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Trade Confirmations

Pursuant to SEC Rule 10b-10 brokerage firms are required to provide a written communication to the brokerage client for each brokerage transaction executed on behalf of that client in the client’s brokerage account. The written communication is called a Trade Confirmation or Trade Confirm.

Trade Confirms generally provide the client with the following details related to their brokerage trade:

  • Side – Buy or Sell
  • The specific Security Bought or Sold
  • The Quantity Bought or Sold
  • The Trade Execution Price
  • The Market or Exchange on which the trade was executed
  • The Capacity in which the brokerage firm acted on behalf of the client – as Broker or as Agent
  • The Principal Amount of the transaction
  • Any Commissions, Accrued Interest or other fees charges on the transaction
  • The Net Amount or the transaction – this is the amount to be paid or received by the client and is equal to the Principal Amount + or – any associated Commission, Interest or fees
  • The client’s Brokerage Account Number
  • The client’s Account Type – Cash, Margin, Short, DVP
  • Any other special security description or required trade disclosures as required. For example, for fixed income securities trades, the confirmation might provide additional security descriptions regarding the Yield to Maturity or Yield to Call. Other regulations require the firm to disclose whether the trade was a short sale, solicited or unsolicited, and if the transaction price quoted the customer was an average price.

Trade Confirm Delivery

There are several options available to the brokerage firm for delivering trade confirmations to the brokerage client. The options include:

  • The United States Postal System - USPS
  • Electronic Delivery

USPS

Delivery via the US Postal System is the traditional method of delivering trade confirms to the brokerage client. ‘Hard Copy’ or paper based trade confirms are printed by the brokerage firm – or by its designated confirm vendor – and mailed to the client utilizing the US Postal stream.

Distributive Printing

The trade confirmation is the brokerage firm’s official trade communication to its client. Upon receipt of the trade confirm the client is expect to make payment for any securities purchased. It is therefore in the brokerage firm’s best interest to expedite the delivery of the trade confirmation to its client. Faster delivery of the trade confirmation to the client results is quicker receipt of payment from the client.

To minimize the amount of time between the printing of the trade confirm and its receipt by the brokerage client – brokerage firms can utilize distributive print sites. Distributive print sites are print centers that are geographically dispersed throughout the Untied States and/or other countries or regions. Brokerage clients receive trade confirmations printed at the distributive print site closest to their mailing address.

Trade confirm records for trades executed on behalf of a client are electronically transmitted to the distributive print center closest to that client’s residence. The client’s trade confirm is printed at the local print site and deposited into the local mailing system. This reduces the transit time between the print center and the client.

For example, a brokerage client who resides in San Diego, California would receive his or her confirm from the distributive print site in Los Angeles. On the other coast, a client in East Rutherford, New Jersey might receive his or her confirm from the distributive print site in New York City.

Electronic Delivery of Trade Confirmations

To expedite the confirm delivery process brokerage firms often utilize electronic delivery methods such as:

  • Fax Confirms
  • ID Confirms
  • E-mail Confirms

Fax Confirms

Faxing trade confirmations to clients is a tedious process that requires time for both the generation of the trade confirmation(s) and the faxing of the confirm(s) to the firm’s multiple clients. As such, faxing trade confirmations is generally not the preferred method of confirm delivery and is typically only utilized under special circumstances or client service requests.

ID Confirms

ID Confirms are electronic trade confirmations generated by the Depository Trust Company’s Institutional Delivery (ID) System. With the consent of the client, brokerage firms can substitute the ID confirm for the mailed confirm and still satisfy SEC rule 10b-10.

In order to receive an ID Confirm the brokerage client must be a member of the Depository’s ID System. The vast majority of ID members are large financial institutions – such as Mutual Funds, Insurance Companies, Pension Plans etc. Therefore, ID Confirm delivery is not a viable delivery method for the brokerage firm’s retail clients – who do not generally meet the large capital requirements that are necessary to become members of the ID System.

E-mail Confirms

Trade confirm delivery via e-mail is a relatively new alternative to the brokerage industry. This alternative has resulted from both the tremendous growth in internet based securities trading and recent SEC approval of this new delivery method.

Typically, the brokerage client receives an e-mail from his or her brokerage firm alerting them to the creation of a new trade confirmation. The e-mail contains a hypertext link that directs the client to the electronic image of the trade confirm on the firm’s web site. The client then uses his or her web browser to view the trade confirmation.

SEC rules require that if the e-mail confirm is not viewed by the client within a designated period of time that a paper confirm be generated and mailed to the client via the US Postal System.

With the consent of the client, the brokerage firm can substitute the e-mail confirm for the mailed confirm and still satisfy SEC rule 10b-10.

Trade Confirm Retention Requirements

See Record Retention





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