Market Access Rule

Adopted on November 3, 2010, Rule 15c3-5 addresses risks associated with automated and rapid electronic trading strategies prevalent in today's markets. This regulation aims to enhance investor confidence in the integrity of financial markets by effectively eliminating practices like unfiltered or naked access, where traders have direct access to exchanges without adequate risk controls.

The rule applies to broker-dealers that have access to trading securities, whether as exchange members, ATS subscribers, or ATS operators with non-broker-dealer subscribers. These broker-dealers must establish, document, and maintain a system of risk management controls and supervisory procedures that are designed to:

1. Limit the financial exposure of the broker-dealer arising from market access.
2. Ensure compliance with all regulatory requirements related to market access.

Specifically, the risk management controls must:

• Prevent the entry of orders that exceed appropriate pre-set credit or capital thresholds or that appear to be erroneous.
• Ensure compliance with all regulatory requirements prior to order entry.
• Restrict entry to authorized individuals and provide immediate post-trade execution reports to appropriate surveillance personnel.