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1 The s Engine Order Management, Trade Change Management and Annuity s USER GUIDE February 2013

2 THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION AND IS FOR THE GENERAL GUIDANCE OF FIRMS UNDER CONTRACT WITH PERSHING LLC ONLY AND MAY NOT BE REPRODUCED FOR, OR GIVEN TO, THIRD PARTIES UNDER ANY CIRCUMSTANCES. THE CONTENT DESCRIBED HEREIN IS SUBJECT TO ONE OR MORE PATENT APPLICATIONS Pershing LLC. Pershing LLC, member FINRA, NYSE, SIPC, is a wholly owned subsidiary of The Bank of New York Mellon Corporation (BNY Mellon). Trademark(s) belong to their respective owners. For professional use only. Not for distribution to the public. The information contained herein, including any attachments, is proprietary to, and constitutes confidential information of Pershing. It may not be reproduced, retransmitted or redistributed in any manner without the express written consent of Pershing LLC.

3 Table of Contents 1. About The s Engine for Order Management System Dependencies, Order Queuing and Order Recycling Administration Order s Source of Input and Customer Messaging...7 Custom Messaging Audit Reports...8 s Assignment Report (PWD003D1)... 8 Pershing s Engine Assignment Report (PWD206D0)... 8 s Assignment Change Report (PWD003D4)... 8 Pershing Engine Log (PWD206D1)... 8 s Engine Daily Order Log (PWD003D0)... 8 Daily Trade Activity Log (VIE280D2) Funds Available Messages Order Management s Table Order Management Parameter Definitions The Order Management s Engine Worksheet (Appendix) About the Trade Change Management s Group ID TCMS New Trade Detail and Retirement Accounts Group ID TCMS New Trade COD Accounts Group ID TCMS Cancellation Trade Retail and Retirement Accounts Group ID TCMS Cancellation Trade COD Accounts Group ID TCMS Trade Correction Retail and Retirement Accounts Group ID TCMS Trade Correction Trade COD Accounts Trade Change Management s Table Trade Change Management Parameter Definitions The Trade Change Management s Engine Worksheet (Appendix) Annuity s Group ID Annuity Request

4 17. Annuity s Table Annuity Parameter Definitions Annuity s Engine Worksheet (Appendix) UIT s Group 1200 UIT Orders UIT s Table UIT s Engine Worksheet (Appendix)

5 1. ABOUT THE RULES ENGINE FOR ORDER MANAGEMENT 1. About The s Engine for Order Management The s Engine for order management is a powerful tool. By designating that your firm s orders go through The s Engine, your firm automates the order management process and can be notified of potential problems. These rules address regulatory, credit, and business issues. Most rules are optional and are used only if they suit your specific business needs. Using The s Engine for order management means that any order that passes the rules specified by your firm and Pershing will be automatically approved and sent directly to the market for execution; this results in speedier executions compared to the manual review process, and your firm saves valuable resources. The s Engine for order management is currently available through NetExchange Client, NetX360, TelExchange Client, and NetExchange Services TM. Equity, option, mutual fund, and fixed income orders are eligible for processing through The s Engine. Additional rules will also be added to future versions of The s Engine to further increase its value to your firm. Note: Use of The s Engine for order management and trade change management is at your own risk and is not a substitute for, nor does it eliminate, the need for your firm to supervise trading activity and to know your clients. 3

6 2. SYSTEM DEPENDENCIES, ORDER QUEUING AND ORDER RECYCLING 2. System Dependencies, Order Queuing and Order Recycling There are a number of factors that can affect the ability of The s Engine to process orders. When one of these factors exists, such as when the Advanced Trade Order Management System (ATOMS) is unavailable (after hours) or when a system (or file) on which The s Engine depends to make decisions is unavailable, all orders are either routed back to Order Browse (which is in OpsCenter) or they are sent to Order (which is accessed through NetX360 > Service & Operations > Work Corner). To help your firm process orders that have accumulated in Order after hours, or over the weekend, an order recycling option is available. This option enables your firm to reroute the queued orders back through The s Engine in the order in which they were originally received, once ATOMS and the other necessary files are available. During the recycling process, orders that pass all of the rules will be automatically approved and sent to the market for execution. Orders that do not pass the rules will be sent back to Order along with the appropriate message(s) for the approver. The order recycling process will only take place if your firm has assigned 700 for equity and option orders, or 702 for mutual fund orders, or both. Recycling occurs on the morning of each business day. Equity and option recycling usually completes by 4:00 a.m. (ET). Mutual fund recycling usually completes by 7:30 a.m. (ET). Notes Since s 700 and 702 are optional, your firm can assign or unassign them at any time using the ComplianceView (TOOL) s Maintenance functionality. If your firm unassigns a recycling rule while the related recycling process is taking place, the recycling process will not be disabled. If 1900 (all orders to approval) is activated at the introducing broker-dealer (IBD) level, do not turn on 700. The order recycling process will not be initiated after 7:00 a.m. (ET) in the event that ATOMS or other applicable systems (or files) are not available by this time. Assigning 700 or 702 does not allow your firm to initiate the recycling processes outside of its assigned time. This means that orders that have accumulated in Order due to an intraday system or file failure may not be recycled using these rules. All orders rely on Account Services and the Securities Pricing System. Therefore, every order must have a valid account number and be assigned to a valid security. If real-time quotes are not available, The s Engine cannot calculate the order value of market orders. This affects the order value calculation as well as the funds available calculation. If a rule is dependent on either of these values, and real-time quotes are not available, any affected orders will be sent to your firm for approval. Your firm must contact your Account Manager to establish cancel and cancel and replace functionality prior to assigning

7 3. RULE ADMINISTRATION 3. Administration Your firm can administer the rules using ComplianceView (TOOL). Most rules can be applied at five different levels: account, investment professional (RR), office, IBD and source of input. In addition, several of the rules may be further applied at the 401(k) and the individual retirement account (IRA) levels, with the flexibility to set different parameters depending on whether it is a 403(b)(7) custodial account or a Traditional IRA. 1 Applying rules at different organizational levels gives your firm a great deal of control over the order management process. Notes outcomes and parameters are applied to orders using the most specific applicable level in the order mentioned above. This means that when an order is received, The s Engine will first verify whether any assigned rules apply to the account before verifying whether any assigned rules apply to the IP (registered representative [RR]), office, IBD, or source of input (in that order). Thus, if a rule has been assigned at the account level, it will take precedence over the same rule assigned at the RR, office, IBD or source of input levels. For example, if 1076 (Trading Limit by Quantity ) is assigned to an account with a quantity parameter of 10,000 shares, and the same rule is assigned at the firm level with a quantity parameter of 5,000 shares, any order for that particular account will pass the rule, provided that the order is for less than 10,000 shares. Orders for any other account will only pass the rule if the order quantity is for less than 5,000 shares. For The s Engine to determine if any rules apply to the RR, the system compares the P code on the incoming order to any rules applied for the applicable IP. If an IP code has not been designated on the order itself, it will compare the IP on the account (derived from Account Services) to any rules applied to that IP. Your firm also can unassign a rule that has otherwise been assigned at a higher level. For example, if you assign a rule at the firm level, you can unassign it for a particular account, RR, or office. 1 s 1172 and 1173 may be applied to the 401(k) and IRA levels. 5

8 4. ORDER OUTCOMES 4. Order s Each order that is processed through The s Engine for order management has four possible outcomes: Stop Any further processing of the order will cease until the rule is satisfied. The order will not proceed past the point of entry. Changing the outcome of a rule to Stop will prevent orders that trigger the rule from being transmitted. The order will be sent to Order with a message citing the reason the order was sent for review along with the respective rule number. 2 Warning - When an order is entered through NetX360, a message is displayed on the screen containing a list of the rules triggered, the rule numbers, and their respective messages. The user is notified via another online message, allowing the user to decide whether to proceed with the order. 3 D (Process Only) s are applied to an order to only perform a processing function, but a message is not attributed. This outcome is only applicable to a few rules. Several order management rules are set by Pershing and are mandatory. Your firm can choose to make any Pershing rule more stringent, but not more lenient. For instance, if a Pershing rule is set for, your firm can reset it so that the outcome is Stop. However, if a Pershing rule is set to Stop, your firm cannot reset it to another outcome. The vast majority of rules available are optional. Your firm can activate them or can choose to institute them for a select group within your organization. The default for most optional rules (if selected) is, but your firm can change the outcome for any optional rule to satisfy your business needs. If all parameters are met, an order will be accepted and sent for execution. The order management rules apply to equities, options, mutual funds and fixed income products. However, some rules may not apply to all four types of securities. Refer to the rule tables in this manual for specific information regarding the applicability of a particular rule to a security type. 2 3 Any order placed after market hours is automatically sent to your firm and can be viewed in Order. Warning is not a valid outcome for orders entered in NetExchange Client. If your firm receives orders via NetExchange Client, the rules should be established for each platform separately by source of input. 6

9 5. SOURCE OF INPUT AND CUSTOMER MESSAGING 5. Source of Input and Customer Messaging This function offers you a greater level of control over the order management system by enabling you to differentiate between the rules and the rule outcomes, depending on the source of the order. By setting different rules, parameter messages, and outcomes for each source of input, you can establish stronger rules and parameters for client orders as opposed to orders entered by IPs. The following list contains applicable sources of input: Input Sources of Input Table 2 NetExchange Services 3 NetX360 4 NetExchange Client 6 TelExchange Client 7 NetExchange Advisor B E G I J K P Z All External Website Bond Exchange Folio Dynamix Web via NetX360 Interactive Voice Response via NetX360 Proprietary Via NetX360 Wireless Pro Home Office Entering Orders on NetX360 Option means that the rule applies to all sources of input Custom Messaging Even though each rule contains a default message that is displayed when the rule is triggered, your firm can customize the message at any of the following levels: account, RR, office, and IBD. Your firm can also customize the message for each source of input so that your clients can see different messages than your IPs see. 7

10 6. AUDIT REPORTS 6. Audit Reports The s Engine for order management produces the following audit reports, which are available via NetX360 > Service & Operations > Report Center: s Assignment Report (PWD003D1) This report lists the Order Management rules assigned or unassigned at each applicable level of your firm: account, RR, office, and IBD. It also lists any changes made to The s Engine assignments within your firm, as well as the personal ID of the individual who made the change. Pershing s Engine Assignment Report (PWD206D0) This report lists the rules assigned or unassigned on the Group-Level Assignment Screen (GLAS) section of TOOL at each applicable level of your firm account, RR, office, and IBD. It also lists any changes made to The s Engine assignments within your firm, as well both the personal ID of the individual who made the change and the date and time the change was made. s Assignment Change Report (PWD003D4) This report lists any changes made with reference to the rules assignment in Order Management. This report reflects the level of assignment before and after the change, as well as the personal ID of the individual who made the change and the date and time the change was made. Pershing Engine Log (PWD206D1) This report lists any changes made with reference to the rules assignment in the GLAS section of TOOL. This report reflects the level of assignment before and after the change, as well as the date and time the change was made. s Engine Daily Order Log (PWD003D0) This report documents the audit trail of orders that go through The s Engine, as well as those orders that have not been approved. This report details the funds available in the client s account at the time an order was placed if it is an opening transaction, and it details the available position if it is a closing transaction. Daily Trade Activity Log (VIE280D2) The existing Trade Activity Log details pertinent information for equity and option orders processed by The s Engine that were sent to ATOMS for processing. This report details whether The s Engine automatically approved the order. The log also details whether the order required additional 8

11 6. AUDIT REPORTS approval because it failed one or more rules, and it lists the rules that the order failed. If the order was manually approved, the report will indicate the personal ID of the individual who approved the order. Notes The s Engine Daily Order Log, in conjunction with the Daily Trade Activity Log, allows your firm to have a complete audit trail of equity and option orders processed by The s Engine. If you rely upon these reports for the purpose of fulfilling order ticket requirements, be sure to maintain them for the appropriate length of time. The Mutual Fund Orders Daily Trade Activity Log (VIE255D0) and the Fixed Income Order Daily Activity Log (BAR276D0) are similar to the Daily Trade Activity Log for equities and options except that they contain mutual fund and fixed income orders. It is important that you receive the following reports: Equity and Option Trade Activity Log, Mutual Fund Orders Daily Trade Activity Log, and the Fixed Income Order Daily Activity Log. If an order has gone through the order recycling process, the Daily Order Log and the Daily Trade Activity Log will indicate that an order has been recycled, the time the order was recycled, and the outcome of the order. 9

12 7. FUNDS AVAILABLE 7. Funds Available Format The format for funds available is as follows: Funds available = trade date cash account balance + money market fund opening balance + (the lesser of house surplus or Special Memorandum Account SMA) (the greatest call: federal, house, 13 or exchange) (technical short value) 4 + checks received today checks disbursed today +/ today s other brokerage activity. For cash accounts flagged for a 90-day cash-on-hand (COH) restriction, funds available are further reduced by unsettled sale proceeds. Type 1 buy orders for all product types (pending, open, executed or pending cancellation) Type 1 sell-long orders for all product types (executed only) Type 1 or type 2 mutual fund exchanges Type 2 equity buy orders (pending, open, executed or pending cancellation) less than or equal to $5 Type 2 equity buy orders (pending, open, executed or pending cancellation) less than $5 Type 2 convertible bond purchase orders or type 3 sellshort orders (pending, open, executed or pending cancellation) Type 2 interest-paying corporate debt purchase (rated no lower than Moody s BAA or S&P s BBB) or type 3 short-sale orders (pending, open, executed or pending cancellation) Type 2 zero coupon corporate bond purchase (rated no lower than Moody s BAA or S&P s BBB; including Certificate of Accrual on Treasury Securities (CATS) and Treasury Investors Growth Receipt (TIGRs)) or type 3 short-sale orders (pending, open, executed or pending cancellation). Type 2 interest-paying municipal bond purchase (rated no lower than Moody s BAA or S&P s BBB) or type 3 short-sale orders (pending, open, executed or pending cancellation) Type 2 zero coupon municipal bond purchase (rated no lower than Moody s BAA or S&P s BBB) or type 3 shortsale orders (pending, open, executed or pending cancellation) Will debit 100% of order value Will credit 100% of order value No effect Will debit 100% of order value Will debit 50% of order value Will debit 50% of order value Will debit 30% of order value Will debit the greater of 30% of the order value or 10% of the face amount Will debit 30% of order value Will debit the greater of 30% of the net amount or 10% of face amount 13 The house call shown on the moneyline for the account may have been systematically reduced by available equity from the cash account. The funds available calculation uses the unadjusted house call. 4 Before May 2004, two-times technical short-value reduced funds available 10

13 7. FUNDS AVAILABLE Format Type 2 direct government obligation purchase (bills, notes, bonds) or type 3 short-sale orders (pending, open, executed or pending cancellation) Type 2 government agency and pass-through purchase (Government National Mortgage Association [GNMA], Federal National Mortgage Association [FNMA], federal home loan) or type 3 short-sale orders (pending, open, executed or pending cancellation) Type 2 government zero coupon bond purchase or type 3 short-sale orders (pending, open, executed or pending cancellation) Other bond type 2 purchase or type 3 short-sale orders (pending, open, executed or pending cancellation) Type 2 equity or mutual fund sell orders (executed only) less than or equal to $5. Type 2 equity or mutual fund sell orders (executed only) greater than $5 Convertible bond sell orders in type 2 or buy-to-cover orders in type 3 (executed only) Type 2 interest-paying corporate debt sell orders (rated no lower than Moody s BAA or S&P s BBB) or buy-tocover orders in type 3 (executed only) Type 2 zero coupon corporate bond sell orders (rated no lower than Moody s BAA or S&P s BBB, including CATS and TIGRs) or buy-to-cover orders in type 3 (executed only) Type 2 interest-paying municipal bond sell orders in type 1 (rated no lower than Moody s BAA or S&P s BBB) or buy-to-cover orders in type 3 (executed only) Type 2 zero coupon municipal bond sell orders in type 2 (rated no lower than Moody s BAA or S&P s BBB) or buy-to-cover orders in type 3 (executed only) Type 2 direct government obligation sell orders in type 2 (bills, notes or bonds) or buy-to-cover orders in type 3 (executed only) Type 2 government agency and pass-through sell orders in type 2 (GNMA, FNMA, federal home loan) or buy-to-cover orders in type 3 (executed only) Type 2 government zero coupon bond sell orders in type 2 or buy-to-cover orders in type 3 (executed only) Other bond sell orders in type 2 or buy-to-cover orders in type 3 (executed only) Type 3 equity short sales (pending, open, executed or pending cancellation) greater than $10 Will debit 10% of order value Will debit 15% of the order value Will debit 10% of the face amount Will debit 100% of the order value Will credit 100% of the order value Will credit 50% of the order value Will credit 50% of the order value Will credit 30% of the order value Will credit the greater of 30% of the net amount or 10% of the face amount Will credit 30% of net amount Will credit the greater of 30% of the net amount or 10% of the face amount Will credit 10% of the order value Will credit 15% of the order value Will credit 10% of the face amount Will credit 100% of the order value Will debit 50% of the order value 11

14 7. FUNDS AVAILABLE Format Type 3 equity short sales (pending, open, executed or pending cancellation) less than $10 Type 3 equity buy-to-cover orders Will debit $5 per share Will credit 50% of the order value Notes Unexecuted pre-session orders are not included after the close of the pre-session. For fixed income orders, any order received with an offering price from BondCentral will use the offering price. The following notes detail what happens if no such price exists. Last night s closing price will be derived from the Product Master (PROM) system (any multiplier parameter you have assigned within 900 would then be applied). If no price exists on PROM, the order value will equal par value, except for convertible securities, which will default for approval if no value exists on PROM. For unconfirmed mutual fund purchases placed in shares, the order value will equal the share quantity multiplied by last night s net asset value (NAV). If a security is not marginable, regardless of product type, 100% of the order value will be debited from funds available. A security that has an initial or maintenance requirement greater than 50% is considered not to be marginable for purposes of this calculation. The order value of executed sell (not held) orders will be debited from funds available. If a multiplier is applied (see 900) to a type 1 or type 2 market or stop order to buy, the order will be multiplied by the multiplier value. Type 1 and type 2 sell order values will only be credited if the sale was for a long, negotiable position. A pending order is an order in Order. An open order is an order that has been sent to the applicable order processing system and has not yet been executed or confirmed as cancelled. The Order Management rules will net out positions in different account types for the same exact CUSIP number. The rules do not, however, discern sophisticated option trading strategies, such as straddles and spreads. Only negotiable long positions are considered long positions. Shares in Safekeeping (K), Pending Transfer (P), Transfer (T), Legal Transfer (L), Reorganization (R), or Pending Papers (X) are not considered long positions because they are not negotiable. 12

15 8. MESSAGES 8. Messages In certain circumstances, The s Engine for order management generates standard messages for orders in the pending approval queue. Refer to the chart below for a list of messages and the circumstances in which you might expect to receive these messages. Message Account history information could not be accessed. Account not found in Account Services. Please review the entire order. Balance database is unavailable. Please review the entire order. Cannot determine possible duplicate. Commission factor not found. Client is not set up for cancel/replace. Cannot determine marginability. Could not determine the marginability of stock. Please review the entire order. Could not determine National Market System (NMS) status. Please review the entire order. Could not determine possible duplicate. Error reading queue. Could not determine quantity of position in holdings. The message appears if The s Engine is experiencing difficulty retrieving historical account information from the NetX360 History tables. The account cannot be found in the Name and Address Account file and The s Engine cannot determine if the account is valid. The Balances Database is unavailable and The s Engine is: (a) unable to calculate the funds available, (b) unable to determine whether the account is on a 90-day restriction or frozen from filing further extensions with the New York Stock Exchange, or (c) unable to verify whether a free credit balance exists to cover a federal margin call. The s Engine is experiencing difficulty determining whether there are any outstanding orders. The commission value parameter is not populated for 902. An attempt to cancel or cancel and replace an order has been made and 801 (Cancel/Replace #2) has not been assigned. 801 must be assigned to accommodate cancel and cancel and replace requests. The file that provides margin information (at the security level) is unavailable and The s Engine is not able to determine whether the security is marginable. The table that provides margin information (at the security level) is unavailable and The s Engine is not able to determine whether the security is marginable. The s Engine is experiencing difficulty reading the NMS file. The s Engine is unable to retrieve any intraday activity from the message transfer function queue. The s Engine is experiencing difficulty retrieving the option contract size. 13

16 8. MESSAGES Message Could not determine the when-issued status. Please review the entire order. Could not determine valid Series 6 and/or 7 license. Could not read the account profile information. Please review the entire order. Could not read the Adoption Agreement file. Please review the entire order. Could not read the Recommendation file. Please review the entire order. Could not read the IP file. Please review the entire order. Could not read ATOMS data. Please review the entire order. Could not read the watch list. Could not retrieve pending transfer status. Please review the entire order. Could not retrieve today s activity from the activity table. Could not retrieve ATOMS data. Please review the entire order. Could not verify exchange of CUSIP. Database could not be accessed. Please review the entire order. Error fetching exchange of CUSIP. The message appears if The s Engine is unable to obtain the whenissued information of a security from the PROM database. The s Engine is experiencing difficulty retrieving the IP s information from the Commission and Payout System (CAPS). The s Engine is experiencing difficulty interfacing with the file containing the account profile information. Therefore, The s Engine cannot verify suitability or employer information. The file that is needed to verify receipt of an adoption agreement is not available. The s Engine is experiencing difficulty interfacing with the file containing the recommendation information. The CAPS file is not available for The s Engine to verify the IP s registration information. The s Engine is experiencing difficulty linking to ATOMS. The Stock Watch file is not available for The s Engine to determine if the security is on the Stock Watch list. The Pending Transfer file is unavailable for The s Engine to determine if an account is undergoing an outgoing Automated Customer Account Transfer Service (ACATS) transfer. The s Engine is experiencing difficulty linking to ATOMS and the Online Trade Processing System (TRAM). The s Engine is experiencing difficulty interfacing with the ATOMS module, making it unable to determine the status of other open or executed orders for the account and cannot calculate the funds available. The database containing the information stating whether the security is traded in the listed or overthe-counter (OTC) market, or whether an option is an index or equity option, does not contain any information for this particular security. The s Engine cannot determine the applicability of the rules in the order size category. The s Engine is experiencing difficulty interfacing with one or more databases. Therefore, it does not have enough information to make a decision. The s Engine database is not available. 14

17 8. MESSAGES Message Error fetching rules. Error fetching when-issued status. Please review the entire order. Error determining the mutual fund cumulative order value. Error retrieving the fixed income multiplier parameters. Error getting mutual fund position. Error linking to LMDATEEX file. Error reading Money Fund file. Please review the entire order. Error reading open item table. Error reading patterned day-trader table. Error reading BOES order. Please review the entire order. Error reading broker information. Please review the entire order. Error reading the Parameter table. Error reading ATOMS data. Please review the entire order. Error retrieving plan information. Error retrieving settlement date. Fixed income funds on-hand parameters not found. The message appears if The s Engine Assignment table is not available. The rules assigned for the order cannot be determined at this time. The file containing when-issued information could not be accessed. The s Engine cannot verify whether the security is when- issued. The s Engine is experiencing difficulty retrieving any intraday mutual fund orders from the Margin and Compliance (MAXX) system. The s Engine is experiencing difficulty retrieving the fixed income multiplier. The s Engine is experiencing difficulty retrieving any outstanding mutual fund positions. The Pershing Date file is not available. The Money Fund file is not available. Therefore, The s Engine is (a) unable to calculate the funds available or (b) unable to verify whether the money fund balance is sufficient to satisfy a margin call. The open item activity table from TRAM is experiencing some difficulty. The s Engine is experiencing difficulty retrieving patterned day-trade status from the ComplianceView system. The s Engine is experiencing difficulty interfacing with the Bond Order Entry System (BOES ), making it unable to view any fixed income activity. The broker information table from CAPS is not available for The s Engine. The s Engine is experiencing difficulty retrieving a parameter from The s Engine database. The s Engine is experiencing difficulty interfacing with the ATOMS module, making it unable to determine the status of other open or executed orders for the account, and it cannot calculate the funds available. The s Engine is experiencing difficulty retrieving 401(k) plan information from Account Services. The Pershing Date file is not available. The parameters for 1071 (Fixed Income/Funds Insufficient) are not populated or are not populated correctly. The s Engine is unable to determine the rating for each type of fixed income. 15

18 8. MESSAGES Message Fixed income multiplier not found. Fixed income order value could not be calculated. Fixed income multiplier has value of zero. Changed to 100%. Fund information not available. Please review the entire order. Fund not found. Please review the entire order. Haircut parameter could not be accessed. Please review the entire order. Incorrect parameter value for 906. Invalid parameter found for Invalid parameter found for Load factor could not be found. Mutual fund minimum dollar thresholds not found. No rules are assigned for the customer. Please contact your Account Manager. Option has expired. Option type could not be determined. Please review the entire order. Parameters for back-end load fund defaulted to approval could not be accessed. The message appears if The s Engine parameter could not be found. When retrieving the preferred price from the preferred price table, an error occurred in calculating the fixed income order value. The fixed income parameters in 904 cannot be equal to zero. The multiplier has been changed to 100%. The s Engine is experiencing difficulty retrieving the price from PROM s preferred price table. The CUSIP cannot be found in PROM s preferred price table. The multiplier parameter for 900 (multiplier) has not been updated, or it has not been updated correctly, or the file that contains this information is not available. As a result, The s Engine is unable to calculate the order size for an incoming market order or for any open or pending market orders, and it cannot determine funds available or order size to evaluate incoming orders. The mutual fund switching parameter was populated with an invalid character. The parameter for 1031 is invalid. Please verify that the parameters have been entered correctly. If not, delete and reassign the rule with the correct parameters. The parameter entered for 1065 is not valid. The parameter can be U if the rule should apply to U.S. accounts, N for non-u.s. accounts or A for U.S. and non-u.s. accounts. The load factor parameter for 905 has not been populated. The mutual fund minimum parameters are not populated for The s Engine did not retrieve any rules assigned for the customer in The s Engine Assignment table. An order has been placed for an option that has already expired. The s Engine is unable to determine an option type, or the CUSIP number may be associated with more than one type. The back-end load fund parameters have not been populated for

19 8. MESSAGES Message Parameters to determine back-end load fund defaulted to approval are not valid. Parameters for load fund defaulted to approval not found. Parameters entered for load fund defaulted to approval not valid. Patterned day-trader and/or solicited parameter not found. Pending order could not be cancelled (50). Pending order could not be canceled (51). Pending order could not be cancelled (52). Pending order could not be cancelled (53). Account Services file not available. Please review the entire order. Position database unavailable. Please review the entire order. Possible duplicate order; review orders. Price could not be found. Please review the entire order. Price is zero. Please review the entire order. Profile information not found. Please review the entire order. Reorganization memo information is not available. Please review the entire order. The message appears if The back-end load fund parameters populated for 1087 are invalid characters. The load fund parameters have not been populated for The load fund parameters populated for 1087 are invalid characters. The s Engine cannot find parameters for Please verify that the parameters are entered correctly. If not, delete and reassign the rule with the correct parameters. The s Engine is experiencing difficulty interfacing with the module that deletes an original order from Order. Thus, the pending order cannot be deleted. The order is no longer in Order and cannot be deleted. The original order cannot be deleted because it is currently being reviewed. The module required to delete the original order from Order is unavailable; thus, the pending order cannot be deleted. The Account file is not available for The s Engine to validate the account number or type of account. The position database is not available for The s Engine to determine the available position. The account already has an open, pending or executed order for the same security on the same side of the market. The s Engine is unable to get a quote for (a) an incoming market order and cannot calculate the order value or (b) any open or pending market orders and cannot calculate funds available. The s Engine has obtained a quote of zero for (a) an incoming market order and, thus, cannot calculate the order value or (b) any open or pending market orders and The s Engine cannot calculate funds available. The proper fields on the profile screen in TOOL have not been populated. Therefore, The s Engine has no suitability or employer information to reference. The file needed to verify the position memo field of R (reorganization) is not available. 17

20 8. MESSAGES Message IP information could not be found citizenship parameter not found. 801 must be on for a cancel of a pending order. Security could not be found. Please review the entire order. Security Master unavailable. Please review the entire order. Share trading limit could not be accessed. Please review the entire order. The total allowable order quantity and order dollar value could not be found. Variables for order dollar limit calculation not found for specified parameter. Variable for funds available exception calculation not found for specified parameter. The message appears if The s Engine is experiencing difficulty retrieving the IP registration status from CAPS. The s Engine cannot find parameters for Please verify that the parameters have been entered correctly. If not, delete and reassign the rule with the correct parameters. The s Engine did not find 801 assigned. And, the current order is a cancellation of a pending order. The CUSIP number or symbol could not be verified by the security and option database. The security database is not available to validate the CUSIP or symbol for an order. The database that contains the parameter information for 1076 (Trading Limit by Quantity or Dollar Value/Equities) is not available. Therefore, The s Engine cannot verify the order review thresholds. The parameters for 1075 (Order Dollar Limit/Options and Low-Priced Securities) are not populated or are not populated correctly. The s Engine is unable to determine the order review thresholds. The parameters for 1141 (Order Dollar Limit/General) are not populated or are not populated correctly; thus, The s Engine is unable to calculate the order dollar limit. The parameters for one of the following rules have not been entered: 1023, 1073, 1074 or If you receive a system message that does not appear on this list, please contact the Pershing Help Desk at (201)

21 9. ORDER MANAGEMENT RULES TABLE 9. Order Management s Table The rules defined on the following pages are organized by : Category Name Description Message Status Data Reference Product Type(s) 612 Order Size Average Daily Volume Check This rule compares all orders greater than 9,999 shares to a 10% value of the 30-day ADV. The order will be rejected if the order size exceeds value. The 30-day ADV filter will apply ONLY to exchange listed equity securities (i.e., not bulletin board, pink sheet or other over-thecounter [OTC] stocks. Order size exceeds percentage of 30 days average daily volume Mandatory Stop Parameter Table, ADV E The 30-day ADV check will bypass Not Held (NH) orders 613 Order Size Limit/Stop Order is too Marketable During Non- Market Hours This rule will only apply to equity orders with a Time in Force (TIF) of pre-trading (PRE) or after-hours (AFT, for firms with system entitlements to order entry in the extended-hours trading session) Limit/Stop Order is too marketable during nonmarket hours Mandatory Stop Parameter Table, NBBO E The price of the order will be compared directly to the National Best Bid/Best Offer (NBBO) quote Limit orders will be checked by comparing a buy (sell) limit to the offer (bid). The order will be rejected if the limit exceeds the quoted price by more than the established parameter for the trading session the order will be rejected. Time in Force conditions of PRE or AFT will use a parameter of 10 % away from the prevailing quote 19

22 9. ORDER MANAGEMENT RULES TABLE Category Name Description Message Status Data Reference Product Type(s) 614 Order Size Limit/Stop Order Exceeds Too Marketable (TIF not PRE & AFT) This rule applies to equity orders with all time in force (TIF) conditions except pretrading (PRE) and after-hours (AFT). The price of the order will be compared directly to the National Best Bid/Best Offer (NBBO) quote Limit, Limit at Close (LOC) and Closing Offset (CO) orders will be checked by comparing a buy (sell) limit to the offer (bid). If the limit exceeds the quoted price by more than the established parameter for the trading session the order will be rejected Limit/Stop Order exceeds too marketable for TIF conditions except PRE and AFT Mandatory Stop Parameter table, NBBO E All time in Force conditions except PRE and AFT will use a parameter of 5 % away from the prevailing quote for orders entered between 9:30 a.m. and 4:00 p.m. (ET). Sell Stop and Sell Stop Limit orders should be entered at or below the bid, while Buy Stop and Buy Stop Limit orders should be entered at or higher than the offer. No parameter will be used for Stop or Stop Limit orders. 619 Order Size Order Share Quantity Maximum for Mutual Fund Orders This rule indicates that the share quantity of a mutual fund order exceeds the maximum parameter value for the rule. The rule applies to opening purchases only. Order share quantity maximum for mutual funds Mandatory Parameter Table M 621 Trade Invalid Trailing Amount This rule will trigger on trailing stop market orders if the percentage entered is greater than or equal to the market price. Trailing amount greater than or equal to the market price Mandatory Stop Current Order E 20

23 9. ORDER MANAGEMENT RULES TABLE Category Name Description Message Status Data Reference Product Type(s) 622 Trade Invalid Trailing Limit Offset This rule will trigger on trailing stop limit orders if the limit price entered is greater than or equal to the market price. Limit offset greater than or equal to the market price Mandatory Stop Current Order E 623 Trade Limit Price Too Marketable for Options This rule applies to time in force (TIF) sell stop, sell stop limit, buy stop and buy stop limit option orders entered between 9:30 a.m. and 4:00 p.m. (EST). The price of the order will be compared to the NBBO quote. The buy (sell) limit of a limit order will be compared to the offer (bid) and rejected if the limit exceeds the quoted price outside of the established parameters. Limit Price too marketable for options Mandatory Stop Parameter table, NBBO O 630 Trade Stop Pershing Internal Order This mandatory rule indicates that a user ID associated with a current order begins with a three-character acronym that is reserved for Pershing internal users. The rule stops these orders from going to market. Pershing internal orders not allowed Mandatory Stop User ID E,O, FI, M 631 Trade SEC 15c3-5 This mandatory rule indicates that the current order, entered in a non-customer account, if executed, will surpass your firm s credit threshold. These credit thresholds were established to comply with SEC 15c3-5. * *Please contact your Account Manager for further details. Order has exceeded your 15c3-5 credit threshold. Please contact your home office. Mandatory Stop Current order, Parameter Table E,O, FI, 632 Trade SEC 15c3-5 This mandatory rule indicates that the current order, entered in a customer account, if executed, will surpass 5 x the account net worth and your firm s credit threshold. These credit thresholds were established to comply with SEC 15c3-5.* Order has exceeded your 15c3-5 credit threshold. Please contact your home office. Mandatory Stop Current order, Balances, Parameter Table E,O, FI, *Please contact your Account Manager for further details. 21

24 9. ORDER MANAGEMENT RULES TABLE Category Name Description Message Status Data Reference Product Type(s) 669 Order Size Option Contract and Market Value Maximum This rule is triggered when an option order exceeds 2,000 contracts and has a market value greater than $400,000. If your firm or authorized associate wishes to execute an order in excess of these two parameters, the order must be called in to call the order in to the Pershing Trading desk. Contract/Mark et Value limit exceeded Mandatory Stop Parameter Table O Do not confuse 669 with 670, which routes option orders exceeding 500 contracts for approval. 670 Order Size Contract Limit for Opening Option Orders This rule indicates that an option order to open has been placed and the order exceeds 500 contracts. Orders violating the rule should be called in to the Pershing Trading desk. Contract limit exceeded Mandatory Parameter Table O 671 Order Size Share Limit for Opening Equity Orders This parameter-driven rule indicates that an opening equity order has been placed in which the share quantity exceeds the share limit parameter of the rule. Share limit exceeded Mandatory Parameter Table E 672 Security Order Placed for Leveraged ETF This rule indicates that an opening order has been placed for a leveraged or inverse Exchange Traded Fund (ETF) Opening transaction in leveraged or inverse ETF Warning PROM E 673 Trade Order in Non- Negotiable Low Priced Stock This rule indicates that a sell order has been placed in a non negotiable position that is priced less than $.01 and/or is categorized in one of the three lowest OTC market tiers. Order in nonnegotiable security Mandatory Stop Parameter Table E 681 Trade DTC Global Lock Restricted Security This rule will reject orders for securities on the Depository Trust & Clearing Corporation (DTCC) Global Lock list. Order in DTC Global Lock Restricted Security Mandatory Stop Security Information E, O, FI, M 22

25 9. ORDER MANAGEMENT RULES TABLE Category Name Description Message Status Data Reference Product Type(s) 697 Trade Ineligible Holdings for 403B(7) Account This mandatory rule will send for approval any opening orders in accounts that are designated as 403(b)7 retirement plans in non-mutual fund products except money markets, qualified retirement plan (QRP) loan products and specifically approved ETF CUSIPs and unit investment trusts (UITs). Asset selected cannot be held in a 403B(7) account Mandatory Current Order E, O, FI 700 Queued Order Recycling Automatic Recycle Assigning this rule means that your firm s orders will be subject to an automated order recycling process each day. This process reroutes orders that are queued overnight in Order back through The s Engine in the order in which they were originally received. Orders that pass all of the rules during the recycling process will be automatically approved and sent directly to the market for execution. All orders that do not pass the rules will be sent back to the Order along with the appropriate message(s) for the approver. Orders recycled automatically Pending orders E, O The recycling process only pertains to equity and option orders. Note: Please refer to page 2 of this guide for important information pertaining to automatic recycling. 23

26 9. ORDER MANAGEMENT RULES TABLE Category Name Description Message Status Data Reference Product Type(s) 702 Queued Order Recycling Send MF Recycle Orders to MFNL Assigning this rule means that your firm s mutual fund orders will be subject to an automated order recycling process each day. This process reroutes orders that are queued overnight in Order back through The s Engine in the order in which they were originally received. Orders that pass all of the rules during the recycling process will be automatically approved and sent directly to the market for execution. All orders that do not pass the rules will be sent back to Order along with the appropriate message(s) for the approver. Send MF recycle orders to MFNL Pending orders M Note: Please refer to page 2 of this guide for important information pertaining to automatic recycling. 801 Trade Cancel/Replace #2 This rule deletes an order from Order when a request to cancel or cancel/replace order is entered. Original order has been deleted Order E, O Note: 801 should be assigned. Otherwise, there is the potential for a cancel/replacement to be sent to ATOMS, while the original order is in the pending queue. 24

27 9. ORDER MANAGEMENT RULES TABLE Category Name Description Message Status Data Reference Product Type(s) 900 Factor Multiplier 5 This parameter-driven rule is used as a factor in the funds available calculation, on which other rules depend. This rule offers the ability to multiply the value of any market or stop order to purchase, including open and pending orders, so that fluctuations in market prices may be taken into consideration. Multiplier may be applied Warning Parameter Table E, O, M For this rule, your firm can designate different multipliers for equity, option and mutual fund orders. Your firm can set the multiplier to any value equal to or greater than 100%. The resulting order value will be used for any rule that relies upon an order value to determine the outcome. For instance, your client has open market orders totaling $5,000. Using a multiplier value of 120%, these orders would use $6,000 of your client s funds available (that is $5,000 multiplied by 120%). Thus, any rule that depends on funds available (for instance, rules 1141 and 1014) will deduct $6,000, instead of $5,000, from the amount of funds available. In this situation, if there are not sufficient funds available to cover the $6,000, the message of the applicable rule will be displayed with the additional message Multiplier applied. 5 This rule will generate the multiplier applied message if the order is sent for approval because another rule has been violated. If this is the case, the multiplier applied message will be displayed along with message(s) regarding any other rule violation(s). The purpose is to notify the approver that this factor has been taken into consideration when The s Engine for Order Management evaluated the order. 25

28 9. ORDER MANAGEMENT RULES TABLE Category Name Description Message Status Data Reference Product Type(s) 901 Factor Zero Money Funds 6 This rule is used as a factor in the funds available calculation, on which other rules depend. This rule sets the value of money funds to $0.00 so that money funds will be excluded from the funds available calculation. The remaining funds available will be used for any rule that relies upon an order value in determining the outcome. Money funds set to zero Warning ACAM E, O, M, FI Note: This rule is useful if your firm s proprietary money fund information, or the Automated Cash Management (ACAM) system, is unavailable or has not been updated. 902 Factor Commission Factor 7 This parameter-driven rule is used as a factor in the funds available calculation, on which other rules depend. This rule offers the ability to deduct a specified dollar amount to represent the commission from all open, pending, and executed orders.8 Commission factor used Warning Parameter Table, Intraday Positions and Balances E, O, M For this rule, your firm may apply different dollar values for equity, option, load mutual funds and no-load mutual funds. 903 Factor Uncollected Funds 9 This rule is used as a factor in the funds available calculation, on which other rules depend. This rule offers the ability to subtract the total value of uncollected funds from the funds available calculation. Uncollected funds subtracted from funds available Warning Balances E, O, M, FI 904 Factor Fixed Income This parameter-driven rule will be used as a Fixed income Warning Security FI This rule will generate the money funds set to zero message if the order is sent for approval because another rule has been violated. If this is the case, the money funds set to zero message will be displayed along with message(s) regarding any other rule violation(s). The purpose is to notify the approver that this factor has been taken into consideration when The s Engine for Order Management evaluated the order. The commission factor is not applicable to fixed income orders as any commission on any fixed income order is already considered in the order value. The factor does not apply to executed mutual fund orders. This rule will generate the uncollected funds subtracted from funds available message if the order is sent for approval bec ause another rule has been violated. If this is the case, the uncollected funds subtracted from funds available message will be displayed along with the message(s) regarding any other rule violation(s). The purpose is to notify the approver that this factor has been taken into consideration when The s Engine for Order Management evaluated the order. 26