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Tuesday, October 15, 2019

Equity Trader Alert #2019 - 82
FINRA/Nasdaq TRF to Modify Step-in/Step-out Handling to NSCC

Category:

  • System Impact

Markets Impacted:

Contact Information:

Resources:

What do firms need to know?

Nasdaq will be modifying its TRF step-in/step-out handling downstream to ensure that the step-in/step-out indicator it sends to NSCC is from the perspective of the ‘seller’.

The new handling will be effective as of Monday, November 18th in FINRA / Nasdaq TRF Chicago, and the following Monday, November 25th in FINRA/ Nasdaq TRF Carteret.

This does not change the way firms report step-ins/step-outs to the FINRA/Nasdaq TRFs. This only changes the handling downstream by the FINRA/Nasdaq TRFs to NSCC.

Who will be impacted?

Clearing firms and their correspondents will see that their FINRA/Nasdaq TRF clearing report step-in/step-out indicator is in line with NSCC requirements. Note that this change is consistent with the way step-outs are processed by the FINRA OTC Reporting Facility (ORF) today.

What is Changing?

Nasdaq will be making modifications to its TRF step-in/step-out handling downstream to ensure that the indicator it sends to NSCC is from the seller’s perspective. This modification addresses a particular use case where a firm would notice a discrepancy, specifically, when, as the executing firm, it steps out and is the buyer. In accordance with FINRA guidance, the clearing report submitted to the FINRA/Nasdaq TRF currently reflects the buyer stepping out. However, NSCC interprets the seller as stepping out, and hence, there is a mismatch. The modification being released on November 18th and 25th would ensure that in the stated case, the FINRA/Nasdaq TRF submission to NSCC reflects that the seller is stepping into the position.

As noted above, this does not change the way firms report step-ins/step-outs to the FINRA/Nasdaq TRFs. This only changes the handling downstream by the FINRA/Nasdaq TRFs to NSCC.

Testing Information for Customers

Firms are encouraged to test in advance of the production change, specifically, those who clear through the FINRA/Nasdaq TRF.

Firms wishing to test the step-in/step-out modification are encouraged to use the Nasdaq Test Facility for a free 30-day period beginning October 16th. Firms must contact ntfbilling@nasdaq.com via email prior to testing to begin the test period.

More Information

If you have any questions, please email Nasdaq TRF Ops or contact Nasdaq Trading Services at +1 212 231 5180 with any questions.


FINRATM, Trade Reporting FacilityTM and TRFTM are trademarks of Financial Industry Regulatory Authority, Inc.; FINRA/Nasdaq TRFTM is used under the license for Financial Industry Regulatory Authority, Inc.


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