Self-regulatory organization, the Financial Industry Regulatory Authority (FINRA) is quietly putting an expiration date of September 1, 2021, on the Order Audit Trail System (OATS) as the Consolidated Audit Trail (CAT) reaches a new level of reliability.
In typical legalese, FINRA officials released the following Regulatory Notice 21-21: “Effective September 1, 2021, FINRA is amending its rulebook to eliminate … the FINRA Rule 7400 Series and FINRA Rule 4554 (Alternative Trading Systems — Recording and Reporting Requirements of Order and Execution Information for NMS Stocks).” Translated, the notice, dated June 17, officially marks the end of the “OATS Rules,” and an era.
The OATS platform is “an integrated audit trail of order, quote, and trade information for all NMS stocks and OTC equity securities. FINRA uses this audit trail system to recreate events in the life cycle of orders and more completely monitor the trading practices of member firms,” according to FINRA.
The OATS Rules require FINRA member firms “to develop a means for electronically capturing and reporting to OATS specific data elements related to the handling or execution of orders, including recording all times of these events in hours, minutes, and seconds, and to synchronize their business clocks. These Rules were approved by the SEC on March 6, 1998,” according to FINRA.
In the meantime, the CAT system has evolved to replace OATS.
“FINRA has determined that the accuracy and reliability of the Consolidated Audit Trail (CAT) meet the standards approved by the SEC and has determined to retire OATS as of September 1, 2021,” according to the bulletin. “As of September 1, 2021, the updated rule text will be available in the FINRA Manual.”
Late last year, “the SEC approved FINRA’s proposed rule change to delete the OATS Rules from the FINRA Rulebook once members are effectively reporting to the CAT and the CAT’s accuracy and reliability meet certain standards,” according to FINRA. “On June 17, 2021, FINRA filed a proposed rule change for immediate effectiveness setting forth the basis for its determination that the CAT meets these standards.2 The OATS Rules will be deleted from the FINRA rulebook effective September 1, 2021.”
FINRA says the last days of the OATS Rules will be as follows:
- “Firms must continue to report to OATS all order events that occur on or before August 31, 2021. Reports submitted to OATS for order events that occur after August 31, 2021, will be rejected. In other words, August 31, 2021, will be the last ‘OATS Business Day,’ as defined under Rule 7450(b)(3), for which OATS will accept order events and perform routine processing (including incorporation of corrections and repairs of rejections).”
- “OATS will continue to accept reports for order events that occur on or before August 31, 2021, (including, but not limited to, late and corrected reports for such order events) through September 16, 2021. … [which] is the last day OATS will accept reports for order events that occur on or before August 31, 2021.
- “Firms must ensure that their OATS reporting is accurate and complete for all order events that occur on or before August 31, 2021. To assist firms in meeting their reporting obligations, existing OATS guidance will remain posted and available on FINRA’s website for a period of time following OATS retirement.”
“With respect to order events that occur on or before August 31, 2021,” FINRA officials want firms to comply with the OATS Rules even though they will be retired after September 1. “If, after that date, firms discover errors in their OATS reporting, including inaccurate, incomplete, or missing data, they must notify FINRA via email to the OATS Help Desk at firstname.lastname@example.org.”
The OATS Help Desk at (800) 321-6273 will also take your calls.