carries customer or broker or dealer accounts and receives or holds funds or securities for those persons. A broker or dealer shall be deemed to receive funds, or to carry customer or broker or dealer accounts and to receive funds from those persons if, in connection with its activities as a broker or dealer, it receives checks, drafts, or other evidences of indebtedness made payable to itself or persons other than the requisite registered broker or dealer carrying the account of a customer, escrow agent, issuer, underwriter, sponsor, or other distributor of securities. A broker or dealer shall be deemed to hold securities for, or to carry customer or broker or dealer accounts, and hold securities of, those persons if it does not promptly forward promptly deliver all of the securities of customers or of other brokers or dealers received by the firm in connection with its activities as a broker or dealer. A broker or dealer, without complying with this paragraph (a)(2)(i), may receive securities only if its activities conform with the provisions of paragraphs (a)(2) (iv) or (v) of this section, and may receive funds only in connection with the activities described in paragraph (a)(2)(v) of this section.

or

(ii) A broker or dealer that is exempt from the provisions of §240.15c3-3 pursuant to paragraph (k)(2)(i) thereof shall maintain net capital of not less than $100,000.

Dealers

(iii) A dealer shall maintain net capital of not less than $100,000. For the purposes of this section, the term "dealer" includes:

(A) Any broker or dealer that endorses or writes options otherwise than on a registered national securities exchange or a facility of a registered national securities association; and

(B) Any broker or dealer that effects more than ten transactions in any one calendar year for its own investment account. This section shall not apply to those persons engaging in activities described in paragraphs (a)(2)(v), (a)(2)(vi) or (a)(8) of this section, or to those persons whose underwriting activities are limited solely to acting as underwriters in best efforts or all or none underwritings in conformity with

paragraph (b)(2) of §240.15c2-4, so long as those persons engage in no other dealer activities.

Brokers or Dealers That Introduce Customer Accounts And Receive Securities

(iv) A broker or dealer shall maintain net capital of not less than $50,000 if it introduces transactions and accounts of customers or other brokers or dealers to another registered broker or dealer that carries such accounts on a fully disclosed basis, and if the broker or dealer receives but does not hold customer or other broker or dealer securities. A broker or dealer operating under this paragraph (a)(2)(iv) of this section may participate in a firm commitment underwriting without being subject to the provisions of paragraph (a)(2)(iii) of this section, but may not enter into a commitment for the purchase of shares related to that underwriting.

Brokers or Dealers Engaged in the Sale of Redeemable Shares of Registered Investment Companies and Certain Other Share Accounts

(v) A broker or dealer shall maintain net capital of not less than $25,000 if it acts as a broker or dealer with respect to the purchase, sale and redemption of redeemable shares of registered investment companies or of interests or participations in an insurance company separate account directly from or to the issuer on other than a subscription way basis. A broker or dealer operating under this section may sell securities for the account of a customer to obtain funds for the immediate reinvestment in redeemable securities of registered investment companies. A broker or dealer operating under this paragraph (a)(2)(v) must promptly transmit all funds and promptly deliver all securities received in connection with its activities as a broker or dealer, and may not otherwise hold funds or securities for, or owe money or securities to, customers.

Other Brokers or Dealers

(vi) A broker or dealer that does not receive, directly or indirectly, or hold funds or securities for, or owe funds or securities to, customers and does not

carry accounts of, or for, customers and does not engage in any of the activities described in paragraphs (a)(2) (i) through (v) of this section shall maintain net capital of not less than $5,000. A broker or dealer operating under this paragraph may engage in the following dealer activities without being subject to the requirements of paragraph (a)(2)(iii) of this section:

(A) In the case of a buy order, prior to executing such customer's order, it purchases as principal the same number of shares or purchases shares to accumulate the number of shares necessary to complete the order, which shall be cleared through another registered broker or dealer or

(B) In the case of a sell order, prior to executing such customer's order, it sells as principal the same number of shares or a portion thereof, which shall be cleared through another registered broker or dealer. (3) [Reserved]

Capital Requirements for Market Makers

(4) A broker or dealer engaged in activities as a market maker as defined in paragraph (c)(8) of this section shall maintain net capital in an amount not less than $2,500 for each security in which it makes a market (unless a security in which it makes a market has a market value of $5 or less, in which event the amount of net capital shall be not less than $1,000 for each such security) based on the average number of such markets made by such broker or dealer during the 30 days immediately preceding the computation date. Under no circumstances shall it have net capital less than that required by the provisions of paragraph (a) of this section, or be required to maintain net capital of more than $1,000,000 unless required by paragraph (a) of this section.

(5) [Reserved]

Market Makers, Specialists and Certain Other Dealers

(6)(i) A dealer who meets the conditions of paragraph (a)(6)(ii) of this section may elect to operate under this paragraph (a)(6) and thereby not apply, except to the extent required by this paragraph (a)(6), the provisions of paragraphs (c)(2)(vi) or Appendix A ($240.15c3-1a) of this section to market

maker and specialist transactions and, in lieu thereof, apply thereto the provisions of paragraph (a)(6)(iii) of this section.

(ii) This paragraph (a)(6) shall be available to a dealer who does not effect transactions with other than brokers or dealers, who does not carry customer accounts, who does not effect transactions in options not listed on a registered national securities exchange or facility of a registered national securities association, and whose market maker or specialist transactions are effected through and carried in a market maker or specialist account cleared by another broker or dealer as provided in paragraph (a)(6)(iv) of this section.

(iii) A dealer who elects to operate pursuant to this paragraph (a)(6) shall at all times maintain a liquidating equity in respect of securities positions in his market maker or specialist account at least equal to:

(A) An amount equal to 25 percent (5 percent in the case of exempted securities) of the market value of the long positions and 30 percent of the market value of the short positions; provided, however, in the case of long or short positions in options and long or short positions in securities other than options which relate to a bona fide hedged position as defined in paragraph (c)(2)(x)(C) of this section, such amount shall equal the deductions in respect of such positions specified by paragraph (c)(2)(x)(A) (1) through (9) of this section.

(B) Such lesser requirement as may be approved by the Commission under specified terms and conditions upon written application of the dealer and the carrying broker or dealer.

(C) For purposes of this paragraph (a)(6)(iii), equity in such specialist or market maker account shall be computed by (1) marking all securities positions long or short in the account to their respective current market values, (2) adding (deducting in the case of a debit balance) the credit balance carried in such specialist or market maker account, and (3) adding (deducting in the case of short positions) the market value of positions long in such account.

(iv) The dealer shall obtain from the broker or dealer carrying the market maker or specialist account a written

undertaking which shall be designated "Notice Pursuant to §240.15c3-1(a)(6) of Intention to Carry Specialist or Market Maker Account." Said undertaking shall contain the representations required by paragraph (a)(6) of this section and shall be filed with the Commission's Washington, DC, Office, the regional or district office of the Commission for the region or district in which the broker or dealer has its principal place of business and the Designated Examining Authorities of both firms prior to effecting any transactions in said account. The broker or dealer carrying such account:

(A) Shall mark the account to the market not less than daily and shall issue appropriate calls for additional equity which shall be met by noon of the following business day;

(B) Shall notify by telegraph the Commission and the Designated Examining Authorities pursuant to 17 CFR 240.17a-11, if the market maker or specialist fails to deposit any required equity within the time prescribed in paragraph (a)(6)(iv)(A) of this section; said telegraphic notice shall be received by the Commission and the Designated Examining Authorities not later than the close of business on the day said call is not met;

(C) Shall not extend further credit in the account if the equity in the account falls below that prescribed in paragraph (a)(6)(iii) of this section, and

(D) Shall take steps to liquidate promptly existing positions in the account in the event of a failure to meet a call for equity.

(v) No such carrying broker or dealer shall permit the sum of (A) the deductions required by paragraph (c)(2)(x)(A) of this section in respect of all transactions in market maker accounts guaranteed, indorsed or carried by such broker or dealer pursuant to paragraph (c)(2)(x) of this section and (B) the equity required by paragraph (iii) of this paragraph (a)(6) in respect of all transactions in the accounts of specialists of market makers in options carried by such broker or dealer pursuant to this paragraph (a)(6) to exceed 1,000 percent of such broker's or dealer's net capital as defined in paragraph (c)(2) of this section for any period exceeding five business days; Provided, That solely for

purposes of this paragraph (a)(6)(v), de-* ductions or equity required in a specialist or market maker account in respect of positions in fully paid securities (other than options), which do not underlie options listed on the national securities exchange or facility of a na tional securities association of which the specialist or market marker is a member, need not be recognized. Provided further, That if at any time such sum exceeds 1,000 percent of such broker's or dealer's net capital, then the broker or dealer shall immediately transmit telegraphic notice of such event to the principal office of the Commission in Washington, DC, the regional or district office of the Commission for the region or district in which the broker or dealer maintains its principal place of business, and such broker's or dealer's Designated Examining Authority. Provided further, That if at any time such sum exceeds 1,000 percent of such broker's or dealer's net capital, then such broker or dealer shall be subject to the prohibitions against withdrawal of equity capital set forth in paragraph (e) of this section, and to the prohibitions against reduction, prepayment and repayment of subordination agreements set forth in paragraph (b)(11) of § 240.15c3–1d, as if such broker or dealer's net capital were below the minimum standards specified by each of the aforementioned paragraphs.

SELF-CLEARING OPTIONS SPECIALISTS

(7)(i) A dealer who meets the conditions of paragraph (a)(7)(ii) of this section may elect to operate under this paragraph (a)(7) and thereby not apply, except to the extent required by this paragraph (a)(7), the provisions of paragraphs (c)(2)(vi), (c)(2)(x), and (c)(2)(xi) of this section or Appendix A (§ 240.15c3-1a) to this section and, in lieu thereof, apply the provisions of paragraph (a)(7)(iii) of this section.

(ii) This paragraph (a)(7) shall be available to a broker or dealer engaged solely in one or more of the following activities:

(A) His transactions as a dealer are limited to the business of effecting (as sole proprietor or through one or more natural persons associated with such dealer ("associated specialist")) and

clearing specialist or market maker transactions in options listed on a nanational securities exchange or a facility A of a national securities association {"listed options"), or in the securities which underlie such options or which are exchangeable or convertible, without the payment of money, into such Kunderlying securities ("underlying securities"); Provided, That such dealer may also guarantee, indorse or carry listed options and underlying securities purchased or sold by a specalist or market maker who is not associated with such dealer (an "independent specialist") and who either is not subject to the provisions of this §240.15c3–1 or operates under paragraph (a)(6) of this section.

(B) His transactions as a broker are limited to (1) effecting transactions in securities as agent for an idependent specialist whose market maker account such broker carries pursuant to the provisions of this section, and (2) effecting transactions on the floor of a national securities exchange in options or securities other than options listed on such an exchange as agent for another broker of dealer.

(iii) A dealer electing to operate pursuant to this paragraph (a)(7) shall adjust its net worth by deducting, for positions in each class of option contracts in which the dealer, as sole proprietor or through associated specialists, is a market maker (“proprietary positions"), or each such independent specialist is a market maker (and for positions in other securities), amount equal to:

an

(A) The deductions specified by paragraph (c)(2)(x)(A) of this section; Provided, That for pusposes of computing such deductions, proprietary positions, as well as positions in each such independent specialist's market maker account, shall be allocated in accordance with paragraph (c)(2)(x) (E) of this section; and, Provided further, That the deductions computed for each such independent specialist's positions pursuant to the foregoing shall be reduced by any liquidating equity, as defined in paragraph (c)(2)(x)(B)(2) of this section, that exists in such independent specialist's market maker account, and shall be increased to the extent of any liquidating deficit in such account; and,

Provided further, That in no event shall the foregoing proviso be construed to increase the net capital of any dealer electing to operate under this paragraph (a)(7).

(B) Such lesser requirement as may be approved by the Commission under specified terms and conditions upon the written application of such dealer.

market

(iv) No dealer electing to operate under this paragraph (a)(7) shall permit the sum of the deductions required by paragraph (iii) of this paragraph (a)(7) in respect of all positions in the market maker accounts of independent specialists guaranteed, endorsed or carried by such dealer pursuant to this paragraph (a)(7), computed without regard to any liquidating equity or liquidating deficit in any such independent specialist's account, to exceed 1,000 percent of such dealer's net capital as defined in paragraph (c)(2) of this section for any period exceeding five business days; Provided, That solely for purposes of this paragraph (a)(7)(iv), deductions required in the maker account of an independent specialist in respect of positions in fully paid securities (other than options), which do not underlie options listed on the national securities exchanges or facility of a national securities association of which the independent specialist is a member, need not be recognized; Provided further, That if at any time such sum exceeds 1,000 percent of such dealer's net capital, then the dealer shall immediately transmit telegraphic notice of such event to the principal office of the Commission in Washington, DC, the regional or district office of the Commission for the region or district in which the dealer maintains its principal place of business, and such dealer's Designated Examining Authority: Provided further, That if at any time such sum exceeds 1,000 percent of such dealer's net capital, then the dealer shall be subject to the prohibitions against withdrawal of equity capital set forth in paragraph (e) of this section, and to the prohibitions against reduction, prepayment and repayment of subordination agreements set forth in paragraph (b)(11) of $240.15c3-1d, as if such dealer's net capital were below the minimum stand

ards specified by each of the aforementioned paragraphs.

(v) A dealer electing to operate under this paragraph (a)(7) shall comply in all respects with the requirements of paragraphs (c)(2)(x)(F) and (c)(2)(x)(G) of this section (or paragraph (a)(6)(iv) of this section) insofar as such dealer acts as the guarantor, endorser or carrying dealer for options written or purchased by an independent specialist not subject to the provisions of this section (or operating pursuant to paragraph (a)(6) of this section).

(8) Municipal securities brokers' brokers. (i) A municipal securities brokers' brokers, as defined in subsection (ii) of this paragraph (a)(8), may elect not to be subject to the limitations of paragraph (c)(2)(ix) of this section provided that such brokers' broker complies with the requirements set out in paragraphs (a)(8) (iii), (iv) and (v) of this section.

(ii) The term municipal securities brokers' broker shall mean a municipal securities broker or dealer who acts exclusively as an undisclosed agent in the purchase or sale of municipal securities for a registered broker or dealer or registered municipal securities dealer, who has no "customers" as defined in this rule and who does not have or maintain any municipal securities in its proprietary or other accounts.

(iii) In order to qualify to operate under this paragraph (a)(8), a brokers' broker shall at all times have and maintain net capital of not less than $150,000.

(iv) For purposes of this paragraph (a)(8), a brokers' broker shall deduct from net worth 1% of the contract value of each municipal failed to deliver contract which is outstanding 21 business days or longer. Such deduction shall be increased by any excess of the contract price of the fail to deliver over the market value of the underlying security.

(v) For purposes of this paragraph (a)(8), a brokers' broker may exclude from its aggregate indebtedness computation indebtedness adequately collateralized by municipal securities outstanding for not more than one business day and offset by municipal securities failed to deliver of the same issue and quantity. In no event may a

brokers' broker exclude any overnight bank loan attributable to the same mu nicipal securities failed to deliver con tract for more than one business day. A brokers' broker need not deduct from net worth the amount by which the market value of securities failed to re ceive outstanding longer than thirty (30) calendar days exceeds the contract value of those failed to receive as re quired by Rule 15c3–1(c)(2)(iv)(E). Certain Additional Capital Requirements for Brokers or Dealers Engaging in Reverse Repurchase Agreements

(9) A broker or dealer shall maintain net capital in addition to the amounts required under paragraph (a) of this section in an amount equal to 10 percent of:

(i) The excess of the market value of United States Treasury Bills, Bonds and Notes subject to reverse repurchase agreements with any one party over 105 percent of the contract prices (including accrued interest) for reverse repurchase agreements with that party;

(ii) The excess of the market value of securities issued or guaranteed as to principal or interest by an agency of the United States or mortgage related securities as defined in section 3(a)(41) of the Act subject to reverse repurchase agreements with any one party over 110 percent of the contract prices (including accrued interest) for reverse repurchase

party; and

agreements with that