In accordance with FINRA Rule 7620A.03, a retail firm is required to attest to its qualifications as a Retail Participant¹, where substantially all of the participant’s trade reporting activity on the FINRA/Nasdaq TRF² comprises Retail Orders. Under FINRA Rule 7620A.01, a Retail Order is defined as an order that originates from a natural person, provided that, prior to submission, no change is made to the terms of the order with respect to price or side of market, and the order does not originate from a trading algorithm or any other computerized methodology. An order from a “natural person” can include orders on behalf of accounts that are held in a corporate legal form, such as an Individual Retirement Account, Corporation, or a Limited Liability Corporation that has been established for the benefit of an individual or group of related family members, provided that the order is submitted by an individual.

The FINRA/Nasdaq TRF has been asked whether this definition applies to firms that utilize so-called “robo-advisory” software to service retail investors. An order does not cease to be a Retail Order simply because a retail firm utilized computerized software to help advise a natural person in making determinations to originate orders or in establishing individual risk or other investment parameters for the retail firm to apply when placing orders on his or her behalf. However, the retail firm must not employ its computerized software to execute routing strategies or order placement with respect to the natural person’s order.

For the avoidance of doubt, the FINRA/Nasdaq TRF also is clarifying the language in the definition of “Retail Order” relating to changes to the order. Once the customer submits an order to the retail firm or, in the case of robo-advisory services, establishes their investment parameters, the firm cannot make any changes to the customer’s order instructions prior to submission for execution. The firm must execute the order on the customer’s behalf as instructed.

If you have any FINRA/Nasdaq Retail Participant program questions, please contact Nasdaq TRF Product Management for more information.

^Footnotes:

^{1: To qualify as a “Retail Participant” and for pricing under the Retail Participant fee schedule, a participant must complete and submit to Nasdaq, as the Business Member, a Retail application and attestation form. The application form requires the participant to attest to its qualifications as a Retail Participant on the FINRA/Nasdaq TRF in which it is a participant. The participant must also attest to its reasonable expectation that it will maintain its qualifications for a one year period following the date of attestation. Once a participant has been designated as a Retail Participant, it must complete and submit a written attestation to Nasdaq on an annual basis to retain its status as such. A Retail Participant must inform Nasdaq promptly if at any time it ceases to qualify or it reasonably expects that it will cease to qualify as a Retail Participant.}

^{2: “FINRA/Nasdaq TRF” means the FINRA/Nasdaq TRF Carteret and the FINRA/Nasdaq TRF Chicago, depending on the facility to which the member firm reports.}

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