Forefront Communications

A-Team Insight: FINRA Starts the Clock on OATS Retirement

Alexandra Hamer

Alexandra Hamer

By Peter Gargone, CEO at n-Tier.

FINRA’s August 14 SEC rule filing, coupled with its July 29 compliance webinar, provide the clearest view yet on FINRA’s approach to enforcing CAT regulatory compliance and achieving the industry’s goal of retiring OATS reporting. Peter Gargone of compliance software specialist n-Tier discusses the complexities of the transition, and the importance of implementing proper policies, procedures, governance structures and control processes for your CAT reporting regulatory obligations.

OATS Retirement

The rule filing is the start of a process that includes significant data quality and data completeness hurdles that the industry must meet before actual OATS retirement can occur. These data requirements are based on phase 2a reporting requirements and are computed as averages over a 180-day period across all participants and include:

  • An error rate for initial pre-correction CAT submission data at or below 5%
  • A post correction CAT submission data error rate at or below 2% (note OATS is currently at 1%)
  • Order Life Cycle Linkage rates of at least 95% pre-correction and 98% post-correction for phase 2a event linkage requirements
  • Intra-Firm Linkage rates of at least 95% pre-correction and 98% post-correction
  • Inter-Firm Linkage rates of at least 95% pre-correction and 98% post-correction
  • Exchange and TRF/ORF Match Rates of at least 95% pre-correction and 98% post-correction

As part of their overall market surveillance obligations regulators are also focused on ensuring that CAT reporting data is complete and accurate based on the comparison of that data to OATS reporting data. And, that surveillance and investigations being run on CAT data produce results consistent with those being run on OATS data.

While OATS retirement could potentially occur sometime in the second quarter of 2021 after phase 2c go-live, there is a recognition by FINRA that the retirement process may take considerably longer than that as stated in their filing. “Based on the proposed accuracy and reliability standards described above, FINRA anticipates that the time period for implementation for the deletion of the OATS Rules could be significant.”

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