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89-70 Automated Submission of Trading Data

SUGGESTED ROUTING*

Senior Management
Internal Audit
Legal & Compliance
Operations
Systems
Trading

*These are suggested departments only. Others may be appropriate for your firm.

EXECUTIVE SUMMARY

As previously reported in Notice to Members 88-104 and 89-17, the NASD requires its members to respond to requests for trading data by using a standardized automated format. This format is consistent with that required by other self-regulatory organizations including the New York Stock Exchange (NYSE) and American Stock Exchange (Amex). This notice briefly addresses the various problems encountered by NASD staff with the submission of these data and reiterates several areas regarding compliance with these electronic filing requirements.

BACKGROUND AND EXPLANATION

In accordance with Part VI, Section 4 of Schedule D and Section 3 of Schedule H of the NASD's By-Laws, it is presently required that member firms submit trading data in a standardized automated format in response to an NASD request. The NASD employs the same automated format that was developed jointly by the NYSE, the Securities Industry Association (SIA), and the Securities and Exchange Commission (SEC). Members have been required to submit trading data to the NASD in this format since February 12, 1989.

To assist member firms in their compliance with this requirement, the following reporting options are currently available:

1. Joint NASD/NYSE Members — Self-Clearing — The NASD and Securities Industry Automation Corporation (SIAC) have developed a communications link that directs trading data from SIAC to the NASD Operations Center in Rock-ville, Maryland. This enables NASD/NYSE member firms to submit automated trading information to SIAC utilizing the same systems and procedures used when submitting trading information regarding securities listed on the NYSE.
2. Sole NASD Member Firms — Self-Clearing — NASD member firms that self-clear and perform internal recordkeeping through the use of an in-house, automated system may submit automated trading information via computer tape or diskette directly to the NASD Operations Center in Rockville. For these types of responses, the specifications are detailed in Notice to Members 89-17.

A label containing the requesting organization number (as assigned by NASD staff), a broker-dealer symbol, and security symbol must be placed on the tape or diskette prior to its mailing to the NASD.

3. NASD and Exchange Members That Clear on a Fully Disclosed Basis — NASD and exchange member firms that introduce their business on a fully disclosed basis should check with their respective clearing broker-dealers to ensure that the clearing firm is able to provide automated trading information to the NASD on behalf of their firms.

EXEMPTIONS

In exceptional circumstances, the NASD will grant limited exemptions from automated submissions on an "as requested" basis. In considering such exemptions, the NASD reviews the nature of the firm's business requesting the exemption, including, but not limited to, the scope, complexity, and nature of the information requested, and the number of requests for trading information that the firm routinely receives. The NASD will not accept manually executed submissions of trading data unless a prior written exemption has been granted.

CURRENT TRANSMISSION PROBLEMS

Since the commencement of the automated "blue sheet" submissions, the NASD has experienced several problems with the information submitted by member firms. In order to rectify these problems, the following areas are noted below along with the appropriate method of submission.

  • Submission of Data to SIAC — SIAC will process only trading data submitted to it between the hours of 1 a.m. and 12 noon. Trading data submitted outside this time period will be accepted by SIAC but will not be processed and transmitted to the NASD.
  • Requesting Organization Number — This number is assigned by the NASD. The NASD's letter that requests trading information identifies this number. Firms must submit the number precisely as it is reflected on the request letter. Because the requesting organization field is left justified (i.e., this field of 15 characters should be completed from left to right with all unused characters left blank), the computer will recognize all characters and spaces between and following characters as part of the requesting organization number. That makes it essential for firms to use the organization number exactly as assigned.
  • Requestor Code — For SIAC submissions, it is imperative that firms input the appropriate requestor code so that the trading data can be forwarded to the correct entity that requested the information. The requestor code for the NASD is R and must be used when submitting automated trading data to the NASD.
  • Opposing Broker Number — The opposing broker field has a length of four characters and should reflect the National Securities Clearing Corporation (NSCC) clearinghouse number or the appropriate regional clearing number of the broker on the other side of the trade. If a customer trade is executed from inventory, then the firm's own NSCC number must be reflected in this field. If a trade is executed on an agency basis, the contra broker's NSCC number then would be reflected in this field.
  • Buy/Sell Code — The buy/sell field length is one character in length. The following values represent the appropriate transaction: 0=Buy, l=Sell, 2=Short Sale, A=Buy Cancel, B=Sell Cancel, and C=Short Sale Cancel. Values 3 to 6 and D to G are for options transactions only.
  • Short Name — The short name field should contain the last name of the customer followed by a comma and then as much of the first name as the remaining field length allows. This is a field that a number of firms have neglected to submit. The field length is 20 characters, and the information is required to be submitted with the trading data.

A response is not considered to be complete unless all the required fields, as detailed in Notice to Members 89-17, have been provided in the appropriate format.

Additionally, it is important to stress that firms must respond to all requests for trading data as a singular request and not submit responses for two securities on the same tape, diskette, or SIAC transmission.

MEMBER'S RESPONSIBILITY

The NASD considers it the responsibility of the introducing firm to ensure that requests for trading information be received by the Market Surveillance Department within the standard 10 business-day time limit. Additionally, member firms using service bureaus are responsible for submissions made on their behalf by the service bureau with regard to the accuracy of the data, proper utilization of the automated format, and the timely receipt of the information by the NASD.

All member firms that provide clearing services for introducing firms are responsible for clearly identifying to the NASD the name of the firm for which the trading information is being submitted. This may be done by furnishing, with the trading data, a key that allows the NASD to identify the introducing firm on behalf of which the data are submitted. This will enable the NASD to readily identify a specific firm's trading data. If an introducing firm has changed clearing firms, the NASD should be notified promptly of this change.

All firms that respond to the NASD's request for trading information in an automated format are requested to provide the Market Surveillance Department with a confirmation letter stating the date on which the transmission was made to SIAC.

To assist member firms in meeting the 10 business-day response requirement, the Association's Market Surveillance Department's requests for trading information will be forwarded to member firms by FAX. Member firms should provide Market Surveillance with a telephone number at which telefax transmissions may be received. Accordingly, please use the attached response form to provide the staff with the appropriate FAX number and include the person's name to whom all requests should be directed. Market Surveillance should be notified promptly if this information changes.

Questions concerning the technical aspects of this notice should be directed to Robert A. Hitchcock, Assistant Director, Information Systems Development, at (301) 590-6631. Questions concerning the requirements in general should be directed to James M. Cangiano, Vice President, Market Surveillance, at (301) 590-6424.

Copies of Notices to Members 88-104 and 89-17 are available to members without charge by calling Jackie Davis in NASD Administrative Services at (202) 728-8302.

Reply Form for FAX Number


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