Quick Answer
A trade reporting system records an executed securities transaction through a trade report submitted to the applicable reporting system. A member may publish a transaction report only when it believes the purchase or sale is bona fide. A quotation includes a bid, an offer, or a formula inducing one, and needs reasonable cause to believe it is bona fide.
Trade reporting converts an execution into information the market and regulators can rely on.
What Does a Trade Report Record?
- A trade reporting system is a system used to report executed securities transactions.
- A trade report is the record submitted through the applicable reporting system for an executed transaction.
- The reporting process begins only after execution: execution → trade report → market and regulatory information.
When Is a Report or Quotation Bona Fide?
- Transaction-report standard: A member may publish a transaction report only when the member believes it concerns a bona fide purchase or sale. Publishing a report when the member knows or has reason to believe the transaction is not bona fide violates the standard.
- Quotation definition: A quotation includes any bid or offer and any formula, such as "bid wanted" or "offer wanted," designed to induce a person to make or submit a bid or offer.
- Quotation standard: A member needs reasonable cause to believe a published quotation is bona fide, is not fictitious, and is not published for a fraudulent, deceptive, or manipulative purpose.
Exam Tip: Gotchas
- A trade report concerns an executed transaction, but a quotation covers more than proposed price information. A quotation includes a bid, an offer, or a formula designed to induce a person to make or submit a bid or offer.
- A reporting system does not make content bona fide. A member may publish a transaction report only when the member believes the purchase or sale is bona fide. The member needs reasonable cause to believe a published quotation is bona fide, not fictitious, and not published for a fraudulent, deceptive, or manipulative purpose.
What Should You Check on Exam Day?
- Confirm that a trade report follows an executed transaction.
- Recognize that a quotation includes a bid, an offer, or a formula designed to induce a person to make or submit a bid or offer.
- Confirm that the member believes a published transaction report concerns a bona fide purchase or sale. A report violates the standard when the member knows or has reason to believe the transaction is not bona fide.
- Confirm that the member has reasonable cause to believe a published quotation is bona fide, not fictitious, and not published for a fraudulent, deceptive, or manipulative purpose.