Trade Report Modifiers

A modifier tells the tape why a print looks the way it does: late, cash settled, priced off an average, or priced at a moment that is not the moment of execution. Two of them also force a second time field into the report.

Which Modifiers Ride on a Last Sale Report?

Reporting members shall append the applicable trade report modifiers, as specified by FINRA, to all last sale reports, including reports of "as/of" trades.

The Alternative Display Facility (ADF) and both Trade Reporting Facilities list eleven subparagraphs, lettered from A through K, of which D is Reserved:

Where any of the modifiers required by the rule conflict, FINRA shall provide guidance regarding the priorities among modifiers, and members shall report in accordance with that guidance, as applicable.

The order protection rule itself is covered in the unit on Regulation NMS, the SEC's national market system rules.

Exam Tip: Gotchas

• An "as/of" report carries its modifiers too. The preamble reaches all last sale reports including "as/of" trades, so reporting a prior day's trade does not shed the modifier obligation.
• The trade-through modifiers come in a pair. A member relying on an exception or exemption appends the general modifier and, in addition, a unique modifier naming the specific exception or exemption.

How Does the OTC Reporting Facility List Differ?

The OTC Reporting Facility (ORF) list runs to eight subparagraphs, lettered A through H, with D again Reserved. Its A through G match the national market system list, and its H covers pre-opening and after-hours trades executed between 8:00 a.m. and 9:30 a.m. or between 4:00 p.m. and 8:00 p.m. Eastern Time and reported more than 10 seconds after execution.

Two categories are simply absent there:

• Neither trade-through modifier appears, because the order protection rule governs national market system stocks.
• There is no catch-all subparagraph for any other modifier specified by FINRA or the SEC.

The conflict-priority sentence appears in the ORF rule as well.

Exam Tip: Gotchas

• The reserved letter sits in the same position on both lists. D is Reserved at all four facilities, so the count of operative subparagraphs is ten and seven rather than eleven and eight.
• The absent catch-all matters for a new modifier. At the OTC Reporting Facility there is no subparagraph authorising any other modifier FINRA or the SEC may specify.

What Is a Stop Stock Transaction?

Stop Stock Price is defined identically at the Alternative Display Facility, both Trade Reporting Facilities and in the OTC equity definitions. It is the specified price at which a member and another party agree a Stop Stock Transaction shall be executed, based upon the prices at which the security is trading at the time the order is received by the member.

The definition then adds that the specified price may deviate from current market prices to factor in the size of the order and the number of shares available at those prices.

Stop Stock Transaction is a transaction meeting both conditions of its definition, and the two versions of that definition do not read alike:

Exam Tip: Gotchas

• The OTC execution limb carries no "or better". Its agreement limb allows a Stop Stock Price or better, while its execution limb names the Stop Stock Price alone, so the two definitions are not interchangeable.
• The stop stock price is anchored to order receipt, not execution. It is based on the prices at which the security is trading when the member receives the order, and it may deviate from the current market to reflect size.

When Does a Modifier Need a Second Time Field?

Two of the modifiers carry a note requiring an extra time field:

• For a Stop Stock Transaction, the transaction report shall include both the time of execution of the trade and the time at which the member and the other party agreed to the Stop Stock Price.
• For a prior reference point report, the transaction report shall include both the time of execution and the prior reference time.

Each note then carries the same relief. If the trade is executed and reported within 10 seconds of the agreement on the Stop Stock Price, or within 10 seconds from the prior reference point in time, the designated modifier shall not be appended and only the time of execution of the trade shall be reported.

Exam Tip: Gotchas

• The 10-second relief requires execution and reporting inside the window. Executing quickly and reporting slowly leaves the modifier and the second time field in place.
• When the relief applies, the modifier is not merely optional. The rule says the designated modifier shall not be appended and only the execution time is reported.

What Extra Time Does a Block Trade Using an Intermarket Sweep Order Carry?

The Alternative Display Facility and both Trade Reporting Facilities carry a Supplementary Material provision the OTC Reporting Facility does not.

Trade reports of block transactions using the outbound intermarket sweep order (ISO) exception under the order protection rule must include the time that all material terms of the transaction are known, including but not limited to the final number of shares executed after reflecting any fills of routed intermarket sweep orders.

If the time that intermarket sweep orders are sent to trading centers with protected quotations priced superior to the block transaction price is different from the time of execution (when all material terms are known), members must also include that routing time.

Exam Tip: Gotchas

• The material-terms list is open. It reads "including, but not limited to", so the final share count after routed fills is an example rather than the whole of what must be known.
• The second time field is conditional. The routing time is added only where it differs from the time of execution.

What Does the Facility Add on Its Own?

Each facility does two things without being asked:

• It will append the appropriate modifier to indicate that a trade was executed outside normal market hours, or that a report was submitted late, where the report contains the time of execution but does not contain the appropriate modifier.
• It will convert to the late modifier, as applicable, on any pre-opening or after-hours report submitted more than 10 seconds after execution. The OTC Reporting Facility states that conversion for pre-opening and after-hours trades in OTC equity securities.

Exam Tip: Gotchas

• The facility can only fix what it can see. The append step is conditioned on the report containing the time of execution, so an omitted execution time leaves nothing to work from.
• A facility correction is not a defence. The conversion to a late modifier records the lateness rather than curing it.

How Precisely Must Time Be Recorded?

Members shall time-stamp all trade tickets at the time of execution. That sentence sits in the Alternative Display Facility rule and in both Trade Reporting Facility rules; the OTC Reporting Facility rule carries no counterpart.

All four facilities do share the baseline precision requirement. All time fields required by the reporting rules and by the trade report input rules must be reported in hours, minutes, seconds and milliseconds, if the member's system captures time in milliseconds.

When an Industry Member reports an order-execution event to the consolidated audit trail (CAT), the time fields the facility's reporting rule requires must use the same timestamp granularity used for that CAT event. For example, microsecond CAT reporting calls for microsecond facility time fields.

This parity duty applies to CAT-reported order executions, while trades outside that CAT reporting duty remain subject to their applicable baseline precision requirements. CAT event timestamp granularity is covered further in the unit on creating, retaining and reporting required records of orders and transactions.

Exam Tip: Gotchas

• Milliseconds are conditional on the member's own system. The requirement bites where the member's system captures time in milliseconds, so it is a duty to report the precision a firm already has.
• CAT order-execution precision carries into the facility report. Match the granularity used for the CAT event; the milliseconds-if-captured baseline does not cap a microsecond CAT-reported event at milliseconds.
• The time-stamp sentence is not universal across the four rules. It appears at the Alternative Display Facility and both Trade Reporting Facilities and has no counterpart in the OTC Reporting Facility reporting rule.

What Should You Check on Exam Day?

• Count the modifier list by facility: eleven lettered subparagraphs at the three national market system facilities, eight at the OTC Reporting Facility, with one reserved on each list.
• Confirm a stop stock or prior reference report carries two times, unless execution and reporting both happened within 10 seconds.
• Read a stop stock execution against the right definition; the OTC version requires execution at the Stop Stock Price with no "or better".
• Confirm a block trade using an outbound intermarket sweep order reports the time all material terms were known.
• Check whether the member's system captures milliseconds before deciding what precision the time fields owe, and match the CAT event's granularity for an order-execution event reported to CAT.