Amendments to the Criteria for the Exclusion to the Definition of an OATS Reporting Member

On May 12, 2014 FINRA filed for immediate effectiveness SR-FINRA-2014-024 with the Securities and Exchange Commission ("SEC"). This filing amends FINRA Rule 7410 to permit members to route orders to two Reporting Members for a defined period of time provided certain conditions are met without losing the exemption from the definition of "Reporting Member" in the Order Audit Trail System ("OATS") rules.

FINRA Rule 7410 excludes from the definition of Reporting Member firms that meet the following criteria:

  • The member must engage in a non-discretionary order routing process where the firm immediately routes all of its orders to a single receiving Reporting Member.
  • The member cannot direct or maintain control over subsequent routing or execution by the receiving Reporting Member.
  • The receiving Reporting Member must record and report all information under FINRA Rules 7440 (recording of order information) and 7450 (reporting of order information).
  • The member must have a written agreement with the receiving Reporting Member specifying the respective functions and responsibilities of each party.

As amended, Rule 7410 allows member firms to retain their exclusion from the definition of Reporting Member when routing orders to two Reporting Members in certain instances, such as a clearing firm transition, provided the following additional conditions are met: 

  • All orders must be routed by the member on a pre-determined schedule approved by FINRA.
  • Orders may only be routed to two receiving members pursuant to the schedule for a time period not to exceed one year.

Firms may use the accompanying form to submit a transition schedule to FINRA for approval so that the firm can continue to rely on the exclusion from the definition of Reporting Member during the transition

Please contact the OATS Helpdesk at 1-800-321-6273 with any questions related to this OATS Report.