FINRA Guidance on OATS Order Trade Matching Obligations for Orders Matched as Agent by a Member, including an ECN or ATS

FINRA is issuing this OATS Report to describe members’ OATS Order Trade Matching (OTM) obligations for orders matched as agent by a Member, including an ECN or ATS.  The guidance contained in this OATS Report supersedes any previously published guidance related to OATS OTM requirements for orders matched as agent by a Member, including an ECN or ATS, and becomes effective upon the implementation date of the OATS expansion to all Reg NMS stocks.

As described in Section 6.5 of the OATS Reporting Technical Specifications, OATS must be able to link OATS Execution Reports with the related trade report submitted by a Member to a FINRA transaction reporting system, including the FINRA/NASDAQ Trade Reporting Facility (TRF), the FINRA/NYSE TRF and the OTC Reporting Facility. OATS uses, among other data elements, the Branch Sequence Number (BR/SEQ#) included on both the OATS Execution Report and the FINRA trade report to link the two reports together.

When member firms match orders on an agency basis, there may be one or more related trade reports to a FINRA transaction reporting system depending on the reporting methodology followed by a Member.  FINRA transaction reporting requirements applicable to orders matched as agent by a Member, including an ECN or ATS, are described in Sections 306, 307 and 308 of FINRA’s Trade Reporting Frequently Asked Questions (FAQ). Given there are several alternatives that a Member may follow to satisfy its trade reporting obligations with respect to matched orders, FINRA is prescribing the specific OATS Order Trade Matching requirements for each alternative to ensure members match OATS Execution Reports to the related trade report in a consistent manner. The goal of FINRA’s guidance is to ensure the sell side of a trade report(s) links to the seller’s order(s) and the buy side of a trade report(s) links to the buyer’s order(s).  Outlined below are the specific matching requirements for each of the trade reporting alternatives in FINRA’s Trade Reporting FAQ:

Scenario 1

Member BD1 matches as agent a customer (as defined in NASD Rule 0120(g)) buy order and a customer sell order for the same quantity of shares at the same price.


Member BD1’s OATS reporting obligations would be as follows:

Customer Sell Order

  1. New Order Report reflecting an order to sell 1,000 shares of ABCD at $10 received from a customer
  2. Execution Report containing the BR/SEQ# SSSS78961

Customer Buy Order

  1. New Order Report reflecting an order to buy 1,000 shares of ABCD at $10 received from a customer
  2. Execution Report containing the BR/SEQ# BBBB1234

Member BD1’s trade reporting obligations would be as follows:

Tape Report:  BD1 (as agent) reports a cross.  Option 1 – The BR/SEQ# must be populated with SSSS7896 and the Contra BR/SEQ# must be populated with BBBB1234.  Option 2 - The BR/SEQ# must be populated with BBBB1234 and the Contra BR/SEQ# must be populated with SSSS7896.    NOTE:  If the sell order is a short sale, the sell order’s BR/SEQ# (SSSS7896) must appear on the side of the trade report that was marked short.  If upon submission of the trade report, the firm does not specifically designate that the short seller is on either the Executing Side or the Contra Side, then the firm must use Option 1.

Scenario 2

Member BD1 matches as agent the orders of multiple customers on one side with the orders of one or more customers on the other side. For example, in a single execution BD1 matches as agent a customer buy order for 100,000 shares with three customer sell orders for 50,000 shares, 20,000 shares and 30,000 shares.


Member BD1’s OATS reporting obligations would be as follows:

Customer Sell Orders

  1. New Order Report reflecting an order to sell 50,000 shares of ABCD at $10 received from a customer
  2. Execution Report containing the BR/SEQ# SSSS7896
  3. New Order Report reflecting an order to sell 20,000 shares of ABCD at $10 received from a customer
  4. Execution Report containing the BR/SEQ# SSSS7896
  5. New Order Report reflecting an order to sell 30,000 shares of ABCD at $10 received from a customer
  6. Execution Report containing the BR/SEQ# SSSS7896

    Note:  The BR/SEQ# is the same for all three sell orders.  If there are multiple orders on the same side of a single matched execution (e.g., in this example, there are 3 sell orders in this single matched execution), then all of the orders on the same side must have the same BR/SEQ#.

Customer Buy Order

  1. New Order Report reflecting an order to buy 100,000 of ABCD at $10 received from a customer
  2. Execution Report containing the BR/SEQ# BBBB1234

Member BD1’s trade reporting obligations would be as follows:

Tape Report:  BD1 (as agent) reports a cross.  Option 1 – The BR/SEQ# must be populated with SSSS7896 and the Contra BR/SEQ# must be populated with BBBB1234.  Option 2 - The BR/SEQ# must be populated with BBBB1234 and the Contra BR/SEQ# must be populated with SSSS7896.    NOTE:  If the sell order is a short sale, the sell order’s BR/SEQ# (SSSS7896) must appear on the side of the trade report that was marked short.  If upon submission of the trade report, the firm does not specifically designate that the short seller is on either the Executing Side or the Contra Side, then the firm must use Option 1.

Scenario 3

Member BD1 matches as agent a buy order from member BD2 and a sell order for the same quantity of shares at the same price from a customer. 
 
Member BD1’s OATS reporting obligations would be as follows:

Customer Sell Order

  1. New Order Report reflecting an order to sell 1,000 shares of ABCD at $10 received from a customer
  2. Execution Report containing the BR/SEQ# SSSS7896

Buy Order from BD2

  1. New Order Report reflecting an order to buy 1,000 shares of ABCD at $10 received from BD2
  2. Execution Report containing the BR/SEQ# BBBB1234

Member BD1’s trade reporting obligations would be as follows:

Alternative #1

Tape Report:  BD1 (as agent) reports a cross.  Option 1 – The BR/SEQ# must be populated with SSSS7896 and the Contra BR/SEQ# must be populated with BBBB1234.  Option 2 - The BR/SEQ# must be populated with BBBB1234 and the Contra BR/SEQ# must be populated with SSSS7896.    NOTE:  If the sell order is a short sale, the sell order’s BR/SEQ# (SSSS7896) must appear on the side of the trade report that was marked short.  If upon submission of the trade report, the firm does not specifically designate that the short seller is on either the Executing Side or the Contra Side, then the firm must use Option 1.
 
Non-tape report: BD1 (as agent) sells to BD2.  The BR/SEQ# must be populated with SSSS7896 and the Contra BR/SEQ# must be populated with BBBB1234.

Alternative #2

Tape report: BD1 (as agent) sells to BD2.  The BR/SEQ# must be populated with SSSS7896 and the Contra BR/SEQ# must be populated with BBBB1234.

Non-tape report: Not required

Alternative #3
 
Tape report: BD1 (as agent) buys from customer (blank contra or other way to indicate a trade with a customer).  The BR/SEQ# must be populated BBBB1234 and the Contra BR/SEQ# must be populated with SSSS7896.

Non-tape report: BD1 (as agent) sells to BD2.  The BR/SEQ# must be populated with SSSS7896 and the Contra BR/SEQ# must be populated with BBBB1234.


Scenario 4

Member BD1 matches as agent a buy order from member BD2 and a sell order for the same quantity of shares at the same price from member BD3.


Member BD1’s OATS reporting obligations would be as follows:

Buy Order from BD2

  1. New Order Report reflecting an order to buy 1,000 shares of ABCD at $10 received from BD2
  2. Execution Report containing the BR/SEQ# BBBB1234

Sell Order from BD3

  1. New Order Report reflecting an order to sell 1,000 shares of ABCD at $10 received from BD3
  2. Execution Report containing the BR/SEQ# SSSS7896

Member BD1’s trade reporting obligations would be as follows:

Alternative #1
 
Tape Report:  BD1 (as agent) reports a cross.  Option 1 – The BR/SEQ# must be populated with SSSS7896 and the Contra BR/SEQ# must be populated with BBBB1234.  Option 2 - The BR/SEQ# must be populated with BBBB1234 and the Contra BR/SEQ# must be populated with SSSS7896.    NOTE:  If the sell order is a short sale, the sell order’s BR/SEQ# (SSSS7896) must appear on the side of the trade report that was marked short.  If upon submission of the trade report, the firm does not specifically designate that the short seller is on either the Executing Side or the Contra Side, then the firm must use Option 1.

Non-tape report #1: BD1 (as agent) buys from BD3. The BR/SEQ# must be populated with BBBB1234 and the Contra BR/SEQ# must be populated with SSSS7896.

Non-tape report #2: BD1 (as agent) sells to BD2.  The BR/SEQ# must be populated with SSSS7896 and the Contra BR/SEQ# must be populated with BBBB1234.

Alternative #2
 
Tape report: BD1 (as agent) buys from BD3.  The BR/SEQ# must be populated with BBBB1234 and the Contra BR/SEQ# must be populated with SSSS7896.

Non-tape report: BD1 (as agent) sells to BD2.  The BR/SEQ# must be populated with SSSS7896 and the Contra BR/SEQ# must be populated with BBBB1234.

Alternative #3
 
Tape report: BD1 (as agent) sells to BD2.  The BR/SEQ# must be populated with SSSS7896 and the Contra BR/SEQ# must be populated with BBBB1234.

Non-tape report: BD1 (as agent) buys from BD3.  The BR/SEQ# must be populated with BBBB1234 and the Contra BR/SEQ# must be populated with SSSS7896.

Should you have additional questions regarding this article or OATS in general, please contact the OATS helpdesk at 1-800-321-6273.


 

1 Any order executed in full on the same day as receipt may also be reported to OATS using a Combined Order/Execution Report.