FACT SHEET

Exemption from 

National Securities 

Association 

Membership

U.S. SECURITIES AND EXCHANGE COMMISSION PAGE 1 OF 2

Why This Matters

The Commission adopted the proprietary trading exemption under Rule 15b9-1 so that an 

exchange member’s limited off-member-exchange proprietary trading activity ancillary to its 

exchange activity – which, at that time, typically was a floor business conducted on a single 

national securities exchange – would not necessitate association membership in addition to 

exchange membership. 

In the decades since that adoption, the securities markets have undergone a substantial 

transformation. Proprietary trading broker-dealer firms have emerged that engage in 

significant, computer-based or algorithmic securities trading activity for their own account 

across the full range of exchange and off-exchange venues, often at lightning speeds. Rule 

15b9-1 has remained static, however, as these types of firms have emerged and offmember-exchange securities trading has proliferated. Several of these firms are exchange 

members but are not FINRA members, presumably in reliance on Rule 15b9-1. FINRA does 

not have direct membership-based jurisdiction over these firms. This provides for a less 

stable and consistent regulatory regime for covered off-member-exchange securities trading 

activity. Further, since these firms are not FINRA members, they are not required to report 

their U.S. Treasury securities transactions to FINRA’s Trade Reporting and Compliance 

Engine.

The Securities and Exchange Commission adopted amendments to an exemption from Section 

15(b)(8) of the Securities Exchange Act of 1934 (“Exchange Act”). Section 15(b)(8) requires any 

broker or dealer registered with the Commission to become a member of a national securities 

association unless the broker or dealer effects transactions in securities solely on an exchange 

of which it is a member. The Financial Industry Regulatory Authority, Inc. (“FINRA”) currently is 

the only registered national securities association.

Exchange Act Rule 15b9-1 provides an exemption from Section 15(b)(8) to certain proprietary 

trading dealers that effect securities transactions other than on an exchange where they are 

members.

The amendments to Rule 15b9-1 set forth narrower exemptions to enhance FINRA oversight of 

firms that trade securities proprietarily across markets.
FACT SHEET | Exemption from National Securities Association Membership

U.S. SECURITIES AND EXCHANGE COMMISSION PAGE 2 of 2

How This Rule Applies

As a result of these rule amendments, a Commission-registered broker or dealer will be 

required to join FINRA pursuant to Section 15(b)(8) if it effects securities transactions other 

than on an exchange where it is a member, unless: 

• It is a member of a national securities exchange;

• It carries no customer accounts; and

• Such transactions (i) result solely from orders that are routed by a national securities 

exchange of which the broker or dealer is a member to comply with Rule 611 of 

Regulation NMS or the Options Order Protection and Locked/Crossed Market Plan; 

or (ii) are solely for the purpose of executing the stock leg of a stock-option order.

What’s Next

The rule amendments will become effective 60 days after the date of publication of the 

adopting release in the Federal Register. The compliance date will be 365 days from the 

date of publication of the adopting release in the Federal Register.