How should a member report a “cross-book” transaction (i.e., a transaction where the member “swaps” ordinary shares and American Depositary Receipts (ADRs) between two customers)?
A702.1: OTC “cross-book” transactions, also known as ADR swap transactions, must be reported to FINRA. In these types of transactions, a member matches holders of ADRs with holders of the foreign ordinary equity security (referred to as the “ordinary” or “ordinaries”) in the same company. To effect the “swap,” the member typically will execute the equivalent of two cross transactions in the two securities between the holders. Because the ADRs and the ordinary shares are separate securities and they are executed in separate transactions, both the ADR and the foreign ordinary share transactions must be reported separately to FINRA for public dissemination pursuant to the trade reporting rules. See NTM 07-25 (May 2007). The conversion of ordinary shares into an ADR and the conversion of an ADR into ordinary shares are not OTC transactions for purposes of the trade reporting rules. Consequently, these types of conversions are not reportable to FINRA. See NTM 07-25 (May 2007).
