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Re: Riskless Principal Capacity
John Harris / BondMart Technologies, Inc.
5 Jun 2011 9:14AM ET Bill,
The practices vary by asset class and regulatory regime. Here are FINRA regulations pertaining to equity securities:
http://www.finra.org/Industry/Regulation/Guidance/p038942#302
Here are the regulations pertaining to TRACE-eligible bonds:
http://www.finra.org/Industry/Compliance/MarketTransparency/TRACE/FAQ/P085429
(TRACE cannot cope with riskless principal trades.)
The other broad category of riskless-principal transactions would be orders for exempt securities matched by inter-dealer brokers, not covered by TRACE. To my knowledge there are no reporting requirements for these, so each venue follows its own practice in accordance with the needs of its customers.
Best,
John
> What is the common practice in the US for reporting "Riskless Principal" transactions at the execution level. OrderCapcity R doesn't work in cases where multiple fills for the order are executed in diffrent capacities, and none of the MiFID Riskless Principal Values for TrdSubType seem to jive FINRA's definition: A "riskless principal" transaction is a transaction in which a member, after having received an order to buy (sell) a security, purchases (sells) the security as principal and satisfies the original order by selling (buying) as principal at the same price (the offsetting "riskless" leg).
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> 26 = R ( (i) riskless principal transaction between non-members where the buying and selling transactions are executed at different prices or on different terms (requires a trade report with trade type indicator R for each transaction)
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> (ii) market maker is reporting all the legs of a riskless principal transaction where the buying and selling transactions are executed at different prices (requires a trade report with trade type indicator R for each transaction)or
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> (iii) market maker is reporting the onward leg of a riskless principal transaction where the legs are executed at different prices, and another market maker has submitted a trade report using trade type indicator M for the first leg (this requires a single trade report with trade type indicator R).)
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> > Tag 29 LastCapacity value '3' represents Cross as Principal. Should this value be used for Riskless Principal?
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> > Riskless Principal is an execution where a customer order is executed at the same price that the security was orginally bought for by the trader and it was in his/her inventory. In this case both client order price and the trader execution price are same.
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> > Any clarification would be appreciated.
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> > Thanks.
> >
> > Robert
Re: Riskless Principal Capacity
John Harris / BondMart Technologies, Inc. 5 Jun 2011 9:14AM ET
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