Compliance

OATS Frequently Asked Questions - Clock Synchronization

S2. To what source should the business clocks be synchronized?

All computer system clocks and mechanical time-stamping devices must be synchronized to any source within three seconds of the National Institute of Standards and Technology (NIST) standard. All of your clocks and time-stamping devices must remain accurate within a three-second tolerance of the NIST clock, including

the difference between the NIST standard and a time provider's clock;
transmission delay from the source; and
the amount of drift of your clock.

For example, if you use a Network Time Protocol (NTP) server that is accurate to within one second of the NIST standard, the maximum allowable drift for any computer system is two seconds. (Last updated 07/06/98)

S3. When during the day should clocks be synchronized?

Computer system and mechanical clocks must be synchronized every business day before market open. To maintain clock synchronization, clocks should be checked against the standard clock and re-synchronized, if necessary, at pre-determined intervals throughout the day. Member firms must document and maintain their clock synchronization procedures. (Last updated 03/12/98)

S5. What is our obligation to ensure that the clocks a non-member uses for reports on our behalf are actually in synchronization?

You must obtain a current copy of the procedures used by the non-member entity. Your firm is ultimately responsible for compliance with the OATS Rules; therefore, if you have some indication that the non-member is not in compliance with the OATS Rules, you should contact the non-member entity and FINRA and, if the problem cannot be rectified, select another third party to record and report OATS data for you. (Last updated 07/17/98)

S6. Are we required to synchronize all clocks at our firm?

No, you are only required to synchronize the clocks that are used to record the date and time of those market events that you are obligated to record under FINRA rules or By-Laws. (Last updated 07/17/98)

S7. Shouldn't we just synchronize to the NIST atomic clock because we can’t ensure that our time provider is actually in synchronization with the NIST standard?

Not necessarily. You can synchronize your clocks with any time provider. Most time providers provide information about the difference between their clocks and the NIST clocks. Use this information in order to determine if your business clocks are actually in synchronization. If your chosen time provider does not consistently provide this information, or you have reason to believe that the information is inaccurate, contact the time provider and FINRA and, if the problem cannot be rectified, choose another time provider. Your firm is ultimately responsible for its compliance with the OATS Rules. (Last updated 07/17/98)

S8. Am I responsible for synchronizing my Nasdaq Workstation II?

No, members are only responsible for synchronizing their own computerized system clocks, mechanical time clocks, or other business clocks that are used to record the date and time of the market events they are obligated to record under FINRA rules or By-Laws. (Last updated 09/08/98)

S9. We synchronize all business clocks prior to market open; however, in order to keep our trading systems functioning properly, we cannot reset our clocks during the trading day. What should we do if we find that our clocks are out of synch during the trading day?

The requirement of Rule 7430 is that firms maintain the synchronization of their business clocks. Therefore, every effort should be made to keep your clocks in synchronization; however, if your business clocks do go out of synch during a trading day, and you are unable to adjust them, maintain a record of the synchronization problem in your books and records and notify FINRA that you experienced synchronization problems. If the problem is persistent, FINRA requires that you find a new source for synchronization or create new procedures for ensuring that your business clocks are in synch. (Last updated 03/30/09)

S10. We want to buy mechanical time clocks that record the date and time in compliance with the OATS Rules. Can you provide us with a list of vendors?

FINRA is aware of several manufacturers of mechanical time clocks that claim their clocks can record the date and time in hours, minutes, and seconds and can be synchronized as FINRA prescribes in the OATS Rules and in the OATS Reporting Technical Specifications. Many vendors distribute these and other clocks. Contact the FINRA Business and Technology Support Services to obtain a list of the known manufacturers.

NOTE: FINRA does not recommend or endorse any manufacturer, vendor, or product, nor will it receive any consideration as a result of providing the information about any such manufacturer or vendor. When the Association becomes aware of any other manufacturers of mechanical time stamp machines that claim they meet the requirements of OATS Rule 7430, they will be added to the list maintained by FINRA Business and Technology Support Services. (Last updated 03/30/09)

S11. We would like to buy an inexpensive desk or wall clock that can be synchronized in compliance with the OATS Rules because we have very few manual orders. Can you provide us with a list of vendors?

FINRA is aware of several manufacturers of clocks that can be synchronized as FINRA prescribes in the OATS Rules and in the OATS Reporting Technical Specifications. Many vendors distribute these and other clocks. Contact the FINRA Business and Technology Support Services to obtain a list of the manufacturers.

NOTE: FINRA does not recommend or endorse any manufacturer, vendor, or product, nor will it receive any consideration as a result of providing the information about any such manufacturer or vendor. When FINRA becomes aware of other manufacturers of clocks that meet the requirements of OATS Rule 7430, they will be added to the list maintained by FINRA Business and Technology Support Services. (Last updated 03/30/09)

S12. I need to synchronize my computer clocks. Do I need to synchronize my system time or the time associated with my order handling system software?

You must synchronize the time associated with your order handling system software. This is the time that is recorded for your electronic orders. Thus, you are not necessarily required to synchronize the time recorded by your computer hardware or your system. You would only be required to synchronize this time if your order handling system software refers to it. (Last updated 11/03/98)

S13. I am an independent contractor. Am I required to synchronize my business clocks?

If an independent contractor has an agreement with a member firm to process orders and if that contractor immediately transmits orders to the member firm for handling, either electronically or manually, the independent contractor is not required to maintain a separate synchronized clock. However, by Phase 3, if there is ever any delay in transmitting any orders to the member firm, or if the member firm does not agree to maintain the proper times required under OATS Rules, an independent contractor must maintain a synchronized clock for recording the times. (Last updated 11/23/98)

S14. All of the orders received at our branch offices are immediately transferred to the trading desk at our main office. Are these branch offices required to synchronize their clocks?

If a branch office immediately transmits orders to the main office for handling, either electronically or manually, the branch office is not required to maintain a separate synchronized clock. However, if a branch office receives any orders that are not transmitted immediately to the main office for order handling, then that branch office is required to maintain a synchronized clock for recording the times required under FINRA rules. (Last updated 02/19/99)

S15. Our clearing firm is performing all OATS reporting on our behalf and they are recording all times required by the OATS Rules using their own synchronized clocks. Are we required to synchronize our clocks?

If the times required under OATS Rules are all recorded by your clearing firm or another third party, you are not required to synchronize your business clocks. However, if there are any cases when you must record the time yourself, such as when the computer system malfunctions and you must record the order on a paper ticket, you must maintain a synchronized clock for recording the times required under OATS Rules. (Last updated 11/23/98)

S16. Are we required to synchronize the business clocks used to record the time of execution of securities reported to the Fixed Income Pricing SystemSM (FIPSSM)?

Yes. FINRA Marketplace Rule 6240 requires members to record the time of execution for these transactions. You are required to synchronize the clocks that are used to record the date and time of any market events that you are obligated to record under FINRA rules or By-Laws. (Last updated 11/23/98)

S17. I work for a FINRA member firm that is located in Canada. Are we required to synchronize our clocks?

Yes. All FINRA member firms, including all member firms located outside the United States, are required to synchronize their business clocks according FINRA Rule 7430. (Only those clocks that are used to record the date and time of those market events that are required to be recorded under FINRA rules or By-Laws must be synchronized.) In addition, if your firm handles orders for Nasdaq and OTC Listed Securities, the rules for order reporting apply to your firm. For additional information about clock synchronization and order reporting, refer to the OATS Reporting Technical Specifications. (Last updated 03/30/09)

S18. We are based in New York and have a branch office in Los Angeles. Normally, when our branch office gets an order, the order is immediately transferred via telephone to the main office for handling. In such cases, we use the synchronized clock at the main office to record all of the required times.

Sometimes our branch office receives an order after our main office is closed. Thus, the branch office cannot immediately transfer the order to the main office. In these cases, is the branch office required to use a separate synchronized clock to record order receipt time?

Yes. If a branch office receives any orders that are not transmitted immediately to the main office for order handling, then that branch office is required to maintain a synchronized clock for recording the times required under FINRA rules. (Last updated 02/19/99)

S19. Can we use the time on the Nasdaq Workstation to synchronize our clocks?

No. Currently, although the time transmitted from Nasdaq is synchronized, there is no guarantee that the time displayed on your workstation is synchronized. If there is any change in this situation, it will be posted to these Web pages. (Last updated 05/07/99)

S20. Can we use the time displayed on the Nasdaq Workstation as a source for reporting the time of market events?

S21. Some of our registered representative work out of their homes, which are not registered branch offices. Are these reps required to maintain a synchronized clock for recording the time of market events?

If a registered representative regularly works from home during business hours (i.e., the home is considered a regular place of business), he or she must meet the requirements of the OATS Rules. Therefore, if he or she immediately transmits orders to the main office for handling, either electronically or manually, there is no requirement for a separate synchronized clock. However, if there are any orders that are not transmitted immediately to the main office for order handling, then a synchronized clock is required. If the home is not considered the representative’s regular place of business, and he or she receives a customer order, the order is "received" when all of the specific details of the order are understood and the order arrives at a place where it can be handled or executed. In such a case, no synchronized clock would be required until the representative called or brought that order to the office. (Last updated 03/30/09)

S22. What clock synchronization procedures are we required to have in order to comply with the OATS Rules?

In order to comply with the requirements of NASD Rule 7430, member firms must have written procedures in effect describing their clock synchronization process. The procedures must be thorough and include the method of synchronizing computer system and mechanical clocks used for recording the times of market events. The synchronization process must take place every business day before market open, and it must include checks of synchronization at pre-determined intervals throughout the business day, to ensure that the clocks maintain synchronization.

In addition, all member firms with clock synchronization requirements should have written supervisory procedures that describe the methods they use to ensure that the synchronization process is being followed. Firms should be able to demonstrate their supervision of the synchronization process. (Last updated 03/30/09)

S23. Does our firm need to keep a log of the times we synchronize our clocks?

Yes. Member firms required to synchronize their clocks according to the OATS Rules should keep a log of the times when they synchronize their clocks and the results of the synchronization process. This log should be maintained on-site, and it should include notice of any time the clock drifts more than the 3 seconds allowed by the OATS Rules. (Last updated 05/07/99)

S24. We are FINRA members that only receive orders for securities that are not reportable to OATS. What are our requirements with regards to recording time under the OATS Rules?

You must record all times required under the FINRA rules or By-laws from a synchronized clock. You are not required to record the time to the second for events that are not reportable to OATS. For events that must be reported to OATS, the time must be recorded in hours, minutes, and seconds. (Last updated 05/07/99)