With FINRA reinstituting "short sale exempts" for trade reports to its trade reporting (TRF) and Alternative Display Facilities (ADF) - set for 11/10 - changes are needed for the OATS route reports.  They'll need to include price and a short-exempt identifier, if applicable.   The 11/10/10 start date is consistent with the compliance date of the amendments to SEC Reg. SHO.

On 2/26/10, the SEC adopted amendments to Reg. SHO that, among other things, implement a short-sale circuit breaker for NMS stocks triggered by a 10% or more decrease in the price of the security from the security’s closing price at the end of regular trading hours on the prior trading day.

As amended, Reg. SHO provides several exemptions to the short sale price test restriction and sets forth provisions under which a short sale order may be marked “short exempt.” These provisions include: 

(i) B/D pols and procedures; (ii) seller’s delay in delivery;  (iii) odd lot transactions;  (iv) domestic arbitrage;  (v) international arbitrage;  (vi) over-allotments and lay-off sales;  (vii)riskless principal transactions; and, (viii) transactions on a VWAP basis.

Consistent with these amendments to Reg. SHO, FINRA is reinstituting the “short sale exempt” marking category in FINRA’s trade reporting rules for OTC transactions in NMS stocks.  Thus, firms must indicate on trade reports submitted to a FINRA TFR or ADF if a transaction is “short exempt,” consistent with Reg. SHO.

In addition, the OATS rules have been amended to provide that, when an order is received or originated, firms must record the designation of the order as “short sale exempt” if the order is marked “short exempt” for Reg. SHO purposes.  The amendments also require that firms include on route reports, if applicable, the price at which the order is routed and a short exempt identifier.  For further details, refer to:  [FINRA RegNote 10-48, October]