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2800. Special Products
2830. Investment Company Securities

(a) Exchange Members and their associated persons shall comply with NASD Rule 2830 as if such Rule were part of the Rules of the Exchange.

FINRA is in the process of consolidating certain NASD rules into a new FINRA rulebook. If the provisions of NASD Rule 2830 are transferred into the FINRA rulebook, then Equity Rule 2830 shall be construed to require Exchange members and persons associated with a member to comply with the FINRA rule corresponding to NASD Rule 2830 (regardless of whether such rule is renumbered or amended) as if such rule were part of the Rules of the Exchange.

(b) For purposes of this Rule:

(1) references to "the Rules of the Association" shall be construed as references to "the Rules of the Exchange",

(2) references to Rule 2820 shall be deleted, and no comparable Exchange Rule shall apply to activities of Exchange Members in connection with contracts providing for benefits or values which may vary according to the investment experience of any separate or segregated account or accounts maintained by an insurance company,

(3) references to Rule 2420 shall be construed as a requirement that an Exchange member who is an underwriter of the securities of an investment company sell any such securities to a broker or dealer that is not an Exchange member at the same prices, for the same commission and fees, and on the same terms and conditions as are by such member accorded to the general public, and

(4) references to Rule 2230 shall be construed as references to SEC Rule 10b-10.

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2840. Trading in Index Warrants, Currency Index Warrants, and Currency Warrants
2841. General

(a) Applicability — This Rule 2840 Series shall be applicable: (1) to the conduct of accounts, the execution of transactions, and the handling of orders in index warrants listed on the Exchange; and (2) to the extent appropriate unless otherwise stated herein, to the conduct of accounts, the execution of transactions, and the handling of orders in other exchange-listed stock index warrants, currency index warrants, and currency warrants by members who are not members of the exchange on which the warrant is listed or traded.

(b) Except to the extent that specific provisions in this Rule Series govern, or unless the context otherwise requires, the provisions of the Equity Rules and all other interpretations and policies shall also be applicable to transactions in index warrants, currency index warrants, and currency warrants.

(c) The Rules in this Rule 2840 Series are not applicable to stock index warrants, currency index warrants, and currency warrants listed on national securities exchanges prior to September 28, 1995.

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2842. Definitions

(a) "Control"

(1) The term "control" means the power or ability of an individual or entity to make investment decisions for an account or accounts, or influence directly or indirectly the investment decisions of any person or entity who makes investment decisions for an account. In addition, control will be presumed in the following circumstances:

(A) among all parties to a joint account who have authority to act on behalf of the account;

(B) among all general partners to a partnership account;

(C) when a person or entity:

(i) holds an ownership interest of 10 percent or more in an entity (ownership interest of less than 10 percent will not preclude aggregation), or

(ii) shares in 10 percent or more of profits and/or losses of an account;

(D) when accounts have common directors or management;

(E) where a person or entity has the authority to execute transactions in an account.

(2) Control, presumed by one or more of the above powers, abilities or circumstances, can be rebutted by proving the factor does not exist or by showing other factors which negate the presumption of control. The rebuttal proof must be submitted by affidavit and/or such other evidence as may be appropriate in the circumstances.

(3) The Exchange will also consider the following factors in determining if aggregation of accounts is required:

(A) similar patterns of trading activity among separate entities;

(B) the sharing of kindred business purposes and interests;

(C) whether there is common supervision of the entities which extends beyond assuring adherence to each entity's investment objectives and/or restrictions;

(D) the degree of contact and communication between directors and/or managers of separate accounts.

(b) The term "currency index" means a group of currencies each of whose inclusion and relative representation in the group is determined by its inclusion and relative representation in a currency index.

(c) The term "currency index warrants" shall mean instruments that are direct obligations of the issuing company, either exercisable throughout their life (i.e., American style) or exercisable only on their expiration date (i.e., European style), entitling the holder thereof to a cash settlement in U.S. dollars to the extent that the value of the underlying currency index has declined below (in the case of a put warrant) or increased above (in the case of a call warrant) the pre-stated cash settlement value of the underlying currency index.

(d) The term "currency warrants" shall mean instruments that are direct obligations of the issuing company, either exercisable throughout their life (i.e., American style) or exercisable only on their expiration date (i.e., European style), entitling the holder thereof to a cash settlement in U.S. dollars to the extent that the value of the underlying foreign currency has declined below (in the case of a put warrant) or increased above (in the case of a call warrant) the pre-stated cash settlement value of the underlying foreign currency. The term "foreign currency warrants" shall also include cross-rate currency warrants.

(e) The term "index warrants" means instruments that are direct obligations of the issuing company, either exercisable throughout their life (i.e., American style) or exercisable only on their expiration date (i.e., European style), entitling the holder thereof to a cash settlement in U.S. dollars to the extent that the value of the underlying stock index group has declined below (in the case of a put warrant) or increased above (in the case of a call warrant) the pre-stated cash settlement value of the underlying stock index group.

(f) The term "stock index group" means a group of stocks each of whose inclusion and relative representation in the group is determined by its inclusion and relative representation in a stock index.

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2843. Account Approval

(a) No member or person associated with a member shall accept an order from a customer to purchase or sell an index warrant, currency index warrant, or currency warrant unless the customer's account has been approved for options trading pursuant to NASD Rule 2860(b)(16). To the extent that it is made applicable to index warrants, currency index warrants, and currency warrants by NASD Rule 2843, Exchange Members and their associated persons shall comply with NASD Rule 2860(b)(16) as if such Rule were part of the Rules of the Exchange.

FINRA is in the process of consolidating certain NASD rules into a new FINRA rulebook. If the provisions of NASD Rules 2843 or 2860(b)(16) are transferred into the FINRA rulebook, then Equity Rule 2843 shall be construed to require Exchange members and persons associated with a member to comply with the FINRA rules corresponding to NASD Rules 2843 and 2860(b)(16) (regardless of whether such rules are renumbered or amended) as if such rule were part of the Rules of the Exchange.

(b) For purposes of this Rule, references to "the Rules of the Association" shall be construed as references to "the Rules of the Exchange", and references to the "Association" shall be construed as references to the Exchange.

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2844. Suitability

The provisions of NASD Rule 2860(b)(19) shall apply to recommendations by members and persons associated with members regarding the purchase or sale of index warrants, currency index warrants, or currency warrants. To the extent that it is made applicable to index warrants, currency index warrants, and currency warrants by NASD Rule 2844, Exchange Members and their associated persons shall comply with NASD Rule 2860(b)(19) as if such Rule were part of the Rules of the Exchange.

FINRA is in the process of consolidating certain NASD rules into a new FINRA rulebook. If the provisions of NASD Rules 2844 or 2860(b)(19) are transferred into the FINRA rulebook, then Equity Rule 2844 shall be construed to require Exchange members and persons associated with a member to comply with the FINRA rules corresponding to NASD Rules 2844 and 2860(b)(19) (regardless of whether such rules are renumbered or amended) as if such rule were part of the Rules of the Exchange.

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2845. Discretionary Accounts

(a) Insofar as a member or person associated with a member exercises discretion to trade in index warrants, currency index warrants, or currency warrants in a customer's account, such account shall be subject to the provisions of NASD Rule 2860(b)(18). To the extent that it is made applicable to index warrants, currency index warrants, and currency warrants by NASD Rule 2845, Exchange Members and their associated persons shall comply with NASD Rule 2860(b)(18) as if such Rule were part of the Rules of the Exchange.

FINRA is in the process of consolidating certain NASD rules into a new FINRA rulebook. If the provisions of NASD Rules 28456 or 2860(b)(18) are transferred into the FINRA rulebook, then Equity Rule 2845 shall be construed to require Exchange members and persons associated with a member to comply with the FINRA rules corresponding to NASD Rules 2845 and 2860(b)(19) (regardless of whether such rules are renumbered or amended) as if such rule were part of the Rules of the Exchange.

(b) For purposes of this rule, references to Rule 2510 and Rule 3110(c)(4) shall be construed as references to Equity Rule 2510 and Equity Rule 3110(c)(4).

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2846. Supervision of Accounts

(a) The provisions of NASD Rule 2860(b)(20) shall apply to all customer accounts of a member in which transactions in index warrants, currency index warrants, or currency warrants are effected. To the extent that it is made applicable to index warrants, currency index warrants, and currency warrants by NASD Rule 2846, Exchange Members and their associated persons shall comply with NASD Rule 2860(b)(20) as if such Rule were part of the Rules of the Exchange.

FINRA is in the process of consolidating certain NASD rules into a new FINRA rulebook. If the provisions of NASD Rules 2846 or 2860(b)(20) are transferred into the FINRA rulebook, then Equity Rule 2846 shall be construed to require Exchange members and persons associated with a member to comply with the FINRA rules corresponding to NASD Rules 2846 and 2860(b)(19) (regardless of whether such rules are renumbered or amended) as if such rule were part of the Rules of the Exchange.

(b) For purposes of this rule, references to Rules 3010, 3012, and 3013 shall be construed as references to Equity Rules 3010, 3012, and 3013.

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2847. Customer Complaints

(a) The record-keeping requirements of NASD Rule 2860(b)(17)(A) concerning the receipt and handling of customer complaints relating to options shall also apply to customer complaints relating to index warrants, currency index warrants, or currency warrants. To the extent that it is made applicable to index warrants, currency index warrants, and currency warrants by NASD Rule 2847, Exchange Members and their associated persons shall comply with NASD Rule 2860(b)(17)(A) as if such Rule were part of the Rules of the Exchange.

FINRA is in the process of consolidating certain NASD rules into a new FINRA rulebook. If the provisions of NASD Rules 2847 or 2860(b)(17)(A) are transferred into the FINRA rulebook, then Equity Rule 2847 shall be construed to require Exchange members and persons associated with a member to comply with the FINRA rules corresponding to NASD Rules 2847 and 2860(b)(17)(A) (regardless of whether such rules are renumbered or amended) as if such rule were part of the Rules of the Exchange.

(b) For purposes of this rule, references to Rule 3110 shall be construed as references to Equity Rule 3110.

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2848. Communications with the Public and Customers Concerning Index Warrants, Currency Index Warrants, and Currency Warrants

(a) The provisions of FINRA Rule 2220 (except FINRA Rule 2220(c)) shall be applicable to communications to customers regarding index warrants, currency index warrants, or currency warrants. To the extent that it is made applicable to index warrants, currency index warrants, and currency warrants by NASD Rule 2848, Exchange Members and their associated persons shall comply with FINRA Rule 2220 (except FINRA Rule 2220(c)) as if such Rule were part of the Rules of the Exchange.

FINRA is in the process of consolidating certain NASD rules into a new FINRA rulebook. If the provisions of NASD Rules 2848 are transferred into the FINRA rulebook, then Equity Rule 2848 shall be construed to require Exchange members and persons associated with a member to comply with the FINRA rules corresponding to NASD Rule 2848, but regardless of whether such rules are renumbered or amended) as if such rule were part of the Rules of the Exchange.

(b) For purposes of this rule, references to "NASD" or "FINRA" shall be construed as references to the Exchange.

Adopted Dec. 23, 2008 (SR-BSE-2008-48); amended Jan. 14, 2010 (SR-BX-2010-006), operational Feb. 13, 2010.

2849. Maintenance of Records

The record-keeping provisions of NASD Rule 2860(b)(17)(B) shall be applicable to customer accounts approved to trade index warrants, currency index warrants, or currency warrants. To the extent that it is made applicable to index warrants, currency index warrants, and currency warrants by NASD Rule 2849, Exchange Members and their associated persons shall comply with NASD Rule 2860(b)(17)(B) as if such Rule were part of the Rules of the Exchange.

FINRA is in the process of consolidating certain NASD rules into a new FINRA rulebook. If the provisions of NASD Rules 2849 or 2860(b)(17)(B) are transferred into the FINRA rulebook, then Equity Rule 2849 shall be construed to require Exchange members and persons associated with a member to comply with the FINRA rules corresponding to NASD Rules 2849 and 2860(b)(17)(A) (regardless of whether such rules are renumbered or amended) as if such rule were part of the Rules of the Exchange.

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2850. Position Limits

(a) Except with the prior written approval of the Exchange pursuant to the Rule 9600 Series for good cause shown, no member shall effect for any account in which such member has an interest, or for the account of any partner, officer, director or employee thereof, or for the account of any customer, a purchase or sale transaction in an index warrant listed on the Exchange or on another national securities exchange if the member has reason to believe that as a result of such transaction the member, or partner, officer, director or employee thereof, or customer would, acting alone or in concert with others, directly or indirectly, hold or control an aggregate position in an index warrant issue on the same side of the market, combining such index warrant position with positions in index warrants overlying the same index on the same side of the market, in excess of the position limits established by the Exchange or the other exchange on which the index warrant is listed.

(b) In determining compliance with this Rule, the position limits for index warrants listed on the Exchange are as follows:

(1) Fifteen million warrants with respect to warrants on the same stock index (other than the Standard & Poor's MidCap 400 Index) with an original issue price of ten dollars or less.

(2) Seven million five hundred thousand warrants, with respect to warrants on the Standard & Poor's MidCap 400 Index with an original issue price of ten dollars or less.

(3) For stock index warrants with an original issue price greater than ten dollars, positions in these warrants must be converted to the equivalent of warrants on the same index priced initially at ten dollars by dividing the original issue price of the index warrants priced above ten dollars by ten and multiplying this number by the size of such index warrant position. After recalculating a warrant position pursuant to this subparagraph, such recalculated warrant position shall be aggregated with other warrant positions on the same underlying index on the same side of the market and subjected to the applicable position limit set forth in subparagraph (1) or (2) above. For example, if an investor held 100,000 Nasdaq 100 Index warrants offered originally at $20 per warrant, the size of this position for the purpose of calculating position limits would be 200,000, or 100,000 times 20/10.

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2851. Exercise Limits

(a) Except with the prior written approval of the Exchange pursuant to the Rule 9600 Series for good cause shown, in each instance, no member or person associated with a member shall exercise, for any account in which such member or person associated with such member has an interest, or for the account of any partner, officer, director or employee thereof, or for the account of any customer, a long position in any index warrant if as a result thereof such member or partner, officer, director or employee thereof or customer, acting alone or in concert with others, directly or indirectly:

(1) has or will have exercised within any five (5) consecutive business days a number of index warrants overlying the same index in excess of the limits for index warrant positions contained in Rule 2850; or

(2) has or will have exceeded the applicable exercise limit fixed from time to time by an exchange other than the Exchange.

(b) The Exchange, pursuant to the Rule 9600 Series for good cause shown, may institute other limitations concerning the exercise of index warrants from time to time. Reasonable notice shall be given of each new limitation fixed by the Exchange. These exercise limitations are separate and distinct from any other exercise limitations imposed by the issuers of index warrants.

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2852. Reporting Requirements

(a) Each member shall file with the Regulation Department a report with respect to each account in which the member has an interest, each account of a partner, officer, director or employee of such member, and each customer account of the member, which has established an aggregate position of 100,000 index warrants on the same side of the market in an index warrant issue listed on the Exchange, combining such index warrant position with positions in index warrants overlying the same index on the same side of the market traded on the Exchange or another national securities exchange.

(b) Such report shall identify the person or persons having an interest in such account and shall identify separately the total number of each type of index warrant that comprises the reportable position in such account. The report shall be in such form as may be prescribed by the Regulation Department and shall be filed no later than the close of business on the next business day following the day on which the transaction or transactions necessitating the filing of such report occurred. Whenever a report shall be required to be filed with respect to an account pursuant to this Rule, the member filing such report shall file with the Regulation Department such additional periodic reports with respect to such account as the Regulation Department may from time to time prescribe.

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2853. Liquidation of Index Warrant Positions

(a) Whenever the Regulation Department determines that a person or group of persons acting in concert holds or controls an aggregate position (whether short or long) in index warrants overlying the same index in excess of the position limitations established by Rule 2850, it may, when deemed necessary or appropriate in the public interest and for the protection of investors, direct any member or all members carrying a position in index warrants overlying such index for such person or persons to liquidate such position or positions, or portions thereof, as expeditiously as possible and consistent with the maintenance of an orderly market, so as to bring such person or persons into compliance with the position limitations contained in Rule 2850.

(b) Whenever such a directive is issued by the Regulation Department no member receiving notice thereof shall accept and/or execute for any person or persons named in such directive any order to purchase or sell short any index warrants based on the same index, unless in each instance express approval therefor is given by the Regulation Department, or the directive is rescinded.

Adopted Dec. 23, 2008 (SR-BSE-2008-48).

2854. Reserved

 

Reserved Dec. 23, 2008 (SR-BSE-2008-48).

 
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