FINRA Guidance on OATS Reporting Obligations When Handling Orders on an Agency Basis

FINRA is issuing this OATS Report to further describe members’ OATS reporting obligations when handling orders on an agency basis. This Report supersedes any contrary guidance provided in Section VI of Notice to Members 01-85 and supersedes the OATS Report published on June 22, 2005 entitled “OATS Reporting Obligations for Agency Orders.” Specifically, when a member handles an order as agent, the member must submit to OATS a New Order Report and Route Report, or Combined New Order/Route Report, as applicable.

There are only two exceptions in which the firm must submit an Execution Report rather than a Route Report when handling orders on an agency basis. These are:

1. Agency Average Price Executions
   
   A single Execution Report rather than a Route Report is required when a member executes an order as agent, and pursuant to specific customer instruction provides the customer with a single execution at the average price. In this instance, as explained in OATS Frequently Asked Question C62, the firm is required to submit a New Order Report, reflecting receipt of the order, and an Execution Report, reflecting the fill to the customer at the average price. The execution time field of the Execution Report must reflect the time the average price was determined and the firm is required to append a Capacity Code of “A” (Agency) and a Reporting Exception Code of “A” (Agency Average Price) to each such Execution Report.
   
   
2. Post-Trade Allocations to Multiple Orders
   
   An Execution Report rather than a Route Report is required when a member is simultaneously working multiple customer or client orders on an agency basis and the shares are not allocated to specific orders until after execution(s) have been obtained to satisfy the customer or client orders held by the firm. In this instance, the firm is required to submit a New Order Report for each order reflecting receipt of the order, and an Execution Report reflecting the time the shares are actually allocated to each individual customer or client order. The firm is required to append a Capacity Code of “A” (Agency) and a Reporting Exception Code of “T” (Agency Post Trade Allocation) to each such Execution Report.
   
   This exception is not applicable when a firm is handling only one customer or client order. In this instance, the firm must submit a Route Report even if the firm considers the shares to be allocated post trade based upon the firm’s business model.

Should you have additional questions regarding this article or OATS in general, please contact the OATS helpdesk at 1-800-321-6273.