Loan by a Trading Participant to a Client Structured as a Trade

July 21, 2008PSE MEMORANDUM NO. 0338-08TO:All Trading Participants   RE:Loan by a Trading Participant to a Client Structured as a Trade We provide below for the guidance of all trading participants ("TPs") how the Market Regulation Division ("MRD") will treat an agreement between a TP and a client for the early release of the proceeds of a selling transaction before the actual trade settlement date (i.e., a TP will pay the cash proceeds of the trade to the selling client on T+0 or at any time earlier than T+3). CHTcSE1. The payment by a TP to the selling client of the trade proceeds earlier than the actual trade settlement date will be deemed an advance or a loan to the client. By engaging in such lending activity, the TP will violate the condition of its registration as a broker dealer that it "shall be solely engaged in the business of a Broker Dealer." (SRC Rule 28.1 (1) (C)).2. Considering that the TP will structure the loan as a trade with the TP advancing payment of the...