PODCAST
Trading Around the Clock: Inside FINRA's Trade Reporting Enhancements
Every time you check a stock price on your phone or watch a ticker scroll across a screen, you are seeing the result of a complex reporting system most investors never think about. Behind that number is a vast infrastructure capturing and consolidating trades from exchanges and over-the-counter markets in milliseconds—and that system is undergoing major enhancements.
On this episode, Chris Stone, FINRA Vice President, Transparency Services, takes us inside the systems that make market transparency possible. Stone explains how FINRA recently extended trade reporting hours to 4 a.m. ET, why the industry is preparing for 23-hour, 5-day-a-week trading by December 2026, and how FINRA’s recently implemented fractional share reporting is eliminating what researchers called "phantom volume."
Resources mentioned in this episode:
Trade Reporting Facility (TRF)
Reg. Notice 25-15: FINRA Adopts Amendments to Extend the Trade Reporting Facilities Operating Hours
Blog Post: FINRA Forward’s Rule Modernization—An Update
Blog Post: Vendors, Intelligence Sharing and FINRA’s Mission
Blog Post: FINRA Forward Initiatives to Support Members, Markets and the Investors They Serve
Blog Post: A Progress Update on Rule Modernization
Listen and subscribe to our podcast on Apple Podcasts, Google Podcasts, Spotify, YouTube or wherever you listen to your podcasts. Below is a transcript of the episode. Transcripts are generated using a combination of speech recognition software and human editors and may contain errors. Please check the corresponding audio before quoting in print.
FULL TRANSCRIPT
00:00 – 01:05
Margherita Beale: Every time you check a stock price on your phone or see a ticker scroll across CNBC, you're looking at the consolidated tape, a real-time stream of trades from exchanges and over-the-counter markets. But how does that data actually get there? And what happens when markets decide to trade nearly around the clock?
In this episode, we explore the market infrastructure most investors never see, from extending trading hours to 4 a.m., to preparing for 23-hour, five-day-a-week operations, to capturing fractional share trades that were once invisible, we explain how FINRA is enhancing its systems to meet the demands of a global, always-on trading environment, and why getting that data right matters for everyone, from retail investors to professional traders.
Welcome to FINRA Unscripted. I'm your host, Margherita Beale. Here to talk to us today about enhancements FINRA is making to our trade reporting systems is Chris Stone, FINRA Vice President, Transparency Services. Welcome, Chris.
01:05 – 01:06
Chris Stone: Thanks for having me on the show.
01:06 – 01:11
Margherita Beale: Yeah, thanks for coming on. Can you tell us a bit about yourself and the work that you do at FINRA to start?
01:12 – 02:39
Chris Stone: Yeah, so thanks for having me on the podcast. My name is Chris Stone. I'm a Vice President in FINRA's Transparency Services department. My team is responsible for managing the real-time market systems of FINRA. So, in that role, we oversee transaction reporting in real time for all the asset classes we're responsible for under our statutory jurisdiction for the over-the-counter market.
Our team also manages business and strategic initiatives. We develop business requirements for new systems and enhancements to the systems. We do market analysis and industry outreach, which I found is really critical for new areas because that role, since we're not from the enforcement side and we're not from the regulatory side of the house, really enables us to sit down with traders and market participants and ask their views about what's working or not working with our trade reporting systems and what potentially is a new data product that would be helpful or they'd like to see. My team also represents FINRA on the National Market System data plans. So, this would be the consolidated plans we'll talk about later.
I'm a lawyer by training and had experience at the Commission prior to coming over to NASD, now FINRA. When I first came over, I was in a legal role. And then a number of years later, had the opportunity to move over into a business role, which a lot of lawyers envision doing at some point in their career, and been doing that for a number of years now.
02: 39 – 02:54
Margherita Beale: Fantastic. So, most people know FINRA for regulation, enforcement, but Transparency Services operates differently. Can you explain what Transparency Services is and how you interface with the industry?
02:54 – 03: 52
Chris Stone: So, Transparency Services is a little different than a number of other parts of FINRA. We're not in the post-trade surveillance space. We're not in kind of the rule setting, rulemaking space, or examination space. We are involved in real-time interaction directly with the member firms that report their trades in real-time to our systems. And then we operate data dissemination protocols and services behind that to provide market transparency and price discovery for the marketplace.
The other piece to that reporting system is we provide data for FINRA’s audit trail systems, which is then used for post-trade surveillance and regulatory work on that end. So, we're not necessarily interacting directly with firms, but we are a core piece of the industry plumbing to provide transaction reporting that then turns into market data that's disseminated out in the consolidated data feeds.
03:52 – 04:08
Margherita Beale: So, speaking of the consolidated data feeds, when people watch stock tickers on CNBC or check market data on their phones, they're looking at what's called the consolidated tape. Can you explain what that means and where FINRA fits into that picture?
04:08 – 06:13
Chris Stone: Sure. So, consolidated market data is really critical for price transparency and price discovery in the marketplace. It's a way to ensure that if a trade is done on one exchange versus the over-the-counter market versus a different exchange, that those prices are consolidated and sequenced and disseminated out in real time. So, market participants, investors, regulators, economists, anyone who's interested in market pricing is able to get a real-time, validated view of what that market pricing is and what price levels are for assets in the space.
So, a number of years ago, in the 1975 amendments to the Exchange Act, Congress determined that there was a need for what they call the national market system. So this was a way to consolidate quotes and trades across exchanges geographically dispersed across the country that were trading the same securities. So, to do that, a national market system was formed. And at the heart of that was something called the SIP, or securities information processor, that served as a hub for the consolidation of all this data from the exchanges to be put into a single consolidated tape for everyone to see and make real time pricing decisions about assets.
It turns out significant trading takes place in the over-the-counter market, not just on the exchanges. We generally think of exchanges as a big building with columns where trading activity happens on the floor with potentially human specialists facilitating trading on the floor. And that is true, although most of the trading now is electronic that's done in the exchanges. But a significant portion of NMS volume, in fact, more than 50% on most trading days, takes place in what's called the over-the-counter market. And that's FINRA's sole jurisdiction, where we ensure that trades that are executed in that over-the-counter space are reported to FINRA transaction reporting facilities and disseminated as part of the consolidated tape. The way the markets have developed, extensive percentage of this volume is now over the counter and subject to FINRA jurisdiction and reporting to our facility.
06: 13 – 06:17
Margherita Beale: What does that volume look like? Can you give us some figures?
06:17 – 07:14
Chris Stone: Yeah, so on any given day, we're really over 50% of transaction reporting volume in the national market system overall. And that's for our TRFs that facilitate reporting of national market system securities. So, by national market system securities, we mean securities that are listed on an exchange and can trade on that exchange or another exchange or in the over-the-counter market. In addition to those TRF facilities that handle NMS securities, Transparency Services runs trade reporting facilities for fixed income, which is the TRACE system, and that's virtually 100% of fixed income volume comes through our TRACE system and dissemination feeds. 100% of unlisted equities, by definition, is reported to FINRA. It's called ORF. So obviously, we run a critical linchpin in the market structure to ensure that investors and market participants have the data they need to trade.
07:14 – 07:40
Margherita Beale: To gauge the importance of all of this, FINRA’s trade reporting facilities capture all of this activity. What would the market look like without this consolidated view of exchange and over-the-counter trading? And why is that important for transparency?
07:40 – 09:29
Chris Stone: The short answer is it would be a tremendous hole in transparency. The pricing that you're seeing in the marketplace is only as good as it is complete. And so, by ensuring that we do capture that 50 plus percent of trading activity that's happening over-the-counter market, we're really ensuring that market participants and the marketplace overall gets a full picture of the pricing that's available in national market system securities.
So that's national market system securities. There's other assets out there. There's fixed income. There's corporate bonds. There's asset backed securities. There's treasuries. Those for the most part trade entirely over the counter, very small exchange based volumes for that. We capture all of that, 100%, through the TRACE system and disseminate it through our own proprietary data feeds that we manage and produce data products for the marketplace on. Likewise, another asset class, unlisted equities. So, these are publicly traded equities that trade in the over-the-counter market but are not listed anywhere. So these are not big name tech stocks or S&P 500 stocks that are actively trading on the exchanges, but these might be ADRs, so foreign depository trusts, they might be F shares themselves, foreign shares, they might be really small publicly traded companies that are U.S. based that were restricted and that's seasoned over time and are now traded in the over-the-counter market. This also is a very large space and something we're responsible for under our jurisdictional obligations for the over-the-counter market. 17,000 plus symbols for this OTC equity space alone. And again, that's reported to us and disseminated and there really isn't another source for that data that would be available for market participants to make trading decisions based on. So, I think that's really it. We serve a key part of the infrastructure and the plumbing of the markets to ensure that a complete picture of trading activities is being disseminated out to market participants in the marketplace.
09:15 – 09:29
Margherita Beale: Great. So, moving to a change that's been recently implemented, we extended trade reporting facility hours to 4 a.m. (ET) on March 30. What does that mean and what drove the decision?
09:29 – 12:09
Chris Stone: Well, for one thing, it means we are all going to be getting up a lot earlier than we have been. So, we're very excited about that. But in past years, our systems have operated from 8 a.m. to 8 p.m. A number of years ago, various exchanges moved their opening time up to 4 a.m., to capture some of the overseas market activity and to be able to trade on news that potentially came out overnight. We hadn’t moved our systems’ open at that point. We'd stayed at 8 a.m.
Over the last few years, there's been heightened attention and focus on really trading around the clock. Some of that's driven by the crypto markets being 24/7. Some of it is gaining attention from prediction markets activity. And also, some of it is just from pure organic interest in trading us equities overnight, whether it's potentially overseas, been a lot written about South Korean retail traders’ interest in trading overnight in U.S. equities and the U.S. asset class is becoming much more of global asset class. So based on conversations with the commission and outreach we did with member firms and market participants, we came to the conclusion that just made a lot of sense for us to open at 4 a.m., in line with those other exchanges.
So, on March 30, we did that. Things have gone well so far. I think what a lot of people don't understand when it comes to market infrastructure and market technology is there's an entire ecosystem on the market side to support that. So, it's not just flipping a switch overnight. It's potentially preparing new releases or new software releases overnight, ensuring that the databases are ready to roll first thing in the morning. My team has grown to add some new folks who are going to be working specifically in the overnight shift. And then myself and some other individuals at FINRA are what are called RegSci officers. RegSci is an SEC rulemaking that governs real-time reporting to the SEC about outages, technology problems that happen so the SEC has a real-time view on things that are going on in the market infrastructure. So, part of my job and others at FINRA will be responding in real-time, potentially overnight, and addressing issues, classifying events, and doing what we normally do with our market systems, which is monitoring prices for anomalous pricing and things like that.
So, it's going to be more work, for sure. And it's going to be an adjustment. But I think it's something that we're happy to do as a key participant in the market structure. I think it's important that we are nimble and move in line with the industry. So that's been a positive.
12:09 – 12:26
Margherita Beale: Great. Well, we thank you for the schedule change, even though it's a rough wake-up call. And then looking ahead, in December, we're going to be moving to 23/5 operations. Can you explain what that means and what's happening there?
12:26 – 14:54
Chris Stone: Yeah. So, as you alluded to, a 4 a.m. open for us was a first step in the process. The markets are planning to move overall to a 23/5 schedule. The date that's been put out there by the SIP committee is Dec. 6, 2026. So that's the target date for us. Based on just our volume that we discussed earlier, there's a real interest in ensuring that FINRA is ready to go live in line with exchanges on that new timetable in December and we've committed very publicly that it's of the highest priority for us to ensure that we're there and ready to go and can facilitate 23/5 trading for the industry. So maybe I should just say what I mean by 23/5, might not be completely intuitive. It's not actual 24/7 trading that will be happening in December. Technically the markets will be opening for the new Monday trading day on Sunday at 9 p.m. So, Sunday 9 p.m., we'll be working like a trading day normally. They'll operate until 8 p.m. on Friday, uninterrupted except with a brief pause every day to account for database preparedness for the next day, software releases, things of that nature. That pause is going to start with an hour, but the expectation is that it will shrink over time. So, it's really a big step for the equity markets. And as with 4 a.m., I think, for FINRA, it's important for us to show that we can be responsive to changes in industry and technology, and that we're prepared to be nimble and support our member firms however we need to in a new trading environment.
I've been doing this for a number of years now and I will say I feel like the cadence of change is really unprecedented, and I try not to use the word "unprecedented" because I feel like it's overused, but really, the pace of change around new technology, I find it really exciting. It's a challenge, but I think as regulators, we owe it to the industry and retail investors to ensure that we're understanding it, we're learning about it, and we're prepared to move forward with it in line with the rest of the industry. And that's everything from the extended hours, like we're talking about, but also just things like new asset classes, whether it's crypto or tokens that we're learning more and more about every day. I feel like that pace of change is just palpable how quickly things are moving. And I think it's key that we're ready to move at that speed too.
14:54 – 15:05
Margherita Beale: Let's shift to fractional share reporting, which launched in February. What problem were you solving and how does fractional share reporting work now?
15:05 – 17:50
Chris Stone: Yeah, so thanks for the question. This was really a long-term initiative for us. It required a real end-to-end solution because this was a transaction reporting issue that flowed all the way through from member firms, through our trade reporting systems, into data feeds, and then also downstream into clearance and settlement. So, it was a long term project and we're really kind of proud of the work the team did on it.
So by a fractional amount, we're just talking about a fraction or a slice of a whole share. So, the historical example that we talked about often was Berkshire Hathaway, currently trading over $700,000 a share. That's not typically a share that a retail investor is going to be interested in buying a whole share of. So, a fraction was the best way to go about buying something like that. A few years back, prior to the big tech companies, number of them, doing forward splits, a few of the key tech companies were high priced as well, relatively speaking. And so a lot of fractions were taking place in those shares. When they'd be reported, they wouldn't be reported as a fraction. We had a rounding guidance that would say, basically, if you were executing a share that was a fraction under one, you reported as one. And if it's a fraction or a mixed fraction over one, you round down to the lowest whole share number.
So that worked fine from a reporting standpoint. But a number of academic studies started to scrutinize what they were calling “phantom volume.” So, this is the potential for if you had a fraction of, a $700,000 share, and then it goes out on the tape looking like one whole share, that notional amount is going to seem like $700 plus $1,000 of notional value, where in reality, it might have been one-thousandth of that much or one-hundredth of that much. So, the goal was to get fractions on the tape so everyone could see on a transparent basis what the actual fractional amount was that was going out.
So, as you noted, we successfully launched fractions in February. We've been able to study the data now that we've seen it. It's about 10% of our TRF prints are fractional, with 95% of that showing up as under one share, which is interesting. The names that we're seeing in fractional are some of the key heavily traded names in the industry. So, Nvidia, Tesla, the Qs, Apple. Interestingly enough, Berkshire Hathaway was not in the top 10 that we saw for the data we studied so far. So again, I think this is another example of us trying to move forward with the industry, get more transparency wherever we can to ensure that market participants and investors are getting to see the full picture of what's going on in the market space.
17:50 – 17:59
Margherita Beale: So, how do you see all of these changes connecting to FINRA's broader strategic priorities?
17:59 – 18:56
Chris Stone: With this pace of change that we're seeing, and as I was stating, things have advanced to an inflection point where change is happening really quickly. And as a regulator, especially one that runs technology and facilitates real-time data dissemination on a millisecond basis, it's key that we're ready to move forward and be a modern agile regulator and keep pace with the industry and new changes that are coming our way.
One of the things I really like about my job, and I think my team really enjoys, is we get a lot of opportunities to spend time with firms, with trading desks, talking about what are they seeing in the marketplace, what's working, what's not working, in terms of our trade reporting systems and data. So, I think being proactive is going to be even more important for us going forward, just because this change is coming, whether we're ready or not. So, I think the way to really engage with member firms is to be open to that and having those conversations.
18:56 – 19:07
Margherita Beale: So, to go back to Transparency Services and its value for the market, how does it demonstrate the value of the SRO model?
19:07 – 19:56
Chris Stone: So, the SRO model was really born out of the great financial crash of 1929. Congress said, well, we need an oversight regulator. We need an SEC. But in addition to SEC, because of the complexity of trading activity and the speed of it, we really need these entities called self-regulatory organizations who will be side-by-side with the industry and real market experts, allow the SEC to be the oversight regulator, but the SRO to be close to the trading activity to understand it and regulate it.
So, I think going back to some of the things we talked about, that's a lot of what my team is able to do in terms of spending time with traders and trading desks, and figuring out what's working and what's not working.
19:56 – 20:05
Margherita Beale: So as we finish up today, what is the main thing that member firms and investors should understand about these changes?
20:05 – 21:43
Chris Stone: I think one thing that I'd like to note on that point is we really like to stress to firms that Transparency Services is here really to help. When we have new enhancements coming, new systems or changes to existing systems, we really try to be diligent about offering sufficient user acceptance, testing opportunities. And beyond the big weekend testing opportunities, we're always here to talk and talk through questions about tech specs or business requirements. So really reach out, use this as a resource. Do your homework, start early. If we have a change coming, it's always better to start early. And I get reports from our tech folks after a weekend test saying who came in and what firms came in to test. And we do a number of tests to ensure we get enough folks in to do the testing, but it's slow at first at times. So I think that's one thing I'd stress is as we're moving into these times where it seems like we're putting in more more enhancements and things are moving faster, just I'd say really be proactive in reaching out to us if you have questions about changes that are coming that we can help with.
And then for investors, the extent your show gets a lot of investor interest, I'd say when you do see a stock price, it's interesting to learn the market structure. Learn where your trade is being executed. It may not be on an exchange, and it may be over the counter. And that's a big part of how our market structure works now. As someone who's worked on market structure for 20 plus years, it's never boring because there's always something developing, whether it's a new trading practice strategy or how technology is being deployed in the space, it really keeps you on your toes and you need to constantly be aware and keep learning and being curious. So that's something I try to do every day.
21:43 – 22:12
Margherita Beale: Fantastic. Well, thanks so much, Chris, for joining us today on this important topic. That's it for today's podcast. Listeners, if you don't already, please be sure to subscribe to FINRA Unscripted wherever you listen to podcasts. All of the resources mentioned in today's podcast will be included on the homepage for the podcast episode. Today's episode was produced by me, Margherita Beale, and engineered by John Williams. Until next time.
22:12 – 23:02
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