Draft Document for Review January 6, 2020 11:23 pm 8480ax01.fm The concept of traceability for measurements of time of day refers to a continuous chain of  comparisons extending from a time comparison, time stamp, or clock synchronization  performed by a user, back through the distribution of one of the UTC(K) time scales, and so  on to the reference time scale UTC. Each of these comparisons in the chain is carried out  with some inherent level of inaccuracy (uncertainty of the measurement). The uncertainties  of each link in the overall chain can then be combined to give the total uncertainty of the time  signal at the point where it is available to the user. Understanding the dissemination chain  and calculating this uncertainty is essential to meeting requirements of being able to  demonstrate traceability. Each link in the chain must be documented, along with its  associated uncertainty evaluation, and the resulting total uncertainty of the timestamp or time  output must be determined and recorded. There are two additional requirements for demonstrating time traceability to a common  reference. One is for the timing equipment to be calibrated so that its unknown internal  delays do not bias its time output. The second is for the equipment to be monitored  continuously so that any fault or anomaly can be detected, and the time output not used until  the equipment is once again working correctly. The calibration evidence and monitoring  results should be archived so that the status of the timing equipment at any given point in time  can be verified later. Prior to the advent of High Frequency Trading (HFT) and distributed electronic trading  platforms, many of the clocks maintained for financial transactions were mechanical devices  that physically stamped the time (ink) onto paper documents used to record the transactions. These clocks were seldom synchronized to the granularity expected today. By the late 1990s  it became obvious that the performance of these clocks was far too limited for financial  markets, and synchronization requirements were implemented in the U.S. and in Europe. Since there are some substantial differences, let’s examine the U.S. and EU requirements in  separate sub-sections below. In August 1996, the U.S. Securities and Exchange Commission (SEC) issued a report  alleging that the National Association of Securities Dealers (NASD) and NASDAQ did not  always act in the best interest of customers. This report led to a financial settlement between  the SEC and NASD that also included new regulations. To comply with the new regulations,  the NASD issued a series of rules that were approved by the SEC in March 1998 and went  into effect in August 1998. One rule was NASD OATS (Order Audit Trail System) Rule 6953,  entitled "Synchronization of Member Business Clocks". Rule 6953 required computer  systems and mechanical clocks to be synchronized every business day before the stock  market opened to ensure that event time stamps are accurate. It also required the  synchronization to be within three seconds of the NIST atomic clock, which while not  particularly stringent, did finally force the removal of old clocks that could not display seconds. The NYSE adopted similar requirements in 2003. Overview of Regulations: Past, Present and Future United States: NASD, OATS, FINRA, CAT The US based Financial Industry Regulatory Authority (FINRA) is a not for profit entity that is  responsible for overseeing US brokerage firms and works closely with the SEC. In 2008,  FINRA issued new requirements for stock market time synchronization. These new  requirements, contained in FINRA OATS Rule 7430 "Synchronization of Member Business  Clocks", superseded Rule 6953 for the NASDAQ (2008) and for the NYSE (2011). Similar to  the previous requirements of Rule 6953, Rule 7430 lists NIST time as the official reference for  U.S. stock market transactions. Rule 7340 made the synchronization requirement more  Appendix A. IEEE 1588 Precision Time Protocol (PTP) Introduction and Overview  119