(a) Financial Responsibility Standards.—Each member organization effecting securities transactions shall comply with the capital requirements set forth below:
(i) each member organization subject to SEC Rule 15c3-1 shall at all times comply with said rule and the notification provisions of SEC Rule 17a-11;
(ii) each member organization exempt from SEC Rule 15c3-1 shall, at the time of its admission to the Exchange, have a minimum of $25,000 in net liquid assets;
(iii) each member organization or foreign currency options participant organization exempt from SEC Rule 15c3-1 and whose principal business is as a registered options trader on the Exchange, shall,
subject to subparagraph (iv) below, at all times maintain a minimum of $25,000 in net liquid assets;
(iv) each member organization referred to in paragraph (iii) above shall at all times maintain positive net liquid assets and, in its clearing account(s), positive equity, provided that said organization
has filed with the Exchange a letter of guarantee issued on its behalf by a clearing member organization of this Exchange which is also a clearing member of The Options Clearing Corporation. In said letter the clearing member organization guarantees the financial
responsibilities of said organization for all transactions and balances carried and cleared in the clearing account(s). Such letter of guarantee filed with the Exchange shall remain in effect until a written notice of revocation has been filed with the Exchange
by the clearing member organization. A revocation shall in no way relieve a clearing member organization of responsibility for transactions guaranteed prior to the effective date of such revocation.
(v) a member organization shall promptly notify the Exchange if it ceases to be in compliance with the net capital requirements of SEC Rule 15c3-1 and/or the provisions of paragraphs (a)(iii) and (a)(iv)
above.
(vi) Each member organization which maintains a joint back office ("JBO" arrangement with a clearing broker-dealer subject to the requirements of Regulation T Section 220.7 of the Federal Reserve System
shall comply with the requirements below:
(A) Each JBO participant must be registered as a broker-dealer pursuant to Section 15 of the Exchange Act and subject to SEC Rule 15c3-1(b)(i).
(B) Each JBO participant must meet and maintain a minimum account equity requirements of $1,000,000 the carrying organization must issue a call for additional funds or securities which shall be obtained
within five business days. If funds or securities sufficient to eliminate the deficiency are not received within five (5) business days, the carrying organization must margin the account in accordance with the requirements prescribed for a customer in Regulation
T.
(C) Each JBO participant must meet and maintain the ownership standards.
(D) Each JBO participant must employ or have access to a qualified Series 27 principal.
(vii) Every clearing member organization carrying JBO accounts in accordance with Regulation T, shall comply with Section 220.7 of the Federal Reserve Board.
(A) Each member organization that carries JBO accounts shall not allow its (i) tentative net to fall below $25 million or in the alternative its (ii) net capital $7 million for a period in excess of
three (3) consecutive business days, provided that the broker-dealer has as its primary business the clearance of options market maker accounts and provided that at least 60% of the sum of the gross haircuts calculated for all options market makers and JBO
participant accounts, without regard to related account equity or clearing firm net capital charges, is attributable to options market maker transactions. In addition, the firm operating pursuant to (ii) must include the gross deductions calculated for all
JBO participant accounts in the clearing firm's ratio of gross options market maker deductions to adjusted net capital in accordance with the provisions of SEC Rule 15c3-1.
(B) Each member organization which maintains JBO accounts shall require and maintain equity of $1,000,000 for each JBO participant, over all related accounts. If equity is below $1,000,000 the carrying
organization must issue a call for additional funds or securities which shall be obtained within five business days. If funds or securities are sufficient to eliminate the deficiency are not received within five (5) business days, the carrying organization
must margin the account in accordance with the requirements prescribed for a customer in Regulation T.
(C) Each member organization which maintains JBO accounts shall adjust its net worth daily by deducting any deficiency between a JBO participant's account equity and the proprietary haircut calculated
pursuant to SEC Rule 15c3-1 for the positions maintained in such account.
(D) Each member organization which maintains JBO accounts shall establish and maintain written ownership standards for JBO accounts.
(E) Each member organization which maintains JBO accounts must notify its Designated Examining Authority ("DEA"), in writing of its intention to carry such accounts.
If at any time a clearing member operating pursuant to paragraphs (vii)(A)(i) or (ii) above determines that its tentative net capital or that its net capital, respectively, has fallen below the applicable
requirements, such clearing member shall immediately notify the Exchange of such deficiency by telegraphic or facsimile notice; and be subject to the prohibition against withdrawal of equity capital set forth in SEC Rule 15c3-1(e) and to the prohibitions against
reduction, prepayment and repayment of subordination agreements set forth in paragraph (b)(1) of the SEC Rule 15c3-1d, as if such broker or dealers' net capital were below the minimum standards specified by each of these paragraphs.
(F) Each member organization which maintains JBO accounts must develop risk analysis standards which are acceptable to the Exchange.
(viii) a member organization shall promptly notify the Exchange if it ceases to be in compliance with the net capital requirements of SEC Rule 15c3-1 and/or the provisions of paragraphs (a)(iii) and
(a)(iv) above.
(b) Computation of Net Liquid Assets.—Each member organization subject to this Rule shall compute net liquid assets in accordance with the following.
(i) Net Liquid Assets shall mean Total Assets less Total Liabilities less Non-Allowable Assets plus Exchange-approved Subordinated Liabilities less 2/3 of the value, as defined below. Unless provided
otherwise in this rule, assets, liabilities and net worth shall be computed in accordance with generally accepted accounting principles.
(ii) Assets and Non-Allowable Assets shall have the same meaning as set forth in SEC Rule 15c3-1 except as stated in paragraph (b)(i) above;
(iii) Exchange-approved Subordinated Liabilities shall have the same meaning as those liabilities subject to Appendix D to SEC Rule 15c3-1 and shall be executed and maintained in the same manner as defined
in said Rule and SEC Rule 17a-11.
(c) Reporting and Recordkeeping.—Member organizations shall make the following reports of their compliance with their pertinent financial responsibility rules:
(i) Organizations designated to the Exchange for financial responsibility pursuant to SEC Rule 17d-1 and subject to SEC Rules 15c3-1 and 17a-5 shall file those periodic and annual reports and annual
certified audited statements as prescribed by SEC Rule 17a-5.
(ii) Each organization designated to the Exchange for financial responsibility pursuant to SEC Rule 17d-1 and acting as a Market Maker and/or option Lead Market Maker shall, on forms prescribed by the
Exchange, file the following reports with the Exchange or its designee:
(A) As of the last business day of each month, a statement of assets, liabilities, net worth and a computation of net capital;
(B) As of the last business day of each calendar quarter, in addition to the information required by subparagraph (c)(ii)(A), a statement of profit or loss for said calendar quarter and, where applicable,
changes in retained earnings, partnership capital and subordinated liabilities; and
(C) As of the last business day of each calendar year, in addition to the information required by subparagraph (c)(ii)(A), a statement of profit or loss for said year and where applicable, changes in
retained earnings, partnership capital and subordinated liabilities and any other supplemental schedule(s) as may be required by the SEC.
(iii) Each organization designated to the Exchange for financial responsibility pursuant to SEC Rule 17d-1, exempt from SEC Rule 15c3-1 and maintaining net liquid assets in accordance with subparagraph
(a)(iii), shall, on forms prescribed by the Exchange, file those reports prescribed in subparagraph 1(c)(ii)(A), (B), and (C).
(iv) Each organization designated to the Exchange for financial responsibility pursuant to SEC Rule 17d-1, exempt from SEC Rule 15c3-1 and maintaining net liquid assets in accordance with Options, Section
1(a)(iv), shall file only those reports prescribed in subparagraph (c)(ii)(C) as well as those reports prescribed in subparagraph (c)(iv)(A).
(A) As of the last business day of the first half of each calendar year, in addition to the information required by subparagraph (c)(ii)(A), a statement of profit or loss for said first half, and where
applicable, changes in retained earnings, partnership capital and subordinated liabilities.
(v) Each organization designated to the Exchange for financial responsibility pursuant to SEC Rule 17d-1 and acting as a broker on the Exchange shall, on forms prescribed by the Exchange, file those
reports described in Options 6D, Section 1(c)(ii)(A), (B), and (C).
(vi) Each member organization whose principal business is acting as a broker on PSX, who is not self-clearing and for which the Exchange is the DEA must establish and maintain an account with a clearing
firm for the sole purposes of carrying positions resulting from errors made in the course of its brokerage business. Such an account for options transactions must be maintained with an entity which is also a clearing member of The Options Clearing Corporation.
A broker on PSX, prior to effecting any transactions, must file with the Exchange a letter from its clearing member organization stating that this account has been established and that the clearing member organization guarantees the financial responsibilities
of the broker on PSX with respect to all orders entrusted on PSX with such broker on PSX as well as all transactions and balances carried within the account. This letter shall remain in effect until the Exchange receives written notice from the clearing member
organization of its intent to no longer clear or carry transactions for such broker on PSX. Written notice received at least one-half hour before the normal opening of trading shall take effect on the day of receipt; written notice received less than one-half
hour before the opening of trading shall take effect on the opening of the business day following Exchange receipt.
(d) The Exchange may at any time or from time to time with respect to a particular member organization, prescribe more frequent filing of reports or greater net liquid asset requirements than those prescribed under this Rule, including more stringent treatment
of items in computing net liquid assets.
(e) Due Dates; Fees for Late Filing.—Each financial report required by Rule 703(c) shall be filed with the Exchange within seventeen business days after the conclusion of the reporting period. Reports shall be deemed to have been filed on the date
which they have been postmarked; if such reports have not been postmarked, they shall be deemed to have been filed when received by the Exchange. A request for an extension of time to file any such report must be received by the Exchange no later than the
business day before the due date for the required report. Unless such an extension has been granted, a member organization shall pay a late fee as set forth below for each week or any part thereof that the report has not been filed.
(i) $100 per week for the first late filing in a twelve-month period;
(ii) $300 per week for the second late filing during a twelve-month period; and
(iii) $1,000 per week for the third late filing, and subsequent late filings, during a twelvemonth period.
The twelve-month period is calculated based on report due dates. Delinquencies will be calculated based on a running twelve-month period.
(f) Filings with The Exchange.—All letters, reports, extension requests and other items required to be filed with the Exchange by any provision of this Rule shall be filed with the Exchange or its designee.
Supplementary Material to Options 6D, Section 1
.01 JBO participants shall not be considered self-clearing for any purpose other than the extension of credit under Options 2, Section 3 or under the comparable rules of another self-regulatory organization.
.02 Organizations designated to the Exchange for financial responsibility pursuant to SEC Rule 17d-1 and subject to SEC Rules 15c3-1 and 17a-5 or exempt from SEC Rule 15c3-1 and maintaining net liquid assets in accordance with Options 6D, Section
1(a), must file electronically with the Exchange or its designee, utilizing such method as required by the Exchange, FOCUS Reports and filings required by SEC Rule 17a-5(a) and (b) and Options 6D, Section 1(c), (d) and (f). Exchange members are still obligated
to submit such filings to the SEC as specified in the Exchange Act, as amended, and the rules promulgated under the Act.
Adopted Feb. 3, 2020 (20-03).