In March, FINRA updated 2 sections of its Frequently Asked Questions for Trade Reporting: (i) Short Sales and Short Sale Exempt Indicators; and (ii) Reporting Transactions for Regulatory Purposes  - Odd Lot Transactions.  Since FINRA doesn't clearly map out what changes were made, at least they indicate the sections that have changed. The C-I Takeaway: If your firm or client reports trades, responsible individuals should, at least, glance through the sections below that have changed (denoted by FINRA as "New Graphic").  The FAQs were last updated on 3/9/12.  A link to the applicable page on the FINRA Web site is provided at the end of the post. Trade Report Modifiers and Other Indicators. Section 407: Short Sale and Short Sale Exempt Indicators.    New Graphic Q407.1: Members BD1 and BD2 execute a trade. BD1 has the trade reporting obligation and BD2 is selling short (or short exempt).  Is BD1 responsible for showing that BD2 is selling short (or short exempt) in the trade report submitted to FINRA?      New Graphic A407.1: Yes; if BD2 will not have an opportunity to submit its own trade information by using the acceptance and comparison functionality, then BD1 must indicate in the trade report that BD2 was selling short (or short exempt).  If the parties are using the acceptance and comparison functionality, then BD2 would indicate that it was selling short (or short exempt) when submitting its own trade information;  BD1 would not be responsible for providing such information.  See Rules 6282(c), 6282(d), 7230A(d), 7230B(d) and 7330(d). See also FAQ 204.4. Q407.2: Member BD1 executes a trade with its customer (or a non-member broker-dealer).  BD1 has the trade reporting obligation and the customer (or non-member broker-dealer) is selling short (or short exempt).  Is BD1 responsible for showing that the customer (or non-member broker-dealer) is selling short (or short exempt) in the trade report submitted to FINRA?      New Graphic A407.2: Yes, BD1 is responsible for showing that the customer (or non-member broker-dealer) is selling short (or short exempt) in the trade report.  See Rules 6282(c), 6282(d), 7230A(d), 7230B(d) and 7330(d). Q407.3: When reporting a cross trade to FINRA, should the trade report be marked with the short sale (or short sale exempt) indicator, if applicable?    New Graphic A407.3: Yes. Reports of cross trades should be marked with the short sale (or short sale exempt) indicator, if applicable, but only in accordance with the guidance set forth in this Section 407.  See Rules 6282(c), 6282(d), 7230A(d), 7230B(d) and 7330(d). Q407.4: Member BD1 matches as agent a buy order from a customer (or non-member broker-dealer) with an order to sell short (or short exempt) for the same quantity of shares at the same price from another customer (or non-member broker-dealer).  How should this transaction be reported?     New Graphic A407.4: BD1 is the executing party and has the trade reporting obligation.  BD1 should report this trade as an agency cross (see FAQ 306.1) and should include the short sale (or short sale exempt) indicator in the trade report. Q407.5: Member BD1 matches as agent a buy order from member BD2 and an order to sell short (or short exempt) for the same quantity of shares at the same price from member BD3.  How should this transaction be reported?     New Graphic A407.5: BD1 is the executing party and has the trade reporting obligation.  (See FAQ 307.1.)  BD1 can report this transaction in one of three ways, and because the party selling short (or short exempt), BD3, is a FINRA member, BD1 should include the short sale (or short sale exempt) indicator only in the report (tape or non-tape) that identifies BD3 as the seller: Alternative #1

Tape report: BD1 (as agent) reports a cross—no short sale (or short sale exempt) indicator Non-tape report #1: BD1 (as agent) buys from BD3—short sale (or short sale exempt) indicator Non-tape report #2: BD1 (as agent) sells to BD2—no short sale (or short sale exempt) indicator

Alternative #2

Tape report: BD1 (as agent) buys from BD3—short sale (or short sale exempt) indicator Non-tape report: BD1 (as agent) sells to BD2—no short sale (or short sale exempt) indicator

Alternative #3

Tape report: BD1 (as agent) sells to BD2—no short sale (or short sale exempt) indicator Non-tape report: BD1 (as agent) buys from BD3—short sale (or short sale exempt) indicator

Q407.6: Assume the same facts as FAQ 407.5.  For purposes of this example, BD1 elects to report under Alternative #2 (i.e., the tape report shows BD1 and BD3 as the parties to the trade).  BD1 fails to include the short sale (or short sale exempt) indicator in the tape report.  Can BD1 submit a non-tape report to show that BD3 was selling short (or short exempt)?       New Graphic A407.6: No. If BD1 identifies BD3 in the tape report, but fails to include the short sale (or short sale exempt) indicator in that report, BD1 must cancel and replace the original tape report with a new tape report that includes the short sale (or short sale exempt) indicator.  In such instance, BD1 would not be required to cancel an associated clearing-only report, assuming that BD1 submits a tape only cancellation and then re-reports the trade between BD1 and BD3, with the short sale (or short sale exempt) indicator, as tape only. Q407.7: Assume the same facts as FAQ 407.5. For purposes of this example, BD1 elects to report under Alternative #3 (i.e., the non-tape report shows BD1 and BD3 as the parties to the trade).  BD1 fails to include the short sale (or short sale exempt) indicator in the non-tape report.  Can BD1 submit a second non-tape report to show that BD3 was selling short (or short exempt)?       New Graphic A407.7: No. If BD1 identifies BD3 in the non-tape report, but fails to include the short sale (or short sale exempt) indicator in that report, BD1 must cancel and replace the original non-tape report with a new non-tape report that includes the short sale (or short sale exempt) indicator.  In such instance, BD1 would not be required to cancel the original tape report. Q407.8: Member BD1 matches as agent a buy order from member BD2 and an order to sell short (or short exempt) for the same quantity of shares at the same price from a customer (or non-member broker-dealer).  How should this transaction be reported?     New Graphic A407.8: BD1 is the executing party and has the trade reporting obligation.  (See FAQ 308.1.)  BD1 can report this transaction in one of 3 ways, and because the party that is selling short (or short exempt) is not a member, BD1 should include the short sale (or short sale exempt) indicator in the tape report under all 3 alternatives: Alternative #1

Tape report: BD1 (as agent) reports a cross—short sale (or short sale exempt) indicator Non-tape report: BD1 (as agent) sells to BD2—no short sale (or short sale exempt) indicator

Alternative #2

Tape report: BD1 (as agent) sells to BD2—short sale (or short sale exempt) indicator Non-tape report: Not required

Alternative #3

Tape report: BD1 (as agent) buys from customer (or non-member)—short sale (or short sale exempt) indicator Non-tape report: BD1 (as agent) sells to BD2—no short sale (or short sale exempt) indicator

Q407.9: Member BD1 matches as agent a buy order from a customer (or non-member broker-dealer) and an order to sell short (or short exempt) for the same quantity of shares at the same price from member BD2.  How should this transaction be reported?   New Graphic A407.9: BD1 is the executing party and has the trade reporting obligation.  (See FAQ 308.1.)  BD1 can report this transaction in one of three ways, and because the party selling short (or short exempt), BD2, is a FINRA member, BD1 should include the short sale (or short sale exempt) indicator only in the report (tape or non-tape) that identifies BD2 as the seller: Alternative #1

Tape report: BD1 (as agent) reports a cross—no short sale (or short sale exempt) indicator Non-tape report: BD1 (as agent) buys from BD2—short sale (or short sale exempt) indicator

Alternative #2

Tape report: BD1 (as agent) buys from BD2—short sale (or short sale exempt) indicator Non-tape report: Not required

Alternative #3

Tape report: BD1 (as agent) sells to customer or non-member—no short sale (or short sale exempt) indicator Non-tape report: BD1 (as agent) buys from BD2—short sale (or short sale exempt) indicator

Q407.10: Member BD1’s customer wants to sell 100 shares of ABCD, and BD1 will handle the customer’s order on a riskless principal basis.  The customer is long the 100 shares of ABCD;  however, BD1 does not have 100 shares of ABCD in its proprietary account.  Is BD1 required to mark its sale to the street with the short sale (or short sale exempt) indicator?   New Graphic A407.10: Yes.  Even though BD1’s customer is long the shares, since BD1 does not have the shares in its proprietary account, it must use the short sale (or short sale exempt) indicator when routing the order to the street for execution.  Accordingly, the trade report(s) showing the sale from BD1 to the street must include the short sale (or short sale exempt) indicator. Q407.11: If the tape report of a trade contains the short sale (or short sale exempt) indicator, should the non-tape report for that same trade also contain the short sale (or short sale exempt) indicator?     New Graphic A407.11: No.  Firms should include the short sale (or short sale exempt) indicator in only one report, i.e., the report that identifies the short (or short exempt) seller.  If both the tape report and non-tape report identify the short (or short exempt) seller, then the short sale (or short sale exempt) indicator should be used in the tape report only. ============================================ Reporting Transactions for Regulatory Purposes Section 604: Odd Lot Transactions New Graphic Q604.1: What is an odd lot for purposes of the trade reporting rules?      New Graphic A604.1: For purposes of the trade reporting rules, an odd lot is less than a "normal unit of trading," which is generally defined as “100 shares of a security unless, with respect to a particular security, FINRA determines that a normal unit of trading shall constitute other than 100 shares.” See, e.g., Rules 6320A and 6320B. Q604.2: How should odd lot transactions be reported to FINRA for regulatory transaction fee purposes?      New Graphic A604.2: When reporting odd lot transactions to FINRA for regulatory transaction fee purposes, firms must mark the trade report for media dissemination (i.e., "for publication" or as "tape eligible"), and report to FINRA within 30 seconds of trade execution. See, e.g., FAQ 102.1. Q604.3: Are odd lot transactions disseminated?      New Graphic A604.3: Although reports of odd lot transactions are marked "for publication" or as "tape eligible," with the general exception of certain high-priced securities, transactions of fewer than 100 shares are not publicly disseminated by FINRA or the appropriate securities information processor.  See Trade Reporting Notice 3/18/08 (Revised Policy for Disseminating Reports of Fewer Than 100 Shares). For further details, go to:   [FINRA - Trade Reporting FAQs, Last Update 3/9/12].