Late-Sale Reporting: What It is, How It Works

What Is Last-Sale Reporting?

The term last-sale reporting refers to a Nasdaq requirement that states dealers must submit details to the stock market within 90 seconds of any completed transaction. The Nasdaq requires dealers to provide the name of the stock, the number of shares, as well as the price paid by the buyer. Last-sale reporting ensures that all traders and transactions meet the compliance regulations set by the Securities and Exchange Commission (SEC).

If a dealer fails to report the transaction within 90 seconds, it is marked as late by the Financial Industry Regulation Authority (FINRA). If FINRA finds a pattern or practice of unexcused late reporting without reasonable justification or exceptional circumstances, the member may be found to be in violation of Rule 2010, which states that "a member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade."

How Last-Sale Reporting Works

Last-sale reporting grew out of the need to ensure Nasdaq’s computerized trading system complied with regulations enforced by the SEC. In order to maintain transparency across the market and drive competitive pricing among market makers, any exchange needs to make current information on sales available to all market participants.

While the New York Stock Exchange (NYSE) gets this information from the specialists who facilitate trades on the exchange floor, trades made on the Nasdaq have no third party to track the data. Therefore, Nasdaq requires dealers to provide trade data directly to the exchange, also known as the last-sale reporting. In order to improve the transparency and the efficiency of markets, regulators require that market makers use real-time trade reporting to provide a public record of stocks. Since Nasdaq’s trades take place electronically over a network rather than on the trading floor, market makers are responsible for delivering trade data directly to the exchange.

As per the requirements, dealers must report the most important details of each transaction they execute. These details include the stock in question, the total number of shares traded, and the price per share. The information must be submitted to the Nasdaq within 90 seconds of the transaction. The 90-second window for trade reporting required by Nasdaq fulfills the exchange’s regulatory obligation for real-time trade reporting.

This means a trader who executes the sale of 100 shares of Company X at $75 per share must transmit all the pertinent details to the Nasdaq within 90 seconds of completion in order to be compliant with the requirement.

Special Considerations

In 2006, Nasdaq made the transition from a stock market to a securities exchange company—the largest in the world. At that time, the primary trading platforms relied upon specialists to facilitate trades using an auction-based system. This is where buyers and sellers compete directly with each other to strike deals.

The NYSE employs specific firms as market makers to work the floor of the exchange, reporting all bid and ask prices in a timely manner, setting opening prices, and acting as a catalyst for trades. Specialists—who act as third-party facilitators—match buyers with sellers in order to keep up the flow of trade across the market.

The Nasdaq, on the other hand, uses hundreds of market makers—none of which actually operate at a fixed, physical exchange. All of them, though, do enter directly into trades. Investment companies that act as Nasdaq market makers also act as dealers in securities over the exchange’s network. These firms purchase shares of stocks to amass an inventory to use as a basis from which to sell shares to others on the network, either to investors or other market makers. Dealers also purchase shares from investors or other dealers, adding those shares back into their inventories.