Quick Answer
A participant in each transaction, designated by the exchange, must report or ensure the transaction is reported to the exchange within 90 seconds of execution so it can reach time and sales. Both the buyer and the seller immediately build an eight-item transaction record, and the seller, or the buyer if designated, submits it.
The 90-second clock is two duties on two actors, and the exam tests which one a scenario is describing. Build the record, then submit it.
Who Must Report a Transaction to the Exchange, and How Fast?
A participant in each transaction, to be designated by the exchange, must report or ensure the transaction is reported to the exchange within 90 seconds of the execution, in a form and manner prescribed by the exchange, so that the trade information may be reported to time and sales reports.
Late reports carry a consequence. Transactions not reported within 90 seconds after execution are designated as late, and a pattern or practice of late reporting without exceptional circumstances may be considered conduct inconsistent with just and equitable principles of trade and subject to discipline under the exchange's disciplinary rules.
A separate duty runs to the firms behind the trade. For each transaction on the exchange in which a Trading Permit Holder participates, that Trading Permit Holder reports the transaction as promptly as possible to the Trading Permit Holder for whom the transaction was made, or to the Trading Permit Holder that will clear it, or to both, in a form and manner prescribed by the exchange.
Exam Tip: Gotchas
- The exchange designates the reporter. The duty falls on a participant in the transaction to be designated by the exchange, and that participant may report the trade or ensure it is reported.
- Two clocks, two standards. The report to the exchange runs on a 90-second clock, and the report to the firm behind the trade runs on an as promptly as possible standard.
What Goes in the Transaction Record?
For each transaction on the exchange, both the buyer and the seller shall immediately record on a card or ticket, or enter in an electronic data storage medium acceptable to the exchange, eight items. That record constitutes the transaction record.
| Item | Detail |
|---|---|
| Broker initial code | The assigned broker initial code and clearing firm, if a Market-Maker |
| Underlying | The symbol of the underlying security or index |
| Option contract | The type, expiration month and exercise price of the option contract |
| Price | The transaction price |
| Size | The number of contract units comprising the transaction |
| Time | The time of the transaction, obtained from a source designated by the exchange |
| Contra clearing firm | The name of the contra Clearing Trading Permit Holder |
| Contra broker | The assigned broker initial code of the contra Trading Permit Holder |
The transaction record for any agency order also includes the account Capacity.
Exam Tip: Gotchas
- Both sides build the record, immediately. The recording duty falls on the buyer and the seller alike, and the standard is immediate, not within 90 seconds.
- The time comes from a designated source. The time of the transaction is obtained from a source the exchange designates, not from the firm's own clock of choice.
Who Submits the Report Within 90 Seconds?
The seller in each transaction, or the buyer if designated by the exchange, shall also within 90 seconds of the execution submit the transaction report through an electronic data transmission link approved by the exchange or, in certain circumstances, by providing a paper form copy to the price Reporting Authority on the exchange floor.
Four more procedures sit alongside that submission.
- Trading Permit Holders not using an electronic medium to report trades are expected to provide the transaction record to the Trading Permit Holder for whom the transaction was executed, or to the Clearing Trading Permit Holder that will clear the trade, or to both, as promptly as possible.
- A Trading Permit Holder receiving a report of execution from another Trading Permit Holder shall immediately forward the report to the Clearing Trading Permit Holder that will clear the transaction.
- Before submitting the transaction record information for price reporting purposes, the Trading Permit Holder shall use best efforts to make sure that the Designated Primary Market-Maker (DPM) acting in option contracts of the class involved, or the DPM's clerk, is aware of the transaction and its price.
- A Trading Permit Holder shall also submit the transaction record information for price reporting purposes whenever the transaction represents the partial execution of a larger order.
Any floor Trading Permit Holder failing to report a transaction in accordance with the reporting-to-the-firm duty and this procedure may be subject to discipline under the exchange's disciplinary rules.
An outage changes the method, and for orders executed during it, the deadline. Where an exchange system malfunction or disruption leaves a participant unable to electronically report trade information for orders executed in open outcry, the participant records execution information for those orders in a manner and form determined by the exchange.
On resolution of the outage, the participant must resume electronic submission of transaction reports within the 90 second time frame, and must use best efforts to input the execution information electronically for those open outcry orders not later than the close of business on the day the malfunction or disruption ceases.
Exam Tip: Gotchas
- Recording your own side is not submitting. Both sides record immediately, and the 90-second submission falls on the seller, or on the buyer if the exchange designates the buyer.
- A partial execution is still reported for price purposes. The transaction record information goes in whenever the transaction represents the partial execution of a larger order.
What Trade Information Is Filed Each Business Day?
Each Trading Permit Holder files with the exchange trade information, in such form as the exchange prescribes, covering each exchange transaction during each business day, so the exchange can properly match and clear trades. The trade information shows thirteen items for each transaction.
| Item | Detail |
|---|---|
| Clearing firms | The identity of the purchasing Clearing Trading Permit Holder and the writing Clearing Trading Permit Holder |
| Underlying security | The underlying security |
| Exercise price | The exercise price |
| Expiration month | The expiration month |
| Size | The number of option contracts |
| Premium | The premium per unit |
| Executing brokers | The identity of the executing brokers representing both the purchasing and writing Clearing Trading Permit Holders |
| Purchase or writing | Whether a purchase or a writing transaction |
| Opening or closing | Except for a transaction executed by or for a Market-Maker, whether an opening or closing transaction |
| Account | The identity of the account of the Clearing Trading Permit Holder in which the transaction was effected |
| Time | The time of purchase or sale |
| Put or call | Whether a put or call |
| Anything else | Such other information as may be required by the exchange |
Exam Tip: Gotchas
- The opening or closing item carries an exception. It is not required for a transaction executed by or for a Market-Maker, so a Market-Maker trade leaves out that one item.
- This daily file is for matching and clearing, not for time and sales. It is separate from the 90-second report, which exists so the trade can reach time and sales reports.
How Are Off-Exchange Option Trades Reported?
For each transaction a Trading Permit Holder participates in off the exchange, in any option pertaining to an underlying security which is currently approved for exchange transactions, that Trading Permit Holder reports the transaction to the exchange in a form and manner the exchange prescribes. With the identity of participants removed, the exchange makes those transactions public.
The exchange has established a two-part procedure for reporting those transactions.
- For trades executed via an electronic data storage medium or electronic system, trade information shall be immediately submitted to the exchange for trade matching and clearance.
- For trades not executed on an electronic data storage medium or electronic system, trade information shall be immediately recorded on a card or ticket and submitted as soon as reasonably possible.
Exam Tip: Gotchas
- The off-exchange duty is limited by the underlying. It reaches an option pertaining to an underlying security currently approved for exchange transactions, not every option the firm trades away.
- Publication strips the participants. The exchange makes those off-exchange transactions public with the identity of participants removed.
When Is Trade Information Considered Received?
Trade information is considered to have been received by the exchange as of the time electronically recorded by the exchange computer system, when the information has been submitted by electronic transmission to the exchange or entered into an electronic file for processing by the appropriate exchange computer system, except as provided for the Trade Desk route below.
- The point in the system at which the time is electronically recorded is determined by the exchange and uniformly applied to all submissions on any given day.
- The system may treat trade information contained in a batch transmission as not received until the last record in the batch has been entered into an electronic file.
Where a Clearing Trading Permit Holder attempts to send trade information by electronic transmission but is unable to get through, it may contact the exchange's Trade Desk Department to ask whether the exchange's system is ready to receive the transmission.
| What the exchange finds | What happens |
|---|---|
| The system was not ready | Trade information submitted within 10 minutes of being informed by Trade Desk personnel that the system is ready is considered received as of the time the Clearing Trading Permit Holder contacted the Trade Desk, based on the time the Trade Desk personnel recorded |
| The system was and remains ready | The exchange resets the line at its end and informs the firm, and trade information submitted within 10 minutes of being informed is considered received as of the time of contact, based on the time the Trade Desk personnel recorded |
The reset route is narrow. It applies only once for any given day, repetitive use of it by any Clearing Trading Permit Holder shall be investigated, and employing it when no actual attempt was made to transmit trade information makes it inapplicable and is considered conduct inconsistent with just and equitable principles of trade.
Exam Tip: Gotchas
- A batch is received when its last record lands. The system may treat batched trade information as not received until the last record in the batch has been entered into an electronic file.
- The line reset is a once-a-day relief. Repetitive use is investigated, and invoking it without an actual transmission attempt is itself a conduct violation.
What Should You Check on Exam Day?
- Separate recording from submitting: both sides record the eight-item transaction record immediately, and the seller, or the designated buyer, submits within 90 seconds.
- Check whether the scenario is the 90-second time and sales report or the daily file that lets the exchange match and clear trades.
- On a Market-Maker trade, do not expect the opening or closing indicator in the daily trade information.
- For a batch transmission, treat the trade information as received when the last record in the batch is entered into an electronic file.
- Confirm an off-exchange option trade is reported to the exchange, and published with the identity of participants removed.