Companies regulated by the Financial Industry Regulatory Authority (FINRA) will soon be required to report fractional shares as a whole number. These new changes, which are set to take effect in the first quarter of 2025, aim to streamline the reporting standards of fractional shares.

Currently, FINRA's existing trade reporting rules require the disclosure of the last sale reports to various trade reporting facilities. This framework does not support the reporting of fractional share quantities, prompting the need for an update.

Upcoming Changes to Reporting Guidelines

In the upcoming guidelines, entities registered by FINRA are required to disclose the last sale reports of equity transactions to designated Trade Reporting Facilities, Alternative Display Facility, or the OTC Reporting Facility.

Additionally, FINRA will enhance the Trade Reporting Facilities to enable the reporting of fractional share quantities. Under the updated guidance, a new "Fractional Share Quantity" field will be introduced alongside the existing "Quantity" field. Trades involving fractional shares will require reporting in the "Quantity" and "Fractional Share Quantity" fields. The "Quantity" field will continue to accommodate whole numbers, with fractional amounts either rounded up or truncated.

According to the press release, the regulator mentioned: "Where a trade is executed for less than one share, e.g., 1/3 share, the trade quantity should be reported in two fields. Firms should round up and report a share quantity of 1 in the Quantity field."

"Additionally, firms should report the actual fractional quantity in the Fractional Share Quantity field, in decimal format only, up to six digits after the decimal and truncated beyond six decimal places. Thus, for example, for a trade of 1/3 share, the reported Fractional Share Quantity would be reported in decimal format as 0.333333."

FINRA Gears Up for Trade Reporting Changes

Meanwhile, the "Fractional Share Quantity" field will capture the entire quantity of the trade, including the fractional component up to six digits after the decimal. Existing trade reporting FAQs will be revised to accommodate these changes and ensure clarity for market participants. Firms will need to adhere to specific reporting guidelines for trades involving fractional share quantities.

FINRA has urged market participants to stay informed through FINRA's communication channels for updates. While the effective date of the updated guidance is set for next year, FINRA has pledged to provide timely announcements regarding the specific implementation date. The regulator has urged companies to stay informed through FINRA's notices and e-mail communication to ensure a smooth transition.