September 23, 2003
OATS Phase 3 reporting of manual orders has not yet been approved by the SEC. NASD, however, is reminding firms that have previously submitted an OATS Subscriber Initiation and Registration Form ("SIRF") indicating that they are Phase 3 firms to periodically review their business model and order handling processes to ensure they continue to qualify as a Phase 3 firm. If at any time a member currently registered as a Phase 3 reporting firm begins to receive and handle orders that would qualify for OATS reporting under Phase 2, they must immediately update their OATS registration and begin transmitting data to OATS. Firms that do not update their registration and fail to submit required data to OATS will be subject to disciplinary action.
Compliance with OATS Rules was implemented in phases. Phase 1, implemented in March of 1999, requires events in the lifecycle of electronic orders handled by market makers and ECNs to be reported to OATS. Phase 2, implemented in August 1999, requires events in the lifecycle of electronic orders handled by all member firms to be reported to OATS. Electronic orders are defined as orders received or captured via an electronic order routing or execution system.
Phase 3 was originally targeted for implementation on July 31, 2000. The actual implementation date has been postponed indefinitely pending SEC approval. Phase 3 will require events in the lifecycle of manual orders to be reported to OATS. Manual, or non-electronic, orders are defined as orders captured by a member firm in some way other than in an electronic order routing or execution system, such as a paper ticket.
Some factors to consider while determining your firm’s obligations:
For non-market makers:
For market makers:
If you are unclear in whether your firm has an obligation to report to OATS, or have questions on OATS in general, please contact NASD’s Market Regulation Department at (240) 386-5126.