Technical Notice

Equity Short Sale Validations

April 19, 2018

Effective Monday, August 20, 2018, FINRA will begin to apply validations to the OTC Trade Reporting Facility (ORF) and the Alternative Display Facility (ADF) for equity transactions submitted with the Short Sale Indicator.

A Short Sale Indicator may only be submitted on trades that meet the following conditions:

  • on sell side trades to indicate if the executing party is selling short;
  • on buy side trades where the executing party is buying from a customer (non-FINRA member) who is selling short; or
  • on a buy side trade where the executing party is buying from a contra member firm that is selling short on locked-in or non-locked-in trades that are Tape Only (stated in the report as Publish Indicator = Y and Clearing = N) or Non-tape and Non-clearing.

If a transaction is submitted with the short sale indicator and at least one of these conditions is not met, the transaction will be rejected.

Note: The Short Sale Indicator supports the Short Sale and Short Sale Exempt values. The Short Sale Exempt value is currently not applicable to OTC equity securities because such securities are not subject to Rule 201 of Regulation SHO and thus should not be marked as short exempt pursuant to Rule 200 of Regulation SHO. Please refer to the Trade Reporting FAQs for further guidance on Short Sale reporting.

Specifications:

FINRA expects testing to be available in its NTF environment starting in June 2018. FINRA will issue a separate technical notice with testing details.

Please contact FINRA Product Management or call (866) 899-2107 with questions regarding this notice.