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Thursday, December 13, 2007

Equity Regulatory Alert #2007 - 111
SEC Approves New Membership Application Process for Proprietary Trading Firms

Please Route To: Head Traders; Technical Contacts; Compliance Officers

What you need to know:

  • On Thursday, December 6, 2007, the Securities and Exchange Commission (SEC) approved modifications to NASDAQ’s membership process.
  • The new rules contain a streamlined membership application process for proprietary trading firms.
  • The new rules eliminate the requirement that traders for proprietary trading firms must register as equity traders. These traders will no longer be required to take the Series 55 examination.
  • NASDAQ has issued a revised application form.

Who you should contact: NASDAQ Market Sales at 800.846.0477

What is changing?
On Thursday, December 6, 2007, the SEC approved modifications to NASDAQ’s membership process. The new procedures tailor NASDAQ’s membership application process to “proprietary trading firms”, which are defined as an applicant:

  • That is not required to become a member of FINRA but is a member of another exchange.
  • Whose source of funds used for trading is the applicant’s own capital, traded through the applicant’s own accounts.
  • That does not and will not have “customers” and whose principals and representatives who are acting as traders must be owners of, employees of or contractors to the applicant.

The new procedures reduce the amount of information that must be submitted in an application for membership. The new rules eliminate the requirement that traders for proprietary trading firms must register as equity traders — as a result, these traders will no longer be required to take the Series 55 examination. The rules also provide that a proprietary trading firm with 25 or fewer registered representatives is required to have only one, rather than two, registered principals.

NASDAQ® has issued a revised application form and soon will issue guidance for submitting the items of information required, including an updated Written Supervisory Procedures Checklist and Frequently Asked Membership Questions.

Where can I get additional information?


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