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5330. Adjustment of Orders

(a) A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01), as follows:
(1) Cash Dividends: Unless marked "Do Not Reduce," open order prices shall be first reduced by the dollar amount of the dividend, and the resulting price will then be rounded down to the next lower minimum quotation variation.
(2) Stock Dividends and Stock Splits: Open order prices shall be determined by first rounding up the dollar value of the stock dividend or split to the next higher minimum quotation variation. The resulting amount shall then be subtracted from the price of the order. Unless marked "Do Not Increase," the size of the order shall be increased by first (A) multiplying the size of the original order by the numerator of the ratio of the dividend or split, then (B) dividing the result by the denominator of the ratio of the dividend or split, then (C) rounding the result to the next lowest share.
(3) Dividends Payable in Either Cash or Securities at the Option of the Stockholder: Open order prices shall be reduced by the dollar value of the cash or securities, whichever is greater. The dollar value of the cash shall be determined using the formula in subparagraph (1) above, while the dollar value of the securities shall be determined using the formula in subparagraph (2) above. If the stockholder opts to receive securities, the size of the order shall be increased pursuant to the formula in subparagraph (2) above.
(4) Combined Cash and Stock Dividends/Split: In the case of a combined cash dividend and stock split/dividend, the cash dividend portion shall be calculated first as per subparagraph (1) above, and the stock portion thereafter pursuant to subparagraph (2) above.
(5) Indeterminate Value: If the value of the distribution cannot be determined, the member shall not adjust, execute, or permit an open order to be executed without reconfirming the order with the customer.
(b) When a pending order involves a security that is the subject of a reverse split, the order (buy or sell) shall be cancelled.
(c) When a pending order involves a security that is the subject of a stock split but is not otherwise required to be adjusted under this Rule, a member shall promptly notify the customer of the stock split.
(d) The term "open order" means an order to buy or an open stop order to sell, including but not limited to "good 'til cancelled," "limit" or "stop limit" orders which remain in effect for a definite or indefinite period until executed, cancelled or expired.
(e) The provisions of paragraph (a) of this Rule shall not apply to:
(1) orders governed by the rules of a registered national securities exchange;
(2) open stop orders to buy;
(3) open sell orders; or
(4) orders for the purchase or sale of securities where the issuer of the securities has not reported a dividend, payment, or distribution pursuant to SEA Rule 10b-17.
Amended by SR-FINRA-2009-084 eff. April 19, 2010.
Amended by SR-NASD-01-10 eff. March 12, 2001.
Amended by SR-NASD-00-46 eff. Aug. 28, 2000.
Amended by SR-NASD-97-48 eff. July 30, 1997.
Amended by SR-NASD-95-27 eff. Aug. 22, 1995.
Amended by SR-NASD-94-71 eff. Feb. 7, 1995.
Amended by SR-NASD-94-46 eff. Sept. 15, 1994.
Adopted by SR-NASD-93-52 eff. May 16, 1994; eff. date amended to Sept. 15, 1994 by SR-NASD-94-22.

Selected Notices: 93-61, 94-9, 94-28, 94-63, 10-10.

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