Index Warrants Position & Exercise Limit Rules

FINRA Rule 2359(a) provides that “…no member shall effect for any account in which such member has an interest, or for the account of any partner, officer, director or employee thereof, or for the account of any customer, a purchase or sale transaction in an index warrant listed on a national securities exchange if the member has reason to believe that as a result of such transaction the member, or partner, officer, director or employee thereof, or customer would, acting alone or in concert with others, directly or indirectly, hold or control an aggregate position in an index warrant issue on the same side of the market, combining such index warrant position with positions in index warrants overlying the same index on the same side of the market, in excess of the position limits established by the exchange on which the index warrant is listed.”

FINRA Rule 2359(b) provides that “…no member or person associated with a member shall exercise, for any account in which such member or person associated with such member has an interest, or for the account of any partner, officer, director or employee thereof, or for the account of any customer, a long position in any index warrant if as a result thereof such member or partner, officer, director or employee thereof or customer, acting alone or in concert with others, directly or indirectly, has or will have exceeded the applicable exercise limit fixed from time to time by an exchange for an index warrant.”

Changes to an exchange rule regarding index warrants position and exercise limits could affect a FINRA-regulated firm’s compliance with FINRA Rule 2359(a) and (b). Accordingly, FINRA is providing information about the pending rule filings with the SEC seeking to amend position and exercise limits as well as any SEC orders approving or disapproving those rule filings.

• No currently pending filings