Tick Size Pilot OATS Data Collection FAQ
Tick Size Participation Flag
Q1. My firm operates a trading unit that executes trades otherwise than on a national securities exchange. My firm also receives agency order flow in other business units of the firm that is always routed away from the firm for execution. We have appropriate information barriers in place between the trading unit and the other business units and rely on the “no-knowledge” exception under FINRA Rule 5320 for any proprietary trades done by the trading unit. Further, we use a separate MPID for the agency order flow that is routed away from the firm for execution. Is my firm required to report the new OATS Tick Size fields for the orders received by the walled off business units that do not execute trades?
A1. If your firm uses a separate MPID for the agency order flow, and such MPID is not used by any part of the firm that meets the definition of Trading Center, then the new OATS Tick Size fields are not required to be reported for the agency flow MPID. However, if any trading is conducted under an MPID by a part of the firm that qualifies as a Trading Center, all orders under that MPID must be reported with the new OATS Tick Size fields.
Q2. My firm uses multiple MPIDs, some of which act as an executing party in over-the-counter trades and some of which do not? Do I have to include the new OATS Tick Size fields for all of the MPIDs used by my firm?
A2. No. Only those MPIDs that act as a Trading Center must report the new OATS Tick Size fields. For example, a firm that operates an ATS that uses a unique ATS MPID, but also provides direct market access under different MPIDs would only be required to report the new OATS Tick Size fields for their ATS MPID. They should not report the new OATS Tick Size fields for the other MPIDs at the firm that are not used to execute and report trades over-the-counter.
Q3. My firm uses a single MPID for multiple business lines, some of which act as Trading Centers and some which do not. Should the Tick Participation Flag be blank for orders received or originated by a business line that does not act as a Trading Center?
A3. No. For purposes of the Tick Size Data Collection rules, Trading Center is determined at the MPID level. Therefore, if any part of a firm that uses a single MPID acts as a Trading Center, all orders received and reported to FINRA under that single MPID must include the new OATS Tick Size fields. If certain orders reported under the firm’s single MPID are excluded from the reporting requirements of Appendix B.I. and B.II. (e.g., market access orders), FINRA will exclude such orders from the relevant calculations based on the attributes of the specific order (e.g., Rec Dept ID of “MA”).
Q4. My firm acts as a Trading Center in securities that are Pre-pilot Data Collection securities and Pilot securities, as well as securities that are not subject to the Tick Size data collection requirements. May we populate the new Tick Size Pilot Participation Flag and related fields for securities that are not Pre-Pilot Data Collection securities or Pilot securities?
A4. Yes. Firms may populate the new Tick Size Pilot Participation Flag and related fields on orders for securities other than Pre-Pilot Data Collection securities or Pilot securities. Firms should note that if the Tick Size Participation Flag is populated with a “T”, all of the new OATS Tick Size fields must be populated or the order event will be rejected.
Q5. My firm acts as a Trading Center in some, but not all, Pre-Pilot Data Collection and Pilot Securities. May we populate the Tick Size Participation Flag with a “T” on all Pre-Pilot Data Collection and Pilot Securities, even though we are not a Trading Center in all securities?
A5. Yes. You may populate the Tick Size Participation Flag with a “T” on all securities. However, this means that you will be required to submit the additional new OATS Tick Size fields on all securities, even if your firm does not act as a Trading Center.
Q6. May a firm that never acts as a Trading Center voluntarily populate the Tick Pilot Participation Flag with "T" and report the new OATS Tick Size fields?
A6. Yes. Firms may populate the Tick Pilot Participation Flag with "T" and report the new OATS Tick Size fields regardless if they are a Trading Center or accept orders in Pre- Pilot Data Collection or Pilot securities. Firms should note that if the Tick Size Participation Flag is populated with a "T", all of the new OATS Tick Size fields must be populated or the order event will be rejected.
Other New Tick Size Fields
Q7. If a customer/client directly routes an order to a system that does not allow orders to be routed out of the firm, but does not otherwise provide explicit instructions as to whether the order may be routed away from the firm, should the Routable Flag be populated with “N”?
A7. Yes. If the customer/client directs an order to a system within the firm that does not allow orders to be routed away from the Trading Center, the firm should populate the Routable Flag with “N”.
Q8. When should the Display Size field be populated?
A8. This field only applies to participants of FINRA’s Alternative Display Facility (“ADF”). Specifically, the Display Size field should only be populated if the order is reported by an MPID that represents an ATS and the reporting ATS is an ADF Participant that displays quotes on the ADF.
Q9. How should the Retail Investor Order Flag be populated?
A9. If the Trading Center is relying upon the Retail Investor Order exception to Test Groups Two and Three of the Plan, then the flag should be ‘Y”, otherwise it should be “N”.
Q10. How should orders with “self-trade prevention” instructions be reported for purposes of the Tick Size Data Collection requirements?
A10. Orders with instructions that prevent two orders received from the same party from executing against each other (“self-trade prevention”) should be reported with a Special Handling Code of “CPR” (Counter Party Restriction).
Q11. During the Pre-Pilot Data Collection Period is it expected that the Retail Investor Order Flag will always be populated with "N"?
A11. Yes. Because the Pilot will not be in effect during the Pre-Pilot Period, there will be no instances where the Retail Investor Order exception would be relied upon. Therefore, it is expected that the Retail Investor Order Flag would always be "N" during the Pre-Pilot Data Collection Period.
Q12. Is it appropriate to use the new “CPR” Special Handling Code (“Counterparty Restriction”) on orders which cannot be executed by the firm as principal?
A12. Yes. A restriction on executing a customer order against a firm’s principal account would be considered a counterparty restriction and, therefore, it would be appropriate to use the “CPR” OATS Special Handling Code for such orders. The existing OATS Special Handling Code of “FA” (“No cross”) would also be appropriate for orders where the customer’s instructions or nature of the customer or order do not allow the firm to execute the order as principal.