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Monday, July 25, 2011

Equity Regulatory Alert #2011 - 10
OATS Rule 7410 to be Expanded to All Reg NMS Securities, Effective October 17, 2011

Markets Impacted:

Contact Information:

What you need to know:

  • Effective October 17, 2011, the Financial Industry Regulatory AuthorityTM (FINRATM) will extend the recording and reporting requirements of the Order Audit Trail System (OATS) Rules to include all Reg NMS stocks and exclude certain FINRA members from the definition of “Reporting Member.”

What has FINRA updated?

Effective October 17, 2011, FINRA OATS Rule 7450 will expand to all NMS Securities. FINRA released updated OATS Technical Specifications on May 3, 2011, which include all required changes related to the expansion.

How does this affect your obligations under the rules of NASDAQ OMX equities markets?

Currently NASDAQ Rule 6955 and BX Rule 6955 require participants to comply with FINRA Rule 7450 as if such rule were a part of the exchange’s rules, with certain reporting differences for Proprietary Trading Firms as discussed below. PSX Rule 3405 also requires order information to be submitted to FINRA’s OATS and similarly retains a reporting difference for Proprietary Trading Firms. NASDAQ OMX® markets and FINRA are parties to the Regulatory Contract pursuant to which FINRA has agreed to perform certain functions on behalf of NASDAQ OMX. Therefore, members of all NASDAQ OMX markets and associated persons must comply with the expansion of OATS to all NMS securities under FINRA Rule 7450 in order to comply with the respective market rules.

How does this new rule affect Proprietary Trading Firms?

Proprietary Trading Firms shall be required to comply with amended FINRA Rule 7450 as if such rule were part of a NASDAQ OMX exchange's rules with regards to recording and retaining OATS data, and must be able to provide the data upon request from NASDAQ OMX Regulation. As such, Proprietary Trading Firms are to modify the data recorded and retained in accordance with the new requirements under amended FINRA Rule 7450 in order to comply with market rules.

However, the reporting requirements of FINRA Rule 7450 and NASDAQ Rule 6955, BX Rule 6955 and PSX Rule 3405 are not applicable to Proprietary Trading Firms.

Where can I find additional information?


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