In addition to knowing the NYSE rules, you will need to know some key regulations governing FINRA, the Municipal Securities Rulemaking Board (MSRB) and the Chicago Board Options Exchange (CBOE).

Rules of Fair Practice
From the registered representative's perspective, the most important part of FINRA's code is a set of regulations commonly known as the Rules of Fair Practice.

  • These are the standard rules for account supervision and record keeping, and they are similar to those of the NYSE. FINRA's Rule 2120 is the catch-all for prohibiting "manipulative, deceptive, or other fraudulent devices".

  • Another fair practice rule states that members cannot rig the bid-ask process by publicly reporting a fallacious purchase or sale price (FINRA Rule 3310) or by bidding up a security's price without intending to buy it.

MRSB Rules
The MSRB also has rules similar to those of the NYSE governing record keeping, fraudulent behavior, adequate supervision of employees and accounts, suitability of recommendations, accounts of employees of other financial institutions, sending confirmations, and appropriate behavior in discretionary accounts.

Its rules governing false price quotation and bidding up prices are very much like those of FINRA. However, the MSRB has some very specific procedural rules of its own:

  • When submitting an order, every syndicate member must disclose if the securities are being purchased on its own account; syndicate managers must promptly disclose how the securities will be allocated to syndicate members (MSRB Rule G-11).

  • Settlement for cash transactions is on the trade date, and settlement for regular-way transactions is the third business day following the trade. (MSRB Rule G-12).

  • No dealer can give a gift or gratuity in excess of $100 per year to a person other than an employee or partner if the payment relates to municipal securities activities; exceptions include occasional gifts of meals or theater or sports tickets (MSRB Rule G-20).

  • Each underwriter who acquires new municipal securities from the issuer must apply in writing to the MSRB for assignment of a Committee on Uniform Securities Identification Procedures (CUSIP) number to identify and record all buy and sell orders (MSRB Rule G-34).

CBOE Rules
The CBOE has rules similar to those of the NYSE regarding fraud, manipulation and rumor-mongering.

  • Also, CBOE Rule 4.11 prohibits having an excessive aggregate position in the options of any one stock.

  • On the most thinly traded options, that position limit is 13,500 contracts of 100 underlying shares each;

  • On the most densely traded it is 75,000 contracts, with gradations in between.

  • What that means is that one CBOE member cannot have a net position (long minus short or short minus long) of 75,000 contracts.

  • According to related Rule 4.12, a CBOE member must observe an exercise limit and cannot exercise options in the same quantities over a five-business-day span.


Primary Market

Related Articles
  1. Investing

    The Days of Rule 48 Are Coming to An End

    A look at the proposal to repeal the controversial Rule 48.
  2. Markets

    Get To Know These Crucial US Options Market Regulations

    How are options regulated in the U.S and which organizations are involved in options market regulations?
  3. Markets

    FINRA: How It Protects Investors

    Find out the history of FINRA, and how it's organized to monitor the markets and protect investors.
  4. Financial Advisor

    What Financial Advisors and Brokers Need to Know About Rule 407

    Learn about NYSE Rule 407 and how it may impact you as a financial advisor or investment broker. What you don't know about this regulation can hurt you.
  5. Markets

    Volcker Rule: How It Will Affect You

    Learn how the Volcker Rule has a limited impact on individual investors but restricts the types of activities in which banks can engage.
  6. Investing

    Protect Your Gains From Volatility With These 3 Rules

    It's been said that trading is the hardest way to make easy money. And after more than two decades in the markets, I wholeheartedly agree. The vast majority of investment advisors, brokers and ...
  7. Financial Advisor

    SEC's CARDS Plan Creates Controversy for Brokers

    The securities industry isn't happy with the hand it may be dealt with the SEC's proposed CARDS rules.
  8. Investing

    What is Rule 48?

    Rule 48 is a tool used by market operators to expedite trading in the opening hour, during periods of extreme volatility.
  9. Financial Advisor

    The SEC Fiduciary Rule Explained

    The SEC plans to propose its own set of fiduciary rules next year. These are some of the potential implications for advisors.
  10. Markets

    Investment Firms Could Be the Losers in New Fed Rule

    A new Fed rule attempts to prevent another financial crisis by rewriting financial contracts between investment firms and big banks.
Trading Center