Quick Answer
Every market center reports monthly on covered orders in national market system stocks. A broker or dealer that is not a market center reports only if it introduces or carries 100,000 or more qualifying customer accounts, which triggers a required reporting period. Reports are electronic, categorized by security, order type and order size, and cover three order-type populations.
These are public execution-quality statistics. The rule presents them as a starting point for visibility and competition, particularly on execution price and speed, and it fixes the order populations and the columns tightly.
Who Must Publish a Monthly Execution Report?
Every market center, and every broker or dealer that meets the account threshold below, makes available, for each calendar month, a report on the covered orders in national market system (NMS) stocks it received for execution from any person, or received for execution in a prior calendar month but which remained open.
A broker or dealer that is not a market center is not subject to the rule unless it introduces or carries 100,000 or more customer accounts through which transactions in NMS stocks are effected, and meeting that threshold triggers a required Reporting Period.
The rules for that period determine when reporting starts, its minimum duration and when reporting may stop after the firm falls below the threshold. Those details are covered in Summary Execution Statistics.
A market center means any exchange market maker, over-the-counter market maker, alternative trading system (ATS), national securities exchange, or national securities association.
Two participants report separately from the entity they sit inside.
- Any over-the-counter market maker that provides a trading system for only a single dealer to solely buy and sell securities against all other persons entering orders in that system produces a separate report pertaining only to covered orders entered in that trading system.
- Alternative trading systems prepare reports separately from their broker-dealer operators, to the extent those entities are required to prepare reports.
Each report is in electronic form, is categorized by security, order type and order size, and includes the columns of information the rule then sets out.
Exam Tip: Gotchas
- The population is orders received, not orders executed. Orders that remained open from a prior calendar month are pulled into the current month's report, and shares cancelled before execution are a reported column.
- An alternative trading system does not fold into its operator's report. It prepares its report separately from its broker-dealer operator, so one legal entity can owe two reports.
Which Orders Are Covered Orders?
A covered order is either of two things.
- Regular-hours market and limit orders. Any market order or any limit order, including immediate-or-cancel orders, received by a market center, broker or dealer during regular trading hours, at a time when a national best bid and national best offer is being disseminated, and after the primary listing market has disseminated its first firm, uncrossed quotations in the security.
- The order qualifies only if, when executed, it is executed during regular trading hours.
- Non-marketable limit orders received outside those windows. Any non-marketable limit order, including an order submitted with a stop price, received outside of regular trading hours, or at a time before the primary listing market has disseminated its first firm, uncrossed quotations in the security, or at a time when a national best bid and national best offer is not being disseminated.
- This order also qualifies only if, when executed, it is executed during regular trading hours.
Covered order excludes any order for which the customer requests special handling for execution. The rule gives an open list of examples, introduced with the words "including, but not limited to":
- Orders to be executed at a market opening price or a market closing price
- Orders to be executed only at their full size
- Orders to be executed on a particular type of tick or bid
- Orders submitted on a not held basis
- Orders for other than regular settlement
- Orders to be executed at prices unrelated to the market price of the security at the time of execution
Exam Tip: Gotchas
- The special-handling exclusion list is open, not closed. The rule says "including, but not limited to", so an order carrying special handling the rule never names is still excluded.
- A not held order is one member of that list, not the whole of it. Market-on-open, market-on-close, all-or-none, tick-conditioned, non-regular-settlement and away-from-the-market orders are excluded on the same footing.
What Goes in the Order-Type Report?
The detailed report runs over three order-type populations, each with its own set of columns.
| Population | Order types it covers | Columns |
|---|---|---|
| First | Market orders, marketable limit orders, marketable immediate-or-cancel orders, midpoint-or-better limit orders, midpoint-or-better limit orders that are immediate-or-cancel, executable non-marketable limit orders, executable non-marketable limit orders that are immediate-or-cancel, executable market orders submitted with stop prices, executable stop marketable limit orders, and executable stop non-marketable limit orders | 25 |
| Second | Market orders, marketable limit orders, marketable immediate-or-cancel orders, midpoint-or-better limit orders, midpoint-or-better limit orders that are immediate-or-cancel, executable market orders submitted with stop prices, and executable stop marketable limit orders | 19 |
| Third | Midpoint-or-better limit orders, midpoint-or-better limit orders that are immediate-or-cancel, executable non-marketable limit orders, executable non-marketable limit orders that are immediate-or-cancel, and executable stop non-marketable limit orders | 4 |
The first population's 25 columns are volume, speed and spread measures.
| Group | Columns |
|---|---|
| Volume | The number of covered orders; their cumulative notional value; their cumulative number of shares; the cumulative shares cancelled prior to execution; the cumulative shares executed at the receiving market center, broker or dealer, excluding shares executed on a riskless principal basis; and the cumulative shares executed at any other venue |
| Execution speed | Eight buckets of cumulative shares executed: less than 100 microseconds; 100 microseconds to less than 1 millisecond; 1 millisecond to less than 10 milliseconds; 10 milliseconds to less than 1 second; 1 second to less than 10 seconds; 10 seconds to less than 30 seconds; 30 seconds to less than 5 minutes; and 5 minutes or more. Each is measured after the time of order receipt or, for non-marketable limit orders or orders submitted with stop prices, after the time the order becomes executable |
| Realized spread | The average realized spread and the average percentage realized spread, each calculated 50 milliseconds, 1 second, 15 seconds, 1 minute and 5 minutes after the time of execution |
| Midpoint | The average midpoint for executions of covered orders |
The second population's 19 columns measure price against the quote.
| Group | Columns |
|---|---|
| Spreads | The average quoted spread; the average effective spread; the average percentage effective spread; and the average effective spread divided by the average quoted spread, expressed as a percentage |
| Against the quote | Cumulative shares executed with price improvement, with the share-weighted average amount per share prices were improved and the share-weighted average period to execution; cumulative shares executed at the quote, with that same period measure; and cumulative shares executed outside the quote, with the share-weighted average amount per share prices were outside the quote and that same period measure |
| Against the best available displayed price | Cumulative shares executed with price improvement relative to that price, with the share-weighted average amount per share improved; cumulative shares executed at that price; and cumulative shares executed outside it, with the share-weighted average amount per share they were outside it |
| Order size benchmark | The cumulative shares of the order size benchmark; and the sum of, for each execution, the greater of the price-improved shares plus the at-the-quote shares minus the order size benchmark, or zero |
Each period measure above runs from the time of order receipt to the time of order execution, expressed in increments of a millisecond or finer. For midpoint-or-better limit orders, midpoint-or-better limit orders that are immediate-or-cancel, executable market orders submitted with stop prices and executable stop marketable limit orders, it runs from the time the order first becomes executable.
The third population's four columns measure whether a resting order could have been filled.
- The number of covered orders that received either a complete or partial fill.
- The cumulative number of shares executed regular way at prices that could have filled the order while the order was in force, as reported under an effective transaction reporting plan or effective national market system plan, with the share count capped at the order size for each order.
- The same figure limited to executions on any national securities exchange, again capped at the order size for each order.
- For shares executed, the share-weighted average period from the time the order becomes executable to the time of order execution, expressed in increments of a millisecond or finer.
Exam Tip: Gotchas
- The three populations overlap on purpose. A midpoint-or-better limit order appears in all three; a plain market order appears in the first two and never in the third.
- The speed buckets and the realized-spread measures start from different events. A speed bucket runs from order receipt, or from the moment a non-marketable or stop order becomes executable. A realized spread runs from the time of execution.
What Should You Check on Exam Day?
- Confirm the reporting entity: a market center reports whatever its customer account count, and every market center owes the monthly report on covered orders it received.
- Test the order against the covered order definition, including the open special-handling exclusion list, before assuming it belongs in the report.
- Match the statistic to its population: resting-order fill measures belong to the third population, quoted and effective spreads to the second.
- Check the clock the statistic starts from, order receipt or executability for speed, and time of execution for realized spread.
- Remember an alternative trading system prepares its report separately from its broker-dealer operator.