11720. Irregular Delivery — Transfer Refused — Lost or Stolen Securities

(a) Irregular Delivery

Reclamation, by reason of the fact of an irregularity in the delivery of a security, shall be within 30 months after the settlement date of the contract. For purposes of this paragraph (a), the term "irregular delivery" shall include, among other things, wrong, duplicate, misdirected or over-deliveries and delivery of unit investment trust securities having the incorrect payment option.

(b) Transfer Refused

Reclamation, by reason of the fact that a specific certificate tendered in settlement of a contract has been presented for transfer and transfer thereof has been refused by the transfer agent, shall be within 30 months after the settlement date of the contract.

(c) Lost or Stolen or Confiscated Securities

Reclamation, by reason of the fact that a security is lost or stolen or confiscated shall be within 30 months after the settlement date of the contract.

(d) Running of 30 Month Period

The running of the 30-month period described in this Rule shall not be deemed to foreclose a member's rights to pursue its claim via other open avenues, including but not limited to the FINRA arbitration procedure.

11721. Obligations of Members Who Discover Securities in Their Possession to Which They Are Not Entitled

Any member who discovers securities in its possession to which it is not entitled is required to make reasonable attempts to ascertain and to promptly notify the true owner of such securities and to take affirmative steps to correct the situation. Failure to abide by this requirement may result in a violation of Rule 2010.

11730. Called Securities

Reclamation by reason of the fact that a security was delivered after publication of notice of call for its redemption, may be made without limit of time and such security may be returned to the party who held it at the time of such publication; except that this Rule shall not apply when an entire issue is called for redemption or when the security involved was dealt in specifically as a "called" security.

11740. Marking to the Market

(a) Demand for Deposit

The party who is partially unsecured by reason of a change in the market value of the subject of a contract in securities may demand from the other party a deposit equal to the difference between the contract price and the market price, without being required to make a mutual deposit. Such deposit shall be made either with the member demanding same or with a mutually agreed-on depositary or, on failure to agree on a depositary, with any member of the Federal Reserve System with an office in the financial district of the city where the unsecured party maintains its office.

(b) Assignment of Contract

Either party to a contract in securities may assign the contract, either at the time the transaction is effected or at the time a request is made for funds to "mark to the market," provided the other party to the contract assents to the assignment.

(c) Refund of Deposit

If the market value of the subject of the contract changes so as to permit a total or partial refund of any deposits which have been made in accordance with paragraph (a) of this Rule, such refunds shall be made on demand.

(d) Delivery of Demand for Deposit or Refund

All demands for deposits or refunds shall be in writing and shall be delivered at the office of the party upon whom the demand is made during the business hours of member banks of the Federal Reserve System located in the community where such party maintains its office, and such demands shall be complied with immediately.

(e) Failure to Comply with Demand

Failure of a party to comply with a demand for a deposit or refund made in accordance with paragraphs (a), (c) and (d) of this Rule shall entitle the party making the demand to close the contract without notice, by making offsetting purchase or sale contracts in the best available market for the account and liability of the party failing to comply with said demand.

(f) Contract Closure

No contract shall be closed pursuant to paragraph (e) of this Rule prior to the expiration of regular delivery time in the community where the party making the demand maintains its office, on the next business day following the day when notice of such demand was received by the other party.

(g) Notice of Offsetting Purchase or Sale

The party making such offsetting purchase or sale contracts shall as promptly as possible on the day on which they are made (1) notify the other party via letter, facsimile transmission, electronic mail, or other comparable written media, and (2) mail or deliver formal confirmation of same to the other party and a copy of said confirmation to the Committee.

11800. CLOSE-OUT PROCEDURES

11810. Buy-In Procedures and Requirements

(a) A securities contract that has not been completed by the seller according to its terms may be closed by the buyer not sooner than the third business day following the date delivery was due, in accordance with this Rule.However, this Rule shall not apply:

(1) where the contract is subject to the “buy-in” requirements of a national securities exchange or a registered clearing agency, in which case, the requirements of the national securities exchange or registered clearing agency, as applicable, would apply;

(2) to transactions in securities exempted under Section 3(a)(12) of the Exchange Act;

(3) to transactions in municipal securities as defined in Section 3(a)(29) of the Exchange Act;

(4) to transactions in redeemable securities issued by companies registered under the Investment Company Act; provided, however, that this Rule shall apply to secondary market transactions between members in any security issued by a registered investment company classified as a “unit investment trust” under Section 4 of the Investment Company Act. Redemption of securities directly by the trustee of the unit investment trust are not transactions between members for purposes of this subparagraph; and

(5) to transactions in Direct Participation Program securities as defined in Rule 2310.

(b) Notice of "Buy-In" and Confirmation of Receipt

(1) Written notice of "buy-in" shall be delivered to the seller at its office not later than 12:00 noon, Eastern Time (ET), two business days preceding the execution of the proposed "buy-in."

(2) For purposes of this Rule, written notice shall include an electronic notice through a medium that provides for an immediate return receipt capability. Such electronic media shall include but not be limited to facsimile transmission, a computerized network facility, or the electronic functionality of a registered clearing agency.

(3) Confirmation of receipt of the “buy-in” notice by the seller shall be maintained with the notice as part of the buyer's books and records.

(4) If the seller receiving the “buy-in” notice does not accept such “buy-in” notice, it shall send a signed, written response to the buyer stating its rejection with respect thereto by no later than 6:00 p.m. ET on the date of issuance of such notice. If the seller receiving the “buy-in” notice does not send a signed, written response to the buyer stating its rejection of such “buy-in” notice by no later than 6:00 p.m. ET on the date of issuance of the “buy-in” notice, the notice shall be deemed to have been accepted by the seller. However, prior to the proposed effective date of the “buy-in,” the seller has a right to request proof of fail obligation from the buyer and the buyer shall deliver such proof to the seller prior to such date. In no event shall a buyer be entitled to a “buy-in” that exceeds the liability of a seller under an unsettled securities contract because of the failure of the seller to reject a “buy-in” notice as stated in this paragraph (b). A buyer may not execute a “buy-in” notice to such extent the buyer fails to deliver the proof of fail obligation in accordance with the requirements of this paragraph (b).

(5) Notice shall be redelivered immediately by the receiving party to other parties from which the securities involved are due in the form of a re-transmitted notice. A re-transmitted notice of “buy-in” received by a member shall be delivered to subsequent parties not later than 12 noon ET on the business day preceding the time and date of execution of the proposed buy-in, and the time specified for delivery shall not be prior to the time specified in the original notice.Each party receiving a re-transmitted notice shall be subject to paragraphs (b)(3) and (4) of this Rule; provided, however, that with respect to the written response required by paragraph (b)(4), each party receiving the re-transmitted notice must provide such response to the party from which such notice was received.

(6) When notice of “buy-in,” or re-transmitted notice thereof, is given for less than the full amount of securities due, it shall not be for less than one trading unit.

(c) Information Contained in "Buy-in" Notice

Every notice of "buy-in" (including re-transmitted notice thereof) shall state the date that the contract will be closed out, the quantity and contract value of the securities covered by said contract, the settlement date of said contract and any other information deemed necessary to properly identify the contract to be closed out. Such notice shall state further that unless delivery is effected at or before 3:00 p.m. ET on the “effective date” of the “buy-in” notice, the security may be "bought-in" on the date specified for the account of the seller. Each "buy-in" notice shall also state the name and telephone number of the individual authorized to pursue further discussions concerning the buy-in.

(d) Procedures for Closing of Contracts

(1)(A) A seller that has received a “buy-in” notice, pursuant to this Rule, or re-transmitted notice thereof, and that has not rejected or stayed the notice as provided by this Rule, shall deliver the securities to the party issuing such notice at or before 3:00 p.m. ET on the “effective date” of the “buy-in” notice unless otherwise agreed to by the issuing party, prior to execution of the “buy-in” and such seller having notified the issuing party that it has physical possession of the securities. If the issuing party, prior to the execution of the “buy-in” pursuant to this Rule, is notified by a seller that some or all of the securities (but not less than one trading unit) are in the seller's physical possession and will be promptly delivered to such member, then the order to “buy-in” shall not be executed with respect to such securities, and the member that has initiated the original order to “buy-in” shall accept and pay for such securities, if delivered promptly. If such securities are not promptly delivered, the seller that has stated that they would be promptly delivered shall be liable for any resulting damages.

(B) On failure of the seller to effect delivery in accordance with the "buy-in" notice, or to obtain a stay as provided in this Rule, the buyer may close the contract by purchasing all or part of the securities necessary to satisfy the amount requested in the "buy-in" notice. Securities delivered to the buyer by the seller subsequent to the receipt of the "buy-in" notice shall be considered as delivered pursuant to the "buy-in" notice. Delivery of the requisite number of shares, as stated in the "buy-in" notice, or execution of the “buy-in” by the buyer against the seller will also operate to close-out all contracts covered under re-transmitted notices of buy-ins issued pursuant to the original notice of buy-in. However, if a re-transmitted notice is sent by a member prior to the delivery of the requisite number of shares as stated in the “buy-in” notice, or prior to the execution of the “buy-in,” but such notice is not received by the recipient until after the delivery of the shares or execution of the “buy-in,” then the member that sent the notice may, unless otherwise agreed, promptly re-establish, by a new sale, the contract with respect to which such notice was sent. A "buy-in" may be executed by a member from its long position and/or from customers' accounts maintained with such member.