September 10, 2010
To Whom it May Concern:
I work for a small B/D that is required to report to OATS. We have a clearing firm that deals with orders submitted on our primary OE system, however we have to report since we trade away from the clearing firm. The majority of our reporting is done automatically since we have auto match agreements with different firms. Some of our vendors report for us, but other vendors only collect the data in an OATS acceptable format. I then have to electronically submit that data to OATS via the FTP site. Some vendors provide no actual reporting for customers so I have to go onto the OATS site to manually report those trades. Some vendors currently do no OATS reporting, so currently we only route listed trades to them. If this new rule goes into effect, then we will either have to buy expensive software to be in compliance or just stop using those vendors.
Some Thoughts/Questions:
B/Ds use vendors for ease of use, quality of executions, and cost savings. B/Ds should not have to worry about OATS reporting costs when looking at new vendors.
A trader/firm should worry about what vendor will execute a trade the best, not which vendor might do the reporting for them. Let us not forget that we are trying to get the best possible execution for our customers, not the easiest route for OATS reporting.
Firms will have to potentially hire more IT or staff just to deal with increased OATS requirements. Clearing firms will probably pass those costs onto smaller and larger firms that use their services. Clearing firms already have departments dedicated to OATS issues. I am sure that they will have to hire additional people to deal with this extra legislation.
Who uses the actual data? I do not mean the OATS report card information, but the actual data that is submitted to OATS. According to page four of the proposal: This information is then used by FINRA staff to conduct surveillance and investigations of member firms for violations of FINRA rules and federal securities laws. From what I can tell, FINRA/OATS only seems to be worried about data being submitted in the correct format. Please enlighten members on how the OATS staff actually uses the data to investigate securities laws. Please inform FINRA members how OATS data has ever been used to prevent abuse or protect customers. 90% of OATS information is just a bunch of programming language that no one but people versed in OATS language even understand. Why use OATS when ACT seems like a much more simple way to go? I understand the need for regulation and having to have the ability to track orders, but there has to be a much easier way to accomplish these goals.
I understand that this proposal might be an attempt to reel in and/or prevent things like: flash crashes, quote stuffing, Madoff-like fraud, and flash trading. If NASDAQ/OTC securities trades are already reported to OATS, then how has any regulatory organization used this data to prevent or aid in an investigation of these specific issues?
Sincerely,
Steve Allread