15 U.S. Code § 78f - National securities exchanges

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 (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 (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 78q(d) or 78s(g)(2) of this title) to enforce compliance by its (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 (3)

The rules of the exchange assure a fair representation 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 aexchange, broker, or dealer.

The rules of the exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its issuers and other (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 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.

The rules of the exchange provide that (subject to any rule or order of the 78q(d) or 78s(g)(2) of this title) its member, or any other fitting sanction.

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 ofexchange of anyexchange or a (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.

(A) The rules of the exchange prohibit the listing of any security issued in a limited partnership rollup transaction (as such term is defined in paragraphs (4) and (5) of section 78n(h) of this title), unless such transaction was conducted in accordance with procedures designed to protect the rights of limited partners, including—

approval of the limited partnership rollup transaction by not less than 75 percent of the outstanding securities of each of the participating limited partnerships;

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

other comparable rights that are prescribed by rule by the exchange and that are designed to protect dissenting limited partners;

the right not to bear an unfair portion of the costs of a proposed limited partnership rollup transaction that is rejected; and

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.

The rules of the exchange prohibit any security registered under section 78l of this title from granting a proxy to vote the security in connection with a shareholder vote described in subparagraph (B), unless the beneficial owner of the security has instructed the (B)

A shareholder vote described in this subparagraph is a shareholder vote with respect to the election of a member of the board of directors of an issuer, executive compensation, or any other significant matter, as determined by the board of directors of any investment company registered under the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.].

Nothing in this paragraph shall be construed to prohibit a national securities exchange from prohibiting a security registered under section 78l of this title from granting a proxy to vote the security in connection with a shareholder vote not described in subparagraph (A).

(c) Denial of membership in national exchanges; denial of association with member; conditions; limitation of membership

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 naturalregistered broker or dealer.

A national securities exchange may, and in cases in which the registered broker or dealer or natural person associated with a registered broker or dealer, and bar from becoming associated with a person, who is subject to a statutory disqualification. A national securities member, if the (3)

A national securities exchange may deny membership to, or condition the membership of, a registered broker or dealer if (i) such person associated with such person associated with such (B)

A national securities exchange may bar a natural member, or condition the membership of a natural member, if such naturalexchange 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 aperson associated with a member, or any class of such persons, to be registered with the (C)

A national securities exchange may bar anyexchange with such information with respect to its relationship and dealings with theexchange and (ii) to permit the examination of its books and records to verify the accuracy of any information so supplied.

A national securities exchange may limit (A) the number ofexchange and (B) the number ofexchange without the services of another broker: Provided, however, That no national securities exchange shall have the authority to decrease the number of memberships in such exchange, or the number ofexchange without the services of another broker, below such number in effect on May 1, 1975 , or the date suchsection 78s(c) of this title, may amend the rules of any national securities broker, if the (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 aperson associated with a (A)

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

In any proceeding by a national securities exchange to determine whether a member, or prohibited or limited with respect to access to services offered by the exchange or aexchange shall notify suchexchange to deny membership, bar a member, or prohibit or limit aexchange or a (3)

(1) On and after June 4, 1975 , no national securities members: Provided, however, That until May 1, 1976 , the preceding provisions of this paragraph shall not prohibit any such broker on the floor of the dealer: And provided further, That thesection 78s(b) of this title as modified by the provisions of paragraph (3) of this subsection, may—

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 itsNovember 1, 1976 , if the (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 itsNovember 1, 1976 , if the (2)

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 itsNovember 1, 1976 , if the (B)

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 (ii)

(E) In addition to the bases specified in section 78y(a) of this title, a reviewing Court may set aside an order of thesection 78s(b) of this title approving an (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 broker, or

(1) Registration required An exchange that lists or trades security futures products may register as a national securitiessecurity futures products if—

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 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 ; and

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)].

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 theCommodity 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 (B) Immediate effectiveness

Such registration shall be effective contemporaneously with the submission of notice, in written or electronic form, to the (C) Termination

Such registration shall be terminated immediately if any of the conditions for registration set forth in this subsection are no longer satisfied.

(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 itsexchange in security futures products, be required to comply with, the following provisions of this chapter and the rules thereunder:

(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—

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 forsecurity futures products, or rules effectuating such securities laws pursuant to section 78s(b)(7) of this title;

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

such exchange shall file pursuant to section 78s(b)(1) of this title proposed rule changes that have been abrogated by thesection 78s(b)(7)(C) of this title.

(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—

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—

on a principal-to-principal basis between parties trading for their own accounts or as described in section 1a(18)(B)(ii) of the Commodity Exchange Act [7 U.S.C. 1a(18)(B)(ii)]; and

only between eligible contract participants (as defined in subparagraphs (A), (B)(ii), and (C) of such section 1a(18) [7 U.S.C. 1a(18)(A), (B)(ii), (C)]) at the time at which the (ii) the transaction is entered into on or after the later of—

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.

It shall be unlawful for any person to effect transactions in security futures products that are not listed on a national securitiessection 78o–3(a) of this title.

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 suchsection 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)].

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;

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;

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;

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 theCommodity Futures Trading Commission jointly determine appropriate;

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;

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;

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;

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;

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;

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);

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

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 margin levels for a security futures product when it deems such action to be necessary or appropriate.

The Commodity Futures Trading Commission , by order, may jointly exempt any 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 member—

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;

has rules to require audit trails necessary or appropriate to facilitate the coordinated surveillance required in subparagraph (A); and

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.

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 , theCommodity 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.].

(A) Notwithstanding paragraph (2), until the compliance date, a national securities security futures product that does not—

conform with any listing standard promulgated to meet the requirement specified in subparagraph (E) of paragraph (3); or

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 othersection 78o–3(a) of this title; or

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 theCommodity 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—

rules of such national securities exchange of the type specified in section 78o(c)(3)(B) of this title involving security futures products; and

similar rules of national securities exchanges registered pursuant to subsection (g) and national securities associations registered pursuant to section 78o–3(k) of this title involving security futures products.

A national securities exchange registered pursuant to subsection (a) shall implement the procedures specified in subsection (h)(5)(A) and adopt the rules specified in subparagraphs (B) and (C) of subsection (h)(5) not later than 8 months after the date of receipt of a request from an alternative trading system for such implementation and rules.

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 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.

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.

It shall be unlawful for any person to effect a transaction in a security-based swap with or for aeligible contract participant, unless such transaction is effected on a national securities(June 6, 1934, ch. 404, title I, § 6, 48 Stat. 885; Pub. L. 94–29, § 4, June 4, 1975 , 89 Stat. 104; Pub. L. 100–181, title III, §§ 309–312, Dec. 4, 1987 , 101 Stat. 1255; Pub. L. 103–202, title III, § 303(b), Dec. 17, 1993 , 107 Stat. 2365; Pub. L. 106–554, § 1(a)(5) [title II, §§ 202(a), 206(a), (i), (k)(2), (l)], Dec. 21, 2000 , 114 Stat. 2763, 2763A–416, 2763A–426, 2763A–433, 2763A–434; Pub. L. 111–203, title VII, §§ 721(e)(8), 734(b)(2), 763(e), title IX, § 957, July 21, 2010 , 124 Stat. 1671, 1718, 1777, 1906.)

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 Investment Company Act of 1940, referred to in subsec. (b)(10)(B), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, which is classified generally to subchapter I (§ 80a–1 et seq.) of chapter 2D of this title. For complete classification of this Act to the Code, see section 80a–51 of this title and Tables.

The Commodity Exchange Act, referred to in subsecs. (g)(1)(A) and (h)(6), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, which is classified generally to chapter 1 (§ 1 et seq.) of Title 7, Agriculture. Section 1a(2) of Title 7 was redesignated section 1a(6) by Pub. L. 111–203, title VII, § 721(a)(1), July 21, 2010 , 124 Stat. 1658. For complete classification of this Act to the Code, see section 1 of Title 7 and Tables.

Subsection (k) of section 78q of this title, referred to in subsec. (g)(4)(A)(iv), was redesignated subsec. (j) by Pub. L. 111–203, title VI, § 617(a)(2), July 21, 2010 , 124 Stat. 1616.

2010—Subsec. (b)(9). Pub. L. 111–203, § 957(1), designated introductory provisions and subpars. (A) to (D) as subpar. (A), redesignated former subpars. (A) to (D) as cls. (i) to (iv), respectively, of subpar. (A) and realignedPub. L. 111–203, § 957(2), added par. (10).

Subsec. (g)(1)(A). Pub. L. 111–203, § 734(b)(2), substituted “that has been designated” for “that—(i) has been designated” and “and” for “or” at end and struck out cl. (ii) which read as follows: “is registered as a derivative transaction executionCommodity Exchange Act and such registration is not suspended by the Commodity Futures Trading Commission ; and”.

Subsec. (g)(5)(B)(i)(I). Pub. L. 111–203, § 721(e)(8)(A), substituted “section 1a(18)(B)(ii)” for “section 1a(12)(B)(ii)”.

Subsec. (g)(5)(B)(i)(II). Pub. L. 111–203, § 721(e)(8)(B), substituted “section 1a(18)” for “section 1a(12)”.

Subsec. (k). Pub. L. 106–554, § 1(a)(5) [title II, § 206(l)], added subsec. (k).

1993—Subsec. (b)(9). Pub. L. 103–202 added par. (9).

1987—Subsec. (c)(2). Pub. L. 100–181, § 309, substituted “protection of investors shall” for “protection shall”.

Subsec. (c)(3)(A). Pub. L. 100–181, § 310, substituted “associated” for “association”.

Subsec. (c)(4). Pub. L. 100–181, § 311, substituted “may limit (A)” for “may (A) limit”.

Subsec. (e)(1). Pub. L. 100–181, § 312(1), substituted “paragraph (3) of this subsection” for “paragraph (4) of this section”.

Subsec. (e)(3), (4). Pub. L. 100–181, § 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 , theSenate 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 ofPub. L. 94–29 restructured the entire section and, in addition, authorized the Statutory Notes and Related Subsidiaries

Amendment by section 957 of Pub. L. 111–203 effective 1 day after July 21, 2010 , except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12,Pub. L. 111–203 effective on the later of 360 days after July 21, 2010 , or, to the extent a provision of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle A, see section 754 of Pub. L. 111–203, set out as a note under section 1a of Title 7, Agriculture.

Amendment by section 763(e) of Pub. L. 111–203 effective on the later of 360 days after July 21, 2010 , or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.

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 ].

Notwithstanding paragraph (1), the authority of the Securities and Exchange Commission , a registered securities association, and a national securitiessection 303 is effective on the date of enactment of this Act.

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.

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 securitiesSecurities Exchange Act of 1934 [15 U.S.C. 78a et seq.], or preclude the 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 anyJune 4, 1975 , asection 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.

Changes in Organization and Rules of National Securities Exchanges and Registered Securities Associations

“If it appears to the section 78a of this title] to the Securities Exchange Act of 1934 that the organization or rules of any national securitiesJune 4, 1975 ] do not comply with such Act as amended, theSecurities 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 Executive Documents

For transfer of functions of Securities and Exchange Commission , with certain exceptions, to Chairman of suchMay 24, 1950 , 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.