Welcome to Creating, Retaining and Reporting Required Records of Orders and Transactions: the unit that turns every order a trader touches into a dated, time-stamped, retrievable record, and then hands that record to a regulator.
Exam Weight: about 3 of the 50 scored items (CertFuel planning estimate; FINRA publishes weights only by function, and Function 2, Maintaining Books and Records, Trade Reporting and Clearance and Settlement, is 9 items / 18%)
What You'll Learn
In this unit, you'll cover:
- Large Trade ID and Related Reporting Requirements: the two routes to large trader status, the two activity levels, the eight excluded transaction categories, and the aggregation rules
- Filing Form 13H and Disclosing Large Trader Status: the three filing triggers, the disclosure a trader owes its executing firms, and the three ways the identification requirements switch off
- Large Trader Monitoring Requirements: the transaction records a broker-dealer keeps, the request-driven report to the SEC, and the safe harbor that turns an unknown customer into an Unidentified Large Trader
- Order Execution Information: the monthly execution-quality report, the covered order definition, and the three order-type populations and their columns
- Summary Execution Statistics and Reporting Thresholds: the second monthly report, its size bands and columns, the posting rules, and the customer-account threshold for a broker that is not a market center
- Order Routing Information: the quarterly routing report, the ten-venue and five percent tests, and the payment and relationship disclosures
- Customer Requests for Routing Information: the six-month venue disclosure, the not held order handling report, and the two thresholds that switch that report off
- Consolidated Audit Trail (CAT) Reporting Obligations: who reports, which securities the duty runs on, and the defined terms the field lists are built from
- CAT Required Fields by Reportable Event: the items recorded on origination, routing, receipt, modification, cancellation and execution, and the extra fields an alternative trading system adds
- CAT Received Data and Reporting Exceptions: the received data a member reports, the two reliefs for a trade reported to a FINRA facility, and the options market maker quote exception
- CAT Reporting Timing and Time Stamps: the contemporaneous recording duty, the 8:00 a.m. Eastern Time deadline, the error-correction clock and time-stamp granularity
- Business Clock Synchronization: the fifty-millisecond audit trail tolerance, the one-second residual tolerance, and the logging, certification and violation-reporting duties
- Consolidated Options Audit Trail System (COATS): what systematizing an order means, the fields that go in before representation, the outage procedure, and what an approved proprietary system must do
- Reporting Options Transactions to the Exchange: the 90-second report, the eight-item transaction record, the daily matching file, and when trade information counts as received
- Correcting a Trade Through the Clearing Editor: the trading-date correction window, the default values a firm may later change, and why an accepted change is not a compliance finding
- Exchange Books, Records and Automated Trading Data: the exchange-level recordkeeping duty, the short stock position records, and the request-driven trade data submission
- Books and Records Requirements: the general recordkeeping rule, the blotters, ledgers and securities record, and the three-year and six-year retention groups
- Order Memoranda and Trading Records: what the order ticket must show, the firm's own memorandum, and the confirmation, options and internal-system records
- Account Designations and Pre-Time Stamping: naming the account before execution, principal approval of a change, adviser allocations, and the pre-time stamping prohibition
- ATS Transparency: the volume figures FINRA publishes for each alternative trading system, and why they never merge with a member's own published volume
Why This Matters
A securities trader creates records all day without thinking about them: an order ticket, a routing decision, an execution report, a time stamp. Function 2 tests whether you know which of those become regulatory records, what each must contain, how fast it must be reported, and how long it must be kept.
The unit moves from the trader who must identify itself, to the reports the public sees, to the audit trail the regulators see, to the paper and electronic records the firm keeps:
- Who has to raise a hand, and at what level of activity
- What the firm publishes about how it executes and routes orders
- What every order lifecycle event owes the central repository, and by when
- What the order ticket must show, and how long it lives
Let's start with the trader whose own activity forces an identification filing.