(a) Registration; application. An exchange may be registered as a national securities exchange
under the terms and conditions hereinafter provided in this section
and in accordance with the provisions of section 19(a) of this title,
by filing with the Commission an application for registration in such
form as the Commission, by rule, may prescribe containing the rules
of the exchange and such other information and documents as the Commission,
by rule, may prescribe as necessary or appropriate in the public interest
or for the protection of investors.
5-033
(b) Determination by Commission requisite to registration
of applicant as a national securities exchange. An exchange shall
not be registered as a national securities exchange unless the Commission
determines that—
(1) Such
exchange is so organized and has the capacity to be able to carry
out the purposes of this title and to comply, and (subject to any
rule or order of the Commission pursuant to section 17(d) or 19(g)(2)
of this title) to enforce compliance by its members and persons associated
with its members, with the provisions of this title,
the rules and regulations thereunder, and the rules of the exchange.
(2) Subject to the provisions of subsection
(c) of this section, the rules of the exchange provide that any registered
broker or dealer or natural person associated with a registered broker
or dealer may become a member of such exchange and any person may
become associated with a member thereof.
(3) The rules of the exchange assure a
fair representation of its members in the selection of its directors
and administration of its affairs and provide that one or more directors
shall be representative of issuers and investors and not be associated
with a member of the exchange, broker, or dealer.
(4) The rules of the exchange provide for
the equitable allocation of reasonable dues, fees, and other charges
among its members and issuers and other persons using its facilities.
(5) The rules of the exchange are
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; and are not designed
to permit unfair discrimination between customers, issuers, brokers,
or dealers, or to regulate by virtue of any authority conferred by
this title matters not related to the purposes of this title or the
administration of the exchange.
(6) The rules of the exchange provide that (subject to any rule or
order of the Commission pursuant to section 17(d) or 19(g)(2) of this
title) its members and persons associated with its members shall be
appropriately disciplined for violation of the provisions of this
title, the rules or regulations thereunder, or the rules of the exchange,
by expulsion, suspension, limitation of activities, functions, and
operations, fine, censure, being suspended or barred from being associated
with a member, or any other fitting sanction.
(7) The rules of the exchange are in accordance
with the provisions of subsection (d) of this section, and in general,
provide a fair procedure for the disciplining of members and persons
associated with members, the denial of membership to any person seeking
membership therein, the barring of any person from becoming associated
with a member thereof, and the prohibition or limitation by the exchange
of any person with respect to access to services offered by the exchange
or a member thereof.
(8) The rules
of the exchange do not impose any burden on competition not necessary
or appropriate in furtherance of the purposes of this title.
5-033.1
(9) (A) The rules of the exchange
prohibit the listing of any security issued in a limited partnership
rollup transaction (as such term is defined in paragraphs (4) and
(5) of section 14(h)), unless such transaction was conducted in accordance
with procedures designed to protect the rights of limited partners,
including—
(i) the right
of dissenting limited partners to one of the following:
(I) an appraisal
and compensation;
(II) retention of
a security under substantially the same terms and conditions as the
original issue;
(III) approval of
the limited partnership rollup transaction by not less than 75 percent
of the outstanding securities of each of the participating limited
partnerships;
(IV) the use of a committee
of limited partners that is independent, as determined in accordance
with rules prescribed by the exchange, of the general partner or sponsor,
that has been approved by a majority of the outstanding units of each
of the participating limited partnerships, and that has such authority
as is necessary to protect the interest of limited partners, including
the authority to hire independent advisors, to negotiate
with the general partner or sponsor on behalf of the limited partners,
and to make a recommendation to the limited partners with respect
to the proposed transaction; or
(V)
other comparable rights that are prescribed by rule by the exchange
and that are designed to protect dissenting limited partners;
(ii) the right not to have their voting
power unfairly reduced or abridged;
(iii) the right not to bear an unfair portion of the costs of a proposed
limited partnership rollup transaction that is rejected; and
(iv) restrictions on the conversion of contingent
interests or fees into non-contingent interests or fees and restrictions
on the receipt of a non-contingent equity interest in exchange for
fees for services which have not yet been provided.
(B) As used in this paragraph, the
term “dissenting limited partner” means a person who, on the date
on which soliciting material is mailed to investors, is a holder of
a beneficial interest in a limited partnership that is the subject
of a limited partnership rollup transaction, and who casts a vote
against the transaction and complies with procedures established by
the exchange, except that for purposes of an exchange or tender offer,
such person shall file an objection in writing under the rules of
the exchange during the period during which the offer is outstanding.
(10) (A)
The rules of the exchange prohibit any member that is not the beneficial
owner of a security registered under section 12 from granting a proxy
to vote the security in connection with a shareholder vote described
in subparagraph (B), unless the beneficial owner of the security has
instructed the member to vote the proxy in accordance with the voting
instructions of the beneficial owner.
(B) A shareholder vote described in
this subparagraph is a shareholder vote with respect to the election
of a member of the board of directors of an issuer, executive compensation,
or any other significant matter, as determined by the Commission,
by rule, and does not include a vote with respect to the uncontested
election of a member of the board of directors of any investment company
registered under the Investment Company Act of 1940 (15 U.S.C. 80b-1
et seq.).
(C) Nothing in this
paragraph shall be construed to prohibit a national securities exchange
from prohibiting a member that is not the beneficial owner of a security
registered under section 12 from granting a proxy to vote the security
in connection with a shareholder vote not described in subparagraph
(A).
5-034
(c) Denial of membership in national exchanges; denial of association
with member; conditions; limitation of membership.
(1) A national securities exchange
shall deny membership to (A) any person, other than a natural person,
which is not a registered broker or dealer or (B) any natural person
who is not, or not associated with, a registered broker or dealer.
(2) A national securities exchange
may, and in cases in which the Commission, by order, directs as necessary
or appropriate in the public interest or for the protection of investors
shall, deny membership to any registered broker or dealer or natural
person associated with a registered broker or dealer, and bar from
becoming associated with a member any person, who is subject to a
statutory disqualification. A national securities exchange shall file
notice with the Commission not less than thirty days prior to admitting
any person to membership or permitting any person to become associated
with a member, if the exchange knew, or in the exercise of reasonable
care should have known, that such person was subject to a statutory
disqualification. The notice shall be in such form and contain such
information as the Commission, by rule, may prescribe as necessary
or appropriate in the public interest or for the protection of investors.
5-035
(3) (A) A national securities exchange
may deny membership to, or condition the membership of, a registered
broker or dealer if (i) such broker or dealer does not meet such standards
of financial responsibility or operational capability or such broker
or dealer or any natural person associated with such broker or dealer
does not meet such standards of training, experience, and competence
as are prescribed by the rules of the exchange or (ii) such broker
or dealer or person associated with such broker or dealer has engaged
and there is a reasonable likelihood he may again engage in acts or
practices inconsistent with just and equitable principles of trade.
A national securities exchange may examine and verify the qualifications
of an applicant to become a member and the natural persons associated
with such an applicant in accordance with procedures established by
the rules of the exchange.
5-036
(B) A national securities exchange may bar a natural person from
becoming a member or associated with a member, or condition the membership
of a natural person or association of a natural person with a member,
if such natural person (i) does not meet such standards of training,
experience, and competence as are prescribed by the rules of the exchange
or (ii) has engaged and there is a reasonable likelihood he may again
engage in acts or practices inconsistent with just and equitable principles
of trade. A national securities exchange may examine and verify the
qualifications of an applicant to become a person associated with
a member in accordance with procedures established by the rules of
the exchange and require any person associated with a member, or any
class of such persons, to be registered with the exchange in accordance
with procedures so established.
5-037
(C) A national securities exchange may bar any person from becoming
associated with a member if such person does not agree (i) to supply
the exchange with such information with respect to its relationship
and dealings with the member as may be specified in the rules of the
exchange and (ii) to permit the examination of its books and records
to verify the accuracy of any information so supplied.
5-038
(4) A national securities exchange may
limit (A) the number of members of the exchange and (B) the number
of members and designated representatives of members permitted to
effect transactions on the floor of the exchange without the services of another
person acting as broker: Provided, however, That no national
securities exchange shall have the authority to decrease the number
of memberships in such exchange, or the number of members and designated
representatives of members permitted to effect transactions on the
floor of such exchange without the services of another person acting
as broker, below such number in effect on May 1, 1975, or the date
such exchange was registered with the Commission, whichever is later: And provided further, That the Commission, in accordance with
the provisions of section 19(c) of this title, may amend the rules
of any national securities exchange to increase (but not to decrease)
or to remove any limitation on the number of memberships in such exchange
or the number of members or designated representatives of members
permitted to effect transactions on the floor of the exchange without
the services of another person acting as broker, if the Commission
finds that such limitation imposes a burden on competition not necessary
or appropriate in furtherance of the purposes of this title.
5-039
(d) Discipline of national securities exchange members
and persons associated with members; summary proceedings.
(1) In any proceeding by
a national securities exchange to determine whether a member or person
associated with a member should be disciplined (other than a summary
proceeding pursuant to paragraph (3) of this subsection), the exchange
shall bring specific charges, notify such member or person of, and
give him an opportunity to defend against, such charges, and keep
a record. A determination by the exchange to impose a disciplinary
sanction shall be supported by a statement setting forth—
(A) any act or practice in which
such member or person associated with a member has been found to have
engaged, or which such member or person has been found to have omitted;
(B) the specific provision of this
title, the rules or regulations thereunder, or the rules of the exchange
which any such act or practice, or omission to act, is deemed to violate;
and
(C) the sanction imposed
and the reasons therefor.
5-040
(2) In any proceeding by a national securities exchange to determine
whether a person shall be denied membership, barred from becoming
associated with a member, or prohibited or limited with respect to
access to services offered by the exchange or a member thereof (other
than a summary proceeding pursuant to paragraph (3) of this subsection),
the exchange shall notify such person of, and give him an opportunity
to be heard upon, the specific grounds for denial, bar, or prohibition
or limitation under consideration and keep a record. A determination
by the exchange to deny membership, bar a person from becoming associated
with a member, or prohibit or limit a person with respect to access
to services offered by the exchange or a member thereof shall be supported
by a statement setting forth the specific grounds on which the denial,
bar, or prohibition or limitation is based.
5-041
(3) A national securities exchange may summarily (A) suspend a member
or person associated with a member who has been and is expelled or
suspended from any selfregulatory organization or barred or suspended
from being associated with a member of any self-regulatory organization,
(B) suspend a member who is in such financial or operating difficulty
that the exchange determines and so notifies the Commission that the
member cannot be permitted to continue to do business as a member
with safety to investors, creditors, other members, or the exchange,
or (C) limit or prohibit any person with respect to access to services
offered by the exchange if subparagraph (A) or (B) of this paragraph
is applicable
to such person or, in the case of a person who is not a member, if
the exchange determines that such person does not meet the qualification
requirements or other prerequisites for such access and such person
cannot be permitted to continue to have such access with safety to
investors, creditors, members, or the exchange. Any person aggrieved
by any such summary action shall be promptly afforded an opportunity
for a hearing by the exchange in accordance with the provisions of
paragraph (1) or (2) of this subsection. The Commission, by order,
may stay any such summary action on its own motion or upon application
by any person aggrieved thereby, if the Commission determines summarily
or after notice and opportunity for hearing (which hearing may consist
solely of the submission of affidavits or presentation of oral arguments)
that such stay is consistent with the public interest and the protection
of investors.
5-042
(e) Commissions, allowances,
discounts, and other fees.
(1) On and after the date of enactment
of the Securities Acts Amendments of 1975, no national securities
exchange may impose any schedule or fix rates of commissions, allowances,
discounts, or other fees to be charged by its members: Provided,
however, That until May 1, 1976, the preceding provisions of this
paragraph shall not prohibit any such exchange from imposing or fixing
any schedule of commissions, allowances, discounts, or other fees
to be charged by its members for acting as broker on the floor of
the exchange or as odd-lot dealer: And provided further, That
the Commission, in accordance with the provisions of section 19(b)
of this title as modified by the provisions of paragraph (3) of this
subsection, may—
(A) permit a national securities exchange, by rule, to impose a reasonable
schedule or fix reasonable rates of commissions, allowances, discounts,
or other fees to be charged by its members for effecting transactions
on such exchange prior to November 1, 1976, if the Commission finds
that such schedule or fixed rates of commissions, allowances, discounts,
or other fees are in the public interest; and
(B) permit a national securities exchange,
by rule, to impose a schedule or fix rates of commissions, allowances,
discounts, or other fees to be charged by its members for effecting
transactions on such exchange after November 1, 1976, if the Commission
finds that such schedule or fixed rates of commissions, allowances,
discounts, or other fees (i) are reasonable in relation to the costs
of providing the service for which such fees are charged (and the
Commission publishes the standards employed in adjudging reasonableness)
and (ii) do not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of this title, taking into
consideration the competitive effects of permitting such schedule
or fixed rates weighed against the competitive effects of other lawful
actions which the Commission is authorized to take under this title.
5-043
(2) Notwithstanding the provisions
of section 19(c) of this title, the Commission, by rule, may abrogate
any exchange rule which imposes a schedule or fixes rates of commissions,
allowances, discounts, or other fees, if the Commission determines
that such schedule or fixed rates are no longer reasonable, in the
public interest, or necessary to accomplish the purposes of this title.
5-044
(3) (A) Before approving or
disapproving any proposed rule change submitted by a national securities
exchange which would impose a schedule or fix rates of commissions,
allowances, discounts, or other fees to be charged by its members
for effecting transactions on such exchange, the Commission shall
afford interested persons (i) an opportunity for oral presentation
of data, views, and arguments, and (ii) with respect to any such rule concerning
transactions effected after November 1, 1976, if the Commission determines
there are disputed issues of material fact, to present such rebuttal
submissions and to conduct (or have conducted under subparagraph (B)
of this paragraph) such cross-examination as the Commission determines
to be appropriate and required for full disclosure and proper resolution
of such disputed issues of material fact.
5-045
(B) The Commission shall prescribe rules and make rulings concerning
any proceeding in accordance with subparagraph (A) of this paragraph
designed to avoid unnecessary costs or delay. Such rules or rulings
may (i) impose reasonable time limits on each interested person’s
oral presentations, and (ii) require any cross-examination to which
a person may be entitled under subparagraph (A) of this paragraph
to be conducted by the Commission on behalf of that person in such
manner as the Commission determines to be appropriate and required
for full disclosure and proper resolution of disputed issues of material
fact.
5-046
(C) (i) If any class
of persons, the members of which are entitled to conduct (or have
conducted) cross-examination under subparagraphs (A) and (B) of this
paragraph and which have, in the view of the Commission, the same
or similar interests in the proceeding, cannot agree upon a single
representative of such interests for purposes of cross-examination,
the Commission may make rules and rulings specifying the manner in
which such interests shall be represented and such cross-examination
conducted.
(ii) No member of any class
of persons with respect to which the Commission has specified the
manner in which its interests shall be represented pursuant to clause
(i) of this subparagraph shall be denied, pursuant to such clause
(i), the opportunity to conduct (or have conducted) cross-examination
as to issues affecting his particular interests if he satisfies the
Commission that he has made a reasonable and good faith effort to
reach agreement upon group representation and there are substantial
and relevant issues which would not be presented adequately by group
representation.
5-047
(D) A transcript shall be kept of any oral presentation and cross-examination.
(E) In addition to the bases specified
in section 25(a), a reviewing Court may set aside an order of the
Commission under section 19(b) approving an exchange rule imposing
a schedule or fixing rates of commissions, allowances, discounts,
or other fees, if the Court finds—
(1) a Commission determination under paragraph
(1)(A) that an interested person is not entitled to conduct cross-examination
or make rebuttal submissions, or
(2)
a Commission rule or ruling under paragraph subparagraph (B) of this
paragraph limiting the petitioner’s cross-examination or rebuttal
submissions,
has precluded full disclosure and
proper resolution of disputed issues of material fact which were necessary
for fair determination by the Commission.
5-048
(f) Compliance of nonmembers with exchange rules. The Commission, by rule or order, as it deems necessary or appropriate
in the public interest and for the protection of investors, to maintain
fair and orderly markets, or to assure equal regulation, may require—
(1) any person not a member
or a designated representative of a member of a national securities
exchange effecting transactions on such exchange without the services
of another person acting as a broker, or
(2) any broker or dealer not a member of
a national
securities exchange effecting transactions on such exchange on a regular
basis to comply with such rules of such exchange as the Commission
may specify.
5-048.1
(g) Notice registration of security futures product exchanges.
(1) An exchange that lists
or trades security futures products may register as a national securities
exchange solely for the purposes of trading security futures products
if—
(A) the exchange
is a board of trade, as that term is defined by the Commodity Exchange
Act (7 U.S.C. 1a(2)), that—
(i) has been designated a contract market by the Commodity Futures
Trading Commission and such designation is not suspended by order
of the Commodity Futures Trading Commission; or
(ii) is registered as a derivative transaction
execution facility under section 5a of the Commodity Exchange Act
and such registration is not suspended by the Commodity Futures Trading
Commission; and
(B) such exchange does not serve as a market place for transactions
in securities other than—
(i) security futures products; or
(ii) futures on exempted securities or groups or indexes of securities
or options thereon that have been authorized under section 2(a)(1)(C)
of the Commodity Exchange Act.
(2) (A) An exchange required
to register only because such exchange lists or trades security futures
products may register for purposes of this section by filing with
the Commission a written notice in such form as the Commission, by
rule, may prescribe containing the rules of the exchange and such
other information and documents concerning such exchange, comparable
to the information and documents required for national securities
exchanges under section 6(a), as the Commission, by rule, may prescribe
as necessary or appropriate in the public interest or for the protection
of investors. If such exchange has filed documents with the Commodity
Futures Trading Commission, to the extent that such documents contain
information satisfying the Commission’s informational requirements,
copies of such documents may be filed with the Commission in lieu
of the required written notice.
(B) Such registration shall be effective contemporaneously with the
submission of notice, in written or electronic form, to the Commission,
except that such registration shall not be effective if such registration
would be subject to suspension or revocation.
(C) Such registration shall be terminated
immediately if any of the conditions for registration set forth in
this subsection are no longer satisfied.
(3) The Commission shall promptly publish
in the Federal Register an acknowledgment of receipt of all notices
the Commission receives under this subsection and shall make all such
notices available to the public.
(4) (A) An exchange that is registered
under paragraph (1) of this subsection shall be exempt from, and shall
not be required to enforce compliance by its members with, and its
members shall not, solely with respect to those transactions effected
on such exchange in security futures products, be required to comply
with, the following provisions of this title and the rules thereunder:
(i) Subsections (b)(2),
(b)(3), (b)(4), (b)(7), (b)(9), (c), (d), and (e) of this section.
(ii) Section 8.
(iii) Section 11.
(iv) Subsections (d), (f), and (k) of section 17.
(v) Subsections (a), (f), and (h) of section
19.
(B) An exchange
that registered under paragraph (1) of this subsection shall also
be exempt from submitting proposed rule changes pursuant to section
19(b) of this title, except that—
(i) such exchange shall file proposed rule changes
related to higher margin levels, fraud or manipulation, recordkeeping,
reporting, listing standards, or decimal pricing for security futures
products, sales practices for security futures products for persons
who effect transactions in security futures products, or rules effectuating
such exchange’s obligation to enforce the securities laws pursuant
to section 19(b)(7);
(ii) such exchange
shall file pursuant to sections 19(b)(1) and 19(b)(2) proposed rule
changes related to margin, except for changes resulting in higher
margin levels; and
(iii) such exchange
shall file pursuant to section 19(b)(1) proposed rule changes that
have been abrogated by the Commission pursuant to section 19(b)(7)(C).
(5) (A) Subject to subparagraph
(B), it shall be unlawful for any person to execute or trade a security
futures product until the later of—
(i) 1 year after the date of the enactment
of the Commodity Futures Modernization Act of 2000; or
(ii) such date that a futures association
registered under section 17 of the Commodity Exchange Act has met
the requirements set forth in section 15A(k)(2) of this title.
(B) Notwithstanding
subparagraph (A), a person may execute or trade a security futures
product transaction if—
(i) the transaction is entered into—
(I) on a principal-to-principal
basis between parties trading for their own accounts or as described
in section 1a(12)(B)(ii) of the Commodity Exchange Act; and
(II) only between eligible contract participants
(as defined in subparagraphs (A), (B)(ii), and (C) of such section
1a(12)) at the time at which the persons enter into the agreement,
contract, or transaction; and
(ii) the transaction is entered into on or
after the later of—
(I) 8 months after the date of the enactment
of the Commodity Futures Modernization Act of 2000; or
(II) such date that a futures association
registered under section 17 of the Commodity Exchange Act has met
the requirements set forth in section 15A(k)(2) of this title.
5-048.2
(h) Trading in security futures products.
(1) It shall be unlawful
for any person to effect transactions in security futures products
that are not listed on a national securities exchange or a national
securities association registered pursuant to section 15A(a).
(2) Except as otherwise provided in paragraph
(7), a national securities exchange or a national securities association
registered pursuant to section 15A(a) may trade only security futures
products that (A) conform with listing standards that such exchange
or association files with the Commission under section 19(b) and (B)
meet the criteria specified in section 2(a)(1)(D)(i) of the Commodity
Exchange Act.
(3) Such listing standards
shall—
(A) except
as otherwise provided in a rule, regulation, or order issued pursuant
to paragraph (4), require that any security underlying the security
future, including each component security of a narrow-based security
index, be registered pursuant to section 12 of this title;
(B) require that if the security futures
product is not cash settled, the market on which the security futures
product is traded have arrangements in place with a registered clearing
agency for the payment and delivery of the securities underlying the
security futures product;
(C)
be no less restrictive than comparable listing standards for options
traded on a national securities exchange or national securities association
registered pursuant to section 15A(a) of this title;
(D) except as otherwise provided in
a rule, regulation, or order issued pursuant to paragraph (4), require
that the security future be based upon common stock and such other equity securities
as the Commission and the Commodity Futures Trading Commission jointly
determine appropriate;
(E) require
that the security futures product is cleared by a clearing agency
that has in place provisions for linked and coordinated clearing with
other clearing agencies that clear security futures products, which
permits the security futures product to be purchased on one market
and offset on another market that trades such product;
(F) require that only a broker or dealer
subject to suitability rules comparable to those of a national securities
association registered pursuant to section 15A(a) effect transactions
in the security futures product;
(G) require that the security futures product be subject to the prohibition
against dual trading in section 4j of the Commodity Exchange Act (7
U.S.C. 6j) and the rules and regulations thereunder or the provisions
of section 11(a) of this title and the rules and regulations thereunder,
except to the extent otherwise permitted under this title and the
rules and regulations thereunder;
(H) require that trading in the security futures product not be readily
susceptible to manipulation of the price of such security futures
product, nor to causing or being used in the manipulation of the price
of any underlying security, option on such security, or option on
a group or index including such securities;
(I) require that procedures be in place
for coordinated surveillance among the market on which the security
futures product is traded, any market on which any security underlying
the security futures product is traded, and other markets on which
any related security is traded to detect manipulation and insider
trading;
(J) require that the
market on which the security futures product is traded has in place
audit trails necessary or appropriate to facilitate the coordinated
surveillance required in subparagraph (I);
(K) require that the market on which
the security futures product is traded has in place procedures to
coordinate trading halts between such market and any market on which
any security underlying the security futures product is traded and
other markets on which any related security is traded; and
(L) require that the margin requirements
for a security futures product comply with the regulations prescribed
pursuant to section 7(c)(2)(B), except that nothing in this subparagraph
shall be construed to prevent a national securities exchange or national
securities association from requiring higher margin levels for a security
futures product when it deems such action to be necessary or appropriate.
(4) (A)
The Commission and the Commodity Futures Trading Commission, by rule,
regulation, or order, may jointly modify the listing standard requirements
specified in subparagraph (A) or (D) of paragraph (3) to the extent
such modification fosters the development of fair and orderly markets
in security futures products, is necessary or appropriate in the public
interest, and is consistent with the protection of investors.
(B) The Commission and the Commodity
Futures Trading Commission, by order, may jointly exempt any person
from compliance with the listing standard requirement specified in
subparagraph (E) of paragraph (3) to the extent such exemption fosters
the development of fair and orderly markets in security futures products,
is necessary or appropriate in the public interest, and is consistent
with the protection of investors.
5-048.3
(5) It shall be unlawful for any person
(other than a national securities exchange or a national securities
association registered pursuant to section 15A(a)) to constitute,
maintain, or provide a marketplace or facilities for bringing together
purchasers and sellers of security future products or to otherwise
perform with respect to security future products the functions commonly
performed by a stock exchange as that term is generally understood,
unless a national securities association registered pursuant to section
15A(a) or a national securities exchange of which such person is a
member—
(A) has in
place procedures for coordinated surveillance among such person, the
market trading the securities underlying the security future products,
and other markets trading related securities to detect manipulation
and insider trading;
(B) has
rules to require audit trails necessary or appropriate to facilitate
the coordinated surveillance required in subparagraph (A); and
(C) has rules to require such person
to coordinate trading halts with markets trading the securities underlying
the security future products and other markets trading related securities.
(6) No person shall offer
to enter into, enter into, or confirm the execution of any put, call,
straddle, option, or privilege on a security future, except that,
after 3 years after the date of the enactment of this subsection,
the Commission and the Commodity Futures Trading Commission may by
order jointly determine to permit trading of puts, calls, straddles,
options, or privileges on any security future authorized to be traded
under the provisions of this Act and the Commodity Exchange Act.
(7) (A) Notwithstanding
paragraph (2), until the compliance date, a national securities exchange
or national securities association registered pursuant to section
15A(a) may trade a security futures product that does not—
(i) conform with any listing standard
promulgated to meet the requirement specified in subparagraph (E)
of paragraph (3); or
(ii) meet the
criterion specified in section 2(a)(1)(D)(i)(IV) of the Commodity
Exchange Act.
(B) The Commission and the Commodity Futures Trading Commission shall
jointly publish in the Federal Register a notice of the compliance
date no later than 165 days before the compliance date.
(C) For purposes of this paragraph,
the term “compliance date” means the later of—
(i) 180 days after the end of the first full
calendar month period in which the average aggregate comparable share
volume for all security futures products based on single equity securities
traded on all national securities exchanges, any national securities
associations registered pursuant to section 15A(a), and all other
persons equals or exceeds 10 percent of the average aggregate comparable
share volume of options on single equity securities traded on all
national securities exchanges and any national securities associations
registered pursuant to section 15A(a); or
(ii) 2 years after the date on which trading in any security futures
product commences under this title.
5-048.4
(i) Consistent with this title, each national securities exchange
registered pursuant to subsection (a) of this section shall issue
such rules as are necessary to avoid duplicative or conflicting rules
applicable to any broker or dealer registered with the Commission
pursuant to section 15(b) (except paragraph (11) thereof ), that is
also registered with the Commodity Futures Trading Commission pursuant
to section 4f(a) of the Commodity Exchange Act (except paragraph (2)
thereof), with respect to the application of—
(1) rules of such national securities exchange
of the type specified in section 15(c)(3)(B) involving security futures
products; and
(2) similar rules
of national securities exchanges registered pursuant to section 6(g)
and national securities associations registered pursuant to section
15A(k) involving security futures products.
(j) Procedures and rules for security future products. A national securities exchange registered pursuant to subsection
(a) shall implement the procedures specified in section 6(h)(5)(A) of this
title and adopt the rules specified in subparagraphs (B) and (C) of
section 6(h)(5) of this title not later than 8 months after the date
of receipt of a request from an alternative trading system for such
implementation and rules.
(k) (1) To the extent necessary or
appropriate in the public interest, to promote fair competition, and
consistent with the promotion of market efficiency, innovation, and
expansion of investment opportunities, the protection of investors,
and the maintenance of fair and orderly markets, the Commission and
the Commodity Futures Trading Commission shall jointly issue such
rules, regulations, or orders as are necessary and appropriate to
permit the offer and sale of a security futures product traded on
or subject to the rules of a foreign board of trade to United States
persons.
(2) The rules, regulations,
or orders adopted under paragraph (1) shall take into account, as
appropriate, the nature and size of the markets that the securities
underlying the security futures product reflect.
(l) It shall be unlawful for any person to effect a transaction
in a security-based swap with or for a person that is not an eligible
contract participant, unless such transaction is effected on a national
securities exchange registered pursuant to subsection (b).
[15 USC 78f. This section became effective Sept. 1, 1934. As amended
by acts of June 4, 1975 (89 Stat. 104); Dec. 4, 1987 (101 Stat. 1255,
1256); Dec. 17, 1993 (107 Stat. 2365); Dec. 21, 2000 (114 Stat. 2763A-416,
426, 433, 434); and July 21, 2010 (124 Stat. 1777, 1906).]
