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Friday, June 28, 2019

Options Regulatory Alert #2019 - 16
Relocation of GEMX and MRX Rules

Category:

  • Regulatory

Markets Impacted:

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Nasdaq GEMX and Nasdaq MRX recently filed rule changes with the Securities and Exchange Commission to relocate its rules into a new Rulebook Structure. For ease of reference in locating the rules of these markets, below is a guide.

General 2Current Rule Number
Section 1Rule 204. Divisions of the Exchange
Section 2 (all 4 rules combined)

Rule 205. Participant Fees

Section 3Rule 207. Exchange's Costs of Defending Legal Proceedings
Section 4Rule 309. Limitation on Affiliation between the Exchange and Members
General 3Current Rule Number
Section 1Rules 300. Membership and 301. Qualification of Members
Section 2Rule 303. Denial of and Conditions to Becoming a Member
Section 3Rule 305. Persons Associated with Members
Section 4Rule 307. Documents Required of Applicants and Members
Section 5Rule 302. Member Application Procedures
Section 6Rule 308. Dissolution and Liquidation of Members
General 5Current Rule Number
Section 1Rule 16. Disciplinary Jurisdiction
Section 2Rule 80. Investigations and Sanctions
Section 3Rule 90. Code of Procedure
Options 2Current Rule Number
Section 1Rule 800. Registration of Market Makers
Section 2Rule 801. Designated Trading Representatives
Section 3Rule 802. Appointment of Market Makers
Section 4Rule 803. Obligations of Market Makers
Section 5Rule 804. Market Maker Quotations except 804(h) which will be relocated into Options 3
Section 6Rule 805. Market Maker Orders
Section 7Rule 807. Securities Accounts and Orders of Market Makers
Section 8Rule 809. Financial Requirements for Market Makers
Options 2AProposed Rule Number
Section 1Rule 304. Approval to Operate Multiple Memberships
Options 3Current Rule Number
Section 1Rule 700. Days and Hours of Business
Section 2Rule 708. Units of Trading/Rule 709. Meaning of Premium Quotes and Orders (combined into one rule)
Section 3Rule 710. Minimum Trading Increments
Section 4Rule 711. Acceptance of Quotes and Orders, except (c) and (d)
Section 5Reserved.
Section 6Rule 704. Collection and Dissemination of Quotations
Section 7Rule 715. Types of Orders
Section 8Rule 701. Opening
Section 9Rule 702. Trading Halts/Rule 703. Trading Halts Due To Extraordinary Market Volatility
Section 10Rule 713. Priority of Quotes and Orders
Section 11Rule 716. Auction Mechanisms
Section 12Rule 721. Crossing Orders
Section 13Rule 723. Price Improvement Mechanism for Crossing Transactions
Section 14Rule 722. Complex Orders (MRX only)
Section 15Rule 714. Automatic Execution of Orders
Section 16Rule 724. Complex Order Risk Protections (MRX only)
Section 17Kill Switch (relocating 711(c))
Section 18Detection of Loss of Communication (relocating 711(d))
Section 19Reserved.
Section 20Rule 720. Nullification and Adjustment of Options Transactions including Obvious Errors/Rule 720A. Erroneous Trades due to System Disruptions and Malfunctions (combined into one rule)
Section 21Rule 706. Access to and Conduct on the Exchange
Section 22Rule 717. Limitations on Orders
Section 23Rule 718. Data Feeds and Trade Information
Section 24Rule 719. Transaction Price Binding
Section 25Reserved.
Section 26Message Traffic Mitigation (relocating Rule 804(h)
Section 27Rule 705. Limitation of Liability
Options 6Current Rule Number
Section 1Rule 707. Authorization Member Give Up
Section 2Rule 712. Submission of Orders and Clearance of Transactions
Section 3Rule 806. Trade Reporting and Comparison
Section 4Rule 808. Letters of Guarantee
Options 6ACurrent Rule Number
Section 1Rule 1000. Contracts of Suspended Members
Section 2Rule 1001. Failure to Pay Premium
Options 6BCurrent Rule Number
Section 1Rule 1100. Exercise of Options Contracts
Section 2Rule 1101. Allocation of Exercise Notices
Section 3Rule 1102. Delivery and Payment
Options 6CCurrent Rule Number
Section 1Rule 1200. General Rule
Section 2Rule 1201. Time Margin Must Be Obtained
Section 3Rule 1202. Margin Requirements
Section 4Rule 1203. Meeting Margin Calls by Liquidation Prohibited
Section 5Rule 1204. Margin Required Is Minimum
Section 6Rule 1205. Margin Requirements Exception
Options 6DCurrent Rule Number
Section 1Rule 1300. Minimum Requirements
Section 2Rule 1301. "Early Warning" Notification Requirements
Section 3Rule 1302. Power of President to Impose Restrictions
Section 4Rule 1303. Joint Back Office Arrangements
Options 6ECurrent Rule Number
Section 1Rule 1400. Maintenance, Retention and Furnishing of Books, Records and Other Information
Section 2Rule 1401. Reports of Uncovered Short Positions
Section 3Rule 1402. Financial Reports
Section 4Rule 1403. Audits
Section 5Rule 1404. Automated Submission of Trade Data
Section 6Rule 1405. Risk Analysis of Market Maker Accounts
Section 7Rule 1406. Regulatory Cooperation
Section 8Rule 1408. Fingerprint-Based Background Checks of Exchange Employees and Independent Contractors and Other Service Providers

  • Rule 212 titled “Sales Value Fee” will be relocated to Options 7, Section 12

Options 9Current Rule Number
Section 1Rule 400. Just and Equitable Principles of Trade
Section 2Rule 401. Adherence to Law
Section 3Rule 402. Sharing of Offices and Wire Connections
Section 4Rule 403. Disruptive Quoting and Trading Activity Prohibited
Section 5Rule 404. False Statements
Section 6Rule 405. Manipulation
Section 7Rule 406. Gratuities
Section 8Rule 407. Rumors
Section 9Rule 408. Prevention of the Misuse of Material Nonpublic Information
Section 10Rule 409. Disciplinary Action by Other Organizations
Section 11Rule 410. Other Restrictions on Members
Section 12Rule 411. Significant Business Transactions
Section 13Rule 412. Position Limits
Section 14Rule 413. Exemptions from Position Limits
Section 15Rule 414. Exercise Limits
Section 16Rule 415. Reports Related to Position Limits
Section 17Rule 416. Liquidation Positions
Section 18Rule 417. Limit on Outstanding Uncovered Short Positions
Section 19Rule 418. Other Restrictions on Options Transactions and Exercises
Section 20Rule 419. Mandatory Systems Testing
Section 21Rule 420. Anti-Money Laundering Compliance Program
Section 22Rule 421. Proxy Voting
Section 23Reserved.
Options 10Current Rule Number
Section 1Rule 600. Exchange Approval
Section 2Rule 601. Registration of Options Principals
Section 3Rule 602. Registration of Representatives
Section 4Rule 606. Discipline, Suspension, Expulsion of Registered Persons
Section 5Rule 607. Branch Offices
Section 6Rule 608. Opening of Accounts
Section 7Rule 609. Supervision of Accounts
Section 8Rule 610. Suitability of Recommendations
Section 9Rule 611. Discretionary Accounts
Section 10Rule 612. Confirmation to Customers
Section 11Rule 613. Statement of Accounts to Customers
Section 12Rule 614. Statements of Financial Condition to Customers
Section 13Rule 616. Delivery of Current Options Disclosure Documents and Prospectus
Section 14Rule 617. Restrictions on Pledge and Lending of Customers' Securities
Section 15Rule 618. Transactions of Certain Customers
Section 16Rule 619. Guarantees
Section 17Rule 620. Profit Sharing
Section 18Rule 621. Assuming Losses
Section 19Rule 622. Transfer of Accounts
Section 20Rule 623. Options Communications
Section 21Rule 624. Brokers' Blanket Bonds
Section 22Rule 625. Customer Complaints
Section 22Rule 626. Telemarketing

    Additionally, the following Chapters were relocated as indicated for both markets:

  • Chapter 4 Business Conduct will move to Options 9
  • Chapter 5 Securities Traded on the Exchange will move to Options 4
  • Chapter 6 Doing Business with the Public will move to Options 10
  • Chapter 7 Doing Business on the Exchange
  • Chapter 10 Closing Transactions will move to Options 6A
  • Chapter 11 Exercises and Delivery will move to Options 6B
  • Chapter 12 Margins will move to Options 6C
  • Chapter 13 Net Capital Requirements will move to Options 6D
  • Chapter 14 Records, Reports and Audits will move to Options 6E
  • Chapter 19 Intermarket Linkage will move to Options 5
  • Chapter 20 Index Rules will move to Options 4A
  • Chapter 16 will move in part to Options 11

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