This chapter covers about 9 of the 50 scored items (18% of the exam, a CertFuel planning estimate). Function 2 of the exam: reporting trades to the right facility, creating and keeping the required order and transaction records including the consolidated audit trail (CAT), and clearance and settlement.
What You'll Learn
| Unit | Topic | Lessons |
|---|---|---|
| 1 | Reporting Trades to the Designated Reporting Facility | The Reporting Obligation and Which Facility Takes the Trade; Distinctions Among the Reporting Facilities; Multiple MPIDs for Reporting Facility Participants; Which Party Reports, and What the Report Contains; Timing of Trade Reports; Trade Report Modifiers; Tape, Non-Tape and Clearing-Only Reports, and Trades That Are Not Reported; Trade Report Input, Acceptance and Processing; Obligation to Honor Trades and Audit Trail Requirements; Trade Reporting Exemptions for Alternative Trading Systems; Violation of the Reporting Rules |
| 2 | Creating, Retaining and Reporting Required Records of Orders and Transactions | Large Trade ID and Related Reporting Requirements; Filing Form 13H and Disclosing Large Trader Status; Large Trader Monitoring Requirements; Order Execution Information; Summary Execution Statistics and Reporting Thresholds; Order Routing Information; Customer Requests for Routing Information; Consolidated Audit Trail (CAT) Reporting Obligations; CAT Required Fields by Reportable Event; CAT Received Data and Reporting Exceptions; CAT Reporting Timing and Time Stamps; Business Clock Synchronization; Consolidated Options Audit Trail System (COATS); Reporting Options Transactions to the Exchange; Correcting a Trade Through the Clearing Editor; Exchange Books, Records and Automated Trading Data; Books and Records Requirements; Order Memoranda and Trading Records; Account Designations and Pre-Time Stamping; ATS Transparency |
| 3 | Clearance and Settlement | Confirmations; Standard Settlement Time Frames for Various Products; Ex-Dividend, Ex-Rights and Ex-Warrants Dates; Clearing and Settling Facility and Corporate Debt Trades; Options Clearing Corporation Assignment Procedure; Close-Out Requirements for Various Products |
Why This Chapter Matters
Function 2 of the exam, Maintaining Books and Records, Trade Reporting and Clearance and Settlement, is 9 of the 50 scored items across three units. It follows a trade after execution: which facility takes the report and how fast, what records the firm must make and keep and what it reports to the consolidated audit trail, and how the trade clears, settles and closes out.
Exam Strategy
FINRA publishes weights by function only, so the per-unit figures in each introduction are planning estimates. Focus on:
- Trade reporting starts with the facility. Know which trades go to a Trade Reporting Facility, the Alternative Display Facility or the OTC Reporting Facility, who reports, the 10-second clock and the modifiers.
- Records are tested by period and by content. Learn which records are six-year and which are three-year, the first two years in an easily accessible place, and what an order memorandum must show.
- The consolidated audit trail has its own clocks and fields. Clock synchronization tolerances, the reporting deadline and the required order events are the tested facts.
- Settlement is T+1 for most products. Know the exceptions, the ex-dividend date rules, the confirmation content the SEC and FINRA require, and the buy-in and sell-out procedures when delivery fails.
-> Start Unit 1: Reporting Trades to the Designated Reporting Facility