged in the
among other things, that Institutional trading activities, on either an agency or securities business of a Participant who
Broker Representatives 16 at Participant principal basis’’ and rename the are to function as a Principal shall be
Firms that do not hold customer exception as the ‘‘Securities Trading registered with the Exchange as a
accounts and that only execute orders Exception.’’ General Securities Principal, unless the
from other brokers or dealers or engage Principal meets the requirements under
in proprietary trading only may, in the Proposed Securities Trader Principal
this Rule 2(c), so as to contemplate the
alternative to passing the Series 7, pass Current Article 6, Rule 2(c)(2) proposed Securities Trader Principal
the Series 56 Proprietary Trader Exam. provides for a limited principal registration requirement. Moreover, for
The Exchange now proposes to replace registration category called the ‘‘Limited the purpose of clarifying the
all references under current Article 6, Principal—Proprietary Trader.’’ examination requirements for all
Rule 3(d) to the ‘‘Series 56’’ with the Specifically, current subparagraph (A) Principals, the Exchange proposes to
‘‘Series 57.’’ The Exchange also provides that each person associated amend the last sentence of current Rule
proposes to replace the reference to the with a Participant who is included 2(c) to provide that each Principal shall
‘‘Proprietary Trader Exam’’ with the within the definition of a Principal 20 pass the Series 24 or Series 14 exam, as
‘‘Securities Trader Exam’’ and the may register with the Exchange as a applicable, pursuant to Article 6, Rule
reference to the ‘‘Proprietary Trader Limited Principal—Proprietary Trader 3(b).22
Exception’’ under current Article 6, if: (i) His or her supervisory
Rule 3(b)(1) with the proposed responsibilities in the securities Proposed Continuing Education
‘‘Securities Trading Exception’’ under business are limited solely to the Requirements
amended Article 6, Rule 3(b)(1), as activities of a Participant that involve Current Article 6, Rule 11 provides
described below. In addition, the proprietary trading; (ii) he or she is continuing education requirements for
Exchange proposes to capitalize the registered pursuant to Exchange Rules registered persons, including
term ‘‘Customer,’’ as it is defined under as a Proprietary Trader; and (iii) he or Proprietary Traders. The Exchange now
CHX Rules.17 Moreover, the Exchange she is qualified to be so registered by proposes to amend Article 6, Rule
proposes to amend the third sentence passing the Series 24 examination. 11(a)(3) to eliminate reference to the
under Rule 3(d) to provide that Current subparagraph (B) provides that S501 Series 56 Proprietary Trader
Institutional Broker Representatives at a person registered in this category shall continuing education program for Series
Participant Firms that do not carry not be qualified to function in a 56 registered persons, as the S501 Series
Customers accounts and that only Principal capacity with responsibility 56 Proprietary Trader continuing
execute orders from other brokers or over any area of business activity not education program was phased out
dealers or engage in proprietary trading described in paragraph (c)(2)(A)(i) of along with the Series 56 exam on
must pass the Series 57 Securities this Rule. January 4, 2016.23 The Exchange now
Trader Exam. The Exchange now proposes to amend proposes to require Series 57 registered
The Exchange also proposes to delete Article 6, Rule 2(c)(2)(A) to provide that persons to take the S101 General
current Article 6, Rule 3(e) as it each Principal shall register with the Program to fulfill the Regulatory
provides obsolete compliance dates.18 Exchange as a Securities Trader Element requirement. Thus, the
Proposed Securities Trading Exception Principal if such Principal supervises Exchange proposes to replace current
for Certain Chief Compliance Officers the securities trading activities of a Article 6, Rule 11(a)(3) with new
Participant. Moreover, a Principal is language that provides that the
Current Article 6, Rule 3(b)(1) permits required to pass the Series 57 exam as following sets forth the Regulatory
the Chief Compliance Officer of a a prerequisite to registration as a Element appropriate for each
Participant Firm to maintain the Series Securities Trader Principal.21 registration category:
14 Compliance Official qualification, in The Exchange also proposes to amend
lieu of the Series 24 General Securities Article 6, Rule 2(c)(2)(B) to provide that Catergory of
Principal qualification, if the Participant Regulatory element
a person registered as a Securities registration
Firm engages solely in proprietary Trader Principal shall only be qualified
trading and otherwise meets the to supervise the securities trading General Securities S101 General Pro-
requirements listed under current activities of a Participant and shall not Representative. gram.
Article 6, Rule 3(b) and Article 6, Rule Securities Trader ....... S101 General Pro-
be qualified to supervise any other gram.
2(c)(1).19 The Exchange now proposes to activities of a Participant. Moreover, a General Securities S201 Supervisor
Principal shall not be qualified to Principal. Program.
16 See CHX Article 1, Rule 1(gg) defining
‘‘Institutional Broker Representative.’’ Securities Trader S201 Supervisor
17 See CHX Article [sic], Rule 1(hh) defining are designated as Principals. Such persons shall Principal. Program.
include: Financial and Oper- S201 Supervisor
‘‘Customer.’’
sradovich on DSK3GMQ082PROD with NOTICES
18 See supra note 14. (A) Sole Proprietors; ations Principal. Program.
19 CHX Article 6, Rule 2(c)(1) provides as follows: (B) Officers;
(C) Partners; The Exchange also proposes to
Definition of Principals. Persons associated with
(D) Branch office managers; and
a Participant, enumerated in subparagraphs (A) replace a reference to ‘‘Series 56’’ with
through (E) hereafter, who are actively engaged in (E) Directors.
20 See id. ‘‘Series 57’’ under the first sentence of
the management of the Participants’ securities
business, including supervision, solicitation, 21 All Principals are required to pass the Series 24
22 See id.
conduct of business or the training of persons or Series 14 exam, as applicable, pursuant to
associated with a member for any of these functions current Article 6, Rule 3(b). 23 See supra note 6.
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![Federal Register / Vol. 81, No. 150 / Thursday, August 4, 2016 / Notices 51517
Commission and any person, other than 19(b)(2) of the Act,4 the Commission The Exchange has made the following
those that may be withheld from the designated a longer period within which representations and statements in
public in accordance with the to approve the proposed rule change, describing the Fund and its investment
provisions of 5 U.S.C. 552, will be disapprove the proposed rule change, or strategy, including the Fund’s portfolio
available for Web site viewing and institute proceedings to determine holdings and investment restrictions.10
printing in the Commission’s Public whether to disapprove the proposed A. Exchange’s Description of the Fund’s
Reference Room, 100 F Street NE., rule change.5 The Commission received Principal Investments
Washington, DC 20549 on official no comments on the proposed rule
business days between the hours of change. This order grants approval of The investment objective of the Fund
10:00 a.m. and 3:00 p.m. Copies of the the proposed rule change. will be to generate high current income.
filing also will be available for Under normal market conditions,11 the
II. Exchange’s Description of the Fund will seek to achieve its investment
inspection and copying at the principal
Proposal objective by investing at least 80% of its
office of the CHX. All comments
received will be posted without change; The Exchange proposes to list and net assets (including investment
the Commission does not edit personal trade the Shares under Nasdaq Rule borrowings) in the exchange-traded
identifying information from 5735, which governs the listing and common shares of U.S. exchange-traded
submissions. You should submit only trading of Managed Fund Shares on the mortgage real estate investment trusts
information that you wish to make Exchange. The Fund will be an actively- (‘‘mortgage REITs’’). In general terms, a
available publicly. All submissions managed exchange-traded fund (‘‘ETF’’). mortgage REIT makes loans to
should refer to File No. SR–CHX–2016– The Shares will be offered by the Trust, developers and owners of property and
11 and should be submitted on or before which was established as a invests primarily in mortgages and
August 25, 2016. Massachusetts business trust on similar real estate interests, and
February 22, 2016.6 The Fund will be a includes companies or trusts that are
For the Commission, by the Division of primarily engaged in the purchasing or
Trading and Markets, pursuant to delegated series of the Trust.
authority.32 First Trust Advisors L.P. will be the servicing of commercial or residential
investment adviser (‘‘Adviser’’) to the mortgage loans or mortgage-related
Robert W. Errett,
Fund. First Trust Portfolios L.P. securities, which may include mortgage-
Deputy Secretary. backed securities issued by private
[FR Doc. 2016–18472 Filed 8–3–16; 8:45 am] (‘‘Distributor’’) will be the principal
underwriter and distributor of the issuers and those issued or guaranteed
BILLING CODE 8011–01–P by U.S. Government agencies,
Fund’s Shares. The Bank of New York
instrumentalities, or sponsored entities.
Mellon Corporation will act as the
The Fund intends to qualify each year
SECURITIES AND EXCHANGE administrator, accounting agent, as a regulated investment company
COMMISSION custodian, and transfer agent to the under Subchapter M of the Internal
Fund. The Exchange states that the Revenue Code of 1986, as amended.
[Release No. 34–78443; File No. SR– Adviser is not a broker-dealer, but it is
NASDAQ–2016–064] B. Exchange’s Description of the Fund’s
affiliated with the Distributor, a broker-
dealer.7 The Exchange represents that Other Investments
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order the Adviser has implemented a fire wall The Fund may invest (in the
Granting Approval of Proposed Rule with respect to its broker-dealer affiliate aggregate) up to 20% of its net assets in
Change Relating to the Listing and regarding access to information
Trading of the Shares of the First Trust concerning the composition of, and 10 The Commission notes that additional
Strategic Mortgage REIT ETF of First changes to, the portfolio.8 According to information regarding the Fund, the Trust, and the
the Exchange, the Fund currently does Shares, including investment strategies, risks,
Trust Exchange-Traded Fund VIII creation and redemption procedures, fees, portfolio
not intend to use a sub-advisor.9 holdings disclosure policies, calculation of net asset
July 29, 2016. value (‘‘NAV’’), distributions, and taxes, among
4 15 U.S.C. 78s(b)(2). other things, can be found in the Notice and the
I. Introduction 5 See Registration Statement, as applicable. See Notice
Securities Exchange Act Release No. 78078
On May 3, 2016, The NASDAQ Stock (Jun. 21, 2016), 81 FR 40377. and Registration Statement, supra notes 3 and 6,
respectively.
Market LLC (‘‘Exchange’’ or ‘‘Nasdaq’’) 6 The Exchange represents that the Trust is
11 The term ‘‘under normal market conditions’’ as
filed with the Securities and Exchange registered under the Investment Company Act of
used herein includes, but is not limited to, the
1940 (‘‘1940 Act’’). See Registration Statement on
Commission (‘‘Commission’’), pursuant Form N–1A for the Trust dated March 14, 2016 (File
absence of adverse market, economic, political or
to Section 19(b)(1) of the Securities other conditions, including extreme volatility or
Nos. 333–210186 and 811–23147) (‘‘Registration
trading halts in the securities markets or the
Exchange Act of 1934 (‘‘Act’’ or Statement’’). The Exchange further states that the
financial markets generally; operational issues
‘‘Exchange Act’’) 1 and Rule 19b–4 Trust has obtained certain exemptive relief under
causing dissemination of inaccurate market
the 1940 Act. See Investment Company Act Release
thereunder,2 a proposed rule change to No. 28468 (October 27, 2008) (File No. 812–13477).
information; or force majeure type events such as
list and trade shares (‘‘Shares’’) of the 7 See Notice, supra note 3, 81 FR at 29591.
systems failure, natural or man-made disaster, act
of God, armed conflict, act of terrorism, riot or labor
First Trust Strategic Mortgage REIT ETF 8 See id. The Exchange further represents that, in
disruption or any similar intervening circumstance.
(‘‘Fund’’) of First Trust Exchange- the event (a) the Adviser or any sub-adviser On a temporary basis, including for defensive
Traded Fund VIII (‘‘Trust’’) under registers as a broker-dealer, or becomes newly purposes, during the initial invest-up period and
affiliated with a broker-dealer, or (b) any new during periods of high cash inflows or outflows, the
NASDAQ Rule 5735. The proposed rule adviser or sub-adviser registers is a registered Fund may depart from its principal investment
change was published for comment in broker-dealer or becomes affiliated with another strategies; for example, it may hold a higher than
sradovich on DSK3GMQ082PROD with NOTICES
the Federal Register on May 12, 2016.3 broker-dealer, it will implement a fire wall with normal proportion of its assets in cash. According
On June 15, 2016, pursuant to Section respect to its relevant personnel and such broker- to the Exchange, during such periods, the Fund may
dealer affiliate, as applicable, regarding access to not be able to achieve its investment objective. The
information concerning the composition of, and Fund may adopt a defensive strategy when the
32 17 CFR 200.30–3(a)(12). changes to, the portfolio, and will be subject to Adviser believes securities in which the Fund
1 15 U.S.C. 78s(b)(1). procedures designed to prevent the use and normally invests have elevated risks due to political
2 17 CFR 240.19b–4. dissemination of material, non-public information or economic factors and in other extraordinary
3 See Securities Exchange Act Release No. 77781 regarding such portfolio. circumstances. See Notice, supra note 3, 81 FR at
(May 6, 2016), 81 FR 29590 (‘‘Notice’’). 9 See id. 29591 n.8.
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Document Created: 2016-08-04 02:53:19
Document Modified: 2016-08-04 02:53:19
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 51513 |
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