Effect of Rule 540-Responsibility for Customer Orders B. Liability for Negligence

Market Regulation Advisory Notices

To	All Members and Clearing Members
From	Market Regulation
Subject	Effect of RULE 540.- RESPONSIBILITY FOR CUSTOMER ORDERS B. Liability for Negligence - In Connection with the Situation Commonly Referred to as a "Print Through"
Notice Date	2003-12-29
Notice Number	RA-03-10
Effective Date
In response to recent inquiries, the Division of Market Regulation is re-issuing the following Regulatory Advisory: It is erroneous to presume that a floor broker is automatically liable on a limit order simply because the quotation listing reflects that the market traded through the limit price while the order was active. Floor brokers are not held to a "print through" unless they were negligent in failing to fill an order. RULE 540.B. Liability for Negligence - provides that "A floor broker or clearing member shall not be allowed to adjust the price at which an order was executed or be held responsible for executing or failing to execute an order unless such floor broker or clearing member was negligent or is settling a bona-fide dispute regarding negligence. A clearing member may not compel an adjustment from a floor broker in the absence of a bona-fide dispute regarding negligence." The practice of holding a floor broker to a fill when there is no evidence of negligence is merely another way of guaranteeing a fill. Guaranteed fills are expressly prohibited and may constitute a major rule violation. If you have any questions regarding the above, please call Eric S. Wolff, Managing Director, Regulatory Affairs at (312) 930-3255, or James P. Moran, Director, Division of Market Regulation, at (312) 930-8520.