Section 1: Participant Information
Qualifications (CHX Rules Article 3, Rule 1; Article 17, Rule 1)
- A CHX participant firm can be a Corporation, a Partnership, or a Limited Liability Company.
- The Exchange requires that an applicant wishing to conduct business as an Institutional Broker must designate the CHX as its Designated Examining Authority.
- The Exchange requires that the primary purpose of every participant firm shall be the transaction of business as a broker or dealer in securities.
- The active principals of a participant firm shall have adequate experience in and knowledge of the securities business to comply with the rules and policies of the Exchange and to properly serve the public.
- Individual participants may function either as an Institutional Broker Representative or a Market Maker Trader.
- Individual applicants for permits shall have a liquid net worth of not less than $10,000.
- An individual participant who is a sole proprietor may not transact business with the public.
Requirements Applicable to All Participants and Participant Firms
- As a prerequisite for obtaining a CHX Trading Permit, an individual participant or participant firm must be registered as a broker/dealer with the Securities and Exchange Commission ("SEC").
- If not already registered with the SEC, this registration process can take 30 calendar days or longer. CHX approval will be granted conditionally, however assignment of a permit cannot proceed until SEC "conditional approval" is confirmed by the CHX.
- If the applicant is not registered as a broker/dealer with the SEC, the CHX can assist in registration. See "Form BD" in Section 2.
- Each participant or participant firm is subject to Rule 15c3-1 ("Net Capital Rule") promulgated pursuant to the Securities Exchange Act of 1934, and shall comply with the capital requirements prescribed therein.
Instructions For All Applicants
The CHX requires certain specific information in order to process an application. The following checklist is provided to assist you in collecting and organizing the required documents and information. See also, the Application Form Index in Section Two to access the corresponding forms.
Documentation Required of All Applicants
Cover Letter indicating how and what the permit will be used for, signed by a principal officer, general partner, or managing member of the firm.
Application For Registration
This form must be completed and signed by an authorized signer as a noted on the form.
Form BD – Uniform Application For Broker Dealer Registration
- If applicant is not registered as a broker/ dealer with the SEC, complete and submit (2) originally signed, currently dated and notarized copies of Form BD. The CHX will submit one original to the Central Registration Depository ("CRD") on behalf of the applicant to register as a broker/dealer with the SEC and will retain one original for its records.
- If applicant is a registered broker/dealer, a copy of the current completed Form BD must be submitted.
NOTE: All registered broker/dealers are reminded that once they become CHX participants, an amended BD must be filed with the CRD and the CHX.
Executed and notarized copy of Statement of Financial Condition Pursuant to Rule 15b1-2 Under the SEC Act of 1934, attached to a Balance Sheet
Copies of FOCUS II or IIA for the most recent 6 months. (If not required to file FOCUS please include a statement to that effect.)
Copy of the most recent Confidential Annual Audit Report prepared by the firm’s independent public accountant (If not required to have an audit please include a statement to that effect.)
An executed and notarized copy of either sheet 15b1-2 Information (for Partnership, Corporation or Limited Liability Company) or 15b1-2 Information (for Sole Proprietor)
A completed form titled Designation of Recipient For Service of Notice of Commission Proceeding
Names of Subordinate Lenders, if any
Form U4 – Uniform Application for Securities Industry
- Complete, execute and submit a Form U4 for all general partners, members or principal officers shown on Schedule A and B of Form BD and others as defined in CHX Rules, Article 6, Rule 2. (Note, if the CHX will not be the applicant’s Designated Examining Authority then only page 1, 6 and 10 of Form U-4 for the individuals reflected on Form BD is necessary.)
- Form U4s are required for persons acting as Institutional Broker Representatives and Market Maker Traders.
Specific Documentation Required of a Corporation, Partnership or Limited Liability Company
- Copy of Articles or Certificate of Incorporation and all amendments hereto, certified by the Corporate Secretary
- Copy of By-Laws and all amendments thereto, certified by the Corporate Secretary
- Copy of the Corporate Resolution authorizing registration of the corporation certified by the Corporate Secretary
- Originally executed copy or a certified copy of Partnership Agreement and all amendments thereto If CHX is the Designated Examining Authority ("DEA"), the Partnership Agreement must include a provision for prior notification to the CHX of all Capital withdrawals. See, CHX Rules, Article 3, Rule 6(b).
Limited Liability Company:
- Operating Agreement If CHX is the Designated Examining Authority ("DEA"), the Operating Agreement must include a provision for prior notification to the CHX of all Capital withdrawals. See, CHX Rules Article 3, Rule 6(b).
- Articles of Firm or Certificate of Formation
Specific Documentation Required of a Market Maker Applicant
A completed Market Maker Authorization Application Form
Specific Documentation Required of Applicants Designated to the CHX:
A copy of the applicants's Written Supervisory Procedures (WSP) and WSP Checklist. Please refer to the CHX Information Memorandum MR-05-24 pertaining to Supervisory System, published December 27, 2005. See also the guideline provided in Section 2, labeled Written Supervisory Procedures Review Checklist Guideline. More information about DEA Services can be found in Section 3.
Specific Documentation Required of Applicants Designated to the FINRA
A copy of the FINRA Membership Agreement.
Specific Documentation Required of Applicants Designated to an Examining Authority other than the CHX:
A copy of the letter sent to the applicant's DEA, granting the DEA permission to provide any information that may be requested by the CHX, pursuant to their application for a trading permit.
There are separate examination requirements for Institutional Broker Representatives and Market Maker Traders. Arrangements to take an examination may be made by contacting the CHX Examination Area. (See, Section Three, Telephone Contact List for "IBR / MMT Examinations")
The Exchange may require the successful completion of a training course or an examination, or both, in connection with the registration of Participants and persons associated with Participants, and may charge fees for such registration and examination. See, CHX Rules, Article 6, Rule 3.
Persons Registered in Special Capacities
- Institutional Broker Exam
All Applicants seeking to register as Institutional Broker Representatives must successfully complete the Institutional Broker Exam.
- Market Maker Exam
Prior to the Exchange approving a Participant's request to qualify as a Market Maker Trader, such Participant must successfully complete the Market Maker Exam.
- Public Business Exam
Participants who successfully complete the Series 7 Examination may conduct a public business which is limited to accepting orders while acting as Institutional Broker Representatives directly from non broker/dealer customers. In lieu of the Series 7 Examination, Participants who act as Institutional Broker Representatives and successfully complete the Series 7A Examination may conduct a public business which is limited to accepting orders directly from professional customers for execution on the Exchange. Clerks, employed by Participants that have successfully completed the Series 7 or Series 7A Examination, may accept orders from professional customers for execution on the Exchange so long as such clerks successfully complete both the Institutional Broker Representative Exam and either the Series 7 Examination or the Series 7A Examination. For purposes of this interpretation and policy, a "professional customer" includes a bank; trust company; insurance company; investment trust; a state or political subdivision thereof; a charitable or nonprofit educational institution regulated under the laws of the United States, or any state; a pension or profit sharing plan subject to ERISA or of any agency of the United States or of a state or political subdivision thereof; or any person (other than a natural person) who has, or who has under management, net tangible assets of at least sixteen million dollars. Participants which accept orders from public or professional customers (i.e., from non-broker-dealers) must also be members (or associated persons thereof) of the Financial Industry Regulatory Authority ("FINRA").
- Joint Back Office Participants
All registered persons associated with Joint Back Office ("JBO") Participants (as defined in CHX Rules, Article 7, Rule 3A, section (a)) designated as financial and operations principals must successfully complete the Financial and Operations Principal Examination, Series 27.
Associated persons of Participants for which the Exchange is the Designated Examining Authority ("DEA") who execute, make trading decisions with respect to, or otherwise engage in proprietary or agency trading of equities, preferred securities or convertible debt securities, must successfully complete the Uniform Registered Representative Exam, Series 7. This requirement shall not apply to any associated person who is subject to the examination requirements of interpretation and policy .01. See, CHX Rules, Article 6, Rule 3, Interpretation and Policies .01 and .02.
Upon approval of the Application for Registration, and if applicable, approval of the Market Maker Authorization Application, business unit and trading account symbols will be established in the CHX and NSCC systems, effective upon the agreed upon first trade date.
All individuals seeking access to Exchange facilities must obtain an access badge from CHX Security. See, Section Three, CHX Telephone Contact List for Security.
Technical Requirements and Connectivity to CHX
For information about technical and connectivity requirements, refer to the "Technical Documents" found in Section Three, Additional Information, and contact "Connectivity Services". See, Section Three,
CHX Telephone Contact List.
SEC Rule 17f-2 and Section 17 (f)(2) of the Exchange Act requires fingerprinting of securities industry personnel. The Exchange will conduct a fingerprint–based criminal records check of all prospective employees, all prospective and current independent contractors or all prospective and current temporary employees, who have or are anticipated to have access to the Exchange facilities for ten business days or longer, and all other persons who have or are anticipated to have access to premises controlled by CHX Holdings, Inc., which are located in the same building as Exchange facilities. CHX Participants are responsible for ensuring compliance with the fingerprinting requirements for all of their associated persons, whether or not they have access to Exchange facilities.
All participants must have the ability to clear and settle transactions. This can be accomplished in one of two ways:
As a direct participant of National Securities Clearing Corporation (NSCC)
- The firm must meet NSCC's requirements and become accepted as a participant of NSCC.
- Direct clearing arrangements must be made with NSCC.
- In order to be in a position to clear your transactions you must have assigned a numeric account symbol from NSCC and an Alpha symbol from the CHX.
- A CHX Alpha Account Symbol can be obtained by calling the CHX Participant Services Department. (See Section Three, CHX Telephone Contact List for "Participant Services")
- Once a clearing number is received from NSCC, the CHX Participant Services Department must be advised to update the CHX trading systems before trading can commence.
- Trading may commence after the CHX Alpha symbol and the NSCC account number have been established and entered into the CHX trading systems.
Through the services of a clearing broker which is a direct participant of NSCC and CHX
- The firm must select a clearing broker. A list of member firms who are currently providing clearing services at the CHX can be found in Section Three, “Broker/Dealers Providing Clearing Services”.
- The CHX Participant Services Department will assign an Alpha Symbol for use on the CHX.
- The clearing broker must arrange with NSCC to establish a sub-account number for your account. (This sub-account number is needed in addition to the alpha account symbol assigned by the CHX.)
- Once a clearing account number is received from NSCC, the CHX Participant Services Department must be advised to update the CHX Systems before trading can commence.
- Trading may commence after the CHX alpha symbol and the NSCC sub-account number have been established and entered into the CHX trading systems.
Participants for which CHX is the DEA shall submit to the Exchange for its approval, all clearing agreements between the participant and any other clearing broker/dealer.
Introduction to the Application for a Trading Permit
Section 1: Participant Information
Section 2: Application Form Index
Section 3: Additional Information Index
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