Questions and Answers Regarding Real-time Transaction Reporting - August 21, 2003

These questions and answers expand upon the system specifications.  You are welcome to direct additional questions to the MSRB.  Page v of the system specifications has a list of contacts.

Each Q&A is followed by a reference number that identifies it, for example, [10.0].


CATEGORIES

DATA FIELDS

            Capacity

            Intermediate dealer

            Price override

ISO 15022 MESSAGE FORMAT

ERRORS AND CORRECTIONS

            Modifying inter-dealer trades

            15-minute reporting requirement for changes

REPORTING TRADES

            Voluntary real-time reporting

            Reporting procedures


QUESTIONS AND ANSWERS

DATA FIELDS

Capacity

On a bilateral trade, should I report the contra party’s capacity (i.e., capacity as principal or agent for a customer)?

No, on a bilateral trade report only your own capacity.  You are responsible, however, for knowing and reporting the capacity of the contra party on unilateral inter-dealer trade submissions.  Unilateral submissions are demand trades (submitted by the syndicate manager as syndicate takedowns), locked-in trades (submitted by a qualified special representative or QSR) and inter-dealer regulator only trades (submitted by the clearing broker regarding its correspondent’s trades from the clearing broker’s inventory).  [10.0]


Intermediate Dealer

What is an “intermediate dealer”?

The term “intermediate dealer” is used in RTRS messages regarding trades by a “correspondent of a correspondent.”  An intermediate broker is a dealer that is not an NSCC participant but nevertheless acts as a clearing firm for smaller dealers that effect trades.  The intermediate dealer submits inter-dealer trade data to the NSCC participant.  The MSRB’s proposed Rule G-14 will require that if one of the intermediate dealer's correspondents effects a trade eligible for comparison, the trade report submitted by that side must identify the NSCC participant, the intermediate broker, and the effecting dealer.  Consult the Specifications for Real-time Reporting of Municipal Securities Transactions, section 1.3.2.  [11.0]


On a bilateral trade, should I report the identity of an intermediate dealer on the contra side of the transaction?

You should report the intermediate dealer on the contra side of your bilateral trade submissions whenever possible. If, however, you have no knowledge that there is an intermediate dealer on the contra side of a bilateral trade, you may report, on that side, the dealer that effected the trade. Specifically, in such a case, use the PART field to report the contra party clearing broker and the CORR field to report the dealer with whom you effected the trade.

For a unilateral inter-dealer submission, you are responsible for knowing and reporting the identity of the intermediate dealer on the contra side, if any, as well as the intermediate dealer on your side.  [12.0]


Price Override

Under what circumstances will I enter the “Price Override” indicator?

 “Price Override” is not used in RTRS.  It is an indicator in the NASD’s TRACE system,  used by the dealer to show that a price initially rejected by TRACE should be accepted.  RTRS will send the dealer a message that a price outside a reasonable range is questionable, but RTRS will not reject the trade (unless the price is negative).  Therefore, there is no need for the dealer to override the RTRS message.  [13.0]


ISO 15022 MESSAGE FORMAT

The specifications for RTTM and RTRS state that an MT515 Cancel message will be an “exact copy of an Instruct message, and as such will contain full trade details” (RTTM Section 2 page 6 and RTRS page 23).  Shouldn’t the Sender Message Reference (SEME) of the Cancel message be different than the SEME of the Instruct message?

Yes.  Although the trade details on the Cancel should be the same as on the Instruct, each message should have a unique Sender Message Reference.  [30.0]


ERRORS AND CORRECTIONS

Modifying Inter-dealer Trades

Let’s say my firm inadvertently omits the accrued interest when reporting an inter-dealer trade with final money.  Our contra party reports the same final money as we do, and the trade is matched.  Once we become aware of the error, may we modify the trade data to include accrued interest?  This change would be for regulatory purposes only, because the final money would not change.

You should bear in mind that such a report – an inter-dealer trade with final money – requires the correct accrued interest so that RTRS will compute and report the correct dollar price.  If both sides fail to report accrued interest correctly, an incorrect dollar price will be disseminated.  (If you report accrued interest incorrectly as a syndicate manager on a syndicate takedown submission, you should detect this inaccuracy at once and correct it.  It cannot be corrected after submission date and even then the incorrect price may already have been disseminated.) 

After a bilateral trade is matched, you cannot change the accrued interest.  Neither RTRS nor RTTM allows a change to the accrued interest after the trade has been matched or after the date the trade was submitted.  You and the contra party must agree to reverse the incorrect report and to report the correct data as a “new” trade (see next question).  [40.0]


On a compared trade, how can I modify data that RTTM used for matching?

You cannot modify data used for matching after the match has been made or after the end of submission date.  On a compared trade, only regulatory fields may be modified after the trade has been matched.  Please consult the Specifications for Real-time Reporting of Municipal Securities Transactions, section 1.3.3b,for a list of fields that may be modified after the match.  If the data matched by RTTM, or the accrued interest, is incorrect, you should contact the contra party and arrange to reverse the incorrect trade and to report the correct data as a “new” trade.  Please note that the reversal trade submission should include the reversal control number, which identifies the original trade report.  [41.0]


My question relates to modifying regulatory data – not “match data” – of an inter-dealer trade that has been matched but has not yet settled.  To what destination should I direct the Modify message – to MSRB only, or to both MSRB and FICC?

Assuming you are making the change by submitting a message: as long as the trade is in the RTTM database, send regulatory changes to both FICC and MSRB.  The RTTM database will retain trade data until the later of (a) the trade’s settlement date or (b) three days after the date the trade was submitted to RTTM.  Condition (b) applies to trades reported after trade date.   After the RTTM purges the trade, direct regulatory changes only to MSRB. 

Different procedures will apply to changes submitted via the web-based method and these will be documented in the Web User’s Manual.  [42.0]


15-Minute Reporting Requirement for Changes

How will I know if my firm’s rate of correction to trade reports is acceptable?

The MSRB and regulators having responsibility to enforce Rule G-14 view frequent instances of inaccurate trade reports, trade modifications or late trades as being of particular concern in a real-time system, since it is expected that market professionals will rely increasingly on real-time trade data once it becomes available.  The MSRB intends to work with the enforcement agencies to ensure that overall industry compliance with the 15-minute reporting requirement reaches acceptable levels within a reasonable time-frame.  As with the current transaction reporting system, MSRB will make reports available to each dealer showing the dealer’s performance on the various compliance parameters, along with industry averages for each parameter.  See MSRB Notice 2003-23, “Request for Comment: Plan for Real-time Reporting” (June 13, 2003) on www.msrb.org.   [43.0]


Does the 15-minute regulatory requirement apply to modifications and cancellations of trades?

Trades should be reported correctly the first time and, if incorrect, should be corrected or canceled and replaced without delay.  The proposed amendments to Rule G-14 Transaction Reporting Procedures state that “transaction data that is not submitted in a timely and accurate manner in accordance with these Procedures shall be submitted or corrected as soon as possible” (emphasis added).  As noted above, reports will be available to dealers that show the time taken to perform each correction and cancellation.  [44.0]


When would I receive the error messages “Trade canceled more than 15 minutes after time of trade” and “trade modified more than 15 minutes after time of trade” (N914 and N915)?

RTRS will not send these messages.  They will be dropped from the specification.  [45.0]


REPORTING TRADES

Voluntary Real-time Reporting

My firm plans to begin reporting its inter-dealer trades in real time before the required date, in order to use the real-time trade matching features of RTTM.  However, our systems for reporting inter-dealer and customer trades are different and our customer trade reporting system will not be ready to work in real time as early as our inter-dealer system will be ready.  May we continue to report the customer trades in batch files even after we voluntarily begin reporting inter-dealer trades in real-time?

Yes.  The MSRB will continue to accept input as it does currently until the effective date of the real-time reporting requirement.  When your firm notifies the MSRB that it is voluntarily reporting inter-dealer trades in real-time, be sure to notify us that you are continuing to report customer trades in batch files.  [60.0]


My firm plans to begin submitting all its trades in real-time before the effective date of the Rule G-14 changes that require us to do so.  Will we be penalized for submitting Modify and Cancel records on trade date even though firms that still follow the batch procedure have all day to correct their reports?

No.  An equal standard for timeliness will apply to all firms, regardless of reporting method, before and after real-time reporting is mandated by Rule G-14.  The MSRB will encourage firms to change from batch (end-of-day) to real-time trade reporting in advance of the mandated date.  There will be a period, beginning on a date to be determined, during which such voluntary real-time reporting will be possible.  During the voluntary period, the MSRB will tabulate the modifications and cancellations that are reported on trade date separately from those reported after trade date.  [61.0]


Reporting Procedures

We do a small volume of customer trades, but more than might be convenient to enter using the MSRB’s web browser method.  Will we be able to transmit small batches of trade data to MSRB at frequent intervals in order to report them?

No.  Only two input methods will be available to report customer trades:  The web-based method and real-time messaging.  In either method, trades must be reported individually as they occur.  [62.0]

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