The Financial Industry Regulatory Authority Calls for Rule Changes in Trade Reporting

The Financial Industry Regulatory Authority is looking forward to bring changes to a currently existing rule and if the same actually takes place, brokerages will be required to report all the trades within 10 seconds, rather than the current rule of a report within 30 seconds time frame.

A filing has already been made to the US Securities and Exchange Commission on this regard on 1st February and the new rule is expected to be applicable to all the equity transactions including even those companies which are not listed on any particular exchange. This rule will be applicable to order cancellations as well. While making the filing, the group stated that more than 99% of the total transactions which are executed by the brokers are already reported within the 10 seconds mark and hence it should not be a problem for the brokerages in anyway.

The Financial Industry Regulatory Authority or Finra, as it is often called, has also strengthened the language to prohibit delays in the reporting and also said that the brokers should be programing systems for reporting the executions as fast as possible. As mentioned in the proposal of Finra, this new rule will ensure that the trade data is a true reflection of the current market.

Incidentally, Finra manages a total of 4300 brokerages and only 22 of the same were not able to report to Finra with even half of the eligible transactions within a time period of 10 seconds on last week, as mentioned in the filing. Most of these brokerages actually route the trades to some other brokers or do not go for the handling responsibilities pretty often, as mentioned in the filing.

If US Securities and Exchange Commission actually decide to approve these proposed changes, the same will take effect around 120 to 180 days after the decision is made. According to the filing, it is not necessary that if the brokerage reports late, there will always be stern actions against the brokerage. Rather, Finra will be closely going through the pattern of late reporting and then decide whether some disciplinary action should be undertaken or not. Some of the exceptional circumstances such as unusual market conditions or system failure will also be considered before making any final decision on any sort of action, as stated in the filing.