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Wednesday, December 11, 2019

Options Regulatory Alert #2019 - 28
Relocation of The Nasdaq Stock Market LLC Rules

Category:

  • Regulatory

Markets Impacted:

Contact Information:

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The Nasdaq Stock Market LLC recently filed a rule change to relocate its rules into a new Rulebook Structure. For ease of reference in locating the rules of this market, below is a guide.

General 1

Proposed New Rule NumberCurrent Rule Number
Section 1Rule 0111, “Adoption of Rules”, Rule 0112, “Effective Date”, Rule 0113 “Interpretation”, Rule 0120 “Definitions,” and certain definitions from Rule 0121, “Definitions in Nasdaq By-Laws” into General 1 as well as certain definitions from Chapter VI, Section 1

General 2

Proposed New Rule NumberCurrent Rule Number
Section 1Reserved
Section 2

Chapter VI, Section 16, Fees, Dues and Other Charges
Section 3

Reserved
Section 4

2130, Nasdaq Ownership Restriction (re-titled as Limitation on Affiliation between the Exchange and Members)
Section 5

0130, Regulation of the Exchange and Its Members
Section 6

0115, Applicability
Section 7

0150, Regulatory Independence
Section 8

Reserved
Section 9

1130, Reliance on Current Membership List
Section 10

1150, Executive Representative
Section 11

1160. Contact Information Requirements
Section 12

1170, Nasdaq’s Business Continuity and Disaster Recovery Plan Testing Requirements for Members and Options Participants Pursuant to Regulation SCI (re-titled as “Business Continuity and Disaster Recovery”)
Section 13

0140, Fingerprint-Based Background Checks of Employees and Independent Contractors
Section 14

2160, Restrictions on Affiliation
Section 15

3510, Business Continuity Plans
Section 16

3520, Emergency Contact Information

General 5

The Nasdaq Series 8000 and 9000 Rules are relocated within General 5.

General 9

Proposed New Rule NumberCurrent Rule Number
Section 1

2010A, Standards of Commercial Honor and Principles of Trade; 5320A, Prohibition Against Trading Ahead of Customer Orders; IM-2110-4, Trading Ahead of Research Reports; IM-2110-5, Anti-Intimidation/Coordination; IM-2110-6, Confirmation of Callable Common Stock; 2120, Use of Manipulative, Deceptive or Other Fraudulent Devices; and 2140, Interfering With the Transfer of Customer Accounts in the Context of Employment Disputes
Section 2

2150, Customers' Securities or Funds; and IM-2150, Segregation of Customers' Securities
Section 3

2210, Communications with the Public; IM-2210-1. Guidelines to Ensure That Communications With the Public Are Not Misleading; and IM-2210-4, Limitations on Use of the Exchange's Name
Section 4

2211, Institutional Sales Material and Correspondence
Section 5

2212, Telemarketing
Section 6

2251, Forwarding of Proxy and Other Issuer-Related Materials
Section 7

2261, Disclosure of Financial Condition; 2262, Disclosure of Control Relationship with Issuer; and 2269, Disclosure of Participation or Interest in Primary or Secondary Distribution (re-titled as “Disclosure of Financial Condition, Control Relationship with Issuer and Participation or Interest in Primary or Secondary Distribution”)
Section 8

2266, SIPC Information
Section 9

2290, Fairness Opinions
Section 10

2090A, Know Your Customer, 2111A. Suitability (re-title “Recommendations to Customers (Suitability)”)
Section 11

5310A, Best Execution and Interpositioning
Section 12

2340, Customer Account Statements
Section 13

2341, Margin Disclosure Statement
Section 14

2360, Approval Procedures for Day-Trading Accounts; and 2361, Day-Trading Risk Disclosure Statement (re-title as “Approval Procedures for Day-Trading Accounts”)
Section 15

2370, Borrowing From or Lending to Customers
Section 16

2430, Charges for Services Performed
Section 17

2441, Net Transactions with Customers

Section 18

2460, Payments for Market Making
Section 19

2510, Discretionary Accounts
Section 20

3010, Supervision; IM-3010-1, Standards for Reasonable Review; and IM-3010-2, Guidance on Heightened Supervision Requirements (re-title as “Supervision”)
Section 21

3012, Supervisory Control System
Section 22

3013, Annual Certification of Compliance and Supervisory Processes; and IM-3013. Annual Compliance and Supervision Certification (re-titled as “Annual Certification of Compliance and Supervisory Processes”)
Section 23

3030, Outside Business Activities of an Associated Person
Section 24

3040, Private Securities Transactions of an Associated Person
Section 25

3050, Transactions for or by Associated Persons
Section 26

3220A, Influencing or Rewarding Employees of Others

Section 27

3070, Reporting Requirements
Section 28

3080, Arbitration Disclosure to Associated Persons When Signing Form U4 (re-titled “Disclosure to Associated Persons When Signing Form U4”)
Section 29

2070A, Transactions Involving Nasdaq Employees

Section 30

3110A, Books and Records
Section 31

3120, Use of Information Obtained in Fiduciary Capacity
Section 32

3140, Approval of Change in Exempt Status Under SEC Rule 15c3-3
Section 33

3150, Reporting Requirements for Clearing Firms and IM-3150, Exemptive Relief
Section 34

3160, Extensions of Time Under Regulation T and SEC Rule 15c3-3
Section 35

2040, Nonregistered Foreign Finders
Section 36

IM-2460-1, Market Quality Program
Section 37

3011, Anti-Money Laundering Compliance Program
Section 38

2520, Margin Requirements
Section 39

3020, Fidelity Bonds
Section 40

4110A, Capital Compliance
Section 41

4120A, Regulatory Notification and Business Curtailment
Section 42

4140A, Audit
Section 43

4511A, General Requirements
Section 44

4513A, Records of Written Customer Complaints
Section 45

4512A, Customer Account Information
Section 46

4514A, Authorization Records for Negotiable Instruments Drawn From a Customer's Account
Section 47

4515A, Approval and Documentation of Changes in Account Name or Designation
Section 48

4521A, Notifications, Questionnaires and Reports
Section 49

5230A, Payments Involving Publications that Influence the Market Price of a Security
Section 50

1090, Foreign Member
Section 51

1050, Research Analysts

Equity Rules

Equity 1

Proposed New Rule NumberCurrent Rule Number
Section 1Rule 0121 “Definitions in the By-Laws of the Exchange” into Equity 1

Options Rules

Options 1

Proposed New Rule NumberCurrent Rule Number
Section 1Chapter I, Section 1, Definitions and Chapter VI, Section 1(a)-(c) and (h)
Section 2Chapter I, Section 2, Applicability
Section 3Chapter I, Section 3, Regulation of Nasdaq and its Members

Options 2

Proposed New Rule NumberCurrent Rule Number
Section 1Chapter VII, Section 2, Market Maker Registration; and Section 3 Continuing Market Maker Registration (re-titled as Registration of Market Makers)
Section 2Reserved
Section 3Reserved
Section 4Chapter VII, Section 5, Obligations of Market Makers
Section 5Chapter VII, Section 6, Market Maker Quotations
Section 6Reserved
Section 7Chapter VII, Section 7, Securities Accounts and Orders of Market Makers
Section 8Chapter VII, Section 9, Financial Requirements for Market Makers
Section 9Chapter VII, Section 4, Good Standing for Market Makers
Section 10Reserved

Options 2A

Proposed New Rule NumberCurrent Rule Number
Section 1Chapter II, Section 1, Options Participation
Section 2Chapter II, Section 2, Requirements for Options Participation
Section 3Chapter II, Section 3, Persons Associated with Options Participants
Section 4Chapter II, Section 4, Good Standing for Options Participants

Options 3

Proposed New Rule NumberCurrent Rule Number
Section 1Chapter VI, Section 2, Days and Hours of Business
Section 2Chapter VI, Section 3. Units of Trading; and Section 4, Meaning of Premium Quotes and Orders (combined into one rule and retitled as “Units of Trading and Meaning of Premium Quotes and Orders”)
Section 3Chapter VI, Section 5, Minimum Increments
Section 4Chapter VI, Section 6, Entry and Display of Quotes
Section 5Chapter VI, Section 7, Entry and Display of Orders
Section 6Chapter V, Section 5, Unusual Market Conditions
Section 7Chapter VI, Section 1(d)-(g) Definitions; and Chapter VI, Section 21 Order and Quote Protocols (re-title as “Types of Orders and Quote Protocols”)
Section 8Chapter VI, Section 8, Nasdaq Opening and Halt Cross (re-titled as “Opening and Halt Cross”)
Section 9Chapter V, Section 3, Trading Halts; and Section 4, Resumption of Trading After a Halt (re-titled as to “Trading Halts”)
Section 10Chapter VI, Section 10, Book Processing (re-titled as “Order Book Allocation”)
Section 11Reserved
Section 12Reserved
Section 13Reserved
Section 14Reserved
Section 15Chapter VI, Section 18, Risk Protections
Section 16Reserved
Section 17Chapter VI, Section 22, Kill Switch
Section 18Chapter VI, Section 23, Detection of Loss of Communication
Section 19Chapter VII, Section 11, Mass Cancellation of Trading Interest
Section 20Chapter V, Section 6, Nullification and Adjustment of Options Transactions including Obvious Errors
Section 21Chapter V, Section 1, Access to and Conduct on NOM Market; and Chapter VI, Section 20 Exchange Sharing of Participant-Designated Risk Settings (re-titled as “Access to and Conduct on NOM”)
Section 22Chapter VI, Section 12, Limitations on Order Entry
Section 23Chapter VI, Section 19, Data Feeds and Trade Information
Section 24Chapter VI, Section 13, Transaction Price Binding
Section 25Chapter VI, Section 12, Anonymity
Section 26Chapter VI, Section 17, Message Traffic Mitigation
Section 27Chapter V, Section 9, Limitation of Liability
Section 28Reserved

Options 4A

Proposed New Rule NumberCurrent Rule Number
Section 1Chapter XIV, Section 1, Application of Index Rules
Section 2Chapter XIV, Section 2, Definitions
Section 3Chapter XIV, Section 3, Designation of a Broad-Based Index
Section 4Chapter XIV, Section 6, Designation of Narrow-Based and Micro-Narrow-Based Index Options
Section 5Chapter XIV, Section 4, Dissemination of Information
Section 6Chapter XIV, Section 5, Position Limits for Broad-Based Index Options
Section 7Chapter XIV, Section 7, Position Limits for Industry and Micro-Narrow Based Index Options
Section 8Reserved
Section 9Chapter XIV, Section 8, Exemptions from Position Limits
Section 10Chapter XIV, Section 9, Exercise Limits
Section 11Chapter XIV, Section 10, Trading Sessions
Section 12Chapter XIV, Section 11, Terms of Index Options Contracts
Section 13Chapter XIV, Section 12, Debit Put Spread Cash Account Transactions
Section 14Chapter XIV, Section 13, Disclaimers
Section 15Chapter XIV, Section 14, Exercise of American-Style Index Options
Section 16Reserved

Options 5

Proposed New Rule NumberCurrent Rule Number
Section 1Chapter XII, Section 1, Definitions
Section 2Chapter XII, Section 2, Order Protection
Section 3Chapter XII, Section 3, Locked and Crossed Markets
Section 4Chapter VI, Section 11(a), Order Routing
Section 5Chapter VI, Section 11(b) to be titled “Cancellation of Orders and Error Account”

Options 6

Proposed New Rule NumberCurrent Rule Number
Section 1Chapter VI, Section 14, Authorization to Give Up
Section 2Chapter VI, Section 15, Submission for Clearance
Section 3Reserved
Section 4Chapter VII, Section 8, Letters of Guarantee

Options 6A

Proposed New Rule NumberCurrent Rule Number
Section 1Chapter X, Section 6, Contracts of Suspended Participants
Section 2Chapter V, Section 8, Failure to Pay Premium

Options 6B

Proposed New Rule NumberCurrent Rule Number
Section 1Options 5, Section 101, Exercise of Options Contracts
Section 2Options 5, Section 102, Allocation of Exercise Notices
Section 3Options 5, Section 103, Delivery and Payment

Options 6C

Proposed New Rule NumberCurrent Rule Number
Section 1Chapter XIII, Section 1, General Rule
Section 2Chapter XIII, Section 2, Time Margin Must Be Obtained
Section 3Chapter XIII, Section 3, Margin Requirements
Section 4Reserved
Section 5Chapter XIII, Section 4, Margin Required Is Minimum
Section 6Reserved

Options 6D

Proposed New Rule NumberCurrent Rule Number
Section 1Reserved
Section 2Reserved
Section 3Reserved
Section 4Chapter XIII, Section 5, Joint Back Office Participants

Options 6E

Proposed New Rule NumberCurrent Rule Number
Section 1Chapter IX, Section 1, Maintenance, Retention and Furnishing of Books, Records and Other Information
Section 2Chapter IX, Section 2, Reports of Uncovered Short Positions
Section 3Chapter IX, Section 3, Financial Reports and Audits
Section 4Reserved
Section 5Chapter IX, Section 4, Automated Submission of Trade Data
Section 6Chapter IX, Section 6, Risk Analysis of Market Maker Accounts
Section 7Chapter IX, Section 5, Regulatory Cooperation
Section 8Reserved
Section 9Chapter V, Section 7, Audit Trail

    Options 9

    Proposed New Rule NumberCurrent Rule Number
    Section 1Reserved
    Section 2Chapter III, Section 1, Adherence to Law and Section 2 Conduct and Compliance with the Rules
    Section 3Reserved
    Section 4Chapter III, Section 16, Disruptive Quoting and Trading Activity Prohibited
    Section 5Reserved
    Section 6Reserved
    Section 7Reserved
    Section 8Chapter III, Section 3, Rumors
    Section 9Chapter III, Section 4, Prevention of the Misuse of Material Nonpublic Information
    Section 10Chapter III, Section 5, Disciplinary Action by Other Organizations
    Section 11Chapter III, Section 6, Other Restrictions on Participants
    Section 12Chapter III, Section 15, Significant Business Transactions of Options Clearing Participants
    Section 13Chapter III, Section 7, Position Limits
    Section 14Chapter III, Section 8, Exemptions from Position Limits
    Section 15Chapter III, Section 9, Exercise Limits
    Section 16Chapter III, Section 10, Reports Related to Position Limits
    Section 17Chapter III, Section 11, Liquidation Positions
    Section 18Chapter III, Section 14, Limit on Outstanding Uncovered Short Positions
    Section 19Chapter III, Section 12, Other Restrictions on Options Transactions and Exercises
    Section 20Chapter III, Section 13, Mandatory Systems Testing
    Section 21Chapter IX, Section 7, Anti-Money Laundering Compliance Program
    Section 22Reserved
    Section 23Reserved

    Options 10

    Proposed New Rule NumberCurrent Rule Number
    Section 1Chapter XI, Section 1, Eligibility
    Section 2Chapter XI, Section 2, Registration of Options Principals
    Section 3Chapter XI, Section 3, Registration of Representatives
    Section 4Chapter XI, Section 5, Discipline, Suspension, Expulsion of Registered Persons
    Section 5Chapter XI, Section 6, Branch Offices
    Section 6Chapter XI, Section 7, Opening of Accounts
    Section 7Chapter XI, Section 8, Supervision of Accounts
    Section 8Chapter XI, Section 9, Suitability of Recommendations
    Section 9Chapter XI, Section 10, Discretionary Accounts
    Section 10Chapter XI, Section 11, Confirmation to Public Customers
    Section 11Chapter XI, Section 12, Statement of Accounts to Customers
    Section 12Chapter XI, Section 13, Statements of Financial Condition to Public Customers
    Section 13Chapter XI, Section 15, Delivery of Current Options Disclosure Documents and Prospectus
    Section 14Chapter XI, Section 16, Restrictions on Pledge and Lending of Customers' Securities
    Section 15Chapter XI, Section 17, Transactions of Certain Public Customers
    Section 16Chapter XI, Section 18, Guarantees
    Section 17Chapter XI, Section 19, Profit Sharing
    Section 18Chapter XI, Section 20, Assuming Losses
    Section 19Chapter XI, Section 21, Transfer of Accounts
    Section 20Chapter XI, Section 22, Communications with Public Customers; and Section 14, Addressing of Communications to Public Customers (re-titled “Communications with Public Customers”)
    Section 21Chapter XI, Section 23, Fidelity Bond
    Section 22Chapter XI, Section 24, Public Customer Complaints
    Section 23Chapter XI, Section 25, Telephone Solicitation
    Section 24Chapter XI, Section 4, Other Affiliations of Registered Persons
    Section 25Reserved

    Options 11

    Proposed New Rule NumberCurrent Rule Number
    Section 1Chapter X, Section 7 titled “Penalty for Minor Rule Violations”
    Section 2Chapter X, Section 1, “Imposition of Suspension,” Section 2, “Investigation Following Suspension Violations,” Section 3, “Reinstatement Following Suspension,” Section 4, “Failure to Obtain Reinstatement,” Section 5, “Termination of Rights by Suspension” and Section 6, “Contracts of Suspended Participants” into Options 11.

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