Exemptive request denied: the OATS Rules do not provide NASD Regulation with the authority to grant exemptions from any of the OATS requirements.
March 8, 1999
Mr. Jess L. Haberman
Chief Compliance Officer
Automated Securities Clearance, Ltd.
800 Harbor Blvd.
Weehawken, N.J. 07087
Re: Order Audit Trail System ("OATS")
Dear Mr. Haberman:
Your letter addressed to Ms. Cindy Foster dated February 22, 1999 has been forwarded to me for a response. Your letter states that Automated Securities Clearance, Ltd. ("ASC"), which operates the BRASS transmission system ("BRASS"), will be the OATS Order Sending Organization for numerous National Association of Securities Dealers member firms. Your letter states that modifications to interfaces and software upgrades or installations will be necessary in order for these firms to report all required data elements to OATS. These actions will not be completed by March 1, 1999, the day that Phase I firms must start reporting to OATS. You have requested a temporary limited exemption from some or all of the OATS reporting requirements for ASC’s customers.
The OATS rules do not provide NASD Regulation with the authority to grant exemptions from any of the OATS requirements, including the reporting requirements. Therefore, we can not grant your request. NASD member firms are responsible for recording and reporting OATS data according to the implementation schedule set forth in OATS Rule 6957. NASD Regulation will work with BRASS to implement the required interface modifications that you describe in items one through four of your letter so that firms will be able to report all required OATS data elements as soon as possible.
With respect to item two, we have determined that the Order Received Method is only required if a routed order is received from another firm; it is not required if an order is received from a retail customer. However, because the OATS system currently requires a value in the Order Received Method field for all orders, firms will be allowed to supply a default value for orders received from customers. In the future, OATS will be changed to make the Order Received Method an optional field for customer orders.
With respect to item four, Terminal or Department (Branch) ID, we have determined that ASC’s original interpretation is correct; that is, the Terminal or Department ID is required for orders electronically captured (i.e., electronic orders) by ASC’s customers’ front end systems. The method of order receipt is not relevant in this case.
In items five and six of your letter, you indicate that 12 of ASC’s existing customers and 26 new customers have not been converted to BRASS 2.4, the release that supports OATS reporting. As stated above, we can not exempt firms from complying with the OATS rules, and these firms are responsible for reporting to OATS according to the OATS Rule 6957 schedule. NASD Regulation urges you to complete the conversion to BRASS 2.4 as expeditiously as possible.
I hope this letter is responsive to your inquiry. Please note that the opinions expressed in this letter are staff opinions only and have not been reviewed or endorsed by the Board of Directors of NASD Regulation. This letter responds only to the issues you have raised based on the facts as you have described them in your letter, and does not necessarily address any other rule or interpretation of the NASD or all the possible regulatory and legal issues involved.
If you have any further questions about this issue, please contact Cindy Foster at (301) 590-6544.
Mary N. Revell
Associate General Counsel