Members Urged To Ensure Timely, Accurate, And Complete Trading Data Submissions

Executive Summary

Schedule D and Schedule H of the NASD By-Laws require members to respond to regulatory requests for trading data by using a standardized automated format. In Notice to Members 93-26 (April 1993), members were urged to take immediate action to ensure the timeliness, accuracy, and completeness of trading data submitted through the NASD electronic blue-sheet system in response to regulatory requests. This Notice seeks to clarify and reinforce members' responsibilities for the timely, accurate, and complete electronic submission of trading data, and to advise members that continued failure to do so could result in disciplinary action. This reporting obligation extends to all requests for trading data, including those initiated by the NASD district offices, and its Market Surveillance and Enforcement Departments.

Background

Since February 12, 1989, Part V, Section 4 of Schedule D and Section 3 of Schedule H to the NASD By-Laws have required members to submit trading data to the NASD in a standardized, automated format when responding to NASD regulatory requests. The NASD employs the same automated format developed jointly with the New York Stock Exchange (NYSE), the Securities Industry Association (SIA), and the Securities and Exchange Commission (SEC).

Member Responsibilities

As previously stated in NASD Notices to Members 88-104, 89-17, 89-70, and 93-26, it is the responsibility of both the submitting firm and the introducing firm to ensure that timely, accurate, and complete trading data are submitted to the NASD, including those required by the district offices, Market Surveillance Department, and Enforcement Department. Although a clearing firm may submit blue-sheet data for an introducing firm, there is a shared responsibility for the complete and accurate submission of trading data that lies with both the introducing firm and the clearing firm.¹ Likewise, member firms using service bureaus are responsible for submissions made for them by the service bureau with regard to timely, accurate, and complete automated trading data. Simply stated, members cannot avoid their regulatory and compliance obligations because another entity is making the data transmission for them.

Complete, accurate, and timely trading data properly formatted are crucial to the NASD investigative process. Continued failure to meet these requirements may result in disciplinary action by the District Business Conduct or Market Surveillance Committees.

Exemptions

While it is possible for a member to petition the NASD for an exemption from filing in the standardized, automated format, approvals are given on a very limited case-by-case basis. In considering such exemptions, the NASD reviews the nature of the firm requesting the exemption, including but not limited to, its back-office capabilities, the scope, complexity, and nature of the information requested and the number of requests for information the firm routinely receives. The submission of manually executed trading data without prior written exemption is contrary to NASD rules and therefore will not be accepted and may lead to the initiation of disciplinary action.

Questions regarding NASD procedures and requirements for submitting automated trading data including requests for exemptions should be directed to Cindy Foster, Systems Administrator, NASD Market Surveillance, 9513 Key West Avenue, Rockville, Maryland 20850, (301) 590-6544.

¹ Notwithstanding the fact that an introducing firm is not always notified of a blue-sheet request to its clearing firm for the trading records of the introducing firm, the introducing firm has the ultimate responsibility for the timely, accurate, and complete submission of the response. Accordingly, the NASD will notify the introducing firm of any problems it has in receiving data from the clearing firm and expects that the introducing firm will take the necessary steps to ensure that the data are submitted in the proper manner.