ATS Rulebook

ATS Rulebook

EFFECTIVE JANUARY 19, 2020

CHAPTER 1 - Definitions

101 Definitions

Unless otherwise specifically provided in the Rules or the context otherwise requires, the terms defined in this Chapter 7 have the meanings specified herein for all purposes of the Rules.

“Access Code” means the unique password or other identifier that is assigned by the Company to each Authorized Person

“Affiliate” means an “Affiliate” of, or a Person “Affiliated” with, another Person is a Person who, directly or indirectly, Controls, is Controlled by, or is under common Control with, such other Person.

“AMR” refers to Applicable Margin Reset, a procedure through which interest rates on CLO debt tranches are lowered via an online auction to improve cash flows of the subordinated note holders. Original ISINS and CUSIPs of these debt securities are preserved

“Applicable Law” means, with respect to any Person, any statute, law, regulation, rule or ordinance of any Regulatory Authority applicable to such Person, including the SEA, SEC Regulations and guidance thereunder, the FINRA Rules, and, to the extent applicable to such Person, similar foreign laws or regulations.

“ATS” means the entirety of the alternative trading system of the Company on which the Platforms are operated.

“Authorized Jurisdiction” means the United States and such other jurisdictions in which the Company or a User may be authorized by Applicable Law to provide financial services from time to time.

“Authorized Person” means, with respect to each User, each (i) Authorized Trader of such User and (ii) Operational/Risk Agent of such User.

“Authorized Trader” means an individual who is an employee or agent of a User who has been authorized by such User to access one or more Platforms on the ATS in accordance with its User Agreement and such fair and reasonable criteria established by the Company, in order to place Orders and execute transactions on one or more Platforms on behalf of such User.

“Business Day” means any day on which the ATS is open for trading.

“Chief Executive Officer” means the Company’s chief executive officer.

“Company” means KopenTech Capital Markets LLC, any or all affiliates or successors thereto.

“Company Requirements” means (i) the Rules, (ii) other requirements implemented by the Company under the Rules and (iii) the User documentation and other contractual obligations between a User (including its Authorized Persons) and the Company.

“CLO Securities” means Collateralized Loan Obligations that are structured finance securities.

“Control” means (i) the ownership, directly or indirectly, of fifty percent (50%) or more of the voting equity share capital of a specific Person or (ii) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or general partnership or managing member interests, by contract or otherwise. “Controlling”, “Controls” and “Controlled” will have correlative meanings. Without limiting the generality of the foregoing, a Person will be deemed to Control any other Person of which it owns, directly or indirectly, a majority of the ownership or voting interests

“Customer Account” means a Person who has granted investment discretion or trading authority to a User to trade on its behalf and is party to a User Agreement.

“Emergency” means any occurrence or circumstance which threatens or may threaten such matters as the fair and orderly trading in, or the liquidation of or delivery pursuant to, any Product, or the timely collection and payment of funds in connection with clearing and settlement of a transaction, and which, in the opinion of the Chief Executive Officer or his designee, requires immediate action, including: any manipulative or attempted manipulative activity; any circumstances that may materially affect the performance of Products traded pursuant to the Rules, including failure of the payment system or the bankruptcy or insolvency of any User or any other Person; and any other circumstance which may have a severe, adverse effect upon the functioning of the Company.

“Error Trade Policy” means such error trade policy applicable to a Product as may be adopted by the Company from time to time.

“FINRA” means the Financial Industry Regulatory Authority, Inc.

“FINRA Rules” means the rules adopted by FINRA or its predecessor, the National Association of Securities Dealers, Inc., and approved by the SEC, as in effect at any given time

“Intellectual Property Rights” means all title, interests and other proprietary rights in and to: (i) trademarks, service marks, brand names, certification marks, trade dress, trade names and other indications of origin, and the goodwill associated with the foregoing; (ii) inventions, discoveries and ideas, whether or not capable of protection by patent or registration; (iii) patents and all reissues, divisions, continuations-in-part, renewals and extensions thereof; (iv) trade secrets; (v) writings and other works, whether or not protectable by copyright or other law; (vi) copyrights, data or database rights, or mask works; (vii) know-how, research and development data, manufacturing methods, commercial information, technical information, design rights, processes, practices and systems, whether or not protectable by patent, copyright, trade secret or other law; (viii) moral rights and (ix) any other intellectual property or similar proprietary rights or interests which may exist in any jurisdiction, in each case, including all registrations thereof, applications therefor and renewals, modifications, translations and extensions thereof, in any jurisdiction, and any claims or causes of action arising out of or related to any infringement or misappropriation of any of the foregoing.

“Live Transaction” means the time period during which sell-side Users may open a matching transaction request for buy-side Users to enter Orders for Products on the ATS or visa versa

“Operational/Risk Agent” means an operational or risk employee, contractor or agent of a User to whom the Company has provided an Access Code solely to access to the ATS on a read-only basis.

“Order” means any bid or offer to buy or sell a Product pursuant to the Rules and the applicable User Manual, and includes any modification to such a bid of offer.

“Person” means any individual, partnership, corporation, association, trust, limited liability company, joint venture, unincorporated organization or other entity.

“Platform” means a separate electronic matching platform administered by or on behalf of the Company for conducting AMR refinancings and transaction in CLOs, mortgages, corporate debt and other securities.

“Product” means (i) any CLO, mortgaged, corporate debt securities or other financial instrument permitted by the Company to be traded on a Platform on the ATS, including the AMR Auction Platform and the BWIC Platform.

“Proprietary Data and Information” means, as to any Person, proprietary data or personal information that separately discloses business transactions, market positions or trade secrets of such Person, but does not include Transaction Data and will, with respect to the Company, include all information regarding the ATS

“Regulatory Authority” means any domestic or foreign government (or political subdivision), governmental or regulatory authority, agency, court, commission or other governmental or regulatory entity (including any self-regulatory authority or Self-Regulatory Organization) with authority or jurisdiction over the trading of, or Persons engaged in the trading of securities or other financial instruments.

“Risk-Based Limits” means, as applicable, limits that may be established by the Company or some of its Users with respect to some Products, based on credit, position or Order size, margin requirements or similar factors.

“Rule” means any Rule adopted or amended, from time to time, by the Company related to or in respect of transactions in Products or the operation of or business conducted on the ATS or otherwise pursuant to these Rules.

“SEA” means the Securities Exchange Act of 1934, as amended.

“SEC” means the Securities and Exchange Commission.

“SEC Regulations” means the rules, regulations and orders promulgated by the SEC and in effect at any given time.

“Self-Regulatory Organization” has the meaning given that term in Section 3(a)(26) of the SEA.

“Transaction and Access Fees” means fees charged to Users by the Company, including an acceptance fee, annual ATS service provider fee, and the AMR pricing fee.

“Transaction Data” means pending or executed Orders, bids, offers and other information (excluding Proprietary Data and Information) concerning Products executed pursuant to the Rules, including information and content contained in, displayed on, generated by or derived from the ATS.

“Transaction Privileges” means the right granted to a User and its Authorized Traders to access one or more Platforms on the ATS pursuant to the Rules.

“User” means a Person (other than an individual) that has been authorized by the Company to have access to one or more Platforms on the ATS and to permit its Authorized Persons to have access to such Platform(s) on the ATS. For the avoidance of doubt, “User” may include without limitation, managers of issuers and other sell-side market participants and buyside market participants investment advisers, banks, savings and loan associations, insurance companies, registered investment companies, brokers and dealers or other Person acting on their own behalf or as agent for another Person, including a Customer Account.

“User Agreement” means the agreement entered into by and between a User and the Company relating to such User’s access to and use of the ATS.

“User Data” means any and all Transaction Data submitted or otherwise reported by the Company with respect to a User regarding any and all transactions entered into by such User.

“User Manual” means the terms from time to time in force upon which a User may access a specific Platform, including any supplemental written guidelines provided by the Company to the User, as amended from time to time. The User Manuals will be posted on the Company’s website. In the event of any inconsistency between the provisions of any User Manual and the Rules, the terms of the Rules will prevail.

“Viruses” means computer viruses, worms, bombs, Trojan horses, trap/back doors, stop codes, protect codes, morphic code, time releasing, tunneling or other harmful, malicious or destructive codes.

CHAPTER 2 - ATS

201 Access to the ATS

  1. Users must adopt, implement and enforce control procedures that, at a minimum, are designed to: (i) prevent unauthorized access to, use or misuse of the ATS, (ii) limit access to the ATS to its Authorized Persons and (iii) prevent entry of Orders that exceed any Risk-Based Limits. Users will be solely responsible for any breach or failure of their respective control procedures and may not rely on control procedures implemented by the Company.

  2. Users will not knowingly introduce or permit the introduction of any Viruses or other software routines or hardware components designed to permit unauthorized access or to disable, erase or otherwise harm the ATS. Each User is solely responsible for ensuring the security of its and its Authorized Persons’ connection to the ATS, and is solely responsible for any Losses (as defined in Rule 608(e)) that may be incurred because of errors made by, or the failure of, or delays caused by, the software, hardware or equipment that is used by such User (and its Authorized Persons) to access the ATS, and which is not provided by the Company.

  3. Except as otherwise expressly permitted by the Company, each User will be responsible for ensuring that it does not grant access to the ATS to any Person located in a country that is not an Authorized Jurisdiction.

  4. A Person’s access and use of the ATS (itself or through an Authorized Person and if on behalf of a Customer Account) constitutes an agreement by such Person to be bound by these Rules as a User and, if accessing and using the ATS on behalf of a Customer Account, an agreement by such Person on behalf of such Customer Account to bind such Customer Account to these Rules. If a Person is unwilling to accept and abide by the Rules as a User, such Person should immediately cease all use of the ATS and should request that the Company disable all Access Codes assigned to it or its Authorized Persons. The Company reserves the right to disable Access Codes for any Person who does not abide by the Rules as a User.

Each User must not allow anyone who is not an Authorized Person to access the ATS.

202 Qualifications of Users

To be eligible for admission as a User, an applicant must:

  1. be duly licensed/registered in an Authorized Jurisdiction, if required by Applicable Law;

  2. comply with any financial responsibility, recordkeeping and reporting requirements set forth under Applicable Law or Rule 202 below;

  3. pass any required “customer identification” and “know your customer” checks, sanctions and anti-money laundering checks (including providing additional information requested as the Company may require to satisfy such checks);

  4. have the legal and regulatory authority and capacity to transact in, clear (where applicable) and settle the Products it bids on or sells on the ATS;

  5. agree to abide by the Rules, consent to the Company’s monitoring with respect to ATS transaction activities and cooperate promptly and fully with the Company in any investigation, inquiry, audit or examination regarding compliance with the Rules; and

  6. at all times maintain a User Agreement with the Company.

203 Transaction Privileges

Subject to the requirements and procedures set forth in this Chapter 1 and any User Agreement, Transaction Privileges are offered to Users, subject to any limitation, restriction or revocation from time to time imposed on a User or its Authorized Persons by the Company. Transaction Privileges are non-transferable, non-assignable and may not be sold or leased.

204 Limitations

Upon notice that the Company has terminated a User’s Agreement, the right of such User and its Authorized Persons to access the ATS will be terminated immediately.

205 Application of Rules and Jurisdiction

  1. Any Person initiating or executing a transaction pursuant to the Rules, directly or through a User, consents to abide by the decisions of the Company in accordance with these Rules.

  2. Any User or Authorized Person whose right to access the ATS is revoked or terminated will remain bound by the Rules and Applicable Law, in each case to the extent applicable, with respect to all matters arising from, related to, or about, the status, actions or omissions of such User or Authorized Person arising out of its use of ATS prior to such revocation or termination.

206 Transaction and Access Fees

  1. Each User as applicable, will pay such fees to the Company as are in effect from time to time (the “Transaction and Access Fees”) in conjunction with the sale of Products on the ATS. The Company may, at any time, modify any or all of the Transaction and Access Fees; provided, that any increases in Transaction and Access Fees will become effective twenty (20) days after the Company has provided notice to the Users.

  2. The Company will not be responsible for, nor has any obligation to a User with respect to, the payment of any sales, use, goods and services, value added, transfer, property or other taxes, including a withholding tax, and any duty or duties payable in respect of Transaction and Access Fees or any part thereof and/or the provision of the ATS, or otherwise (excluding any taxes imposed on the net income of the Company).

207 Modifications to ATS

The Company has sole discretion and control over, and the right to modify at any time, the ATS' functionality, configuration, appearance and content, including without limitation

(i) the selection of Products or transactions generally available on the ATS; (ii) the parameters and protocols by which Orders are placed, routed, matched or otherwise processed by the ATS; and (iii) the availability of the ATS with respect to Products or transactions at any particular times or locations. The Company will endeavor to provide reasonable advance email notice to the Users if such a modification requires technological, operational or systems changes by the Users.

208 Transaction Responsibility

Each User is responsible for the execution and settlement of any trades entered into based on Orders matched on the ATS. Membership on the platform does not obligate any party to enter any bids

CHAPTER 3 - BUSINESS CONDUCT

301 Duties and Responsibilities of Users and Authorized Persons

  1. Each User and each Authorized Person will:

    1. use the ATS and effect transactions in Products in a responsible manner and not for any improper purpose;

    2. use the ATS only to conduct business that is subject to the Rules and in a manner consistent with the Rules and Company Requirements;

    3. comply with the Rules and Company Requirements and act in a manner consistent with the Rules and Company Requirements;

    4. observe high standards of fair dealing and just and equitable principles of trade while conducting or seeking to conduct any business on or with respect to the ATS;

    5. not knowingly mislead or conceal any material fact or matter in any dealings or filings with the Company;

    6. cooperate promptly and fully with the Company in any investigation or inquiry by the Company regarding compliance with the Rules; and

    7. keep all Access Codes, account numbers and passwords related to the ATS confidential.

  2. No User or Authorized Person will:

    1. act or direct another to act based on nonpublic information regarding Orders, however acquired; provided that the mere statement of opinions or indications of the price at which a market may open or resume trading does not constitute a violation of this Rule;

    2. make any fraudulent or misleading communications or engage in any fraudulent act or any scheme to defraud, deceive, trick or mislead in its use of the ATS;

    3. manipulate or attempt to manipulate the market in any Product in its use of the ATS;

    4. engage in conduct in violation of the Rules or the rules of any Regulatory Authority in its use of the ATS;

    5. knowingly enter, or cause to be entered, Orders into the ATS other than in good faith to execute bona fide transactions; or

    6. make any knowing misstatement of a material fact to the Company or any officer of the Company.

    7. Each User will employ practices to monitor and enforce compliance with its internal risk limits. Subject to the limitations set forth in any Error Trade Policy, each User or Customer Account, as applicable, will be responsible for executing all Orders and transactions matched on the ATS by or for the account of such User or Customer Account. Each User will be responsible for all Orders and transactions matched on the ATS by any Person using its Access Codes.

302 Minimum Financial and Related Reporting Requirements

Each User must notify the Company immediately upon becoming aware that it fails to satisfy minimum financial requirements applicable to such User and established pursuant to Applicable Law. A User that is unable to demonstrate to the Company that it complies with such minimum financial requirements must not engage in transactions subject to the Rules except for the purpose of closing open positions.

303 Information Regarding Orders

Each User or other Person receiving any information through the ATS will not redistribute such information other than to the extent and in the manner as may be expressly permitted by the Company in writing from time to time. The foregoing limitation will not apply, with respect to a User’s User Data.

CHAPTER 4 - TRANSACTION PRACTICES

401 Acts Detrimental to Company Prohibited

No User or any of its Authorized Persons will intentionally engage in any act that could reasonably be expected to be detrimental to the Company. Without limiting the generality of the foregoing, it will be deemed an act detrimental to the Company to

  1. permit unauthorized use of the ATS;

  2. assist any Person in obtaining unauthorized access to the ATS;

  3. operate on the ATS without an agreement and an established account with the Company;

  4. alter the equipment associated with the ATS (except with the Company’s consent);

  5. interfere with the operation of the ATS;

  6. intercept or interfere with information provided thereby; or

  7. in any way use the ATS in a manner contrary to the Rules.

402 Violative Communication Prohibited

No User or Authorized Person may engage in any communication for an illegal purpose or in violation of Applicable Law.

403 Risk-Based Limits

Based on the type of Product being offered on a Platform, a User who is a manager of issuers or other sell-side market participant may establish Risk-Based Limits for any buy-side User and may grant exemptions from Risk-Based Limits in certain circumstances. A buy-side User may not enter Orders on the ATS that, if executed, would cause it to exceed Risk-Based Limits imposed by a sell-side User.

404 Order Confirmations

The economic terms specific to a transaction agreed by Users, for itself or on behalf of its Customer Accounts, will be reflected in a written communication(the “Order Confirmation” ) sent to each such User by the Company.

405 Order Cancellations and Adjustments; Error Policy

  1. Error Order Policy. The Company may cancel any Order that it determines would be detrimental to market integrity. All determinations of the Company to cancel or to decline to cancel an Order will be final, and the Company will not have any liability for Losses arising out of determinations made by the Company pursuant to this Rule, notwithstanding the limitations on liability otherwise set forth in Rule 608.

  2. Determination to Review an Order. The Company may determine to review an Order based on its independent analysis of market activity

  3. Liability for Cancelled Orders. A Person responsible for an Order that results in a cancelled trade may be liable for the reasonable out-of-pocket Losses incurred by a Person whose trade was cancelled.

  4. Order Cancellation Procedures. Upon a determination by the Company that an Order will be cancelled, that decision will be implemented. The cancelled Order will be reflected as cancelled in the Company’s official records.

  5. ATS Malfunctions and Employee Errors. If a User believes that an Order was incorrectly displayed, executed and/or reported, it may request review of the Order and any resulting transaction. Upon receipt of such a request for review, the Company will review its records to determine if the Order was correctly displayed and accepted on the ATS. If, as a result of that review, the Company determines that a mistake occurred as a result of a malfunction in the ATS or as a result of an error by an employee of the Company, the Order will be canceled or adjusted, as appropriate, but the Company will not be liable therefor except as provided in Rule 608. The Company will document in writing all requests for review, the time and manner in which it reviewed its electronic audit trail and other information in response to the request, the outcome of that review, and any action taken by the Company in response to that review. A decision by the Company to cancel an Order trade will be made as soon as practicable, and the Company will notify Users of any such decision.

  6. Alternative Resolution by Agreement of Parties.

    1. With the approval and through the facilitation of the Company, parties to an Order that is under review may instead mutually agree to cancel or adjust the price of the Order and execute it based on the new terms.

    2. Subject to clause (i) and through the facilitation of the Company, parties to an Order that is canceled or that has had its price adjusted may mutually agree to a cash adjustment.

    3. Any cancellation or adjustment made pursuant to this paragraph (f) will be reported immediately to the applicable Users by the Company. The parties will maintain a record of such cancellation or adjustment

  7. Trade Rejections. Users will promptly inform the Company if they receive a Trade Confirmation they believe to be in error or if the terms of a trade subsequent to an Order does not match the Order Confirmation.

406 Delays and Cessation of Live Transaction

The Company may, in its reasonable judgment and without liability to any User, Authorized Trader or other party, delay the commencement of any Live Transaction or cease an ongoing Live Transaction if news or events warrant such action. Any such delay or cessation of a Live Transaction will be electronically communicated as soon as is practicable, to the extent possible, to all Authorized Traders.

CHAPTER 5 - TERMINATION, LIMITATION OR SUSPENSION OF ACCESS

501 Determinations of the Company

The Company may decide to suspend, limit or terminate a User’s or Authorized Person’s right to access the ATS. Any such decision by the Company (x) will be made in a non- discriminatory manner, (y) will be the final action of the Company and (z) will not subject to appeal

502 Responsibilities after Termination

When the right of a User or Authorized Person to access the ATS is terminated, all of its rights will terminate. Any suspension or termination of access rights will not relieve the User (as to itself or any Customer Account, as applicable) or any Authorized Trader of its obligations under the Rules to perform any transactions entered into before the suspension, or for any Company fees, costs, or charges incurred prior to termination.

CHAPTER 6 - MISCELLANEOUS

601 Proprietary Data and Information; Transaction Data

  1. Each User and the Company will maintain the other Person’s Proprietary Data and Information in strict confidence and not disclose such information to third parties or use such information for any purpose whatsoever other than for the use or provision of the ATS. Each User and the Company each agrees to advise its employees, officers, directors or agents who may receive access to Proprietary Data and Information of their obligations to keep such information confidential, and each User and the Company will be responsible for any unauthorized disclosures by its respective employees, officers, directors or agents.

  2. Each User, on one hand, and the Company, on the other hand, may disclose the Proprietary Data and Information of the other Person (i) with the consent of such other Person, (ii) to the extent required pursuant to any Applicable Law, (iii) pursuant to a subpoena, court order, audit or inquiry by a Regulatory Authority, (iv) as requested or legally required by any Regulatory Authority, (v) that such Person deems it advisable to provide to such Regulatory Authority, (vi) that is reasonably necessary to defend itself against any claim or proceeding brought against such Person or its Affiliates, or (vii) as otherwise permitted under these Rules and the applicable User Agreement; provided, that in the case of disclosure pursuant to clause (iii), prior notice of such disclosure will be provided to the non-disclosing Person (if legally permitted) as soon as practicable in order to permit the non- disclosing Person to seek a protective order or take other appropriate action to safeguard the Proprietary Data and Information (it being agreed that if the non-disclosing Person is unable to obtain or does not seek a protective order and the receiving Person is legally compelled to disclose Proprietary Data and Information, such disclosure will be permitted hereunder). Each Person may also disclose Proprietary Data and Information, subject to appropriate confidentiality requirements, (x) to its Affiliates and (y) to its managing members (or equivalent), officers, attorneys, auditors, other professional advisors, agents, suppliers and independent contractors to whom the provision of such information is reasonably required for purposes of performance of obligations under these Rules and the applicable User Agreement or, solely with respect to the Company, the operation of the ATS; provided, that in each instance, the relevant Person will be responsible for any unauthorized disclosures by its Affiliates, managing members (or equivalent), officers, attorneys, auditors, other professional advisors, agents, suppliers and independent contractors.

  3. The Company will not use any Proprietary Data and Information of any User other than for the purpose of fulfilling its regulatory obligations; provided, however, that the Company may use Proprietary Data and Information of a User for business or marketing purposes if the User consents to the Company’s use of such Proprietary Data and Information. The Company may use and disclose to other Persons information (other than any User’s identity or Proprietary Data and Information) that is displayed to all Users in the ordinary course in the operation of the ATS.

  4. Upon termination of a User’s User Agreement, each of such User and its Customer Accounts (if any), on the one hand, and the Company, on the other hand, will promptly return to the other all Proprietary Data and Information of such other party; provided, that a party may retain such Proprietary Data and Information solely for its records if such party is required to do so by Applicable Law and continues to comply with this Rule 601 with respect to such materials or documents.

  5. The Company will have no duty to disclose to any User or Customer Account any information, matter or fact relating to the use of the ATS by any other User, other than as required by Applicable Law.

  6. Subject to each User’s rights in its User Data,the Company owns all Intellectual Property Rights in Transaction Data, and all derivative works (excluding User Data) based thereon. Users and other Persons affiliated with any of the foregoing (including Customer Accounts) may not distribute, sell or retransmit Transaction Data to any third party without the consent of the Company; provided that (i) each User retains such rights as it may enjoy under Applicable Law with respect to User Data solely in the form such User Data was submitted to the Company by such User and (ii) a User will be entitled to disseminate User Data through the normal course of business in a manner commonly practiced by like Persons as of the effective date of these Rules.

  7. Notwithstanding any other provision of this Rule 601, each User hereby grants the Company a non-exclusive, perpetual, transferable, world-wide and royalty-free license (without warranties of any kind, express or implied) to any and all rights as such User may have in and to User Data, including, but not limited to, the right to use User Data, in any manner, media and jurisdiction, for the benefit of the Company and/or its Affiliates, and to disclose User Data, in any manner, media and jurisdiction, solely on an aggregated basis that does not directly or indirectly identify any User, Authorized Person, Customer Account or counterparty. Except as may otherwise be permitted by this Rule 601, in any written agreement between the Company and such Person, or as may be required by Applicable Law, the Company will not otherwise disclose User Data.

  8. Each User hereby acknowledges and agrees, on behalf of itself and each of its Affiliates, that the Company owns and will retain all right, title and interest in and to the ATS, any other systems or services provided by the Company, or any services, equipment or facilities used to support such systems or services and all components thereof, including without limitation all related applications, all application programming interfaces, user interface designs, software and source code and any and all Intellectual Property Rights therein, including without limitation all Intellectual Property Rights in or to the ATS and all other related proprietary rights of the Company and/or any of its Affiliates (collectively, with any and all enhancements, corrections, bug fixes, updates and other modifications to any of the foregoing and any and all data or information of any kind, other than Proprietary Data and Information and User Data, transmitted by means of any of the foregoing, “Company Intellectual Property”). Each User, on behalf of itself and each of its Affiliates, further acknowledges and agrees that the Company Intellectual Property is the exclusive, valuable and confidential property of the Company. Each User acknowledges and agrees that it will not, and will not permit its Affiliates to, reverse engineer, copy, bug fix, correct, update, transfer, reproduce, republish, broadcast, create derivative works based on or otherwise modify, in any manner, all or any part of the ATS or the Company Intellectual Property. Each User, further agrees to, and to cause each of its Affiliates to, keep the Company Intellectual Property confidential and not to transfer, rent, lease, loan, sell or distribute, directly or indirectly, all or any portion of the ATS or any Company Intellectual Property.

602 Use of Third Party Providers

From time to time, a User may request or send instructions to the Company authorizing the Company to deliver or transmit such User’s data (including User Data) and the data of its Customer Accounts, if applicable, to certain designated third-party providers of such User. In this event, such User acknowledges and agrees that the Company will have no liability whatsoever to such User or any third party in respect of such delivery or transmission or such providers’ possession, access, use, misuse or protection of such data.

603 Extension or Waiver of Rules

The Company may, in its sole discretion, waive, or extend the time period for performing, any act or acts designated by the Rules, but only to the extent such waiver or extension is not inconsistent with Applicable Law.

604 Effect of Amendment, Repeal or New Rule

The Company may amend or repeal any Rule and/or adopt new Rules. Any such amendment or repeal of a Rule or adoption of a new Rule, will, upon the effective date of such amendment, repeal or adoption, as applicable, be binding on all Persons doing business with the Company and, unless otherwise required by Applicable Law, all Products transactions entered into after such effective date. The Company will provide notice to each User of any such amendment, repeal or adoption at least twenty (20) days prior to the effective date of such amendment, repeal or adoption. Notice of any such amendment, repeal or adoption may be published on the Company’s website. In such case, the Company will deliver a notification by email to the Users that such a notice has been published on the Company’s website. Users are responsible for keeping informed of all such additions, modifications or clarifications when and as posted and notified

605 Signatures

Rather than rely on an original signature, the Company may elect to rely on a signature that is transmitted, recorded or stored by any electronic, optical, or similar means (including but not limited to telecopy, imaging, photocopying, electronic mail, or electronic data interchange) as if it were (and the signature will be considered and have the same effect as) a valid and binding original.

606 Governing Law; Legal Proceedings

  1. The Rules, and the rights and obligations of the Company and all other Persons under the Rules will be governed by, and construed in accordance with, the laws of the State of California applicable to contracts executed and performed wholly within the State of California without regard to any provisions of California law that would apply the substantive law of a different jurisdiction

  2. Subject to Rule 608(j), unless otherwise agreed by the Company and a User in such User’s User Agreement or if required to be arbitrated under the auspices of FINRA, any action, suit or proceeding against the Company, its officers, directors, limited liability company members, employees, or agents, must be brought within one year from the time that a cause of action has accrued. Any such action, suit or proceeding, if not required to be arbitrated under the auspices of FINRA, will be brought in the State or Federal courts located within the City of Los Angeles, California. Each User expressly consents to the jurisdiction of any such court, waives any objection to venue therein, and waives any right it may have to a trial by jury. The Company and the Users agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in the Rules or in such other manner as may be permitted by Applicable Law will be valid and sufficient service thereof.

  3. In the event that a User, Authorized Person or an Affiliate of any of the foregoing fails to prevail in a lawsuit or other legal proceeding instituted by such Person against the Company or any Affiliate of the Company or any of their respective officers, directors, equity holders, employees, agents, or any member of any committee, and related to the business of the Company, such Person will pay to the Company or to such Affiliate all reasonable expenses, including attorneys’ fees and expenses, incurred by the Company in the defense of such proceeding.

  4. Any breach by a User of its obligations under Rule 601 may cause the Company irreparable harm and damage and therefore agrees that, in addition to any other rights or remedies that may be available to the Company at law or in equity, the Company will be entitled to seek appropriate injunctive relief, without the posting of any bond or security.

607 Emergencies

During an Emergency, the Company may implement temporary emergency procedures and rules (“Emergency Rules”), subject to Applicable Law. If the Chief Executive Officer or his designee determines that Emergency Rules must be implemented with respect to an Emergency, the Chief Executive Officer or his designee will have the authority to implement Emergency Rules with respect to such Emergency as he deems necessary or appropriate to respond to such Emergency, and the Company will post such Emergency Rules on its website.

608 LIMITATION OF LIABILITY; NO WARRANTIES

  1. Except as provided below or otherwise agreed by the Company and a User in such User’s User agreement, and except in instances in which the Disclaiming Party (defined below) has been finally adjudicated by a court of competent jurisdiction or, if applicable, FINRA arbitration panel to have engaged in fraud, gross negligence or willful misconduct, in which case the Disclaiming Party found to have engaged in such conduct cannot avail itself of the protections in this rule 608, neither the company, nor any affiliate of the company, nor any of their respective managing members, officers, employees, equity holders, agents, consultants or service providers, nor other governing body of the company or any affiliate of the company (each of the foregoing, as applicable, the “Disclaiming Party”), will be liable to any person for any Losses arising out of or in connection with:

    1. Any failure, malfunction, fault in delivery, delay, omission, suspension, error, inaccuracy, interruption, termination, or any other event, in connection with the furnishing, performance, operation, maintenance, use of or inability to use, or the unintended and unforeseen results obtained by any Person resulting from such use, all or any part of any of the systems and services of the Company, or services, equipment or facilities used to support such systems and services, including without limitation, electronic order entry and delivery, trading through any means, electronic communication of transaction data or information, workstations used by users or Authorized Persons, price reporting systems and any and all terminals, communications networks, central computers, software, hardware and firmware relating thereto; or

    2. Any failure or malfunction, fault in delivery, delay, omission, suspension, inaccuracy, interruption or termination, or any other event, of any system or service of the Company, or services, equipment or facilities used to support such systems or services, caused by any third parties including, but not limited to, independent software vendors and network providers; or

    3. Any errors or inaccuracies in information provided by the Company or any of the Company’s systems, services or facilities; or

    4. Any failure of any User to perform its obligations under any transaction; or

    5. Any failure to maintain the ATS or to supply any corrections, updates or releases in connection therewith; or

    6. Any alteration, unauthorized access to or unauthorized use of any of the Company’s systems, services, equipment or facilities by any Person.

    The foregoing limitation of liability will apply whether a claim is based on breach of contract, tort, including, without limitation, negligence, strict liability, negligent misrepresentation, restitution, breach of statutory duty, breach of warranty or otherwise and whether the claim is brought directly or as a third- party claim

  2. Except as specifically set forth herein, the Company disclaims, overrides and excludes , to the fullest extent permitted by law, all warranties, conditions, guaranties or representations, whether express or implied, including without limitation those as to merchantability, satisfactory quality, suitability, fitness for a particular purpose, correctness, accuracy, completeness, security, reliability, performance, pricing, continued availability, title, non- infringement, timeliness, truthfulness, sequence, any implied warranties, conditions and other contractual terms arising from transaction usage, course of dealing or course of performance, all other warranties, conditions, other contractual terms, representations, indemnities and guarantees with respect to the ATS, systems and services provided by the Company, whether express, implied or statutory, arising by law, custom, prior oral or written statements by the Company or any other Disclaiming Party or otherwise, or as to the participation in the ATS by other Users. The Company will have no responsibility for the failure of any connection or communication service to provide or maintain access to the ATS, or for any interruption or disruption of access to the ATS. The company makes, and each user acknowledges and agrees that the company makes, no representation or warranty, express or implied, that the ATS will meet such User's requirements, be error free, or operate without interruption. No oral or written information or advice given by the Company or its representatives or agents will create any warranties or in any way increase the scope of the Company’s obligations hereunder. Each User acknowledges and agrees that (i) the transmission of information through the internet or any other electronic communications network may not be secure, reliable or timely, and the latency inherent in internet or other networks even during normal operation may result in orders being matched and/or confirmed to a User at a time when the market levels may have changed from the time when the order was originally submitted by a User, and (ii) the Company makes no warranty regarding, and will not be responsible to any User or any other person for, (a) any Loss, corruption, modification, security breach or transmission or performance interruptions or delays relating to any information, or (b) any User's continued access to and use of the ATS or any portion thereof.

  3. The Company is not soliciting any action based upon access to or use of the ATS. Each User is solely responsible for confirming the accuracy, quality, completeness and adequacy of information on the ATS and the resultant output thereof.

  4. Notwithstanding the foregoing, the Company may assume responsibility for direct, out-of-pocket Losses directly caused by the gross negligence, fraud or willful misconduct of a Disclaiming Party. Excluding the Company’s indemnification obligations under Rule 608(e), the Company’s total combined aggregate liabilities to any Person and such Person’s owners, managers, directors, officers, employees, contractors, agents and other representatives, and their respective Affiliates, will not in such circumstances exceed U.S. $10,000.

  5. Notwithstanding any other provision of these Rules, the Company will defend, indemnify and hold harmless a User and its Affiliates and any of its or their officers, directors, employees, agents and representatives (each, a “User Indemnitee”) against any and all Losses, damages, liabilities, costs, and expenses, including without limitation reasonable attorney fees and expenses and court costs (collectively, “Losses”) to the extent such Losses arise directly from any claim, proceeding, or cause of action initiated by a third party other than an affiliate of such User Indemnitee (each, a “Third-Party Claim”) alleging that any Company intellectual property infringes or otherwise violates any patents, copyrights, trade secrets or other intellectual property rights of any person; provided that the Company will not have any obligation under this sentence to the extent the alleged violation results from (i) any modification of any Company intellectual property by or on behalf of User Indemnitee not approved in writing by an authorized officer of the Company, (ii) any combination of any Company intellectual property with any data, information or materials not provided by or on behalf of the Company, or (iii) any misuse or unauthorized use of any Company intellectual property or other violation of these Rules or the User Agreement between a User and the Company. Each User Indemnitee will grant to the Company the sole control of the defense and settlement or other compromise of the Third-Party Claim and notify the Company in writing of any such Third-Party Claim within thirty days following such User Indemnitee becoming aware of such Third-Party Claim. The Company will not negotiate a compromise or settlement of any Third-Party Claim with respect to a User Indemnitee without the prior written consent of such User Indemnitee (such consent not to be unreasonably delayed or withheld) unless such compromise or settlement includes an unconditional release of such User Indemnitee from all liability arising out of such Third-Party Claim and does not contain an admission of wrongdoing or liability on behalf of such User Indemnitee.

  6. Solely with respect to a User trading on its own behalf (and not on behalf of a Customer Account), notwithstanding any other provision of these Rules, such User will defend, indemnify and hold harmless the Company and its Affiliates, and their respective directors, officers, employees and agents (each, a “Company Indemnitee”), from and against all Losses based upon, arising out of, or relating to any Third-Party Claim, demand, action, suit or proceeding of any nature (a “Proceeding”) against a Company Indemnitee, that arises out of or relates to, (i) any access, use, unauthorized use, inaction or misuse of the ATS by such User, or by any of its directors, officers, employees, agents or Authorized Persons, including any breaches of the security of the ATS or any access or entry into any of the Company’s or its Affiliates’ other systems; (ii) such User's breach of or failure to comply with the terms of any transaction without the Company’s permission; (iii) such User’s breach of any rule or such User’s User Agreement, including any breach of the representations and warranties of such User contained herein and therein; (iv) any violation of or noncompliance with Applicable Law by such User or any of its directors, officers, employees, agents or Authorized Persons; or (v) any other acts or omissions of such User or any of its directors, officers, employees, agents or Authorized Persons;provided, in each case, that such Losses do not result from the Company Indemnitee's fraud, gross negligence or willful misconduct.

  7. Solely with respect to a User trading on behalf of a Customer Account, notwithstanding any other provision of these rules, (i) such User will defend, indemnify and hold harmless each Company Indemnitee, from and against all Losses based upon, arising out of, or relating to any proceeding against a Company Indemnitee, that arises out of or relates to any of the following sub clauses, and (ii) a Customer Account referred to in any of the following sub clauses will, jointly together with such User and severally, defend, indemnify and hold harmless each Company Indemnitee from and against all such Losses when such Losses relate to such Customer Account: (a) any access, use, unauthorized use, inaction or misuse of the ATSs by such User or such User’s directors, officers, employees, agents or Authorized Persons, including when acting on behalf of such Customer Account, and including any breaches of the security of the ATS or any access or entry into any of the Company’s or its Affiliates’ other systems; (b) such Customer Account’s breach of or failure to comply with the terms of any transaction; (c) such User’s breach of any Rule or such User’s User Agreement, including any breach of the representations and warranties of such User or such Customer Account contained herein and therein and any breach of any rule or such User’s User Agreement by such User when acting on behalf of such Customer Account; (d) any violation of or noncompliance with applicable law by such user or any of its directors, officers, employees, agents or Authorized Persons, including when acting on behalf of such Customer Account; or (e) any other acts or omissions of such user, such Customer Account, any of their respective directors, officers, employees or agents, or any Authorized Person; provided, in each case that such Losses do not result from the Company Indemnitee's fraud, gross negligence or willful misconduct.

  8. Under no circumstances will the Company, any other Disclaiming Party or a User be liable for any indirect, special, incidental, consequential, exemplary loss or punitive damages of any kind, regardless of whether such liability is based on breach of contract, tort, strict liability, breach of warranties or otherwise, including, without limitation, any loss of revenue, loss of actual or anticipated profits, trading losses, loss of contracts, loss of the use of money, loss of anticipated savings, loss of business, loss of opportunity, loss of market share, loss of goodwill, loss of reputation or loss of, damage to or corruption of data, cost of substitute products or cost of capital, loss of opportunity or loss of use however suffered or incurred, regardless of whether the Company, such Disclaiming Party or such User has been advised of the possibility of such damages or whether such damages otherwise could have been foreseen or prevented.

  9. Under no circumstances will the Company be liable to a User or any of its Customer Accounts for the failure by any counterparty to a transaction entered into by such User to perform such transaction or the failure of any User to comply with the Rules or its agreements with the Company regarding access to or use of the ATS. Each User will, and will ensure that each of its Customer Accounts, proceed solely against the applicable counterparty and not against the Company, to collect or recover any amounts or assets owing to it or to enforce any of its rights in connection with any transaction executed on the ATS.

  10. Except as otherwise required by Applicable Law, the Company will be under no obligation to ensure that Products are successfully settled and will have no liability with respect to a Product that fails to settle for any reason.

  11. Any dispute arising out of the use of the systems or services of the Company or services, equipment, or facilities used to support such systems or services, including, without limitation, the ATS, in which one or more Disclaiming Parties is a party will be arbitrated under the auspices of FINRA Dispute Resolution, and references to a “User” will, to the extent relevant, be deemed for such purpose to mean and include the Disclaiming Parties. Unless otherwise agreed by the Company and a User in a User Agreement, any such claim against a Disclaiming Party will be brought within one year from the time that a cause of action has accrued. This paragraph (k) will in no way be construed to create a cause of action and will not authorize an action that would otherwise be prohibited by the Rules. If for any reason a court of competent jurisdiction finds that a dispute is not arbitrable, such dispute may be litigated only in accordance with Rule 606.

609 Communications to and From the Company

Communications from the Company to Users may be transmitted by electronic mail or posted on the Company’s website; provided that the Company will provide electronic mail notification to the Users to the extent it posts any communications on its website.

Communications made to a User will also be deemed to have been made to its Authorized Persons and other employees and agents, and each User and Authorized Person will be responsible for conveying such communications to such Persons as appropriate.

610 Force Majeure

Notwithstanding any other provision of the Rules, the Company will not be liable for any failure or delay in the performance of any of its obligations under the Rules or any agreement with a User, or to compensate any Person for Losses occasioned by any delay or failure of performance, to the extent due to causes beyond its reasonable control (as determined by the Company in its sole discretion), including but not limited to industrial disputes of any nature, work stoppages, civil disobedience, riots, rebellions, accidents, explosions, acts of God, bomb threats, war, acts of a public enemy, embargo or other action of a Regulatory Authority, interruptions or imperfections of telecommunications, electrical failures, sabotage, terrorism, pestilence, lightning or electromagnetic disturbances, brown-outs or black-outs, earthquakes, storms, floods, fires or other casualty, or the imposition of any new Applicable Law or the change of any Applicable Law (including the manner in which such laws are applied) making performance of any material obligation under this Agreement illegal or otherwise impossible (each, a “Force Majeure Event”). In the event of a Force Majeure Event, the Company will give notice to the Users and Authorized Traders, and the Company will take commercially reasonable measures in order to mitigate the impact of such Force Majeure Event.

Notwithstanding the foregoing, nothing in this Rule 610 will affect a User’s, Authorized Person’s or Customer Account’s obligations under the Rules or the applicable User Agreement.


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