FINRA Proposes Expanding Reporting Requirements For Alternative Trading Systems

FINRA filed a proposed change to FINRA Rule 4554 with the SEC to require alternative trading systems ("ATSs") to include additional order sequence information on reports submitted in the Order Audit Trail System ("OATS").

FINRA Rule 4554 requires ATSs to report order information for each order that an ATS receives in an NMS stock (i.e., listed equities) beyond what is required pursuant to the OATS rules. The stated purposes of Rule 4554 are to enhance FINRA's ability to more fully reconstruct an ATS order book and better perform order-based surveillance, including surveillance for layering, quote spoofing and other forms of stock price manipulation.

The rule change will extend the requirement to report the sequence number beyond just the receipt of an order to include reporting a sequence number on all order events, including reports for the execution of an order or the routing of an order away from the ATS. According to FINRA, requiring ATSs to report a