Companies regulated by the Financial Industry
Regulatory Authority(FINRA) will soon be required to report fractional shares as a whole number. These new changes, which are set to take effect
in the first quarter of 2025, aim to streamline the reporting standards of
fractional shares.
Currently, FINRA’s existing trade reporting rules
require the disclosure of the last sale reports to various trade reporting
facilities. This framework does not support the reporting of fractional share
quantities. This has prompted the need for an update.
In the upcoming guidelines, entities registered by
FINRA are required to disclose the last sale reports of equity transactions to
designated Trade Reporting Facilities, Alternative Display Facility, or the OTC
Reporting Facility.
Additionally, FINRA will enhance its trade reporting
facilities to enable the reporting of fractional share quantities. Under the
updated guidance, a new “Fractional Share Quantity” field will be
introduced alongside the existing “Quantity” field.
Trades involving fractional shares will require
reporting in the “Quantity” and “Fractional Share Quantity” fields. The
“Quantity” field will continue to accommodate whole numbers, with fractional
amounts either rounded up or truncated.
According to the press release, the regulator
mentioned: “Where a trade is executed for less than one share, e.g., 1/3
share, the trade quantity should be reported in two fields. Firms should round
up and report a share quantity of 1 in the Quantity field.”
“Additionally, firms should report the actual
fractional quantity in the Fractional Share Quantity field, in decimal format
only, up to six digits after the decimal and truncated beyond six decimal
places. Thus, for example, for a trade of 1/3 share, the reported Fractional
Share Quantity would be reported in decimal format as 0.333333.”
FINRA Gears Up for Trade Reporting Changes
Meanwhile, the Fractional Share Quantity field will
capture the entire quantity of the trade, including the fractional component up
to six digits after the decimal. Existing trade reporting FAQs will be revised to
accommodate these changes to ensure clarity for market participants. Firms will
need to adhere to specific reporting guidelines for trades involving fractional
share quantities.
FINRA has urged market participants to stay informed
through FINRA’s communication channels for updates and test facility
availability. While the effective date of the updated guidance is
set for no earlier than the first quarter of 2025, FINRA has pledged to provide
timely announcements regarding the specific implementation date.
Additionally, the regulator has urged companies to
stay informed about the updates for the specification and test facility
availability through FINRA’s notices and e-mail communication to ensure a smooth transition to the enhanced reporting framework.
Companies regulated by the Financial Industry
Regulatory Authority(FINRA) will soon be required to report fractional shares as a whole number. These new changes, which are set to take effect
in the first quarter of 2025, aim to streamline the reporting standards of
fractional shares.
Currently, FINRA’s existing trade reporting rules
require the disclosure of the last sale reports to various trade reporting
facilities. This framework does not support the reporting of fractional share
quantities. This has prompted the need for an update.
In the upcoming guidelines, entities registered by
FINRA are required to disclose the last sale reports of equity transactions to
designated Trade Reporting Facilities, Alternative Display Facility, or the OTC
Reporting Facility.
Additionally, FINRA will enhance its trade reporting
facilities to enable the reporting of fractional share quantities. Under the
updated guidance, a new “Fractional Share Quantity” field will be
introduced alongside the existing “Quantity” field.
Trades involving fractional shares will require
reporting in the “Quantity” and “Fractional Share Quantity” fields. The
“Quantity” field will continue to accommodate whole numbers, with fractional
amounts either rounded up or truncated.
According to the press release, the regulator
mentioned: “Where a trade is executed for less than one share, e.g., 1/3
share, the trade quantity should be reported in two fields. Firms should round
up and report a share quantity of 1 in the Quantity field.”
“Additionally, firms should report the actual
fractional quantity in the Fractional Share Quantity field, in decimal format
only, up to six digits after the decimal and truncated beyond six decimal
places. Thus, for example, for a trade of 1/3 share, the reported Fractional
Share Quantity would be reported in decimal format as 0.333333.”
FINRA Gears Up for Trade Reporting Changes
Meanwhile, the Fractional Share Quantity field will
capture the entire quantity of the trade, including the fractional component up
to six digits after the decimal. Existing trade reporting FAQs will be revised to
accommodate these changes to ensure clarity for market participants. Firms will
need to adhere to specific reporting guidelines for trades involving fractional
share quantities.
FINRA has urged market participants to stay informed
through FINRA’s communication channels for updates and test facility
availability. While the effective date of the updated guidance is
set for no earlier than the first quarter of 2025, FINRA has pledged to provide
timely announcements regarding the specific implementation date.
Additionally, the regulator has urged companies to
stay informed about the updates for the specification and test facility
availability through FINRA’s notices and e-mail communication to ensure a smooth transition to the enhanced reporting framework.
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- Source: https://www.financemagnates.com//forex/finra-embraces-fractional-shares-to-overhaul-reporting-standards/
