Rule 414. Index and Currency Warrants
This rule is no longer applicable effective February 17, 2009.
(a) Definitions
(i) "Currency index warrant" means a put or call warrant that overlies an "index currency group" (as defined below) and that is listed for trading on the Exchange pursuant to the listing standards of Paragraph 703.15 of the Exchange's Listed Company Manual.
(ii) "Currency warrant" means a put or call warrant that overlies a foreign currency or a "cross currency" and that is listed for trading on the Exchange pursuant to the listing standards of Paragraph 703.15 of the Exchange's Listed Company Manual. "Cross Currency" means two non-United States currencies that are related in a prescribed manner.
(iii) "Index currency group" means a group of currencies whose inclusion and relative representation in the group is determined by the inclusion and relative representation of the current market prices of the currencies in a currency index.
(iv) "Index stock group" and "broad index stock group" have the meanings that paragraphs (b)(31) and (b)(6) of Rule 700 (Applicability, Definitions and References) assign to those terms.
(v) "Industry index stock group" means, in the context of stock index warrants, an index stock group of nine or more stocks whose inclusion and relative representation in the group are determined by the inclusion and relative representation of their current market prices in a widely-disseminated stock index reflecting a particular industry or closely-related industries.
(vi) "Stock index warrant" means a put or call warrant that overlies a broad index stock group or an industry index stock group and that is listed for trading on the Exchange pursuant to the listing standards of Paragraph 703.17 of the Exchange's Listed Company Manual.
(b) Applicability
This Rule 414 shall apply only to Exchange trading in currency warrants, currency index warrants and stock index warrants.
Except as this Rule otherwise provides, or unless the context otherwise requires, the Rules of the Exchange shall apply to trading on the Exchange in currency warrants, currency index warrants and stock index warrants.
Where this Rule applies to Exchange trading in currency warrants, currency index warrants or stock index warrants, any of the Exchange's Option Rules (Rule 700 (Applicability, Definitions and References) to Rule 795 (Transfer or Lease of Option Trading Right)), references to "option" or "option contract" in the incorporated Option Rule, and in any rule under the Securities Act of 1933 that any such Option Rule may incorporate, shall refer instead to "currency warrant," "currency index warrant," "stock index warrant," as the case may be, unless this Rule 414 specifies otherwise. (Other reference revisions are specified below.)
This Rule 414 shall apply only to Exchange trading in currency warrants, currency index warrants and stock index warrants.
Except as this Rule otherwise provides, or unless the context otherwise requires, the Rules of the Exchange shall apply to trading on the Exchange in currency warrants, currency index warrants and stock index warrants.
Where this Rule applies to Exchange trading in currency warrants, currency index warrants or stock index warrants, any of the Exchange's Option Rules (Rule 700 (Applicability, Definitions and References) to Rule 795 (Transfer or Lease of Option Trading Right)), references to "option" or "option contract" in the incorporated Option Rule, and in any rule under the Securities Act of 1933 that any such Option Rule may incorporate, shall refer instead to "currency warrant," "currency index warrant," "stock index warrant," as the case may be, unless this Rule 414 specifies otherwise. (Other reference revisions are specified below.)
Position Limits and Reports
(c) Position Limits Generally
(i) Except with the prior approval of the Exchange in each instance, no member or member organization shall effect, for any account in which such member or member organization has an interest, for the account of any member or employee of such member or member organization, or for the account of any customer, a transaction (whether on the Exchange or on or through the facilities of, or otherwise subject to the rules of, another national securities exchange or national securities association) in a stock index warrant if the member or member organization has reason to believe that, as a result of such transaction, the member or member organization, the member or employee of such member or member organization, or the customer would, acting alone or in concert with others, directly or indirectly, control any aggregate position in a stock index warrant issue, or in all warrants issued on the same stock index, on the same side of the market, in excess of the position limits specified in subparagraphs (ii) through (iv) of this paragraph (c).
(ii) Broad Index Warrants for Ten Dollars or Less
As to stock index warrants on the same index stock group with an original issue price of ten dollars or less, the position limit is 15 million warrants.
As to stock index warrants on the same index stock group with an original issue price of ten dollars or less, the position limit is 15 million warrants.
(iii) Industry Index Warrants
As to stock index warrants on the same industry index stock group with an original issue price of ten dollars or less, the position limit is:
As to stock index warrants on the same industry index stock group with an original issue price of ten dollars or less, the position limit is:
(A) 4,500,000 warrants if any single stock in the group accounts for 30 percent or more of the index group value.
(B) 6,750,000 warrants if either:
(1) any single stock in the group accounts for 20 percent or more of the index group value; or
(2) any five stocks in the group together account for more than 50 percent of the index group value and no single stock in the group accounts for 30 percent or more of the index group value.
(C) 9,000,000 warrants if none of the conditions specified in clauses (A) and (B) are present.
The Exchange shall make the determination anticipated by clauses (A) through (C) with respect to warrants on each industry index stock group at the commencement on the Exchange of trading of such warrants and thereafter on the semi-annual review dates established by the Exchange from time to time for the purpose of making the required determinations simultaneously for all Exchange-listed warrants on industry index stock groups. The determinations shall be based upon the average relative representation of the stocks within the group during the 30-day period immediately preceding the review.
If the Exchange determines, as a consequence of a semi-annual review, that the position limit in effect with respect to warrants on a particular industry index stock group is lower than the maximum position limit permitted by clauses (A) through (C), the Exchange may increase the position limit immediately.
Once a warrant issue on a particular industry index stock group commences to trade on the Exchange, the Exchange shall not decrease the position limit for that issue as the result of a semi-annual review. As a result, different warrant issues on the same underlying industry index stock group may have different position limits.
All positions in warrants covering a particular industry index stock group shall be aggregated. Accordingly:
If the Exchange determines, as a consequence of a semi-annual review, that the position limit in effect with respect to warrants on a particular industry index stock group is lower than the maximum position limit permitted by clauses (A) through (C), the Exchange may increase the position limit immediately.
Once a warrant issue on a particular industry index stock group commences to trade on the Exchange, the Exchange shall not decrease the position limit for that issue as the result of a semi-annual review. As a result, different warrant issues on the same underlying industry index stock group may have different position limits.
All positions in warrants covering a particular industry index stock group shall be aggregated. Accordingly:
(A) an aggregate position in a particular issue of warrants on an industry index stock group that any person or group of persons acting in concert holds or controls shall be subject to that issue's position limit; and
(B) a combined, aggregate position in multiple issues of warrants on the same underlying industry stock group that any person or group of persons acting in concert holds or controls shall be subject to the maximum position limit that applies in respect of any of the issues.
(iv) Warrants for More Than Ten Dollars
As to stock index warrants with an original issue price of greater than $10 (a "high-priced stock index warrant"), the position in that stock index warrant shall be converted so as to make it the dollar equivalent of warrants on the same index stock group for which the original issue price was $10 and to apply that equivalent stock index warrant position to the position limit set forth in clause (ii) or (iii). The conversion shall be effected by (A) dividing the original offering price of a high-priced index warrant by $10 and (B) multiplying the resulting number by the size of the stock index warrant position in that issue. For example, if a stock index warrant on the NYSE Composite Index has an original issue price of $20, a member's position of 1 million of those warrants would represent the equivalent of 2 million warrants on the NYSE Composite Index for which the original issue price was $10 (($20 ÷ $10) × 1 million warrants). Thus, in determining whether the member's stock index warrant position on the NYSE Composite Index complies with the 15 million warrant position limit set forth in clause (ii), the aggregate position of warrants on the NYSE Composite Index shall include the two million warrant equivalents represented by the position in the $20 stock index warrant.
As to stock index warrants with an original issue price of greater than $10 (a "high-priced stock index warrant"), the position in that stock index warrant shall be converted so as to make it the dollar equivalent of warrants on the same index stock group for which the original issue price was $10 and to apply that equivalent stock index warrant position to the position limit set forth in clause (ii) or (iii). The conversion shall be effected by (A) dividing the original offering price of a high-priced index warrant by $10 and (B) multiplying the resulting number by the size of the stock index warrant position in that issue. For example, if a stock index warrant on the NYSE Composite Index has an original issue price of $20, a member's position of 1 million of those warrants would represent the equivalent of 2 million warrants on the NYSE Composite Index for which the original issue price was $10 (($20 ÷ $10) × 1 million warrants). Thus, in determining whether the member's stock index warrant position on the NYSE Composite Index complies with the 15 million warrant position limit set forth in clause (ii), the aggregate position of warrants on the NYSE Composite Index shall include the two million warrant equivalents represented by the position in the $20 stock index warrant.
(v) Liquidation of Positions
Whenever the Exchange shall determine that a person or group of persons acting in concert holds or controls an aggregate position (whether long or short) in stock index warrants in excess of the applicable position limits established pursuant to this paragraph (c), it may direct all members and member organizations carrying a position in stock index warrants for such person or persons to liquidate such position as expeditiously as possible consistent with the maintenance of an orderly market, to the extent necessary to assure that such person or persons are in compliance with applicable position limits.
Whenever such a direction is issued by the Exchange, no member or member organization receiving notice thereof shall accept any order to purchase or sell any stock index warrant based on the same index stock group for the account of the person or persons named in such directive, unless in each instance express approval therefor is given by the Exchange, or until such directive is rescinded.
Whenever the Exchange shall determine that a person or group of persons acting in concert holds or controls an aggregate position (whether long or short) in stock index warrants in excess of the applicable position limits established pursuant to this paragraph (c), it may direct all members and member organizations carrying a position in stock index warrants for such person or persons to liquidate such position as expeditiously as possible consistent with the maintenance of an orderly market, to the extent necessary to assure that such person or persons are in compliance with applicable position limits.
Whenever such a direction is issued by the Exchange, no member or member organization receiving notice thereof shall accept any order to purchase or sell any stock index warrant based on the same index stock group for the account of the person or persons named in such directive, unless in each instance express approval therefor is given by the Exchange, or until such directive is rescinded.
(vi) Reports of Index Warrant Positions
(A) Each member and member organization shall file with the Exchange a report in respect of:
(1) each account in which the member or member organization has an interest;
(2) each account of a partner, officer, director, or employee of such member organization; and
(3) each customer account,
that has established an aggregate position (whether long or short) of 100,000 warrants covering the same underlying index. In addition, that member or member organization shall file such additional periodic reports in respect of the account as the Exchange may from time to time prescribe.
For the purposes of computing reportable positions under this paragraph (C)(v)(i):
For the purposes of computing reportable positions under this paragraph (C)(v)(i):
(1) long positions in put warrants shall be combined with short positions in call warrants;
(2) short positions in put warrants shall be combined with long positions in call warrants; and
(3) warrants on an index stock group shall not be aggregated with:
(a) warrants or any other index stock group;
(b) options on any index stock group; or
(c) options or warrants on any stock or group of stocks that may be included in the index stock group.
The report shall be filed not later than the close of business on the first business day following the trade date of the transaction requiring the filing of the report.
(B) Each member and member organization shall report promptly to the Exchange any instance in which the member or member organization has reason to believe that a person, acting alone or in concert with others, has exceeded or is attempting to exceed the position limits set forth in this paragraph (c) or the exercise limits set forth in paragraph (d) of this Rule 414.
(C) A member organization need not file the reports that subparagraph (c)(v)(A) requires in respect of positions in the accounts of specialists or specialist units for which such member organization clears, provided that such positions are reported pursuant to Supplementary Material .12 of Rule 104 (Dealings by Specialists).
(d) Exercise Limits
Except with the prior approval of the Exchange in each instance, no member or member organization shall exercise, for any account in which such member or member organization has an interest or for the account of any member or employee of such member or member organization or for the account of any customer, a long position in any stock index warrant dealt in on the Exchange if as a result thereof such member or member organization, or member or employee of such member or member organization or customer, acting alone or in concert with others, directly or indirectly, has or will have exercised within any five consecutive business days aggregate long positions in excess of the number of stock index warrants specified in or pursuant to paragraph (c) of this Rule 414 as the position limit for the stock index warrant. The Exchange may from time to time institute other limitations concerning the exercise of stock index warrants. All such exercise limitations are separate and distinct from any other exercise limitations the issuers of stock index warrants may impose.
Except with the prior approval of the Exchange in each instance, no member or member organization shall exercise, for any account in which such member or member organization has an interest or for the account of any member or employee of such member or member organization or for the account of any customer, a long position in any stock index warrant dealt in on the Exchange if as a result thereof such member or member organization, or member or employee of such member or member organization or customer, acting alone or in concert with others, directly or indirectly, has or will have exercised within any five consecutive business days aggregate long positions in excess of the number of stock index warrants specified in or pursuant to paragraph (c) of this Rule 414 as the position limit for the stock index warrant. The Exchange may from time to time institute other limitations concerning the exercise of stock index warrants. All such exercise limitations are separate and distinct from any other exercise limitations the issuers of stock index warrants may impose.
(e) Trading Halts
Paragraph (b) of Rule 717 (Trading Rotations, Halts and Suspensions) shall apply to trading halts in stock index warrants in the same manner as it applies to trading halts in broad index stock group options.
Paragraph (b) of Rule 717 (Trading Rotations, Halts and Suspensions) shall apply to trading halts in stock index warrants in the same manner as it applies to trading halts in broad index stock group options.
(f) Account Approval
No member or member organization shall accept an order from a customer to purchase or sell a currency warrant, currency index warrant or stock index warrant unless the customer's account has been approved for options trading pursuant to Rule 721 (Opening of Accounts).
No member or member organization shall accept an order from a customer to purchase or sell a currency warrant, currency index warrant or stock index warrant unless the customer's account has been approved for options trading pursuant to Rule 721 (Opening of Accounts).
(g) Supervision of Accounts
Rule 722 (Supervision of Accounts) shall apply to all customer accounts in which transactions in currency warrants, currency index warrants and/or stock index warrants are effected.
Rule 722 (Supervision of Accounts) shall apply to all customer accounts in which transactions in currency warrants, currency index warrants and/or stock index warrants are effected.
(h) Suitability
Rule 723 (Suitability) shall apply to recommendations in currency warrants, currency index warrants and stock index warrants.
Rule 723 (Suitability) shall apply to recommendations in currency warrants, currency index warrants and stock index warrants.
(i) Discretionary Accounts
Rule 724 (Discretionary Accounts) (and not Rule 408 (Discretionary Power in Customers' Account)) shall apply insofar as a member or employee of a member organization exercises discretion to trade in currency warrants, currency index warrants and/or stock index warrants for customer accounts.
Rule 724 (Discretionary Accounts) (and not Rule 408 (Discretionary Power in Customers' Account)) shall apply insofar as a member or employee of a member organization exercises discretion to trade in currency warrants, currency index warrants and/or stock index warrants for customer accounts.
(j) Customer Complaints
Rule 723 (Customer Complaints) shall apply to all customer complaints received regarding currency warrants, currency index warrants or stock index warrants.
Rule 723 (Customer Complaints) shall apply to all customer complaints received regarding currency warrants, currency index warrants or stock index warrants.
(k) Communications to Customers
Rule 791 (Communications to Customers) shall apply to any communication to any customer or member of the public concerning currency warrants, currency index warrants or stock index warrants, subject to the following:
Rule 791 (Communications to Customers) shall apply to any communication to any customer or member of the public concerning currency warrants, currency index warrants or stock index warrants, subject to the following:
(i) paragraphs (a)(iv) and (d) of Rule 791, and the first three sentences of Supplementary Material .20(a) of Rule 791, shall not so apply;
(ii) the reference in paragraph (e)(iii) of Rule 791 to "securities" shall refer instead to "currencies," "index currency groups," or "index stock groups," as the case may be;
(iii) references in the Supplementary Material to Rule 791 to "The Options Clearing Corporation" shall refer instead to "the issuer(s) of index warrants."
In addition, all advertisements, educational material and sales literature concerning currency warrants, currency index warrants or stock index warrants shall state that the warrants share many of the risks of standardized options issued by The Options Clearing Corporation but that, unlike standardized options, the warrants are backed only by the credit of the issuer (and not of The Options Clearing Corporation) and that each issue of the warrants contains its own terms and conditions (including but not limited to duration, exercise price, and other terms and conditions relating to exercise) which may differ from those of other warrants, even other warrants on the same underlying currency or index or issued by the same issuer.
Members are advised that any advertisement, sales literature or educational material that might constitute a "prospectus" as defined in the Securities Act of 1933 should satisfy the applicable requirements of that Act and the Rules thereunder.
Members are advised that any advertisement, sales literature or educational material that might constitute a "prospectus" as defined in the Securities Act of 1933 should satisfy the applicable requirements of that Act and the Rules thereunder.
(l) Margin Requirements
Margin requirements for currency warrants, currency index warrants and stock index warrants shall be as Rule 431 (Margin Requirements) prescribes.
Margin requirements for currency warrants, currency index warrants and stock index warrants shall be as Rule 431 (Margin Requirements) prescribes.
• • • Supplementary Material: --------------
.10 Supplementary Material .10 through .50 of Rule 704 (Position Limits) shall apply to stock index warrant position limits under this Rule in the same manner as they apply to index options under Rule 704, except that references in that Supplementary Material to "opening transactions" of any type shall refer to a transaction in a stock index warrant in which the purchaser's intention is to create or increase a position in the particular warrant.
.20 All notices that this Rule 414 requires to be filed shall be filed in such form and manner as the Exchange may from time to time require.
.30 In order to expedite Commission approval of a warrant on a particular industry index stock group, the Exchange may file for approval of the industry index stock group pursuant to the procedures and criteria set forth in Supplementary Material .25 of Rule 715 (Approval of Underlying Stock and Groups), subject to the following:
(a) references in Supplementary Material .25 of Rule 715 to "series" or "classes" of industry index stock group options shall refer instead to "industry index stick group warrants";
(b) the requirement set forth in clause (a)(iv) of Supplementary Material .25 of Rule 715 is replaced by a requirement that the index contain no fewer than nine component securities; and
(c) the requirement set forth in clause (a)(vii) of Supplementary Material .25 of Rule 715 is replaced by a requirement that terms of the warrant regarding settlement values must not violate the requirements of the penultimate paragraph of Section 703.17 of the Listed Company Manual.
| Adopted. August 29, 1995. Amendment. July 16, 1996; (NYSE-2005-05); February 27, 2006, effective March 8, 2006 (NYSE-2005-77). Amended by SR-FINRA-2008-036 eff. Nov. 11, 2008. Selected Notice: 08-64. |