6.1. General reporting requirement is at individual trade/transaction level
The general requirement is to report at trade or transaction level. A transaction can be said to have taken place when the firm or client becomes the beneficial owner, i.e. takes on economic risk.TRUP v3, 7.2 This is often at the point of allocation by the broker.
For market side transactions the individual executions undertaken on exchange should be set out in individual transaction reports (each individual report showing the time and price of each individual trade/fill). Even though trades may be netted/aggregated for settlement purposes with a central clearing counterparty or broker the transaction reports should be made at the trade/transaction level and not the aggregated/net settlement level.
6.2. Aggregated Trades
A firm may aggregate two or more orders for different clients and execute them in a single trade. Where Firm X buys, e.g. 100,000 shares from Firm Y on behalf of 3 different clients in an aggregated order Firm X should report a buy from Firm Y (identified in the Counterparty 1 field) on behalf of an internal aggregated account (identified in the Customer/Client Identification/Counterparty 2 field). Firm X should then report 3 agency buy transactions from the aggregated account (identified in the Counterparty 1 field) for each client (identified in the Customer/Client Identification/Counterparty 2 field).TRUP v3, 9.3 Care must be taken to ensure the buys and sells are correct. As can be seen above the contra transaction reports to move the trades from the aggregation or average price account are both buys and not a buy and a sell as would normally be expected under accounting practices.
Example transaction reports can be found in TRUP version 3 section 9.3.
6.3. Average Price Transactions
A firm may receive an order from a client that can only be filled by executing 2 or more transactions at different prices but the client wants one or more contract notes showing an average price. For example, Firm X gives an order to Firm Y to buy 100,000 shares as agent and Firm Y completes the order in two tranches one of 20,000 shares and the other of 80,000 shares at unit prices of 100p and 102p respectively. As there is only one client the firm can book and report the two transactions and include the identity of the client on each (even if the firm has issued a single contract note at the average price).
A more complex scenario would be where there is more than one client, for example Firm X fills orders from 10 clients by conducting 5 market side bought transactions and needs to book the stock to the ten clients. In such a scenario the firm could report all the individual transactions separately. To cut down on the number of transaction reports but to maintain an audit trail, FCA recommend that Firm X when acting in an agency capacity reports 5 agency transactions for the market side to a designated internal average price account (identified in the Customer/Client Identification/Counterparty 2 field) and 10 agency crosses out of that designated average price account (identified in the Counterparty field) to the respective clients (identified in the Customer/Client Identification/Counterparty 2 field).TRUP v3, 9.4 Example transaction reports can be found in TRUP version 3 section 9.4.
6.4. External Broker Transactions
There may be instances where the firm gives an order to another broker for execution (e.g. where the firm is not a member of an exchange) and a broker such as SEB fills the order by undertaking multiple transactions. Transaction reports reported by the firm will need to reflect the time at which the firm took on the risk and became the beneficial owner. FCA recognises that the allocations are defined under contractual arrangements which may differ from client to client.TRUP v3, 9.2 As such the firm will report each individual fill based on the fix messages received confirming each execution.
Further details on how to report such transactions can be found in section 5.14. on job-outs and carry/care brokers.
6.5. Guaranteed VWAP Trades
Where the firm takes an order for a guaranteed VWAP trade we can report the resulting client transaction in a single transaction report with unit price equalling the agreed VWAP price and trading time being the time of the last fill.
Note in respect of the individual hedge trades undertaken by the firm on a proprietary basis with the market each individual market transaction should be reported separately.
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|1.||↑||TRUP v3, 7.2|
|2.||↑||TRUP v3, 9.3|
|3.||↑||TRUP v3, 9.4|
|4.||↑||TRUP v3, 9.2|