Quick Answer
The anti-intimidation rule bars members and associated persons from coordinating prices, trades or trade reports with anyone, from directing or requesting another member to alter a price, and from threatening, harassing, coercing, intimidating or otherwise attempting improperly to influence anyone. Nothing in the rule respecting coordination limits seven listed freedoms where the conduct otherwise complies with all applicable law.
This rule protects competition between market makers. It has a prohibition side and a preservation side, and the exam tests the boundary between them.
What Does the Anti-Intimidation Rule Forbid?
The prohibitions bind a member or person associated with a member, and there are three of them.
- Coordination. Coordinating the prices, including quotations, trades or trade reports of the member with any other member or person associated with a member, or any other person.
- Directing a price change. Directing or requesting another member to alter a price, including a quotation.
- Improper influence. Engaging, directly or indirectly, in any conduct that threatens, harasses, coerces, intimidates or otherwise attempts improperly to influence another member, a person associated with a member, or any other person.
Exam Tip: Gotchas
- Two of the three reach any other person. The coordination prohibition and the improper-influence prohibition both extend past members and their associated persons.
- A request is enough on the price-change branch. The rule names directing or requesting, so a polite ask carries the same treatment as an instruction.
- Trade reports are named beside prices and trades. Coordinating what gets reported is inside the coordination prohibition, not only coordinating what gets quoted.
What Conduct Does the Rule Name as an Example?
The third prohibition closes with an illustration that is expressly open: the conduct includes, but is not limited to, the following.
- Any attempt to influence another member or person associated with a member to adjust or maintain a price or quotation, whether displayed on any facility operated by FINRA or otherwise
- Refusals to trade or other conduct that retaliates against or discourages the competitive activities of another market maker or market participant
Exam Tip: Gotchas
- The illustration is open, so it sets no ceiling. Conduct outside the two named examples is not thereby permitted, because the rule says the prohibited conduct is not limited to them.
- A quotation displayed away from a FINRA facility still counts. The words are "whether displayed on any facility operated by FINRA or otherwise".
- Maintaining a price is named beside adjusting one. Pressure to leave a quotation where it is falls inside the same illustration.
Which Freedoms Does the Rule Preserve?
The second paragraph opens with a condition. Provided that the conduct in the seven listed items is otherwise in compliance with all applicable law, nothing in the rule respecting coordination of quotes, trades or trade reports limits, constrains or otherwise inhibits the freedom of a member or associated person to do the following.
| Preserved freedom | What it covers |
|---|---|
| Set its own quotation | Set unilaterally its own bid or ask in any security, the prices at which it is willing to buy or sell any security, and the quantity of shares of any security it is willing to buy or sell |
| Set its own spread and increment | Set unilaterally its own dealer spread, quote increment or quantity of shares for its quotations, or set any relationship between or among its dealer spread, inside spread, or the size of any quote increment, in any security |
| Communicate to explore a trade | Communicate its own bid or ask, or the prices at or the quantity of shares in which it is willing to buy or sell any security, to any person for the purpose of exploring the possibility of a purchase or sale of that security, and negotiate for or agree to it |
| Communicate to retain or be retained as agent | Communicate its own bid or ask, or the price at or the quantity of shares in which it is willing to buy or sell any security, to any person for the purpose of retaining that person as an agent or subagent for the member or for a customer of the member, or for the purpose of seeking to be retained as an agent or subagent, and negotiate for or agree to the purchase or sale |
| Underwrite | Engage in any underwriting, or any syndicate for the underwriting, of securities to the extent permitted by the federal securities laws |
| Choose its market makers and terms | Take any unilateral action or make any unilateral decision regarding the market makers with which it will trade and the terms on which it will trade, unless that action is prohibited by the rule's own prohibitions |
| Route an order | Deliver an order to another member for handling |
Exam Tip: Gotchas
- This paragraph is not a general immunity. It shelters the seven listed freedoms only, only where the conduct is otherwise in compliance with all applicable law, and only as relief from the rule respecting coordination.
- The market-maker choice freedom carries its own trapdoor. It is preserved unless the action is prohibited by the rule's own prohibitions, so a refusal to trade that retaliates against a competitor is still inside them.
- The word unilaterally is doing work in the first two freedoms. A member setting its own quotation alone is protected; two members setting theirs together are describing the coordination prohibition.
- The underwriting freedom is bounded by the federal securities laws. It runs to the extent those laws permit, rather than without limit.
What Should You Check on Exam Day?
- Ask whether the member acted unilaterally or with another firm. Unilateral pricing is preserved; coordinated pricing is prohibited.
- Check whether the target was another member, an associated person, or any other person; two of the three prohibitions reach all three.
- Treat a request to move a quotation the same as a direction, because both words appear in the rule.
- Before relying on a preserved freedom, confirm the conduct is otherwise in compliance with all applicable law.
- On a refusal to trade, ask whether it retaliates against or discourages a competitor's activities.