§ 78f. — National securities exchanges.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC78f]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2B--SECURITIES EXCHANGES
Sec. 78f. National securities exchanges
(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 78s(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.
(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 chapter and to comply, and
(subject to any rule or order of the Commission pursuant to section
78q(d) or 78s(g)(2) of this title) to enforce compliance by its
members and persons associated with its members, with the provisions
of this chapter, 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 chapter matters not related to the purposes of this chapter 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 78q(d) or 78s(g)(2)
of this title) its members and persons associated with its members
shall be appropriately disciplined for violation of the provisions
of this chapter, 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 chapter.
(9) 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 78n(h) of this
title), unless such transaction was conducted in accordance with
procedures designed to protect the rights of limited partners,
including--
(A) 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;
(B) the right not to have their voting power unfairly
reduced or abridged;
(C) the right not to bear an unfair portion of the costs of
a proposed limited partnership rollup transaction that is
rejected; and
(D) 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.
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.
(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 is 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.
(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.
(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.
(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.
(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 78s(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
chapter.
(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 chapter, 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.
(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.
(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 self-regulatory 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.
(e) Commissions, allowances, discounts, and other fees
(1) On and after June 4, 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 78s(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
chapter, 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 chapter.
(2) Notwithstanding the provisions of section 78s(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 chapter.
(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.
(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.
(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.
(D) A transcript shall be kept of any oral presentation and cross-
examination.
(E) In addition to the bases specified in section 78y(a) of this
title, a reviewing Court may set aside an order of the Commission under
section 78s(b) of this title 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 subparagraph (A) of this
paragraph that an interested person is not entitled to conduct
cross-examination or make rebuttal submissions, or
(2) a Commission rule or ruling under 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.
(f) Compliance of non-members 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.
(g) Notice registration of security futures product exchanges
(1) Registration required
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)) [7 U.S.C.
1 et seq.], 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 [7
U.S.C. 7a] 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 [7
U.S.C. 2(a)(1)(C)].
(2) Registration by notice filing
(A) Form and content
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 subsection (a) of this section, 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) Immediate effectiveness
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) Termination
Such registration shall be terminated immediately if any of
the conditions for registration set forth in this subsection are
no longer satisfied.
(3) Public availability
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) Exemption of exchanges from specified provisions
(A) Transaction exemptions
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 chapter 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 78h of this title.
(iii) Section 78k of this title.
(iv) Subsections (d), (f), and (k) of section 78q of
this title.
(v) Subsections (a), (f), and (h) of section 78s of this
title.
(B) Rule change exemptions
An exchange that registered under paragraph (1) of this
subsection shall also be exempt from submitting proposed rule
changes pursuant to section 78s(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 78s(b)(7) of this title;
(ii) such exchange shall file pursuant to sections
78s(b)(1) and 78s(b)(2) of this title proposed rule changes
related to margin, except for changes resulting in higher
margin levels; and
(iii) such exchange shall file pursuant to section
78s(b)(1) of this title proposed rule changes that have been
abrogated by the Commission pursuant to section 78s(b)(7)(C)
of this title.
(5) Trading in security futures products
(A) In general
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 December 21, 2000; or
(ii) such date that a futures association registered
under section 17 of the Commodity Exchange Act [7 U.S.C. 21]
has met the requirements set forth in section 78o-3(k)(2) of
this title.
(B) Principal-to-principal transactions
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
[7 U.S.C. 1a(12)(B)(ii)]; and
(II) only between eligible contract participants (as
defined in subparagraphs (A), (B)(ii), and (C) of such
section 1a(12) [7 U.S.C. 1a(12)(A), (B)(ii), (C)]) 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 December 21, 2000; or
(II) such date that a futures association registered
under section 17 of the Commodity Exchange Act [7 U.S.C.
21] has met the requirements set forth in section 78o-
3(k)(2) of this title.
(h) Trading in security futures products
(1) Trading on exchange or association required
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 78o-3(a) of this title.
(2) Listing standards required
Except as otherwise provided in paragraph (7), a national
securities exchange or a national securities association registered
pursuant to section 78o-3(a) of this title may trade only security
futures products that (A) conform with listing standards that such
exchange or association files with the Commission under section
78s(b) of this title and (B) meet the criteria specified in section
2(a)(1)(D)(i) of the Commodity Exchange Act [7 U.S.C.
2(a)(1)(D)(i)].
(3) Requirements for listing standards and conditions for
trading
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 78l 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 78o-3(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 78o-3(a) of this
title 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 78k(a) of
this title and the rules and regulations thereunder, except to
the extent otherwise permitted under this chapter 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 78g(c)(2)(B) of this title, 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) Authority to modify certain listing standard
requirements
(A) Authority to modify
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) Authority to grant exemptions
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) Requirements for other persons trading security future
products
It shall be unlawful for any person (other than a national
securities exchange or a national securities association registered
pursuant to section 78o-3(a) of this title) 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 78o-3(a) of this title 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) Deferral of options on security futures trading
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 December 21, 2000,
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 chapter and the Commodity
Exchange Act [7 U.S.C. 1 et seq.].
(7) Deferral of linked and coordinated clearing
(A) Notwithstanding paragraph (2), until the compliance date, a
national securities exchange or national securities association
registered pursuant to section 78o-3(a) of this title 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 [7 U.S.C.
2(a)(1)(D)(i)(IV)].
(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
78o-3(a) of this title, 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 78o-3(a) of this title; or
(ii) 2 years after the date on which trading in any security
futures product commences under this chapter.
(i) Rules to avoid duplicative regulation of dual registrants
Consistent with this chapter, 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 78o(b) of this title (except paragraph (11)
thereof), that is also registered with the Commodity Futures Trading
Commission pursuant to section 4f(a) of the Commodity Exchange Act [7
U.S.C. 6f(a)] (except paragraph (2) thereof), with respect to the
application of--
(1) rules of such national securities exchange of the type
specified in section 78o(c)(3)(B) of this title involving security
futures products; and
(2) similar rules of national securities exchanges registered
pursuant to subsection (g) of this section and national securities
associations registered pursuant to section 78o-3(k) of this title
involving security futures products.
(j) Procedures and rules for security future products
A national securities exchange registered pursuant to subsection (a)
of this section shall implement the procedures specified in subsection
(h)(5)(A) of this section and adopt the rules specified in subparagraphs
(B) and (C) of subsection (h)(5) of this section not later than 8 months
after the date of receipt of a request from an alternative trading
system for such implementation and rules.
(k) Rules relating to security futures products traded on foreign boards
of trade
(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.
(June 6, 1934, ch. 404, title I, Sec. 6, 48 Stat. 885; Pub. L. 94-29,
Sec. 4, June 4, 1975, 89 Stat. 104; Pub. L. 100-181, title III,
Secs. 309-312, Dec. 4, 1987, 101 Stat. 1255; Pub. L. 103-202, title III,
Sec. 303(b), Dec. 17, 1993, 107 Stat. 2365; Pub. L. 106-554,
Sec. 1(a)(5) [title II, Secs. 202(a), 206(a), (i), (k)(2), (l)], Dec.
21, 2000, 114 Stat. 2763, 2763A-416, 2763A-426, 2763A-433, 2763A-434.)
References in Text
This chapter, referred to in subsecs. (b) to (e), (g)(4)(A),
(h)(3)(G), (7)(C)(ii), and (i), was in the original ``this title''. This
chapter, referred to in subsec. (h)(6), was in the original ``this
Act''. See References in Text note set out under section 78a of this
title.
The Commodity Exchange Act, referred to in subsecs. (g)(1)(A) and
(h)(6), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, as amended, which
is classified generally to chapter 1 (Sec. 1 et seq.) of Title 7,
Agriculture. For complete classification of this Act to the Code, see
section 1 of Title 7 and Tables.
Amendments
2000--Subsec. (g). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 202(a)], added subsec. (g).
Subsec. (h). Pub. L. 106-554, Sec. 1(a)(5) [title II, Sec. 206(a)],
added subsec. (h).
Subsec. (i). Pub. L. 106-554, Sec. 1(a)(5) [title II, Sec. 206(i)],
added subsec. (i).
Subsec. (j). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 206(k)(2)], added subsec. (j).
Subsec. (k). Pub. L. 106-554, Sec. 1(a)(5) [title II, Sec. 206(l)],
added subsec. (k).
1993--Subsec. (b)(9). Pub. L. 103-202 added par. (9).
1987--Subsec. (c)(2). Pub. L. 100-181, Sec. 309, substituted
``protection of investors shall'' for ``protection shall''.
Subsec. (c)(3)(A). Pub. L. 100-181, Sec. 310, substituted
``associated'' for ``association''.
Subsec. (c)(4). Pub. L. 100-181, Sec. 311, substituted ``may limit
(A)'' for ``may (A) limit''.
Subsec. (e)(1). Pub. L. 100-181, Sec. 312(1), substituted
``paragraph (3) of this subsection'' for ``paragraph (4) of this
section''.
Subsec. (e)(3), (4). Pub. L. 100-181, Sec. 312(2), (3), redesignated
par. (4) as (3) and, in subpar. (E), substituted ``fixing'' for
``fixes'' in introductory provisions, ``subparagraph (A) of this
paragraph'' for ``paragraph (4)(A) of this subsection'' in cl. (1), and
``subparagraph (B) of this paragraph'' for ``paragraph (4)(B) of this
subsection'' in cl. (2), and struck out former par. (3) which read as
follows: ``Until December 31, 1976, the Commission, on a regular basis,
shall file with the Speaker of the House and the President of the Senate
information concerning the effect on the public interest, protection of
investors, and maintenance of fair and orderly markets of the absence of
any schedule or fixed rates of commissions, allowances, discounts, or
other fees to be charged by members of any national securities exchange
for effecting transactions on such exchange.''
1975--Pub. L. 94-29 restructured the entire section and, in
addition, authorized the Commission to require an exchange to file such
documents and information as it deems necessary or appropriate in the
public interest or for the protection of investors and to prescribe the
form and substance of an exchange's application for registration,
expanded to eight the number of explicit statutory requirements that
must be satisfied before an exchange may be registered as a national
securities exchange, set forth the authority of a national securities
exchange to admit or deny persons membership or association with
members, prescribed exchange procedures for instituting disciplinary
actions, denying membership, and summarily suspending members or persons
associated with members, specified the authority of national securities
exchanges to impose schedules or fix rates of commissions, allowances,
discounts, or other fees to be charged by its members for transacting
business on the exchange, and empowered the Commission to regulate any
broker or dealer who effects transactions on an exchange on a regular
basis but who is not a member of that exchange and any person who
effects transactions on an exchange without the services of another
person acting as broker.
Effective Date of 1993 Amendment
Section 304 of title III of Pub. L. 103-202 provided that:
``(a) Effective Date.--
``(1) In general.--The amendments made by section 303 [amending
this section and section 78o-3 of this title] shall become effective
12 months after the date of enactment of this Act [Dec. 17, 1993].
``(2) Rulemaking authority.--Notwithstanding paragraph (1), the
authority of the Securities and Exchange Commission, a registered
securities association, and a national securities exchange to
commence rulemaking proceedings for the purpose of issuing rules
pursuant to the amendments made by section 303 is effective on the
date of enactment of this Act.
``(3) Review of filings prior to effective date.--Prior to the
effective date of regulations promulgated pursuant to this title
[amending this section and sections 78n and 78o-3 of this title and
enacting provisions set out as notes under sections 78a and 78n of
this title], the Securities and Exchange Commission shall continue
to review and declare effective registration statements and
amendments thereto relating to limited partnership rollup
transactions in accordance with applicable regulations then in
effect.
``(b) Effect on Existing Authority.--The amendments made by this
title [amending this section and sections 78n and 78o-3 of this title]
shall not limit the authority of the Securities and Exchange Commission,
a registered securities association, or a national securities exchange
under any provision of the Securities Exchange Act of 1934 [15 U.S.C.
78a et seq.], or preclude the Commission or such association or exchange
from imposing, under any other such provision, a remedy or procedure
required to be imposed under such amendments.''
Effective Date of 1975 Amendment
Amendment by Pub. L. 94-29 effective June 4, 1975, except for
amendment of subsecs. (a) through (d) by Pub. L. 94-29 to be effective
180 days after June 4, 1975, with provisions of subsecs. (b)(2) and
(c)(6), as amended by Pub. L. 94-29, or rules or regulations thereunder,
not to apply in a way so as to deprive any person of membership in any
national securities exchange (or its successor) of which such person
was, on June 4, 1975, a member or a member firm as defined in the
constitution of such exchange, or so as to deny membership in any such
exchange (or its successor) to a natural person who is or becomes
associated with such member or member firm, see section 31(a) of Pub. L.
94-29, set out as a note under section 78b of this title.
Transfer of Functions
For transfer of functions of Securities and Exchange Commission,
with certain exceptions, to Chairman of such Commission, see Reorg. Plan
No. 10 of 1950, Secs. 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat.
1265, set out under section 78d of this title.
Changes in Organization and Rules of National Securities Exchanges and
Registered Securities Associations
Section 31(b) of Pub. L. 94-29 provided that: ``If it appears to the
Commission at any time within one year of the effective date of any
amendment made by this Act [see Short Title of 1975 Amendment note under
section 78a of this title] to the Securities Exchange Act of 1934 that
the organization or rules of any national securities exchange or
registered securities association registered with the Commission on the
date of enactment of this Act [June 4, 1975] do not comply with such Act
as amended, the Commission shall so notify such exchange or association
in writing, specifying the respects in which the exchange or association
is not in compliance with such Act. On and after the one hundred
eightieth day following the date of receipt of such notice by a national
securities exchange or registered securities association, the
Commission, without regard to the provisions of section 19(h) of the
Securities Exchange Act of 1934 [section 78s(h) of this title], as
amended by this Act, is authorized by order, to suspend the registration
of any such exchange or association or impose limitations on the
activities, functions, and operations of any such exchange or
association, if the Commission finds, after notice and opportunity for
hearing, that the organization or rules of such exchange or association
do not comply with such Act. Any such suspension or limitation shall
continue in effect until the Commission, by order, declares that such
exchange or association is in compliance with such requirements.''
Section Referred to in Other Sections
This section is referred to in sections 78c, 78e, 78g, 78k-1, 78o,
78o-3, 78o-5, 78q, 78q-1, 78s, 78u, 78y, 78hh, 80a-2, 80b-2 of this
title; title 5 section 8477; title 7 sections 2, 7a-2; title 29 section
1002.
