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Options 6E Records, Reports and Audits
Section 1. Maintenance, Retention and Furnishing of Books, Records and Other Information

(a) Each Options Participant shall make, keep current and preserve such books and records as Nasdaq Regulation may prescribe pursuant to the Rules of the Exchange and as may be prescribed by the Exchange Act and the rules and regulations thereunder.

(b) No Options Participant shall refuse to make available to Nasdaq Regulation such books, records or other information as may be called for under the Rules of the Exchange or as may be requested in connection with an investigation by Nasdaq Regulation.

(c) All Options Participants shall prepare and make available all books and records as required by the Rules of the Exchange in English and U.S. dollars.

Adopted Dec. 6, 2019 (SR-NASDAQ-2019-098).

Section 2. Reports of Uncovered Short Positions

(a) Upon request of Nasdaq Regulation, each Options Participant shall submit a report of the total uncovered short positions in each options contract of a class dealt in on NOM showing:

(1) positions carried by such Options Participant for its own account and

(2) positions carried by such Options Participant for the accounts of Customers;

(3) provided that the Options Participant shall not report positions carried for the accounts of other Options Participants where such other Options Participants report the positions themselves.

(b) Such report shall be submitted not later than the second business day following the date the request is made.

Adopted Dec. 6, 2019 (SR-NASDAQ-2019-098).

Section 3. Financial Reports and Audits

Each Options Participant shall submit to Nasdaq Regulation answers to financial questionnaires, reports of income and expenses and additional financial information in the type, form, manner and time prescribed by the Exchange or Nasdaq Regulation under the Rules of the Exchange.

Adopted Dec. 6, 2019 (SR-NASDAQ-2019-098).

Section 4. Reserved

 

Adopted Dec. 6, 2019 (SR-NASDAQ-2019-098).

Section 5. Automated Submission of Trade Data

(a) An Options Participant shall submit requested trade data elements, in such automated format as may be prescribed by Nasdaq Regulation from time to time, in regard to a transaction(s) that is the subject of the particular request for information.

(b) If the transaction was a proprietary transaction effected or caused to be effected by the Options Participant for any account in which such Participant, or any person associated with the Options Participant, is directly or indirectly interested, the Participant shall submit or cause to be submitted, any or all of the following information as requested by Nasdaq Regulation:

(1) Clearing house number or alpha symbol as used by the Options Participant submitting the data;

(2) Clearing house number(s) or alpha symbol(s) as may be used from time to time, of the Options Participant(s) on the opposite side of the transaction;

(3) Identifying symbol assigned to the security and where applicable for the options month and series symbols;

(4) Date transaction was executed;

(5) Number of option contracts for each specific transaction and whether each transaction was an opening or closing purchase or sale, as well as:

(A) the number of shares traded or held by accounts for which options data is submitted;

(B) where applicable, the number of shares for each specific transaction and whether each transaction was a purchase, sale or short sale;

(6) Transaction price;

(7) Account number; and

(8) Market center where transaction was executed.

(c) If the transaction was effected or caused to be effected by the Options Participant for any Customer, such Options Participant shall submit or cause to be submitted any or all the following information as requested by Nasdaq Regulation:

(1) Data elements (1) through (8) of paragraph (b) above;

(2) If the transaction was effected for a Public Customer, customer name, address(es), branch office number, representative number, whether the order was discretionary, solicited or unsolicited, date the account was opened and employer name and tax identification number(s); and

(3) If the transaction was effected for a Participant broker-dealer customer, whether the broker-dealer was acting as a principal or agent on the transaction or transactions that are the subject of Nasdaq Regulation's request.

(d) In addition to the above trade data elements, an Options Participant shall submit such other information in such automated format as may be prescribed by Nasdaq Regulation, as may from time to time be required.

(e) Nasdaq Regulation may grant exceptions, in such cases and for such time periods as it deems appropriate, from the requirement that the data elements prescribed in paragraphs (b) and (c) above be submitted to Nasdaq Regulation in an automated format.

Adopted Dec. 6, 2019 (SR-NASDAQ-2019-098).

Section 6. Risk Analysis of Market Maker Accounts

(a) Each Clearing Participant that clears or guarantees the transactions of Market Makers pursuant to Options 6, Section 4 of these Rules (Letters of Guarantee), shall establish and maintain written procedures for assessing and monitoring the potential risks to the Participant's capital over a specified range of possible market movements of positions maintained in such Market Maker accounts and such related accounts as Nasdaq Regulation shall from time to time direct.

(1) Current procedures shall be maintained as current and filed with Nasdaq Regulation.

(2) The procedures shall specify the computations to be made, the frequency of computations, the records to be reviewed and maintained and the position(s) within the organization responsible for the risk management.

(b) Each affected Participant shall at a minimum assess and monitor its potential risk of loss from options Market Maker accounts each business day as of the close of business the prior day through use of a Nasdaq Regulation-approved computerized risk analysis program, which shall comply with at least the minimum standards specified below and such other standards as from time to time may be prescribed by Nasdaq Regulation:

(1) The estimated loss to the Clearing Participant for each Market Maker account (potential account deficit) shall be determined given the impact of broad market movements in reasonable intervals over a range from negative fifteen percent (15%) to positive fifteen percent (15%).

(2) The Participant shall calculate volatility using a method approved by Nasdaq Regulation, with volatility updated at least weekly. The program must have the capability of expanding volatility when projecting losses throughout the range of broad market movements.

(3) Options prices shall be estimated through use of recognized options pricing models such as, but not limited to, Black-Scholes and Cox-Reubenstein.

(4) At a minimum, written reports shall be generated which describe for each market scenario:

(A) projected loss per options class by account;

(B) projected total loss per options class for all accounts; and

(C) projected deficits per account and in aggregate.

Upon direction by Nasdaq Regulation, each affected Participant shall provide to Nasdaq Regulation such information as it may reasonably require with respect to the Participant's risk analysis for any or all of its Market Maker accounts.

Adopted Dec. 6, 2019 (SR-NASDAQ-2019-098).

Section 7. Regulatory Cooperation

(a) Nasdaq Regulation may enter into agreements that provide for the exchange of information and other forms of mutual assistance for market surveillance, investigative, enforcement and other regulatory purposes, with domestic and foreign self-regulatory organizations, as well as associations and contract markets and the regulators of such markets.

(b) No Options Participant, partner, officer, director or other person associated with a Participant or other person or entity subject to the jurisdiction of the Exchange or Nasdaq Regulation shall refuse to appear and testify before another exchange or self-regulatory organization in connection with a regulatory investigation, examination or disciplinary proceeding or refuse to furnish documentary materials or other information or otherwise impede or delay such investigation, examination or disciplinary proceeding if the Exchange or Nasdaq Regulation requests such information or testimony in connection with an inquiry resulting from an agreement entered into by the Exchange or Nasdaq Regulation pursuant to paragraph (a) of this Rule, including but not limited to Participants and affiliates of the Intermarket Surveillance Group. The requirements of this paragraph (b) shall apply regardless whether the Exchange or Nasdaq Regulation has itself initiated a form investigation or disciplinary proceeding.

(c) Whenever information is requested by Nasdaq Regulation pursuant to this Rule, the Options Participant or person associated with a Participant from whom the information is requested shall have the same rights and procedural protections in responding to such request as such Participant or person would have in the case of any other request for information initiated by Nasdaq Regulation pursuant to Nasdaq Regulation's investigative powers.

Adopted Dec. 6, 2019 (SR-NASDAQ-2019-098).

Section 8 Reserved.

 

Adopted Dec. 6, 2019 (SR-NASDAQ-2019-098).

Section 9. Audit Trail

(a) Order Identification. When entering orders on NOM, each Options Participant shall submit order information in such form as may be prescribed by Nasdaq in order to allow NOM to properly prioritize and match orders and report resulting transactions to the Clearing Corporation.

(b) An Options Participant must ensure that each options order received from a Customer for execution on NOM is recorded and time-stamped immediately. The order record must be time-stamped again on execution and also at the time of any modification or cancellation of the order by the Customer. Order records relating to NOM must contain the following information at a minimum:

(1) a unique order identification;

(2) the underlying security;

(3) opening/closing designation;

(4) the identity of the Clearing Participant;

(5) Options Participant identification;

(6) Participant Capacity;

(7) identity of the individual/terminal completing the order ticket;

(8) customer identification;

(9) account identification;

(10) buy/sell;

(11) contract volume;

(12) contract month;

(13) exercise price;

(14) put/call;

(15) price or price limit, price range or strategy price;

(16) special instructions (e.g ., GTC); and

(17) and such other information as may be required by NOM.

(c) An Options Participant that employs an electronic system for order routing or order management which complies with NOM requirements will be deemed to be complying with the requirements of this Rule if the required information is recorded in electronic form rather than in written form.

(d) In addition to any related requirement under applicable securities laws, information recorded pursuant to this Rule must be retained by Options Participants for a period of no less than three (3) years after the date of the transaction.

Adopted Dec. 6, 2019 (SR-NASDAQ-2019-098).

 
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