• Date: Tuesday, January 20, 2009 @ 4 PM ET
• Location: Jordan & Jordan. 5 Hanover Sq. FL. 2, New York, NY, 10004 (Registration required for security)

Meeting Agenda

• FINRA Trade Reporting Structure
  • Executing Broker Model - Approved on Nov 5, 2009.  Implementation Expected 3Q2009.  FINRA is looking for feedback on any unclear scenarios especially with respect to alternative trading system scenarios, negotiated trades, and non-tape reporting of the riskless leg of the transaction. Please let us know if you have open questions or scenarios that you would like specifically addressed
  • Trade Reporting: .W and .PRP - In early 2009, FINRA will look to address issues raised about .W and .PRP now that trading practices have changed significantly since these modifiers were originally created.   (The prior reference price (.PRP) modifier is used to identify transactions executed at a price different from the current market when the price is based on a prior reference point in time and is not reported within 90 seconds of that prior reference point. Weighted average priced orders used the identifier (.W) to identify exchange-for physicals, volume-weighted average-price trades, or another special pricing formula.)
  • Trade Reporting FAQS - Modifiers on Riskless Principal Trades (Second Leg) – In response to the Trade reporting FAQS - Q300.1, the question was raised as to which modifiers are allowed on the non-tape report of a riskless principal trade. FINRA has indicated that when sending two prints for a riskless principal trade (one as principal to the tape and the second leg as a non-media riskless principal trade), no trade modifiers in Bytes 2, 3, 4 should be included in the non-media report.  Trade modifiers in Byte 1 are okay since this gives clearing information. FINRA is planning to require that the TRFs reject non-media trades with modifiers in bytes 2,3,4 except for .RX and .RA in byte 4.
  • Reg NMS Trade Modifiers - Two new modifiers will be coming out for the print protection and error correction exemptions.
• Reg NMS Report Cards - FINRA is in the process of developing a Reg NMS Report. Scott Trilling of FINRA to give an update (see attached)
• FINRA (f/k/a/ NASD) OATS
  • FINRA released a new edition of the OATS Reporting Technical Specifications dated December 15, 2008 to accommodate additional changes to OATS for the February 2, 2009 release date. See OATS Technical Specifications Web Page
  • OATS/OTS Consolidation – No immediate plans to integrate the two systems.  Only enhancement currently scheduled for OATS is the Feb 2009 change that was delayed from Nov 2008
• Sponsored Access
• NYSE will offer a new service to assist broker-dealers with sponsored access.  See Filing of Proposed Rule Change to Establish its New Risk Management Gateway Service (Release No. 34-59145; File No. SR-NYSE-2008-101)
• NASDAQ OMX BX is preparing a proposed rule change to adopt a new sponsored access rule that will apply to BX. See Equity Regulatory Alert #2008 - 44
• NASDAQ and the Securities and Exchange Commission (SEC) are discussing the development of a new sponsored access rule that could be consistently applied across all markets. Pending approval of the new rule, the guidance provided in Regulatory Alert #2008-40 about required sponsored access agreements has been withdrawn. See Equity Regulatory Alert#2008 - 43. The Rule filing (SR-NASDAQ-2008-104) can be accessed here
• NASDAQ Regulatory Update RA#2008-41, provides an update on OATS reporting for sponsored access added to the OATS FAQs.
• NYSE Euronext Initiatives
• NYSE Common Customer Gateway (CCG)
• CMS migration expected for completion on December 31, 2008.   In an effort to provide assistance to the handful of firms that have not yet migrated to CCG, the NYSE will provide a CMS to CCG conversion solution through a third party provider
• NYSE completed a reduction in CMS capacity by 50% on December 11, 2008. At that time, the Exchange had over 70 firms connected to CCG and received approximately 90% of daily order traffic through CCG. See CCG Connectivity Update
• NYSE Alternext U.S. / NYSE AMEX Options
• AMEX Options expected to integrate on Feb 9, 2009. See NYSE/AMEX Integration Information Memo and Quick Resource Guide
• NYSE Sub-Penny Priced Orders
  • Beginning on December 1, 2008, NYSE accepts and no longer reject orders priced less than $1 that are entered in sub-pennies for all securities listed on both the NYSE and NYSE Alternext.
  • In Phase II, currently slated for early 2009, the Exchange will continue to accept limit orders for sub $1 priced securities in four decimal places without truncating the last two places of the orders limit. At that time, Exchange Systems will transmit client orders to CQS as they were originally placed, for up to four decimal places. See Nov 26 Trader Update for links to filing and technical specifications.
• NYSE Reg
• OTS Enhancements - According to the Dec 1, 2008, InfoMemo 08-62, NYSE Regulation has instituted corresponding changes reflecting these new order types and trading facilities in the updated OTS technical specifications. Implementation date is set for March 31, 2009 for both NYSE and NYSE Alternext. Updated Technical Specifications available here.
• NYSE Account Type Indicators - The deadline has been extended for new program trading reporting obligations to June 30, 2009 in order to address concerns raised by member firms regarding technological and implementation issues pertaining to account types “J” and “K.” See Dec 15, 2008 NYSE InfoMemo 08-64. Member organizations are further advised that firms have until February 1, 2009, if they have not already done so, to remove the $1 million dollar threshold for a Program Trade and to revise their trade reporting accordingly.
• NYSE Rule 92 - for implementation of Rule 92(c)(3)  to March 31, 2009.  See Information Memo 08-27. An Information Notice on Rule 92/Manning harmonization is expected shortly but will not cover Rule 92 implementation deadlines.
• NMS Plans
• Exchange Symbology Plans - All of the exchanges have adopted the NMS Symbology Plan.  See link for filings adding exchanges to the Plan.
• Options Order Protection & Locked/Crossed Market Plan . 1Q2009 . See  NMS 4-546
• Erroneous Trades
  • The exchanges, ECNs and the SEC are working together to establish consistent guidelines around erroneous trade policies.  Filings are expected shortly.
  • The different Clearly Erroneous Policies by Exchanges / ECN are provided below:

• Aberrant Trade Indicator
• NYSE filed a proposed rule change on October 6, 2008 with the SEC to adopt a policy relating to its treatment of Trade Reports that it determines to be inconsistent with the prevailing market. See SEC Release No. 34-58736 . The rule filing which was approved on December 5, 2008 would be applied to trades as of January 2007. See SR-NYSE-2008-91
• The SEC approved SR-NASDAQ-2008-100 on December 23, 2008 which allows NASDAQ to adopt a similar policy regarding aberrant trade. NASDAQ also filed SR-NASDAQ-2008-101 to make the use of the Price Variation Modifier Retroactive to September 1, 2008.
• NASDAQ SIP is offering testing of the Price Variation “H” sale condition modifier to identify trades that are inconsistent with the prevailing market. See Data News #2008 - 106
• The price variation modifier is in both UTP and CTA feeds since 2007.  See CTA Notice from July 2007 
• Additional Links:
  • Regulatory Notice 08-80 - FINRA Requests Comment on Proposed FINRA Rule Addressing Best Execution; Comment Period Expires: January 29, 2009
  • Regulatory Notice 08-83 - FINRA Requests Comment on Proposed FINRA Rule Regarding Front Running of Block Transactions; Comment Period Expires: February 6, 2009
  • SR-FINRA-2008-064 - Proposed Rule Change to Amend NASD Interpretive Material (IM) 2110-2 (Trading Ahead of Customer Limit Order) to provide an Alternative Method of Calculating the Current Inside Spread for determining the minimum price variation
  • December 29, 2008 Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating to Rule 1028. Identifying Exchange on Options Confirms