rulebook-banner
Nasdaq Regulation Banner
rulebook-rules-menu
BSECC  | BX  | GEMX  | ISE  | MRX  | Nasdaq  | NFX  | PHLX  | SCCP   
Rulebook - Nasdaq PHLX
Print | Copy Link
Home > Nasdaq PHLX >
General 2 Organization and Administration
Section 1. Reserved

Adopted Feb. 3, 2020 (20-03).

Section 2. Fees, Dues and Other Charges

(a) The Board of Directors shall have the power (i) to establish, assess and levy such fees, dues and other charges (including, without limitation, any extraordinary assessments) upon permit holders, members, member organizations and any other persons using the facilities or services of the Exchange, and upon applicants for and persons being admitted, registered, qualified and/or initiated to any such status, in each case as the Board of Directors may from time to time establish by resolution or in the Rules of the Exchange (which shall be deemed to include any schedule of fees, dues, other charges and penalties as may be in effect from time to time), (ii) to establish rebates, credits and discounts with respect to any of the foregoing, (iii) to establish programs whereby the Exchange shares or permits any person to participate in any identified source of revenues (less any expenses or other charges as the Exchange shall determine) of the Exchange, (iv) to provide for the direct reimbursement to the Exchange of any cost, expense or category thereof, and (v) except insofar as otherwise specified or provided for in the By-Laws, to establish and assess penalties for failure to pay any fees, dues or charges owed to the Exchange, including, without limitation, termination of a permit (which permit may be reissued) and forfeiture of all rights as a member, member organization or permit holder. The Board of Directors may authorize any committee thereof or the Chair of the Board of Directors to exercise any powers of the Board of Directors with respect to the assessment of fees, dues, other charges and penalties authorized in accordance with this Section.

(b) Without limiting the generality of the provisions of the By-Laws, the Board of Directors may, from time to time, fix and impose charges upon members or member organizations, measured by their respective net commissions on transactions effected on the Exchange. Such charges shall be payable at such times and shall be collected in such manner as may be determined by the Board of Directors.

(c) The obligation of members, and member organizations to abide by the provisions of these By-Laws and the Rules of the Exchange shall include, without limitation, the obligation to pay all applicable fees, dues and other charges imposed thereon by these By-Laws or the Rules of the Exchange.

(d) The Board of Directors or their designee may suspend or terminate, after due notice, any permit or rights of any member, member organization or employee thereof using facilities or services of the Exchange, or enjoying any of the privileges therein, who shall not pay dues, fees, other charges, other monies due and owed the Exchange, fines and/or other monetary sanctions in accordance with the Rules of the Exchange.

(e) Subject to the following conditions and procedures, a member or a member organization may pay a regulatory fine via an installment plan:

(1) The member or member organization must check the installment plan option on the election of payment form included with the offer of settlement.

(2) The fine under the offer of settlement must be fifty thousand dollars ($50,000) or more. A fine of less than fifty thousand dollars ($50,000) is not eligible for the installment plan.

(3) A down payment of twenty-five percent (25%) or more of the total fine must be submitted with the signed offer of settlement.

(4) An installment package, including a promissory note and payment schedule, will be mailed to the member or member organization upon receipt of the down payment, as required in paragraph (3) above.

(5) An executed (signed and notarized) promissory note for the unpaid balance of the fine must be returned with the first installment payment.

(6) The term of the installment plan shall not exceed four (4) years after the execution of the offer of settlement. The member or member organization may elect monthly or quarterly payments.

(f) Member Obligations. Each member shall be liable for such fees, fines, dues, penalties and other amounts imposed by the Exchange in connection with his permit or any activities conducted in connection therewith by such member, whether or not any such obligation was incurred on behalf or for his account, or on behalf or for the account of his member organization.

(g) Member Organization Obligations. Each member organization shall be liable for all fees, fines, dues, penalties or other amounts imposed by the Exchange upon such member organization, and upon, any member associated with such member organization in connection with a permit or any activities conducted in connection therewith by such member on behalf or for the account of such member organization. Member organizations may allocate responsibilities as among themselves regarding members associated with more than one member organization, provided that such allocation and any amendment thereto is in writing and duly executed by authorized officers or partners of such member organization and submitted to the Exchange in a form prescribed by the Exchange at least 30 days prior to the effectiveness thereof or such shorter period as the Chairman of the Board of Directors or his designee shall specify.

(h) Effect of Suspension or Termination on Payment of Fees. The suspension or termination of a permit shall not relieve the holder thereof or its member organization from any obligation to pay any applicable dues, fees or other charges billed or accrued through the time of such suspension or termination, and any fines or penalties assessed before or after the time of such suspension or termination.

(i) Effect of Suspension or Termination. When a member's permit is suspended under the provisions of this Rule, such member shall be deprived during the term of such suspension of all rights and privileges of a member but he or she may be proceeded against by the Exchange for any offense other than that for which such suspension was imposed. The termination of any permit or rights and privileges of a member shall terminate all rights and privileges (but not the obligations) arising out of his possession of a permit.

Adopted Feb. 3, 2020 (20-03).

Section 3. Exchange's Costs of Defending Legal Proceedings

Any member or member organization, or person associated with any of the foregoing who fails to prevail in a lawsuit or other legal proceeding instituted by such person or entity against the Exchange or any of its board members, officers, committee members, employees, or agents, and related to the business of the Exchange, shall pay to the Exchange all reasonable expenses, including attorneys' fees, incurred by the Exchange in the defense of such proceeding, but only in the event that such expenses exceed $50,000.00. This provision shall not apply to disciplinary actions by the Exchange, to administrative appeals of Exchange actions or in any specific instance where the Board has granted a waiver of this provision.

Adopted Feb. 3, 2020 (20-03).

Section 4. Affiliation and Ownership Restrictions

(a) Nasdaq Ownership Restriction

(i) No member, member organization, or person associated with a member organization shall be the beneficial owner of greater than twenty percent (20%) of the then-outstanding voting securities of Nasdaq, Inc.

(ii) For purposes of this Rule, any calculation of the number of shares of common stock outstanding at any particular time shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i)(D) under the Exchange Act, as amended ("Exchange Act"). The term "beneficial owner" shall have the meaning set forth in the Restated Certificate of Incorporation of Nasdaq, Inc.

(b) Restrictions on Affiliation

(i) Except as provided in paragraph (ii) below:

(A) an Exchange member or member organization, or an affiliate of an Exchange member or member organization, acquiring or holding an equity interest in Nasdaq, Inc. that is permitted by the ownership limitations contained in subparagraph (a), or

(B) an Exchange member or member organization shall not be or become an affiliate of the Exchange, or an affiliate of an entity affiliated with the Exchange, in the absence of an effective filing under Section 19(b) of the Exchange Act.

The term "affiliate" shall have the meaning specified in Rule 12b-2 under the Exchange Act; provided, however, that for purposes of this Rule, one entity shall not be deemed to be an affiliate of another entity solely by reason of having a common director. The term "business venture" means an arrangement under which (A) the Exchange or an entity with which it is affiliated, and (B) an Exchange member or member organization, or an affiliate of an Exchange member or member organization, engage in joint activities with an expectation of shared profit and a risk of shared loss from common entrepreneurial efforts.

(ii) Nothing in this Rule shall prohibit, or require a filing under Section 19(b) of the Exchange Act, for:

(A) an Exchange member or member organization, or an affiliate of an Exchange member or member organization, acquiring or holding an equity interest in Nasdaq, Inc. that is permitted by the ownership limitations contained in Rule 985(a), or

(B) the Exchange or an entity affiliated with the Exchange acquiring or maintaining an ownership interest in, or engaging in a business venture with, an affiliate of an Exchange member or member organization if:

(I) there are information barriers between the member or member organization and the Exchange and its facilities, such that the member or member organization

(aa) will not be provided an informational advantage concerning the operation of the Exchange and its facilities, and will not be provided changes or improvements to the System that are not available to the industry generally or other Exchange members or member organizations;

(bb) will not have any knowledge in advance of other Exchange members or member organizations of proposed changes, modifications, or improvements to the operations or Systems of the Exchange and its facilities, including advance knowledge of Exchange filings pursuant to Section 19(b) of the Exchange Act;

(cc) will be notified of any proposed changes, modifications, or improvements to the operations or Systems of the Exchange and its facilities in the same manner as other Exchange members or member organizations are notified; and

(dd) will not share employees, office space, or databases with the Exchange or its facilities, Nasdaq, Inc., or any entity that is controlled by Nasdaq, Inc.; and

(II) the Exchange's Board certifies, on an annual basis, to the SEC's Division of Trading and Markets that the Exchange has taken all reasonable steps to implement the requirements of this Rule and is in compliance therewith.

(c)

(1) Nasdaq, Inc., which owns Nasdaq Options Services, LLC and the Exchange, shall establish and maintain procedures and internal controls reasonably designed to ensure that Nasdaq Options Services, LLC does not develop or implement changes to its system on the basis of non-public information regarding planned changes to the Exchange's systems, obtained as a result of its affiliation with the Exchange, until such information is available generally to similarly situated Exchange members and member organizations in connection with the provision of inbound routing to the Exchange.

(2) Nasdaq, Inc., which owns Nasdaq Execution Services, LLC and the Exchange, shall establish and maintain procedures and internal controls reasonably designed to ensure that Nasdaq Execution Services, LLC does not develop or implement changes to its system on the basis of non-public information regarding planned changes to the Exchange's systems, obtained as a result of its affiliation with the Exchange, until such information is available generally to similarly situated Exchange members and member organizations in connection with the provision of inbound routing to the Exchange.

Adopted Feb. 3, 2020 (20-03); amended April 16, 2020 (20-22).

Section 5. Reserved

Adopted Feb. 3, 2020 (20-03).

Section 6. Reserved

Adopted Feb. 3, 2020 (20-03).

Section 7. Reserved

Adopted Feb. 3, 2020 (20-03).

Section 8. Reserved

Adopted Feb. 3, 2020 (20-03).

Section 9. Reserved

Adopted Feb. 3, 2020 (20-03).

Section 10. Reserved

Adopted Feb. 3, 2020 (20-03).

Section 11. Reserved

Adopted Feb. 3, 2020 (20-03).

Section 12. The Exchange's Business Continuity and Disaster Recovery Plan Testing Requirements for Member Organizations and PSX Participants Pursuant to Regulation SCI

With respect to the Exchange's business continuity and disaster recovery plans, including its backup systems, the Exchange shall:

(a) Establish standards for the designation of those Member Organizations and PSX Participants that the Exchange reasonably determines are, taken as a whole, the minimum necessary for the maintenance of fair and orderly markets in the event of the activation of such plans. Such standards may include volume-based and/or market share-based criteria, and may be adjusted from time to time by the Exchange. The Exchange will provide public notice of the standards;

(b) Designate Members Organizations and PSX Participants pursuant to the standards established in paragraph (a) of this rule and require participation by such designated Members Organizations and PSX Participants in scheduled functional and performance testing of the operation of such plans, in the manner and frequency specified by the Exchange, provided that such frequency shall not be less than once every 12 months. The Exchange will provide at least six months prior notice to Members Organizations and PSX Participants that are designated for mandatory testing, and participation of such Members Organizations and PSX Participants is a condition of membership.

Adopted Feb. 3, 2020 (20-03).

Section 13. Reserved

Adopted Feb. 3, 2020 (20-03).

Section 14. Additional Requirements for Securities Listed on the Exchange Issued by Nasdaq or its Affiliates

(a) For purposes of this Rule, the terms below are defined as follows:

(1) "Nasdaq Affiliate" means Nasdaq, Inc. and any entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with Nasdaq, Inc., where "control" means that the one entity possesses, directly or indirectly, voting control of the other entity either through ownership of capital stock or other equity securities or through majority representation on the board of directors or other management body of such entity.

(2) "Affiliate Security" means any security issued by a Nasdaq Affiliate or any Exchange-listed option on any such security, with the exception of Trust Shares and Index Fund Shares.

(A) The term "Trust Shares" means a security (a) that is based on a unit investment trust ("Trust") which holds the securities which comprise an index or portfolio underlying a series of Trust Shares; (b) that is issued by the Trust in a specified aggregate minimum number in return for a "Portfolio Deposit" consisting of specified numbers of shares of stock plus a cash amount; (c) that, when aggregated in the same specified minimum number, may be redeemed from the Trust which will pay to the redeeming holder the stock and cash then comprising the "Portfolio Deposit"; and (d) that pays holders a periodic cash payment corresponding to the regular cash dividends or distributions declared with respect to the component securities of the stock index or portfolio of securities underlying the Trust Shares, less certain expenses and other charges as set forth in the Trust prospectus.

(B) The term "Index Fund Shares" means a security (a) that is issued by an open-end management investment company based on a portfolio of stocks that seeks to provide investment results that correspond generally to the price and yield performance of specified foreign or domestic stock index; (b) that is issued by such an open-end management investment company in a specified aggregate minimum number in return for a deposit of specified numbers of shares of stock and/or a cash amount with a value equal to the next determined net asset value; and (c) that, when aggregated in the same specified minimum number, may be redeemed at a holder's request by such open-end investment company which will pay to the redeeming holder the stock and/or cash with a value equal to the next determined net asset value.

(b) Upon initial and throughout continued listing and trading of the Affiliate Security on the Exchange, the Exchange shall:

(1) provide a quarterly report to the Exchange's Regulatory Oversight Committee detailing the Exchange's monitoring of:

(A) the Affiliate's securities compliance with the listing requirements; and

(B) the trading of the Affiliate Security, which shall include summaries of all related surveillance alerts, complaints, regulatory referrals, trades cancelled or adjusted pursuant to PSX Rule 3312, investigations, examinations, formal and informal disciplinary actions, exception reports and trading data of such security.

(2) engage an independent accounting firm once a year to review and prepare a report on the Affiliate Security to ensure that the Affiliate is in compliance with the listing requirements and promptly provide PHLX's Regulatory Oversight Committee with a copy of the report prepared by the independent accounting firm.

(c) In the event that the Exchange determines that the Affiliate is not in compliance with any of the listing requirements the Exchange shall file a report with the Commission within five business days of providing notice to the issuer of its non-compliance. The report shall identify the date of non-compliance, type of non-compliance and any other material information conveyed to the issuer in the notice of non-compliance. Within five business days of receipt of a plan of compliance from the issuer, the Exchange shall notify the Commission of such receipt, whether the plan of compliance was accepted by the Exchange or what other action was taken with respect to the plan and the time period provided to regain compliance within the listing standards, if any.

Adopted Feb. 3, 2020 (20-03).

Section 15. Reserved

Adopted Feb. 3, 2020 (20-03).

Section 16. Reserved.

Adopted Feb. 3, 2020 (20-03).

Section 17. Accommodations

Notwithstanding the limitations of liability set forth in Options 3, Section 27, Options 4A, Sections 19, and PSX Rule 3226, the Exchange, subject to the express limits set forth below, may compensate users of Nasdaq PHLX for losses directly resulting from the actual failure of the System or any other Exchange quotation, transaction reporting, execution, order routing or other systems or facility to correctly process an order, Quote/Order, message, or other data, provided that Nasdaq PHLX has acknowledged receipt of the order, Quote/Order, message, or data.

(1) For the aggregate of all claims made by all market participants related to the use of Nasdaq PHLX during a single calendar month, the Exchange's liability shall not exceed the larger of $500,000, or the amount of the recovery obtained by the Exchange under any applicable insurance policy.

(2) In the event all of the claims arising out of the use of Nasdaq PHLX cannot be fully satisfied because in the aggregate they exceed the maximum amount of liability provided for in this Rule, then the maximum amount will be proportionally allocated among all such claims arising during a single calendar month.

(3) All claims for compensation pursuant to this Rule shall be in writing and must be submitted no later than 12:00 P.M. ET on the next business day following the day on which the use of Nasdaq PHLX gave rise to such claims. Nothing in this rule shall obligate the Exchange to seek recovery under any applicable insurance policy.

Adopted Feb. 3, 2020 (20-03).

Section 18. Members' Contracts

(a) All contracts of a member of the Exchange or a member organization with any member of the Exchange or with any member organization for the purchase, sale, borrowing, loaning or hypothecation of securities, or for the borrowing, loaning, or payment of money, whether occurring upon the Exchange or elsewhere, are members' contracts.

(b) An exchange contract is:

(1) a member's contract made on the Exchange; and

(2) a member's contract not made on the Exchange, unless made subject to the rules of another exchange, or unless the parties thereto have expressly agreed that the same shall not be an exchange contract.

Adopted Feb. 3, 2020 (20-03).

Section 19. Deliveries through Registered Clearing Agencies

Clearance and settlement of transactions effected on the Exchange shall be made through one or more registered clearing agencies providing such services unless it is otherwise agreed by the parties to the transaction.

Adopted Feb. 3, 2020 (20-03).

Section 20. Disapproval of Business

Whenever it shall appear to the Board of Directors that a member has formed a business entity or established an office or headquarters or is individually or through any member of his or her organization interested in a business entity, or has formed any business connection, whereby the interest or good repute of the Exchange may suffer, the Board of Directors may require the dissolution of any such business entity or the discontinuance of such business, office or headquarters or business connection, as the case may be.

Adopted Feb. 3, 2020 (20-03).

Section 21. Office Vacated by Suspension or Termination

Upon the suspension or termination by the Exchange of any permit or the rights and privileges of a member, whether for insolvency or otherwise, any office in the Exchange held by him shall thereupon become vacant.

Adopted Feb. 3, 2020 (20-03).

Section 22. Sponsored Participants

(a) The Exchange shall be available for entry and execution of orders by Sponsored Participants with authorized access. Sponsored Access shall mean an arrangement whereby a member organization permits its customers to enter orders into the Exchange's System that bypass the member organization's trading system and are routed directly to the Exchange, including routing through a service bureau or other third party technology provider.

(b) A Sponsored Participant may obtain authorized access to the Exchange only if such access is authorized in advance by one or more Sponsoring Member Organizations as follows:

(i) Sponsored Participants must enter into and maintain participant agreements with one or more Sponsoring Member Organizations establishing a proper relationship(s) and account(s) through which the Sponsored Participant may trade on the Exchange ("Customer Agreement"). Such Customer Agreement(s) must incorporate sponsorship provisions set forth in sub-paragraph (ii) below.

(ii) For a Sponsored Participant to obtain and maintain authorized access to the Exchange, a Sponsored Participant and its Sponsoring Member Organization must agree in writing to the following sponsorship provisions:

(A) The authorized access must comply with Rule 15c3-5 under the Exchange Act.

(B) The Sponsoring Member Organization acknowledges and agrees that:

(1) All orders entered by the Sponsored Participant and any person acting on behalf of or in the name of such Sponsored Participant and any executions occurring as a result of such orders are binding in all respects on the Sponsoring Member Organization;

(2) Sponsoring Member Organization is responsible for any and all actions taken by such Sponsored Participant and any person acting on behalf of or in the name of such Sponsored Participant.

(C) Sponsoring Member Organization shall comply with the Exchange's Limited Liability Company Agreement, By-Laws, Rules and procedures with regard to the Exchange and Sponsored Participant shall comply with the Exchange's Limited Liability Company Agreement, By-Laws, Rules and procedures with regard to the Exchange, as if Sponsored Participant were an Exchange member organization.

(D) Sponsored Participant shall maintain, keep current and provide to the Sponsoring Member Organization a list of individuals authorized to obtain access to the Exchange on behalf of the Sponsored Participant.

(E) Sponsored Participant shall familiarize its authorized individuals with all of the Sponsored Participant's obligations under this Rule and will assure that they receive appropriate training prior to any use or access to the Exchange.

(F) Sponsored Participant may not permit anyone other than authorized individuals to use or obtain access to the Exchange.

(G) Sponsored Participant shall take reasonable security precautions to prevent unauthorized use or access to the Exchange, including unauthorized entry of information into the Exchange, or the information and data made available therein. Sponsored Participant understands and agrees that Sponsored Participant is responsible for any and all orders, trades and other messages and instructions entered, transmitted or received under identifiers, passwords and security codes of authorized individuals, and for the trading and other consequences thereof.

(H) Sponsored Participant acknowledges its responsibility to establish adequate procedures and controls that permit it to effectively monitor its employees', agents' and Participants' use and access to the Exchange for compliance with the terms of this agreement.

(I) Sponsored Participant shall pay when due all amounts, if any, payable to Sponsoring Member Organization, Exchange, or any other third parties that arise from the Sponsored Participant's access to and use of the Exchange. Such amounts include, but are not limited to applicable exchange and regulatory fees.

 
home_footer_links
Copyright_statement
App Store       Google Play       Listing Center Content RSS Feed
The Nasdaq Stock Market, Nasdaq, The Nasdaq Global Select Market, The Nasdaq Global Market, The Nasdaq Capital Market, ExACT and Exchange Analysis and Compliance Tracking system are trademarks of Nasdaq, Inc.
FINRA® and Financial Industry Regulatory Authority, Inc.® are registered trademarks of Financial Industry Regulatory Authority, Inc. OTCBBTM and OTC Bulletin BoardTM are trademarks of FINRA