Quick Answer
A Trading Permit Holder makes, keeps current and preserves the books and records the exchange prescribes and the Exchange Act prescribes, as though it were a registered broker-dealer, and may not refuse to make them available to the exchange. Its automated trade data submission is owed only for transactions the exchange has actually asked about.
The exchange runs two separate recordkeeping tracks. One is a standing duty to keep and produce records. The other fires only when the exchange sends a request for information about particular transactions.
What Books and Records Must a Trading Permit Holder Keep?
Each Trading Permit Holder makes, keeps current and preserves such books and records as the exchange may prescribe and as may be prescribed by the Exchange Act, as though that Trading Permit Holder were a broker or dealer registered under that Act.
Two further sentences complete the duty.
- No Trading Permit Holder shall refuse to make available to the exchange such books, records or other information as may be called for under the rules, or as may be requested in connection with an investigation by the exchange.
- Trading Permit Holders must comply with all applicable recordkeeping and reporting requirements under the rules.
Exam Tip: Gotchas
- The standard is borrowed, not invented. The exchange applies the federal broker-dealer recordkeeping standard to a Trading Permit Holder as though it were registered, so the exchange rule does not have to restate what the records are.
- Refusing to produce is its own violation. The duty to make records available covers both records the rules call for and records requested in connection with an exchange investigation.
Who Must Keep Short Stock Position Records?
One class of firm carries an extra record. Each Trading Permit Holder organization that clears stock transactions, and for which the exchange is the Designated Examining Authority (DEA), maintains records of short stock positions in all customer and proprietary firm accounts.
Those records cover two categories of security: securities listed on a United States registered national securities exchange, and securities whose bids and offers are reported on the automated quotation system operated by the National Association of Securities Dealers, Inc.
- Each such Trading Permit Holder that is not required to report short interest data to another stock exchange or to that association as a result of being a Trading Permit Holder of such organization reports those short stock positions to either a stock exchange or to that association, as the exchange so directs.
- The form, manner and time of the report are specified by the appropriate exchange or by that association.
Exam Tip: Gotchas
- Two conditions gate the duty. The organization must clear stock transactions and the exchange must be its Designated Examining Authority, so a Trading Permit Holder failing either condition is outside the record.
- The report is a fallback, not a duplicate. It is owed by a firm not required to report short interest data to another stock exchange or to that association as a result of being a Trading Permit Holder there, and the destination is chosen by the exchange's direction.
What Trade Data Must Be Submitted in an Automated Format?
A Trading Permit Holder or Trading Permit Holder organization submits the specified trade data elements in such automated format as the exchange may prescribe from time to time, in regard to the transaction or transactions that are the subject of a particular request for information made by the exchange.
For a proprietary transaction, the submission covers eight data elements. A proprietary transaction here means one effected or caused to be effected by the Trading Permit Holder or its organization for any account in which that Trading Permit Holder or organization, or any member, allied member, approved person, partner, officer, director or employee of it, is directly or indirectly interested.
| Element | Detail |
|---|---|
| Submitter identifier | Clearing house number, or alpha symbol as used by the Trading Permit Holder or organization submitting the data |
| Contra identifier | Clearing house numbers, or alpha symbols as may be used from time to time, of the Trading Permit Holders or organizations on the opposite side of the transaction |
| Security symbol | The identifying symbol assigned to the security and, where applicable for options, the month and series symbols |
| Execution date | The date the transaction was executed |
| Size and character | The number of option contracts for each specific transaction and whether each transaction was an opening or closing purchase or sale; and where applicable the number of shares traded or held by accounts for which option data is submitted; and where applicable the number of shares for each specific transaction and whether each transaction was a purchase, sale or short sale |
| Price | The transaction price |
| Account number | The account number |
| Market center | The market center where the transaction was executed |
Exam Tip: Gotchas
- This submission is request-driven, not periodic. It is owed only for the transactions that are the subject of a particular request for information made by the exchange.
- The share limb covers shares held, not only shares traded. Where applicable, the submission gives the number of shares traded or held by accounts for which option data is submitted, on top of the per-transaction share figures.
What Extra Information Does a Customer Transaction Require?
Where the transaction was effected or caused to be effected by the Trading Permit Holder organization for any customer account, the organization submits the eight proprietary data elements plus two further items.
- Customer name, address or addresses, branch office number, registered representative number, whether the order was solicited or unsolicited, date the account was opened, employer name, and the tax identification number or numbers.
- If the transaction was effected for a Trading Permit Holder broker-dealer customer, whether that broker-dealer was acting as principal or agent on the transactions that are the subject of the exchange's request.
Two provisions close the rule.
- In addition to the trade data elements above, a Trading Permit Holder or organization shall submit such other information in such automated format as the exchange may prescribe, as may from time to time be required.
- The exchange may grant exceptions, in such cases and for such time periods as it deems appropriate, from the requirement that the proprietary and customer data elements be submitted in an automated format.
Exam Tip: Gotchas
- The exception runs to the format, not to the data. The exchange may excuse automated submission; the rule does not give it power to excuse the elements themselves.
- Solicited or unsolicited is a required field. The customer submission carries the order's solicitation status alongside the identifying details and the account opening date.
What Should You Check on Exam Day?
- Read the exchange recordkeeping duty as the federal broker-dealer standard applied as though the Trading Permit Holder were registered, plus a duty not to refuse production.
- For short stock position records, check both conditions: the organization clears stock transactions and the exchange is its Designated Examining Authority.
- Treat the automated trade data submission as owed only for transactions the exchange has specifically requested.
- On a customer transaction, look for the solicitation status, the account opening date and the tax identification numbers on top of the eight proprietary elements.