Order/Trade Matching Changes for Stop Stock, PRP and ISO Exception Trades

As announced in Regulatory Notice 14-21, the SEC approved amendments to FINRA rules governing the reporting of over-the-counter ("OTC") transactions in equity securities to the FINRA Facilities1 including the reporting of an additional time field for Stop Stock transactions, as defined for purposes of the FINRA trade reporting rules, prior reference price transactions (PRP) and block transactions using the Intermarket Sweep Order (ISO) exception (outbound) under SEC Rule 611 (Order Protection Rule).

Currently, FINRA rules require that trade reports submitted to the FINRA Facilities include the time of trade execution, except where another time is expressly required by rule. Because the time of execution is one of the fields that OATS uses to link an OATS Execution Report to the related trade report submitted to a FINRA Facility, if a time other than the time of trade execution is required by FINRA rules to be reported to a FINRA Facility, this alternate time must be reported to OATS in the Execution Time field on the OATS Execution Report. FINRA rules currently require that the time at which the parties agree to the Stop Stock price be reported as the time of execution for Stop Stock transactions, and the prior reference time be reported as the time of execution for PRP transactions. Accordingly, current OATS Compliance FAQs require members to report on OATS Execution Reports for Stop Stock and PRP: 1) the time the member firm and other party agreed to the Stop Stock price in a Stop Stock transaction; and 2) the Prior Reference Price time on a PRP trade instead of the time of trade execution.

The recently approved amendments to FINRA trade reporting rules require firms to reflect two times in reports of Stop Stock transactions and PRP transactions. Specifically, firms must report (1) the time at which the parties agree to the Stop Stock price or the prior reference time (i.e., the time currently required by rule), and (2) the actual time of execution. Once the amendments become effective, firms will be required to report the time of trade execution to OATS in the Execution Time field on OATS Execution Reports instead of the time at which the parties agreed to the Stop Stock price or the prior reference time.

In addition, the amendments require firms to include two times when reporting block transactions in NMS stocks to the ADF or a TRF using the ISO exception (outbound) under the Order Protection Rule if the time the firm routed ISOs is different from the execution time. Once the amendments become effective, the time of trade execution should be reported in the Execution Time field on the OATS Execution Report for block transactions using the ISO exception (outbound) under SEC Rule 611.

The effective dates of the amendments and related OATS execution time reporting requirements for Stop Stock, PRP and ISO exception trades are as follows:

OTC Reporting Facility: November 17, 2014

Alternative Display Facility, FINRA/Nasdaq TRF and FINRA/NYSE TRF: July 13, 2015

Please contact the OATS Helpdesk at 1-800-321-6327 with any questions related to this report.

  1. Specifically, the FINRA Facilities are the Alternative Display Facility (ADF) and the Trade Reporting Facilities (TRF), to which members report OTC transactions in NMS stocks; and the OTC Reporting Facility (ORF), to which members report transactions in OTC Equity Securities, as defined in FINRA Rule 6420 (i.e., equity securities that are not NMS stocks), as well as transactions in Restricted Equity Securities, as defined in FINRA Rule 6420, effected pursuant to Securities Act Rule 144A.