Notice to All TRF, ADF and Other NASD Facility Participants Regarding AGU and QSR Relationships
January 25, 2007
The rules governing each NASD Trade Reporting Facility ("TRF") provide that a member may agree to allow a TRF Participant to report and lock-in trades on its behalf, only if both parties have completed an agreement to that effect (a "give up agreement") in the form specified by NASD. A give up agreement also is required to establish an "on behalf of" reporting relationship on NASD's Alternative Display Facility ("ADF") and the OTC Reporting Facility ("ORF"). The form of give up agreement that must be executed for purposes of "on behalf of" trade reporting to any TRF, the ADF or the ORF is the Uniform Trade Reporting Facility Service Bureau/Executing Broker Agreement. A single give up agreement may be used by parties wishing to establish an "on behalf of" reporting relationship on multiple NASD facilities (e.g. the NASD/Nasdaq TRF, the NASD/NSX TRF and the ADF); however, the parties must submit a copy of the agreement to each NASD facility to which the relationship applies. This includes, but is not limited to, ECNs or ATSs, which must have a give up agreement with each subscriber that is an NASD member, if the ECN or ATS will be reporting on behalf of that subscriber.
Members that are NASD/Nasdaq TRF Participants and have executed the Nasdaq AGU/Attachment 2 Agreement are not required to execute a new agreement to continue their existing "on behalf of" reporting relationships for purposes of trade reporting to the NASD/Nasdaq TRF. Likewise, members that have executed the ADF AGU/Attachment C Agreement are not required to execute a new agreement to continue their existing "on behalf of" reporting relationships for purposes of trade reporting to the ADF. However, existing AGU/Attachment 2 Agreements are not sufficient to establish valid "on behalf of" reporting relationships for purposes of trade reporting to any other NASD facility; NASD/Nasdaq TRF Participants wishing to establish "on behalf of" reporting relationships for purposes of reporting to another NASD facility, including another TRF, must execute and submit the Uniform Trade Reporting Facility Service Bureau/Executing Broker Agreement. Similarly, TRF Participants wishing to establish new "on behalf of" reporting relationships for purposes of trade reporting to the NASD/Nasdaq TRF must execute and submit the Uniform Trade Reporting Facility Service Bureau/Executing Broker Agreement.
NASD staff understands that there has been confusion with respect to whether a give up agreement is required if the two parties already have a Qualified Service Representative ("QSR") agreement in effect. A QSR agreement is an NSCC agreement and only establishes that one party can send a trade to clearing on behalf of the other party. It does not establish that one party can trade report on behalf of another party for purposes of complying with the NASD trade reporting rules. Therefore, a give up agreement is required for a Participant to report to an NASD facility on behalf of another member even if the parties have a QSR agreement in effect. Members should review and confirm that they have the appropriate documentation in place. All existing Participants that do not have the appropriate documentation in place will have until February 26, 2007, to execute and submit the required documentation. Any "on behalf of" reporting relationship that is not supported by the documentation described herein will be considered invalid by NASD.
Members are reminded that the member with the reporting obligation remains responsible for the transaction submitted on its behalf. Further, both the member with the reporting obligation and the member submitting the trade to NASD are responsible for ensuring that the information submitted is in compliance with all applicable rules and regulations.
NASD understands that, despite diligent efforts, some firms will be unable to meet the February 26, 2007 deadline for executing and submitting the required documentation in accordance with the above notice. If your firm is having difficulties obtaining or submitting the required documentation, you can request an extension by contacting NASD Operations immediately via email. Please provide the following information: (1) your firm name; (2) the names of the participants for which you have still not received the necessary paperwork; (3) whether there is an existing QSR relationship for those participants supported by the necessary paperwork; and (4) the date you expect to have all paperwork executed and submitted.