[Federal Register Volume 83, Number 195 (Tuesday, October 9, 2018)]
[Notices]
[Pages 50705-50708]
[FR Doc No: 2018-21787]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84338; File No. SR-BOX-2018-32]

Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend Rules
Relating to Registration and Qualification Examinations Required for
Participants That Engage in Trading Activities on the Exchange

October 2, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 27, 2018, BOX Exchange LLC (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 self-regulatory organization. The Commission is
publishing this notice to solicit comments on the proposed rule 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 its rules relating to registration
and respective qualification examinations required for Participants
that engage in trading activities on the Exchange. The text of the
proposed rule change is available from the principal office of the
Exchange, at the Commission's Public Reference Room and also on the
Exchange's internet website at http://boxoptions.com.

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

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
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 SEC recently approved a proposed rule change to restructure the
FINRA representative-level qualification examination program.\3\ The
rule change, which will become effective on October 1, 2018,
restructures the examination program into a more efficient format
whereby all new representative-level applicants will be required to
take a general knowledge examination (the Securities Industry
Essentials Examination (``SIE'')) and a tailored, specialized knowledge
examination (a revised representative-level qualification examination)
for their particular registered role. Individuals are not required to
be associated with an Exchange or any other self-regulatory
organization (``SRO'') member to be eligible to take the SIE. However,
passing the SIE alone will not qualify an individual for registration
with the

Exchange. To be eligible for registration, an individual must also be
associated with a firm, pass an appropriate qualification examination
for a representative or principal and satisfy the other requirements
relating to the registration process.
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    \3\ See Securities Exchange Act Release No. 81098 (July 7,
2017), 82 FR 32419 (July 13, 2017) (Order Approving File No. SR-
FINRA-2017-007).
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    The SIE would assess basic product knowledge; the structure and
function of the securities industry markets, regulatory agencies and
their functions; and regulated and prohibited practices. In particular,
the SIE will cover four major areas. The first, ``Knowledge of Capital
Markets,'' focuses on topics such as types of markets and offerings,
broker-dealers and depositories, and economic cycles. The second,
``Understanding Products and Their Risks,'' covers securities products
at a high level as well as associated investment risks. The third,
``Understanding Trading, Customer Accounts and Prohibited Activities,''
focuses on accounts, orders, settlement and prohibited activities. The
final area, ``Overview of the Regulatory Framework,'' encompasses
topics such as SROs, registration requirements and specified conduct
rules. It's anticipated that the SIE would include 75 scored questions
plus an additional 10 unscored pretest questions. The passing score
would be determined through methodologies compliant with testing
industry standards used to develop examinations and set passing
standards.
    The restructured program eliminates duplicative testing of general
securities knowledge on the current representative-level qualification
examinations by moving such content into the SIE. The SIE will test
fundamental securities related knowledge, including knowledge of basic
products, the structure and function of the securities industry, the
regulatory agencies and their functions and regulated and prohibited
practices, whereas the revised representative-level qualification
examinations will test knowledge relevant to day-to-day activities,
responsibilities and job functions of representatives. The SIE was
developed in consultation with a committee of industry representatives
and representatives of several other SROs. Each of the current
representative-level examinations covers general securities knowledge,
with the exception of the Research Analyst (Series 86 and 87)
examinations.
    The Exchange proposes to require that effective October 1, 2018,
new applicants seeking to register in a representative capacity with
the Exchange must pass the SIE before their registrations can become
effective. The Exchange proposes to make the requirement operative on
October 1, 2018 to coincide with the effective date of FINRA's
requirement.
    The Exchange notes that individuals who are registered as of
October 1, 2018 are eligible to maintain their registrations without
being subject to any additional requirements. Individuals who had been
registered within the past two years prior to October 1, 2018, would
also be eligible to maintain those registrations without being subject
to any additional requirements, provided they register within two years
from the date of their last registration. However, with respect to an
individual who is not registered on the effective date of the proposed
rule change but was registered within the past two years prior to the
effective date of the proposed rule change, the individual's SIE status
in the CRD system would be administratively terminated if such
individual does not register with the Exchange within four years from
the date of the individual's last registration. The Exchange also notes
that consistent with IM-2040-2, the Exchange will consider waivers of
the SIE alone or the SIE and the representative or principal-level
examination(s) for Participants who are seeking registration in a
representative-or principal-level registration category.\4\
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    \4\ Pursuant to a Regulatory Services Agreement between FINRA
and BOX, FINRA provides BOX certain exam waiver services in
responding to exam waiver requests from BOX Participants.
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    Lastly, the Exchange proposes to eliminate references in its rules
to alternative foreign examination modules. Particularly, the Exchange
notes that FINRA recently announced it was eliminating the United
Kingdom Securities Representative and the Canadian Securities
Representative registration categories, along with the respective
associated exams (i.e., Series 17, Series 37 and Series 38).\5\ FINRA
also stated that it intended to provide individuals who are associated
persons of firms and who hold foreign registrations an alternative,
more flexible, process to obtain an Exchange representative-level
registration.\6\ The Exchange believes that there is sufficient overlap
between the SIE and foreign qualification requirements to permit them
to act as exemptions to the SIE. As such, the Exchange proposes to
provide that individuals who are in good standing as representatives
with the Financial Conduct Authority in the United Kingdom or with a
Canadian stock exchange or securities regulator would be exempt from
the requirement to pass the SIE, and thus would be required only to
pass a specialized knowledge examination to register with the Exchange
as a representative. The proposed approach would provide individuals
with a United Kingdom or Canadian qualification more flexibility to
obtain an Exchange representative-level registration. The Exchange
notes that FINRA has adopted a similar rule.\7\
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    \5\ See Securities Exchange Act Release No. 81098 (July 7,
2017), 82 FR 32419 (July 13, 2017) (Order Approving File No. SR-
FINRA-2017-007).
    \6\ Id.
    \7\ See Securities Exchange Act Release No. 81098 (July 7,
2017), 82 FR 32419 (July 13, 2017) (Order Approving File No. SR-
FINRA-2017-007).
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    The Exchange also proposes to remove the last sentence from Rule
2020(b)(1) and also remove Rule 2020(b)(3) and Rule 2020(c)(5) in their
entirety. The Exchange is making these changes in order to conform to
FINRA's rules regarding registration requirements.
    The Exchange proposes to make a non-substantive conforming changes
to the term ``Form U-4'' and ``Form U-5'' throughout the BOX Rulebook.
Specifically, BOX proposes to change the term ``Form U-4'' to ``Form
U4'' and ``Form U-5'' to ``Form U5'' in order to conform to both the
BOX Rules and FINRA rules.\8\ Lastly, the Exchange is proposing to
amend BOX Rule 2020(d)(1) regarding Principal Status. Currently, the
rule states that a representative whose duties are changed as to
require registration as a Principal shall be allowed a period of 90
calendar days following such change to pass the appropriate
qualification examination. The Exchange proposes to change the number
of calendar days from 90 to 120 in order to conform to FINRA's rules.
Similarly, the Exchange proposes to change the number of calendar days
from 90 to 120 in Rule 2020(d)(2) as well.
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    \8\ See FINRA Rule 1010(c).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ 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) \11\ requirement that the rules
of an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
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    The Exchange believes that the proposed rule change will improve
the efficiency of the Exchange's examination requirements, without
compromising the qualification standards, by eliminating duplicative
testing of general securities knowledge on examinations. FINRA has
indicated that the SIE was developed in an effort to adopt an
examination that would assess basic product knowledge; the structure
and function of the securities industry markets, regulatory agencies
and their functions; and regulated and prohibited practices. The
Exchange also notes that the introduction of the SIE and expansion of
the pool of individuals who are eligible to take the SIE, has the
potential of enhancing the pool of prospective securities industry
professionals by introducing them to securities laws, rules and
regulations and appropriate conduct before they join the industry in a
registered capacity. Lastly, the Exchange notes adopting the SIE
requirement is consistent with the requirement recently adopted by
FINRA.\12\
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    \12\ See Securities Exchange Act Release No. 81098 (July 7,
2017), 82 FR 32419 (July 13, 2017) (Order Approving File No. SR-
FINRA-2017-007).
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    The Exchange believes that the changes to the term ``Form U4'' and
``Form U5'' are reasonable as the changes will conform to FINRA's rules
and reduce investor confusion. The Exchange also believes that removing
and amending certain language from Rule 2020(b)(1), Rule 2020(b)(3),
Rule 2020(c)(5) and Rule 2020(d)(1) is reasonable as the changes
conform to FINRA's rules regarding registration requirements and will
reduce investor confusion.

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, which harmonizes its rules with 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 has neither solicited nor received 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: (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) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days from the date of filing. However, Rule
19b-4(f)(6)(iii) \14\ 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 on
October 1, 2018 to coincide with the effective date of FINRA's proposed
rule change on which the proposal is based.\15\ The waiver of the
operative delay would make the Exchange's qualification requirements
consistent with those of FINRA, as of October 1, 2018. Therefore, the
Commission believes that the waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest and
hereby waives the 30-day operative delay and designates the proposal
operative on October 1, 2018.\16\
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ See supra note 3.
    \16\ 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).
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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 necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-BOX-2018-32 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-BOX-2018-32. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit

personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BOX-2018-32 and should be
submitted on or before October 30, 2018.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-21787 Filed 10-5-18; 8:45 am]
 BILLING CODE 8011-01-P