An individual who processes transactions by communicating orders to the member’s clearing firm, which then calls or electronically communicates with the contra-side of the transaction, is not involved in the execution of transactions for purposes of Rule 1032(f) and thus is not required to be Series 55 registered.
September 25, 2001
David A. Genelly, Esq.
Vanasco Genelly & Miller
The Traders Building
401 South LaSalle Street
Chicago, IL 60605
Re: Series 55 Registration Requirement
Dear Mr. Genelly:
I am writing in response to our phone conversation, and your letter dated July 19, 2001. You have asked for guidance as to whether individuals who enter orders into a broker/dealer’s order routing system need to register as equity traders.
You represent an NASD member firm that trades securities on a proprietary basis. Your client’s employees electronically submit orders to one clearing firm for execution. Your client’s employees do not process or execute the orders and do not communicate with the contra-side of trades.
On April 1, 1998, NASD Regulation implemented amendments to NASD Registration Rules, creating Rule 1032(f). This new rule establishes the qualification requirements for representatives who trade equity securities in The Nasdaq Stock Market and/or over-the-counter markets. Rule 1032(f) established the Series 55 registration category and qualification examination for equity traders. The Rule requires a representative to register as a "Limited Representative-Equity Trader" if the representative is engaged in proprietary trading or in the execution of transactions on an agency basis in equity, preferred, or convertible debt securities. The registration requirement also applies to persons who directly supervise those who are engaged in such activities.
In the Regulatory & Compliance Alert (Fall 1999), NASD Regulation explained that a person who processes transactions by communicating orders to the member’s clearing firm, which then calls or electronically communicates with the contra-side of the transaction, is not required to register under Series 55. The person is not involved in the execution of transactions. Rather, he or she is acting as an order processor. Based on the facts that you have described, the staff of NASD Regulation’s Office of General Counsel does not believe that the activities of your client’s employees trigger the equity trader registration requirements.
I hope this letter is responsive to your inquiry. Please note that the opinions expressed in this letter are staff opinions only and have not been reviewed or endorsed by the Board of Directors of NASD Regulation. This letter responds only to the issues you have raised based on the facts as you have described them, and does not necessarily address any other rule or interpretation of the NASD or all the possible regulatory and legal issues involved.
Very truly yours,
Eric J. Moss
Associate General Counsel
|cc:||Carlotta A. Romano, Senior Vice President and District Director
NASD Regulation, Inc., District 8