IDSX Broker Rules

1.1 Purpose

These Broker Rules establish the requirements applicable to any person or entity admitted by IDSX (the Exchange) to act as a Broker in connection with securities or other financial products admitted to trading on IDSX. The purpose of these Rules is to ensure that Brokers:

• act fairly, honestly and professionally in dealings with Clients;
• maintain appropriate regulatory authorisations, systems, controls and financial resources;
• perform appropriate customer identification and due diligence;
• ensure orders submitted to IDSX originate from properly authorised and identifiable Clients;
• maintain appropriate controls over Client accounts, wallets and assets;
• prevent unauthorised, abusive or manipulative activity;
• maintain accurate books and records; and
• cooperate with IDSX in relation to market supervision, compliance and regulatory matters.

1.2 Application

These Rules apply to every Broker admitted or recognised by IDSX. A Broker must comply with these Broker Rules, the IDSX General Rules, IDSX Trading Rules, IDSX Market Conduct Rules, applicable settlement, custody and wallet requirements, applicable product-specific rules, IDSX notices, procedures, technical specifications and directions, and all Applicable Laws. Where these Rules conflict with Applicable Law, Applicable Law prevails.

2.1 Broker

A Broker is an entity approved by IDSX to provide services to Clients in connection with financial products traded or capable of being traded through IDSX. Subject to its regulatory permissions and IDSX approval, a Broker may:

• open and maintain Client accounts;
• perform Client onboarding and identity verification;
• receive instructions and orders from Clients;
• transmit or route Client orders to a Trading Participant;
• where separately admitted as a Trading Participant, submit Client orders directly to the IDSX trading system;
• provide Client-facing trading technology;
• arrange settlement or custody services;
• provide statements, confirmations and transaction information to Clients; and
• provide other services approved by IDSX.

2.2 Broker Status Does Not Automatically Confer Trading Access

Admission as a Broker does not automatically confer direct access to the IDSX trading system. A Broker wishing to enter orders directly into the IDSX market must separately satisfy the requirements applicable to a Trading Participant unless IDSX expressly determines otherwise. A Broker that is not itself a Trading Participant must route orders through an approved Trading Participant.

2.3 Separate Regulatory Status

Recognition or admission as a IDSX Broker does not constitute a governmental or regulatory licence, authorisation to provide financial advice, authority to hold Client Money or Client Assets, authority to provide custody services, or authorisation to conduct business in any jurisdiction. Each Broker remains responsible for determining and maintaining every licence, registration, exemption, consent and regulatory permission required for its activities.

3.1 General Eligibility

An applicant seeking admission as a Broker must satisfy IDSX that it:

• is duly incorporated or otherwise legally established and is of good standing in its jurisdiction of establishment;
• has an appropriate ownership and governance structure;
• has adequate operational, compliance and technical capabilities;
• has sufficient financial resources for its proposed activities;
• maintains effective internal controls and appropriate AML/CFT and sanctions compliance arrangements;
• maintains appropriate cybersecurity and data protection controls;
• has suitably qualified personnel; and
• is fit and proper to participate in the IDSX ecosystem.

3.2 Regulatory Authorisation

A Broker must hold all registrations, licences, permissions or exemptions required in the jurisdictions in which it operates or provides services. IDSX may require evidence of such regulatory status at any time. Where a Broker relies upon an exemption, IDSX may require a legal opinion, written confirmation from professional advisers, evidence supporting the exemption, or any other information IDSX reasonably considers necessary.

3.3 Overseas Brokers

IDSX may admit a Broker incorporated or regulated outside New Zealand. An overseas Broker must demonstrate that it is legally permitted to provide the relevant services; is subject to appropriate regulatory or professional standards where applicable; its jurisdiction is acceptable to IDSX from an AML/CFT, sanctions and market integrity perspective; IDSX can obtain information reasonably required for supervision; and no legal restriction would materially prevent compliance with IDSX Rules. IDSX may impose additional conditions on an overseas Broker.

4.1 Client Identification

A Broker must establish and verify the identity of each Client before permitting that Client to submit orders or acquire securities through IDSX. It must maintain sufficient information to identify the Client and, where applicable, the ultimate beneficial owner.

4.2 Individual Clients

For an individual Client, the Broker must obtain information reasonably sufficient to establish:

• legal name and date of birth;
• nationality or citizenship, where relevant;
• residential address and tax residency, where applicable;
• identification documentation and contact information;
• beneficial ownership where the account is operated for another person; and
• other information required under Applicable Law or IDSX requirements.

4.3 Entity Clients

For an entity Client, the Broker must obtain information reasonably sufficient to establish:

• legal name, jurisdiction and legal form;
• registration or incorporation details;
• registered office or principal place of business;
• directors or equivalent controlling persons and authorised account operators;
• ownership and control structure and ultimate beneficial owners;
• nature of business;
• source of funds or source of wealth where required; and
• other information required by Applicable Law or IDSX.

4.4 Ongoing Due Diligence

Client due diligence is not a one-time obligation. A Broker must maintain processes for keeping Client information reasonably current; reviewing higher-risk Clients; identifying material changes in ownership or control; monitoring transactions for unusual or suspicious activity; conducting sanctions screening; and taking appropriate action where Client information can no longer be verified.

5.1 Permitted Clients

A Broker must ensure that a Client is legally permitted to access the relevant product and market. It must consider, where applicable, Client jurisdiction, investor classification, age and legal capacity, product restrictions, securities offering restrictions, sanctions restrictions, transfer restrictions, and restrictions imposed by an Issuer or IDSX.

5.2 Restricted Jurisdictions

A Broker must not knowingly permit a person from a prohibited or restricted jurisdiction to access IDSX products contrary to Applicable Law or IDSX requirements. IDSX may publish or communicate a list of restricted jurisdictions from time to time.

5.3 Product Restrictions

Admission of a Client to the Broker does not automatically make the Client eligible to trade every security listed on IDSX. A Broker must enforce product-specific eligibility restrictions communicated by IDSX, the Issuer, applicable securities law, a settlement or custody provider, or another competent authority.

6.1 Unique Client Identification

Each Client must be assigned a unique identifier capable of being linked to the Client’s verified identity. Where reasonably required by IDSX, the Broker must transmit or make available sufficient Client identification information to permit IDSX to reconstruct trading activity.

6.2 No Anonymous Trading

Anonymous or fictitious Client accounts are prohibited. A Broker must not knowingly permit an unidentified beneficial owner to trade; create accounts intended to conceal Client identity; permit account sharing that obscures beneficial ownership; or structure accounts to avoid applicable compliance requirements.

6.3 Omnibus Accounts

IDSX may permit a Broker to operate an omnibus structure. The Broker must maintain complete underlying Client records and be capable of identifying the beneficial Client associated with any transaction without undue delay. IDSX may require underlying Client information at any time for market surveillance, regulatory enquiries, sanctions compliance, investigations, corporate actions, ownership limits or other legitimate market purposes.

7.1 Approved Wallets

Where securities traded on IDSX are represented, recorded or transferred using blockchain or distributed ledger technology, a Broker must ensure that Client securities are transferred only to wallets approved under the applicable IDSX wallet framework.

7.2 Wallet Verification

Before associating an external wallet with a Client account, the Broker must take reasonable steps to verify the identity of the wallet owner or controller; that the wallet is controlled by the relevant Client or approved custodian; that it is technically compatible with the relevant security; that it is not subject to applicable sanctions or restrictions; and any additional IDSX requirements.

7.3 Whitelisted Wallet Requirement

Where IDSX or the relevant security uses wallet whitelisting, securities must not be transferred to a non-whitelisted wallet. A Broker must not deliberately facilitate a mechanism designed to circumvent wallet whitelisting or investor eligibility controls.

7.4 Transfers to Third Parties

A Client must not transfer a IDSX-traded digital security merely by transferring the relevant token to an unidentified or unapproved wallet where that would bypass required investor identification, transfer restrictions or registration requirements. A Broker becoming aware of an attempted transfer must take appropriate action, which may include rejecting the transfer; freezing or restricting the relevant functionality; requesting additional identification; notifying the relevant custody or transfer agent; notifying IDSX; or taking other action required by Applicable Law.

7.5 Off-Market Transfers

Off-market transfers may occur only where permitted under IDSX Rules and the terms applicable to the security. IDSX may require an off-market transfer to be recorded in the Exchange’s systems even where no matching trade has occurred.

8.1 Authority

A Broker must have appropriate authority from a Client before submitting an order on that Client’s behalf.

8.2 Order Information

A Broker must maintain sufficient records of each Client order, including, where applicable, Client identifier, security, buy or sell direction, quantity, order type, price or pricing instruction, time of receipt and transmission, modifications, cancellations, execution details, and the identity of the person or system receiving the instruction.

8.3 Prompt Handling

Client orders must be handled fairly and promptly. A Broker must not intentionally delay a Client order to obtain an improper advantage for itself, another Client, an affiliate, an employee or a third party.

8.4 Order Priority

Where the Broker aggregates, queues or handles multiple Client orders, it must maintain fair and consistently applied order handling procedures. It must not improperly prioritise proprietary, employee or affiliated-person orders over a Client order.

9.1 Execution Arrangements

A Broker must maintain reasonable arrangements designed to achieve fair execution of Client orders, having regard to the Client, relevant security, available execution venues, price, transaction costs, liquidity, likelihood of execution and settlement, and speed and size of execution.

9.2 No Guaranteed Best Price Representation

A Broker must not represent that a Client will always receive the best available price unless it has reasonable grounds to substantiate that representation.

9.3 Order Routing

Where a Broker routes Client orders through a Trading Participant, it must select the Trading Participant using reasonable criteria; understand material routing terms; monitor service quality and reliability; disclose material conflicts where required; and remain responsible for its obligations to the Client.

9.4 Routing Payments and Incentives

Material payments, rebates, commissions or other economic incentives arising from order routing must be managed in accordance with Applicable Law and the Broker’s conflict-of-interest policies. A routing arrangement must not improperly prejudice Clients.

10.1 General Principle

A Broker may hold, receive, transfer or control Client Money or Client Assets only where legally authorised to do so.

10.2 Segregation

Where a Broker holds Client Money or Client Assets, it must maintain appropriate arrangements to distinguish Client property from its own property. It must comply with any segregation or trust arrangements required by Applicable Law.

10.3 Use of Client Assets

A Broker must not use Client Money or Client Assets for its own account, to satisfy another Client’s obligations, as security for its own obligations, or inconsistently with Client authority, unless expressly permitted by Applicable Law and agreed by the Client.

10.4 Reconciliation

A Broker holding or controlling Client Money or Client Assets must perform reconciliations at a frequency appropriate to its activities and Applicable Law. Any material discrepancy must be investigated and corrected promptly.

10.5 Third-Party Custodians

Where Client Assets are held through a third-party custodian, the Broker must undertake reasonable due diligence regarding that custodian and maintain appropriate oversight.

11.1 Disclosure

A Broker must clearly disclose material fees and charges payable by a Client, including brokerage, commissions, transaction, custody and settlement fees, blockchain or network fees, foreign exchange and account fees, and other material charges.

11.2 No Misleading Fees

A Broker must not describe a service as “free” or “zero commission” where material mandatory charges are concealed or presented misleadingly.

12.1 Conflict Management

A Broker must maintain reasonable arrangements to identify, manage and, where appropriate, disclose conflicts of interest.

12.2 Relevant Conflicts

Potential conflicts may include proprietary trading by the Broker; holdings in an Issuer; relationships with Sponsors, Underwriters or Market Makers; payment for order flow or routing incentives; employee trading; affiliated investment products; and compensation linked to particular securities or transactions.

12.3 Client Priority

A Broker must not misuse Client order information or confidential Client information for its own benefit or that of another person.

14.1 Prohibited Conduct

A Broker must not knowingly facilitate activity that constitutes or appears intended to constitute market manipulation, wash trading, matched orders intended to create a false market, spoofing, layering, marking the close, artificial price creation, a misleading appearance of trading activity, insider trading, front-running, unauthorised trading, or another abusive or disorderly trading practice.

14.2 Client Activity Monitoring

A Broker must maintain reasonable systems to identify suspicious or abnormal Client trading. Monitoring should be proportionate to the Broker’s size, Client base, trading volume, products offered and business-model risks.

14.3 Reporting to IDSX

A Broker must promptly notify IDSX of conduct that may materially affect market integrity, orderly trading, settlement, ownership or transfer of a security, or compliance with IDSX Rules or Applicable Law.

15.1 Execution Services Distinguished from Advice

IDSX approval does not authorise a Broker to provide financial advice. A Broker providing recommendations, personalised advice, portfolio management or other advisory services must ensure it has all necessary regulatory authority.

15.2 No Exchange Recommendation

A Broker must not represent that admission of a security to IDSX, acceptance of an Issuer, appointment of a Sponsor, existence of a Market Maker, or approval of a Broker constitutes an investment recommendation, guarantee or endorsement by IDSX.

17.1 Systems

A Broker must maintain technology systems reasonably appropriate for the nature and scale of its business.

17.2 Security

A Broker must maintain appropriate safeguards for account authentication, access controls, encryption, API and wallet security, key management, cybersecurity monitoring, incident response, backups and business continuity.

17.3 API Access

Where a Broker provides Client API access, algorithmic trading or automated order submission, it remains responsible for orders submitted through its systems. It must maintain appropriate risk controls to prevent erroneous, excessive or abusive order submission.

18.1 Required Records

A Broker must maintain records sufficient to reconstruct its IDSX activities, including Client identification and due diligence; account opening; wallet associations; Client orders and executions; allocations; settlement instructions; Client communications; fees; complaints; compliance reviews; suspicious activity investigations; and other records required by IDSX or Applicable Law.

18.2 Accessibility

Records must be maintained in a reasonably accessible form and capable of being provided to IDSX within the period it specifies.