Rule 92 is history.
Next month, the three U.S. exchanges operated by NYSE Euronext plan to change their rules covering trading ahead by adopting FINRA’s newly updated Manning rule.
The changeover is part of the rulebook harmonization process that has been underway at the Financial Industry Regulatory Authority and NYSE Regulation for the past four years.
NYSE, NYSE Amex and NYSE Arca asked the Securities and Exchange Commission this month for permission to change their trading ahead rules to conform with FINRA Rule 5320, the updated version of Manning.
At NYSE and Amex, the prohibition is known as Rule 92. At Arca, it’s Rule 6.16.
In general, all four rules prohibit traders from trading for their own accounts ahead of or alongside customer orders at the same price. This is also known as front-running.
FINRA received approval for its Rule 5320 from the SEC in February. It plans to require broker-dealers to comply with the rule from September 12. The NYSE Euronext exchanges will do the same.
The three NYSE exchanges will all adopt the same numbered ruling—5320—which largely comports with FINRA Rule 5320, the exchanges told the SEC in a filing.
Likewise, there will be exceptions for certain large orders from institutional accounts; for trading done by separate market making desks; riskless principal trades; intermarket sweep orders; and other circumstances.
FINRA and NYSE Regulation have been working on a universal trading ahead rule since 2007. The move to harmonize their respective rules was a key part of a master plan by the two regulators to eliminate as many duplications from their respective rulebooks as possible. The plan was the driving force behind the merger of the NASD (now FINRA) with parts of NYSE Reg in 2007.
