OATS for all NMS Stocks FAQ

1. The OATS expansion to all NMS stocks includes a narrower definition of the Account Type Code field. Specifically, the Account Type Code field will now be restricted to the type of beneficial owner of the account for which an order was placed, while information about whether an order was received from another broker dealer will be captured in a separate field. For orders received from another broker dealer, is there now an obligation to determine the type of beneficial owner of the account with respect to the sending broker’s order?

The changes to the OATS Account Type Code field do not impose any new obligation on members to capture the type of beneficial owner of an account for orders received from another broker dealer. If a receiving member does, however, know the type of beneficial owner of an account for an order received from another broker dealer, the receiving member is required to report that information to OATS in the Account Type Code field. Otherwise, the member may populate the field with a “U” for Unknown. An Account Type Code value of “U” is not acceptable for orders received from a customer of the firm or originated by a proprietary account of the firm. Members may refer to the OATS Report entitled Validation of Order Origin Code and Account Type Code for a more detailed explanation of the allowable values with respect to Account Type Code.

2. What is the definition of institution for purposes of the new Account Type Code value of “A” Institution?

For purposes of the OATS Account Type Code, “institution” has the same meaning as the term “institutional account,” as defined in NASD Rule 3110(c)(4).1

3. Does the change expanding all OATS timestamps to include milliseconds require members to start recording all order event timestamps in milliseconds?

Members are not required to change their recording timestamps to milliseconds. Event times must be reported to OATS in milliseconds only if those times are captured by the member in milliseconds. Members should, however, note that all OATS timestamp fields have been expanded to Numeric (17) and must be in the format YYYYMMDDHHMMSSCCC. If milliseconds are not captured by the firm, then the millisecond portion of the timestamp must be populated with zeroes.

4. Although OATS is expanding the execution timestamp to include milliseconds, not all FINRA transaction reporting systems, such as the FINRA/Nasdaq Trade Reporting Facility (TRF), include milliseconds in the execution timestamp field. How will this impact Order Trading Matching?

OATS will truncate the OATS execution timestamp down to the second when comparing to the related TRF transaction report for purposes of Order Trading Matching. For example, if the OATS execution timestamp is 11:15:33.756, OATS will use the timestamp of 11:15:33 when comparing to the execution timestamp on the related TRF transaction report.

5. The May 3, 2011 OATS Reporting Technical Specifications state that syntax and semantic rejections will be made available within four hours of receipt. How will OATS notify reporting members when all syntax and semantic rejection processing is complete for a particular processing day?

As noted, OATS will make syntax and semantics rejections available to reporting members within four hours of submission. OATS will begin processing context rejections upon the completion of all syntax and semantics validations. As such, firms will know upon publication of context rejections that syntax and semantic rejection processing for a particular day is complete.

6. If an NMS stock is also listed on a foreign exchange, are orders routed to and executed on a foreign exchange required to be reported to OATS?

Yes. Just as with NASDAQ listed securities, orders involving any security that meets the definition of an NMS stock pursuant to SEC Rule 600 must be reported to OATS, regardless of where the order is ultimately executed.

7. What account type code should be used if the beneficial owner of an account for which an order is received is an employee but the account also meets the definition of an institutional account?

If an order is placed by an employee of the firm and the account also meets the definition of an institutional account according to NASD Rule 3110(c)(4), then the firm must use the Account Type Code of (“E”) on the related OATS Report to identify that the beneficial owner of the account is an employee of the firm.

8. The latest OATS Reporting Technical Specifications state that the Order Received Date field must now be identical to the date portion of the Order Received Timestamp. What date should be reported in the Order Recevied Date field if an order is captured by a firm on one day, but not released to the firm’s trading systems for handling and execution until the next day, such as an order from an international customer?

The OATS Order Received Timestamp must be the same time the firm records to satisfy its SEC Rule 17a-3(a)(6) recording obligation with respect to that order. As such, the OATS Order Received Date field must also be identical to the date portion of the timestamp used to satisfy SEC Rule 17a-3(a)(6).

9. NASD Notice to Members 04-46 states that combined order reports must be used for all orders routed or executed in full on the same day as receipt. Will use of combined reports still be mandatory once the rule changes expanding OATS reporting requirements to all NMS stocks become effective?

No. As part of the OATS for NMS release, FINRA will no longer require firms to use combined order reports. For instance, information currently required to be reported on a Combined Order/Route Report may be reported with separate New Order and Route Reports. However, the combined order reports will remain an acceptable submission option. This FAQ supersedes the guidance provided in Notice to Members 04-46.

10. The OATS Member Type Code and Destination Code fields have a value to designate an affiliate. How should members determine who is an “affiliate” for these purposes?

For purposes of the OATS Member Type Code and Destination Code, an “affiliate” of the member would include a person or entity that (i) directly or indirectly controls the member, (ii) is controlled by the member, or (iii) is under common control with the member. Employees of the member would not be considered “affiliates” for purposes of these Codes.

11. How should orders sent to a Floor Broker on the New York Stock Exchange be reported to OATS?

Floor Brokers receive orders from: (1) FINRA members that are not members of NYSE; (2) FINRA members that are also NYSE members, and (3) customers that are not members of FINRA or NYSE. The OATS reporting requirements for orders directed to a Floor Broker on the New York Stock Exchange (NYSE) depend on the parties involved and how the order is communicated to the Floor Broker. Outlined below are the reporting requirements for each order routing scenario involving FINRA/non NYSE members, joint FINRA/NYSE members and customers.

Scenario #1 – Orders sent to an NYSE Floor Broker by a FINRA member that is not an NYSE member firm.

If an order is originated by a FINRA member that is not a NYSE member and sent to a NYSE Floor Broker, either electronically or manually, the OATS reporting requirements are as follows:

  • FINRA, non-NYSE Member OATS Reporting Obligations
    The FINRA member must submit to OATS a New Order and Route to the Floor Broker. On the Route Report to the Floor Broker, the FINRA member should populate the Destination Code as “Member” and the Sent To MPID with the NYSE Floor Broker’s FINRA MPID. Note: A routed order ID is required if the order is electronically transmitted to the Floor Broker. If the order is communicated to the floor broker “manually”, such as calling down to the booth, no routed order ID is required.
  • Floor Broker OATS Reporting Obligations
    The Floor Broker must submit to OATS a New Order and Route to the NYSE. On the New Order Report, the Floor Broker should populate the Order Receiving Firm MPID with the NYSE Floor Broker’s FINRA MPID and the Routing Firm MPID with the FINRA, non-NYSE Member’s MPID. The Order Receipt Time on the Floor Broker’s New Order Report should be populated with the time the order was first received from the Floor Broker by the FINRA, non-NYSE member and the Sent To Timestamp on the Route Report should be populated with the time the Floor Broker entered the order into an NYSE system.

Scenario #2 – Orders directed to a Floor Broker by a joint FINRA/NYSE member via an NYSE system.

If an order is originated by a FINRA member that is also an NYSE member and sent to a Floor Broker via an NYSE system, the OATS reporting requirements are as follows:

  • Joint FINRA/NYSE Member OATS Reporting Obligations
    The joint member must submit to OATS a New Order and Route to the NYSE. On the Route Report to the NYSE, the joint member should populate the Destination Code as “XN” and the Routed Order ID field with the BR/SEQ sent to NYSE.

    Note: The NYSE will require Floor Brokers to capture the FINRA MPID of the sending firm for any order received from a FINRA member.
  • Floor Broker
    No OATS reporting

Scenario #3 – Orders phoned to a Floor Broker at the booth by a joint FINRA/NYSE member.

  • Joint FINRA/NYSE Member
    The joint member must submit to OATS a New Order and Route directly to the Floor Broker. The joint member should populate the Destination Code on the Route Report as “Member” and the Sent To MPID with the NYSE Floor Broker’s FINRA MPID.

    A routed order ID would not be required to be passed from the joint member calling the order down to the Floor Broker since this is a manual route.
  • Floor Broker
    The Floor Broker must submit to OATS a New Order and Route to the NYSE. On the New Order Report, the Floor Broker should populate the Order Receiving Firm MPID with the NYSE Floor Broker’s FINRA MPID and the Routing Firm MPID with the joint member’s FINRA MPID.

Scenario #4 – Order sent to Floor Broker by a customer (not a FINRA or NYSE member).

  • Customer
    No OATS reporting
  • Floor Broker OATS Reporting Obligations
    The Floor Broker must submit to OATS a New Order and Route to the NYSE. On the New Order Report, the Floor Broker should populate the Order Receiving Firm MPID with the NYSE Floor Broker’s FINRA MPID and the Routing Firm MPID should be blank.

Scenario #5 – Orders phoned by a joint FINRA/NYSE member from an upstairs desk to its own Floor Broker at the booth.

  • Option 1 – The upstairs desk and the Floor Broker use different FINRA MPIDs
    The joint member must submit to OATS under the MPID used by the upstairs desk a New Order and Route directly to the Floor Broker. The joint member should populate the Destination Code on the Route Report as “Member” and the Sent To MPID with the FINRA MPID used by the Floor Broker.

    A routed order ID would not be required to be passed from the upstairs desk calling the order down to the Floor Broker since this is a manual route.

    The Floor Broker must submit to OATS under the FINRA MPID used by the Floor Broker a New Order and Route to the NYSE. On the New Order Report, the Floor Broker should populate the Order Receiving Firm MPID with the FINRA MPID used by the Floor Broker and the Routing Firm MPID with the FINRA MPID used by the upstairs desk.
  • Option 2 – The upstairs desk and the Floor Broker use the same FINRA MPID
    The joint member must submit to OATS a New Order and Desk Report to reflect the movement of the order from the upstairs desk to the Floor Broker (since the order has been transmitted to a different desk or department within the same member). The joint member would also submit a Route Report to NYSE reflecting the entry of the order by the Floor Broker into the exchange.

    A routed order ID would not be required to be passed on the Route Report to NYSE since this is a manual route.

12. What is the purpose of the new Information Barrier ID field and how should it be used?

FINRA has introduced a new Information Barrier ID field that will allow firms to uniquely identify each information barrier on an order-by-order basis that meets the criteria of the “no-knowledge” exception for certain proprietary trading activity under FINRA Rule 5320. By identifying specific information barriers that are in place with respect to individual orders, both customer and proprietary, firms will provide FINRA with this information that can then be used when conducting reviews of members’ compliance with FINRA Rule 5320. Specifically, on all “new” type order events for orders received or originated at a desk or department with an information barrier in place, firms may populate the Information Barrier ID with the value assigned by the firm to the specific information barrier. The use of this field allows each customer and proprietary order to be identified with a particular information barrier.

For example, if a firm has two or more separate desks or departments that share a single information barrier, orders received or originated at these separate desks or departments may be reported to OATS with the same unique Information Barrier ID. If, alternatively, a firm has separate desks or departments that are not within the same information barrier, orders received or originated at these desks or departments would be reported to OATS with different Information Barrier IDs. Finally, if an order is received or originated within a firm that has no information barriers in place, those orders must be reported to OATS with the Information Barrier ID field left blank. To the extent that firms populate the Information Barrier ID field, the use of values must remain consistent. Therefore, once used, a value may not be reassigned to identify a different information barrier.

Reporting Scenarios

Scenario #1 – Desks or Departments Sharing an Information Barrier

  • Example: Firm A has a customer facing desk (Desk 1) and a proprietary desk (Desk 2) within the same information barrier that the firm has named “AB12”. Desk 1 receives an order from a customer and Desk 2 originates a proprietary order. The OATS reporting would be as follows:
    Desk 1: NW from customer Information Barrier ID: AB12
    Desk 2: NW proprietary order Information Barrier ID: AB12

Scenario #2 – Desks or Departments Separated by Information Barriers

  • Example: Firm A has a customer facing desk (Desk 1) that is within an information barrier the firm has named “U89T” and a proprietary desk (Desk 2) that is within an information barrier the firm has named “4RYH”. Desk 1 receives an order from a customer and Desk 2 originates a proprietary order. The OATS reporting would be as follows:
     
    Desk 1: NW from customer Information Barrier ID: U89T
    Desk 2: NW proprietary order Information Barrier ID: 4RYH

Scenario #3 – Desks or Departments with No Information Barriers Example:

  • Example: Firm A has a customer facing desk (Desk 1) and a proprietary desk (Desk 2), neither of which have information barriers in place. Desk 1 receives an order from a customer and Desk 2 originates a proprietary order. The OATS reporting would be as follows:
     
    Desk 1: NW from customer Information Barrier ID: Blank
    Desk 2: NW proprietary order Information Barrier ID: Blank

13. Should baskets submitted to NYSE’s Crossing Session II be reported to OATS as a Route Report or an Execution Report?

Members that have either facilitated a basket trade or crossed two customers’ baskets and submitted the information to NYSE’s Crossing Session II, should report these transactions to OATS as an Execution Report. The time of execution reported to OATS should be the time the member crossed or facilitated the basket and not the acknowledgment time received back from NYSE. Further, the Execution Report must contain the Market Center ID of “N” to designate the New York Stock Exchange and the Branch/Sequence Number should be populated with “NYSE CS2” to denote the transaction was reported to the Crossing Session II.

14. If my firm receives an order before October 17, 2011 in a security that was not subject to OATS requirements at the time of receipt, are any events taking place on or after October 17, 2011 with respect to that order reportable to OATS?
No. Orders received or originated prior to October 17, 2011 in securities that were not subject to the OATS Rules until October 17, 2011 are not required to be reported to OATS. Further, subsequent order events occurring on or after October 17, 2011 relating to such orders also are not required to be reported to OATS. Firms should note that any such subsequent events (Desk, Route, Execution, Cancel/Replace or Cancel Reports) submitted to OATS will be rejected. These rejections are not required to be repaired, but will appear in the daily OATS Statistics posted to the OATS web site.

15. How should the Account Type Code be populated for orders received from an Investment Advisor or money manager exercising discretion over client accounts? Should the Account Type Code represent the status of the IA/money manager or the status of the IA/money manager’s client accounts?

For purposes of OATS, the Account Type Code should always reflect the status of the entity exercising discretion. For example, an order received from an Investment Advisor that meets the definition of institution (as defined in NASD Rule 3110(c)(4))2 exercising discretion over client accounts (which could include both individual and institutional clients), should be reported to OATS with an Account Type Code of “A” (Institution) to reflect the status of the Investment Advisor. As described in OATS FAQ C70, any post trade allocations made by the Investment Advisor to its client accounts are not reportable to OATS.

16. My firm provides market access to customers that are not broker/dealers. When reporting these orders to OATS, what value should be populated in the Receiving Department ID?

Firms providing market access to non-broker/dealer customers must populate the Receiving Department ID field with the value of “A” (Agent). The value of Market Access “MA” is only used for market access orders involving another broker-dealer.

17. The New York Stock Exchange LLC (“NYSE”) and NYSE MKT, LLC (together with NYSE, the “Exchange”) are eliminating certain Account Type Indicator (“ATI”) values (see NYSE Information Memo 16-2). Will this impact the values that need to be reported to OATS in the Account Type Code field?

No. The Exchange ATI values are separate and distinct from the OATS Account Type Code values. The ATI values required to be submitted to the Exchange primarily are used to identify whether an Exchange member is entering an order into Exchange systems for its account or the account of some other entity, while the OATS Account Type Code values are used to identify the type of account originating an order. OATS captures capacity and information about program trades and index arbitrage trades in fields separate and distinct from the Account Type Code. Consequently, the Exchanges’ changes to ATI values will have no impact on member firms population of the Account Type Code in OATS.

To assist members, FINRA is providing the below chart that reflects the most common combinations of Exchange ATIs and OATS Account Type Codes.

Capacity of Member OATS Exchange
Member Firm routing to the Exchange for the account of the member Account Type Code: “O”, “P”, or “X” and Order Origination Code: “F” ATI: "P", “Q” or “R”
Member Firm acting as agent on behalf of its own customer Account Type Code: “I”, “A”, “C”, or “E” and Order Origination Code: “F” ATI: "A"
Member Firm acting as agent for the customer of another Broker/Dealer Account Type Code: “I”, “A”, “C”, “E”, or “U” and Order Origination Code: “W” ATI: "A"
Member Firm acting as agent for the proprietary account of another Broker/Dealer Account Type Code: “O”, “P” or “U” and Order Origination Code : “W” ATI: "A"

1 Members should note that the SEC has approved a rule change that, among other things, will move the definition of “institutional account” in NASD Rule 3110(c)(4) to FINRA Rule 4512(c).

2 NASD Rule 3110(c)(4) is becoming FINRA Rule 4512(c).