As of October 17, FINRA’s new requirements for the Order Audit Trail System (OATS) are live — is your firm ready for these regulatory compliance changes?
Prior to the updates, the OATS recordkeeping and reporting requirements in FINRA Rules 7410 through 7470 only applied to orders for equity securities listed on the NASDAQ Stock Market and OTC equity securities. But now, FINRA is phasing in an expansion so that OATS Rules apply to orders for NMS stocks, as defined in Regulation NMS Rule 600(b)(47), including those listed on markets other than NASDAQ.
To date, FINRA is implementing the OATS Rule expansion to all NMS stocks in three phases based on the security’s symbol. Key changes include:
- Creating standard values for Receiving and Originating Department ID fields.
- Adding a new Order Origination Code.
- Eliminating the Received By Desk ID.
- Aligning the OATS Account Type Code with the NYSE Account Type Indicators.
- Creating a new Exchange Participant ID field on all Route Reports identifying routes to a national securities exchange.
- Generally requiring each reporting MPID to use unique Routed Order IDs and Branch/ Sequence Numbers each day.
- Reducing the allowable clock drift from three seconds to one second, and requiring timestamps to be reported to OATS in milliseconds if the firm captures the time in milliseconds.
Many of our clients have been working closely with their technology partners to test the regulatory compliance changes prior to implementation, but this initial work is not enough. Without a consolidated industry testing process, testing every possible scenario before implementation was impossible, so firms should carefully review their OATS reports over the next six weeks to ensure they are complete and accurate. Pay special attention to the new destination codes and account type code fields to make sure you report them accurately.
As you work to ensure a smooth OATS implementation, now is the time to review your written procedures related to trade reporting to make sure they are in synch with regulatory requirements and your business practices. Oyster is fortunate to have key resources to help firms evaluate their trade reporting platforms and practices — if you have any questions about trade reporting or Oyster Consulting, call me at 804.965.5403. I might not always be by my phone, but I will always call you back.