Role of an Exchange: Membership
Broker dealers who are interested in accessing the Nasdaq markets will have to undergo an approval process that determines whether or not members are eligible from a financial and regulatory perspective.
Nasdaq operates six self-regulatory organizations (“SROs”) in the United States, and through those SROs, it operates nine exchanges – three equity exchanges and six options exchanges.
Each exchange offers its own unique market structure and incentives for membership. Only broker dealers registered with the U.S. Securities and Exchange Commission are eligible for membership on any of the Nasdaq exchanges.
Applicants are subject to a robust regulatory review prior to becoming eligible for direct participation on our markets. Nasdaq has rules for each exchange and its priority is to ensure that applicants meet all of the qualification criteria outlined in the rules of the SRO. This is Nasdaq’s first of many processes in place which are aimed at protecting the integrity of its markets.
For example, an applicant for membership is reviewed for compliance with registration and qualification requirements; this review is a crucial step because it confirms that associated persons of the broker dealer are qualified and registered in accordance with industry standards. Additionally, all broker dealers are required to identify qualified and licensed supervisors that are responsible for direct supervision of the day to day activities of these associated persons, including orders sent to and transacted on Nasdaq markets.
All U.S. registered broker dealers are subject to SEC-mandated net capital rules. Applicants for membership must demonstrate that they are well capitalized and financially viable, and are subject to net capital compliance monitoring on an ongoing basis.
Applicants must demonstrate that they have adequate Written Supervisory Procedures in place covering all aspects of their business. Disciplinary history is also taken into consideration during a new member review.
Only approved members may directly access the Nasdaq trading systems; non-members must utilize a member firm to access the Nasdaq markets.
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