Notice to Member Summaries Continued

NTM 06-15 – OATS

OATS – Order Audit Trail System.  Compliance date is July 10, 2006.  Members are required to capture and report both the time an order is received from the customer, and the time the order is received at the trading desk or trading department (if those times are different).  OATS provides an accurate, time sequenced record of orders and transactions, beginning with the receipt of an order at first point of customer contact – continuing through order execution.  It also provides for market wide synchronization of clocks in connection with the recording of market events.

If your firm receives and/or handles any orders in Nasdaq securities, (including convertible bonds, SmallCap Securities, or National market Securities), you must comply with the OATS reporting rules. NOT subject to OATS reporting are OTC Bulletin Board, OTC Pink Sheets, mutual funds, and listed securities. Members who introduce 100% of their trades to a single firm will not be subject to the OATS reporting requirements; however, if even a single trade is routed to another firm for execution and clearing, then the OATS reporting requirements apply to the firm for 100% of the trades for which that firm is the broker dealer of record.

Members who have not previously been subject to the OATS Rules that now meet the definition of an OATS Reporting Member must register for OATS by completing a Subscriber Initiation and Registration Form (SIRF) and obtaining an OATS user ID and password.  Firms will be assigned an MPID# for reporting purposes. 

OATS reporting is done by recording the time of receipt for all orders, whether electronic or manual, by utilizing a time stamp to document all three phases of the order processing cycle – Receipt, Entered, and Executed.

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