OATS Integrated Sweep
June 21, 2002
NASD OATS staff is adjusting its compliance sweep process by combining several current sweep processes into one. The new sweep will be known as the OATS Integrated Sweep and will commence with the 1st Quarter 2002 OATS data. The integrated sweep process has been designed to make regulatory reviews and inquiries more comprehensive and efficient. The integrated sweep allows for various systemic issues to be simultaneously identified, addressed, and resolved with fewer inquiries. This new process will consider a firm's overall OATS compliance. Specifically, NASD will merge the following areas into the integrated sweep:
The Daily Non-Reporting and the Negative Subsequent Order Event sweeps will continue to be conducted individually. They will not be included in the Integrated Sweep.
All potential OATS violations identified in the integrated sweep will be reviewed in the context of the percentage of the total number of reports submitted over the review period. As a general matter, firms displaying the highest overall levels of apparent OATS non-compliance will be selected for review. For example, a firm may submit to OATS 100,000 ROEs. Of these 100,000 reports the firm may have submitted 25,000 late reports of which 10,000 were Unmatched Execution reports. NASD generally will view this as 25,000 erroneous reports for a potential overall non-compliance rate of 25%. NASD generally will not "double count" the same erroneous ROE if it has multiple potential violations. Firms with the highest overall non-compliance rate regardless of category will be selected for review. If a firm, however, displays an unusually high level of non-compliance in just one area, the firm may still be selected for review in that particular area. For example, a firm may submit 1,000 ROEs successfully, on-time and in full compliance. However, during that time the same firm may have 200 ROEs rejected and fail to repair all of them. In that case, NASD could open a review for failure to repair and resubmit rejected data, although the overall compliance of accepted reports is high. This would hold true for any one area in which a firm shows an unusually high level of apparent OATS non-compliance.
Questions or comments regarding this matter or OATS in general may be directed to NASD Market Regulation at (240) 386-5126.