What Is FINRA Rule 7100? The Alternative Display Facility's Participation and Processing Rules
FINRA Rule 7100 is the series marker for the technical, operational, and participation rules governing the Alternative Display Facility, sitting within the broader Rule 7000 Series.
The ADF itself dates to 2002, developed by NASD in conjunction with Nasdaq's anticipated registration as a national securities exchange under the SEC's SuperMontage Approval Order; the underlying rule series was adopted as the NASD Rule 6100A Series by SR-NASD-2002-97, effective July 29, 2002.
As part of FINRA's Consolidated FINRA Rulebook initiative, the NASD Rule 6100A Series was renumbered as the FINRA Rule 7100 Series by SR-FINRA-2008-021, effective December 15, 2008, per Regulatory Notice 08-57, alongside the parallel renumbering of NASD Rule 4000A as the substantive Rule 6200 Series governing ADF quoting and trading. The two series have shared this parallel numbering relationship, 6200 for substance and 7100 for mechanics, since that 2008 consolidation.
Candidates should carefully distinguish this series from the Rule 6200 Series: Rule 6200 governs the substantive quoting and trading obligations of ADF market participants, including modifiers, session hours, and reporting content requirements under Rule 6282, while the Rule 7100 Series governs the mechanics of how a member connects to, participates in, and transmits trade reports through the ADF system itself.
The ADF is an SRO display-only facility operated directly by FINRA that provides members with a facility for the display of quotations, the reporting of trades, and the comparison of trades; unlike an exchange, the ADF does not itself execute transactions.
The Rule 7100 Series consists of Rule 7110, Definitions; Rule 7120, Trade Reporting Participation Requirements; Rule 7130, Trade Report Input; Rule 7140, Trade Report Processing; Rule 7150, Obligation to Honor Trades; Rule 7160, Audit Trail Requirements; Rule 7170, Violation of Reporting Rules; and Rule 7180, Termination of Access. This eight-rule structure is a template FINRA reuses with only minor variation across its trade reporting facilities: the FINRA/Nasdaq Trade Reporting Facility and FINRA/NYSE Trade Reporting Facility carry a parallel Rule 7200A/7200B Series with the same eight functional categories, and the OTC Reporting Facility carries a parallel Rule 7300 Series.
Definitions
Rule 7110 defines "ADF-eligible security" as an NMS stock as defined in Rule 600(b) of SEC Regulation NMS.
"Clearing Broker-Dealer" or "Clearing Broker" means the member firm identified in the System as principal for clearing and settling a trade.
"Correspondent Executing Broker-Dealer" means the member firm identified in the System as having a correspondent relationship with a clearing firm.
"Introducing Broker-Dealer" means the member firm identified in the System as a party to the transaction that does not itself execute or clear trades.
"Participant" means any member of FINRA in good standing that uses the System.
"Reportable System Transaction" means those transactions in an ADF-eligible security required, or eligible, to be submitted using the ADF, expressly including transactions for less than one round lot.
"Reporting Party" or "Reporting Member" means the Participant required to input the trade information according to the Rule 6280 Series.
FINRA has since amended Rule 7110 to delete legacy definitions distinguishing categories of ADF participants, such as "TRACS ECN," "TRACS Market Maker," and "TRACS Order Entry Firm," in favor of the single, uniform term "Participant," aligning the ADF's definitional structure with the parallel Rule 7200A and 7200B Series.
Trade Reporting Participation Requirements
Rule 7120 establishes mandatory participation for any FINRA member with an obligation to report an over-the-counter transaction to FINRA, unless the member has an alternative electronic mechanism for reporting and clearing that transaction. Participation is conditioned on execution of a Participant Application Agreement, membership in a clearing agency registered under the Exchange Act, maintenance of physical security over equipment to prevent unauthorized entry of information into the ADF, and acceptance and settlement of each trade the ADF identifies as having been effected by the Participant or its correspondents on the regularly scheduled settlement date. Before submitting trade information, every Participant must obtain a unique identifying Market Participant Symbol from FINRA and use that identifier consistently for trade reporting purposes.
Trade Report Input
Rule 7130 governs the content, timing, and mechanics of ADF trade reports, paralleling the substantive timing rules found in Rule 6282. Where the ADF is used to transfer a transaction fee between two FINRA members, Rule 7130(h) requires the trade report to reflect a total per share or contract price amount inclusive of the transaction fee for clearance and settlement purposes, while the price exclusive of the transaction fee is what gets publicly disseminated. Members must report the cancellation or reversal of any previously submitted trade report, and any agreement facilitating the transfer of a transaction fee, or any give-up agreement under Rule 6282(h), must be executed and submitted to FINRA Market Operations before any such report is submitted, and is treated as a member record under Rule 4511.
Trade Report Processing
Rule 7140 governs how the ADF matches and locks in reported trades: the Reporting Party enters its version of the trade, and the contra party accepts or declines it, with an acceptance resulting in a locked-in trade. The ADF will automatically lock in and submit to DTCC any carried-over trade, from trade date through T+21 calendar days, if that trade remains open as of noon Eastern Time on the applicable subsequent processing day.
Obligation to Honor Trades
Rule 7150 requires that if a Participant is reported by the ADF as a party to a trade treated as locked-in and sent to DTCC, that party must honor the trade on the scheduled settlement date, notwithstanding any other agreement to the contrary.
Audit Trail Requirements
Rule 7160 imposes an ongoing obligation on member firms using the ADF's trade reporting service to input the data elements specified in Rule 7130(d) accurately and completely, since those elements are critical to FINRA's compilation of a transaction audit trail for regulatory purposes.
Violation of Reporting Rules
Rule 7170 provides that failure of a Participant, or a person associated with a Participant, to comply with any of the rules or requirements of the ADF may be considered conduct inconsistent with high standards of commercial honor and just and equitable principles of trade, in violation of Rule 2010.
Termination of Access
Rule 7180 gives FINRA authority to terminate a Participant's access to the ADF's trade reporting service, upon notice, where the Participant fails to abide by any rule or operating procedure of the ADF, fails to honor contractual agreements with FINRA, or fails to pay promptly for services rendered.
Enforcement Context and Examination Priorities
The ADF's enforcement posture is shaped by its distinctive market position: unlike the two TRFs and the ORF, which handle the substantial majority of OTC NMS stock reporting volume, the ADF has historically attracted comparatively limited quoting participation, with FINRA noting elsewhere that no firms have quoted on the related, now-retired OTC Bulletin Board since October 2019, reflecting a broader industry shift away from ADF-style quotation display toward exchange-based and ATS-based trading.
Much of the ADF's current use is trade-reporting-only activity, as reflected in the annual connectivity and testing obligations FINRA adopted under Rule 7520 for FIX-connected firms using the ADF purely as a secondary reporting facility rather than for quoting.
Enforcement activity under Rule 7170 follows the same Rule 2010 bridge used throughout FINRA's trade reporting rules, and firms are expected to maintain Rule 3110 supervisory procedures addressing ADF trade reporting accuracy and MPID usage consistent with the audit trail obligations under Rule 7160, particularly for firms that maintain ADF connectivity primarily as a contingency facility rather than a primary reporting venue.
Examination Relevance and Key Takeaways
Candidates should retain the MPID requirement under Rule 7120 as a precondition to any ADF participation, and the T+21 calendar day automatic lock-in mechanism under Rule 7140 as the backstop ensuring open trades do not remain unresolved indefinitely.
The Rule 7130(h) transaction-fee-transfer mechanism, requiring a total price inclusive of the fee for clearance purposes alongside a separately disseminated price exclusive of the fee, is a frequently tested mechanical detail. Candidates should recognize that Rule 7150's obligation to honor a locked-in trade applies notwithstanding any contrary private agreement, and that Rule 7170's enforcement mechanism ties facility-specific violations back to the general Rule 2010 commercial honor standard.
Finally, candidates should understand the ADF's comparatively limited current market role relative to the TRFs and ORF, and should treat the Rule 7100 Series structure, definitions through participation, input, processing, honor obligation, audit trail, violations, and termination, as the template underlying the parallel Rule 7200A, 7200B, and 7300 Series.
