Contra Trading Meaning

[Desiderato Merriwether]

Settlement marks the official transfer of securities to the buyer's account and cash to the seller's account. Settlement takes place 2 business days (T+2) after your trade is partially or fully executed, unless the stock is trading under a Deferred Settlement basis or your trade is managed through Contra.

Contra trading occurs where multiple buy and sell trades completed on the same day or next trading day, are offset against each other. This means that only the net difference between the value of the trades will debited or credited to your linked settlement account.
When contra trading occurs, the date on which you are debited or credited depends on when you cease trading within a contra period.

If you place three or more buy and sell orders that all execute within T+1, or over a short period of time, then your net debit or credit account, and the date of that net debit/credit may continue to move until you stop placing trades within a contra period.

Alternatively you can view the estimated settlement amount and due date of your unsettled trades at any time by navigating to My Account > My Portfolio > Holdings & Accounts and selecting the Account Details tab.

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The information on this website does not take into account your personal objectives, financial situation or needs. Because of this, you should consider its appropriateness, having regard to these factors before acting on it.

Before you obtain any product or service from Westpac Securities Limited and the Participant, you must view the most recent Financial Services Guides (FSG's) issued by them, Global Markets Trading Terms & Conditions (T&Cs) and the Pershing FSG.

In case of an individual DP (promoters / directors / etc. as recognized by the listed company), the immediate relatives also have certain obligations under the Regulations as their trades may be said to be influenced by the DPs. Similarly, in case of non-individual DPs (promoters), there may be other promoters and persons belonging to the promoter group who may act in concert with a particular non-individual promoter.

We see that the listed company is being held by two corporate promoters, which in turn are held by common shareholders. Here, RMML intended to sell its shareholding in open-market within 6 months of the allotment made to AIRL.

There have been instances in the past where SEBI has given the view that contra trade restrictions apply individually on DPs. The view seems to be supported by the interpretation of clause 10 of Schedule B of the Regulations, which states that:

Previously, in 2020, in the matter of Raghav Commercial Ltd[3], SEBI in its interpretative letter took the view that the contra trade restrictions apply to trades made by promoters individually and not the entire promoter group.

Reference of the above case was taken in 2019 in the matter of Arvind Limited[5], where contra trade restrictions were said to apply individually on DP through PAN, disregarding who took the trading decision. Our detailed article on the same can be read here.

Whether Leg 2 will be contra to Leg1? Here we see that significant stake i.e. 50% is being held by Partner A (promoter of X Ltd) in the LLP. The trades of LLP can be said to be influenced by the decision of Partner A. This can be a case of common control and therefore Leg 2 becomes contra to Leg 1.

The rationale behind exemption is that for stock options and non-market transactions, the exercise price / purchase price is predetermined. The selling transaction pursuant to exercise of stock options or pursuant to acquisition of shares in non-open market is not influenced by purchases made basis some UPSI. The exercise price / acquisition price is already decided by the company.

Article 41 A shareholder that holds five percent of the shares issued by a company limited by shares shall, within three days from the date on which the number of shares held by him reaches this percentage, report the same to the company, which shall, within three days from the date on which it receives the report, report the same to the securities regulatory authority under the State Council. If the company is a listed company, it shall report the matter to the stock exchange at the same time.

Article 42 If the shareholder described in the preceding article sells, within six months of purchase, the shares he holds of the said company or repurchases the shares within six months after selling the same, the earnings so obtained by the shareholder shall belong to the company and be recovered by the board of directors of the company. However, a securities company that has a shareholding of not less than five percent due to purchase of the remaining shares in the capacity of a company that underwrites as the sole agent shall not be subject to the restriction of six months when selling the said shares.

We had earlier in our article (supra) given the view that contra-trade should be seen jointly and not individually, considering the intent. To establish violation of PIT Regulations, one has to go beyond tracking trades based on PAN. It is important to know the decision maker behind the trades, in order to establish a clear nexus. It would be important to see whether such a view was taken by SEBI because of the case in hand or is it reflective of a new trend i.e. position of common control.

Important Note: The correspondent firm must execute the URA, which also must be countersigned by the clearing broker-dealer. The fully executed agreement must be on file with FINRA prior to submitting trades on behalf of another firm.

The link to the URA is on www.finra.org/industry/trace/transparency-services-legal-agreements. Submit the agreement directly to PDM or email the form to [email protected] (depending on reporting facility).

All users of the TRACE system, whether FINRA member firms or third-party reporting intermediaries, must complete agree to the terms of the FINRA Transparency Services Participation Agreement - Version 1.4 (FPA).

Please note: Non-member service bureaus or vendors transmitting trade reports for FINRA members (i.e., via an Order Management System) should submit the FINRA Transparency Services Service Bureau Access Authorization.

2.2 If my firm uses FIX protocol to submit trade reports, will I be able to see them in the Web application and take any corrective action necessary or would I need to amend trade reports using FIX?

Yes. Members may elect to use the FIX protocol to report trades to TRACE. Technical details can be found in the FIX Specifications on the FINRA TRACE Web pages, and questions can be answered by the NASDAQOMX Technical Support at (212) 231-5180. For more information on FIX, please refer to the NASDAQ website.

TRACE reporting participants may report through a secure web-based application called TRAQS. The system supports a variety of standard web browsers. Please see the TRACE User Guides for further details.

When an outage or technical problem occurs that may cause late reporting, a firm must immediately contact NASDAQ Technical Support at (212) 231-5180. A problem ticket number will be issued which should be kept in a firm's records as documented proof of a system problem.

If the problem involves a third-party reporting intermediary or is related to a malfunction in an internal system, the firm should not contact NASDAQ Technical Support, but rather have the appropriate party at the firm document the problem. FINRA's Market Regulation Department has established an email address so that firms may register their system outage or other technology problem related to TRACE. It is suggested that the firm include its name, MPID, capacity and the telephone number of the person submitting the information in the text of the email. It is suggested that the firm retain copies of these emails for their records.

FIX: If your firm reports trades through FIX, FINRA will send the firm an electronic acknowledgment message for each successfully processed trade report submitted. The firm's application should retain the acknowledgements and provide appropriate review capacity.

Reporting via another FINRA member: Firms reporting via a FINRA member clearing firm that reports using a give-up can view their transaction reports using the Trade Management function on the TRACE Web browser.

Reporting via a service bureau/non-FINRA member firm: Firms reporting via a non-FINRA member service bureau (vendor) can see their reports using the Trade Management function on the TRACE Web browser.

The Issue Master is a full file and is available in real-time beginning at approximately 7:00 a.m. Eastern Time each day. The Issue Master contains corporate bonds, equity-linked notes, agency and GSE debentures, and church bonds that are reportable to TRACE. Additionally, FINRA publishes a real-time Daily List, available via the API and on the TRACE Web browser.

FINRA Operations will need all of the pertinent data as provided in FINRA Rule 6760 by 5:00 p.m. Eastern Time to ensure that the security will be included in the file. As always, however, it is most beneficial for FINRA Operations to receive the information as soon as possible.

Third-Party Reporting Intermediaries: If a firm plans to report through a FINRA member clearing firm or via a vendor or service bureau, it is recommended that they contact that firm directly for information regarding their services and process around corrections and managing rejected trades. Most qualified third-party reporting intermediaries already have FIX lines in place to NASDAQ, FINRA's technology provider.

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