NASD Provides Additional Guidance Regarding OATS Reporting Changes Related to NASDAQ Exchange Registration

June 13, 2006

 

On March 15, 2006, NASD published an OATS Report entitled NASDAQ Exchange Registration – OATS Reporting Changes. This article discussed several OATS issues relating to NASDAQ’s operation as an exchange, including NASD’s pending rule filing proposing to establish rules for the trade reporting of transactions otherwise than on an exchange through a new NASD facility, called the Trade Reporting Facility (“TRF”).1 Specifically, members were advised that if the TRF is approved by the SEC, upon the operational date of NASDAQ’s exchange registration, or June 1, 2006, whichever came later, transactions reported to the TRF must be reported to OATS with a Market Center Code of “L” on the OATS Execution Report. Further, members were advised that upon NASDAQ operation as an exchange, they must properly identify NASDAQ-only members and NASD-only members when appropriate. NASD has received numerous inquiries regarding the above-mentioned guidance and is publishing this OATS Report to provide additional information to assist members in complying with the guidance issued in the March 15, 2006 OATS Report.

 

In addition, NASD is providing guidance in this OATS Report regarding the appropriate reporting of orders routed to INET, BRUT and the NASDAQ Market Center as it relates to NASDAQ’s planned migration to Single Book.2

 

New Market Center Code

 

Currently, trades not executed through the NASDAQ Market Center (SuperMontage) and reported to ACT are required to be reported to OATS with a Market Center Code of “Q” on the related OATS Execution Report. Upon the operational date of NASDAQ’s exchange registration, the Market Center Code of “Q” will be used only for executions occurring on the NASDAQ exchange. Members should note, however, that ACT will be used for trade reporting through the proposed TRF. Therefore, transactions that are not executed on the NASDAQ exchange and are reported to the TRF through ACT must be reported to OATS with a Market Center Code of “L” instead of “Q,” given that the trade did not occur on or through the NASDAQ exchange.

 

In light of NASDAQ’s announcement on May 24, 20063 that it was changing the target date for exchange operation to August 2006, the new Market Center Code will become effective upon the operational date of NASDAQ’s exchange registration.

 

Membership Status

 

NASD has received questions regarding how a member will be able to determine the membership status of a broker/dealer. In this regard, NASDAQ has added new fields to the existing Symbol Directory to assist firms in identifying the member status of another broker/dealer. NASDAQ published information regarding these new fields on the NASDAQTrader.com website on February 13, 2006. Firms may view this information at http://nasdaqtrader.com/Trader/News/2006/generalnews/20060213.stm

 

Orders Routed to INET and BRUT

 

If, as anticipated by NASDAQ, migration to the Single Book is completed prior to Exchange Registration, orders previously routed to INET or BRUT will now be routed to the NASDAQ Market Center and should be reported to OATS as such, using the Destination Code of “U”. The routed order identifier must be submitted to the NASDAQ Market Center as required today for orders routed to the NASDAQ Market Center (SuperMontage).

 

In the event the operational date of NASDAQ’s exchange registration were to occur prior to the migration to Single Book, orders routed to INET and BRUT should continue to be reported to OATS as they are currently reported today. No changes to orders routed to these venues will be required upon the operational date of NASDAQ’s exchange registration.

 

Please call the OATS Helpdesk at (800) 321-NASD with any questions regarding this article or on OATS in general.

 

1 See Exchange Act Release No. 52049 (July 15, 2005), 70 FR 42398 (July 22, 2005).

 

2 As noted in NASDAQ Head Trader Alert #2006-074, NASDAQ is targeting July 2006 for beginning the migration of NASDAQ, Brut and INET systems into Single Book, subject to approval from the Securities and Exchange Commission (SEC).

 

3 See NASDAQ Head Trader Alert #2006-074