OATS Reporting Obligations for Modifications to Executed Orders
January 14, 2005
This notice provides guidance to firms regarding OATS reporting requirements for orders where a customer adds additional shares to the order after it has been fully or partially executed. NASD understands that some firms will allow an order to remain open after it has been executed in anticipation that the customer may add additional shares later in the day. These orders are often referred to as “add-on” or “reloaded” orders and generally involve large orders received by broker/dealers from institutions that are worked over the course of the business day. Additionally, firms sometimes receive instructions from a customer to add more shares to an existing order after part of the order has already been executed. In both instances, firms should use a Cancel/Replace Report to reflect the modification to the existing order. For orders that have been fully executed prior to the modification (“add-on” orders), firms should include a special handling code of ADD to denote it is an add-on order. An example of each scenario is provided below.
Example 1 – Add-on Orders
A firm receives a “Not Held” order for 50,000 shares of ABCD at 9:45 and executes 10,000 shares each at 10:00, 10:05, 10:10, 10:20 and 10:30. The firm does not close the order and at 10:35 the same customer instructs the firm to buy an additional 20,000 shares of the same security. The 20,000 shares are executed in two 10,000-share executions at 10:40 and 10:45. The OATS reporting should be as follows:
NW 9:45 NH ABCD 50,000 shares
EX 10:00 ABCD partial 10,000 shares leaves 40,000
EX 10:05 ABCD partial 10,000 shares leaves 30,000
EX 10:10 ABCD partial 10,000 shares leaves 20,000
EX 10:20 ABCD partial 10,000 shares leaves 10,000
EX 10:30 ABCD partial 10,000 shares leaves 0
CR 10:35 NH ADD* ABCD 20,000 shares
EX 10:40 ABCD partial 10,000 shares leaves 10,000
EX 10:45 ABCD full 10,000 shares leaves 0
Firms currently reflecting add-on orders with a New Order Report should modify their systems accordingly as soon as possible to reflect the above guidance. *Please note that firms must include a new special handling code of ADD to reflect add-on orders. This special handling code will be included in OATS with the 2/14/05 release.
Example 2 – Modification to Partially Executed Orders
A firm receives an order for 2,000 shares of ABCD at 11:00 and executes 1,000 shares at 11:05. At 11:10, the firm then receives a modification to increase the order quantity by another 3,000 shares. This scenario should be reported as follows.
NW 11:00 ABCD 2,000 shares
EX 11:05 ABCD partial 1,000 shares leaves 1,000
CR 11:10 ABCD 4,000 shares
As shown in the example, the shares quantity of the replacement order must include the leaves quantity of the original order plus the additional shares quantity added to the order. This way OATS can determine the active quantity of the order.
Should you have any questions regarding this article or on OATS in general, please contact the OATS Helpdesk at 1-800-321-NASD.