FINRA Rule 5270 Disclosure
Rule 5270 generally prohibits BTIG from trading for its own account when in possession of material, non-public information concerning an imminent client block transaction. The rule expands the scope of its existing front running prohibitions beyond equity securities to include trades in related financial instruments (e.g., options or derivatives related to the security that is the subject of an imminent block transaction).
The Rule does set forth three broad categories of permitted transactions that BTIG may engage in, while in possession of such information: (1) transactions that a firm can demonstrate are unrelated to the customer block order1; (2) transactions that are undertaken to fulfill or facilitate the execution of the customer block order2, and (3) transactions that are executed, in whole or in part, on a national securities exchange and comply with the marketplace rules of that exchange3.
As indicated below, BTIG may trade alongside your block order, or ahead of your block order, to liquidate or hedge a facilitation position resulting from your block order or another customer’s block order. In addition, before you place an order, BTIG may trade for its own account so that it may better facilitate any block order you may or may not subsequently place. If you do not want BTIG to trade in this manner with respect to any order, please inform your BTIG representative. Be aware however, that if you request that BTIG not trade in this manner, we may not be able to commit capital or otherwise facilitate the execution of your block orders.
BTIG conducts its trading in a manner designed to limit market impact and is consistent with best execution obligations. In addition, BTIG conducts supervisory reviews to monitor for execution quality of customer orders.
1 Transactions that the firm can demonstrate are unrelated to the customer block order. This includes transactions occurring on trading units where effective information barriers exist to prevent internal disclosure of the customer block order, transactions in the same security related to an earlier customer order and transactions to correct bona fide errors.
2 Transactions undertaken to facilitate the execution of the block order. In these situations, BTIG may trade ahead of, or alongside, the customer block order in connection with the block facilitation. We will make every effort to minimize any potential market impact such activity may have on the order.
3 Trading activity undertaken in compliance with the rules of a national securities exchange and at least one leg of the activity is executed on that exchange.
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