Financial Services

What is TRACE Reporting? (Part 1 of 6)

In my over thirty years of experience in the financial services industry, I have learned a thing or two about completing, reviewing, and filing various types of reports — some of which have extremely tight restrictions and constraints to which the reporter must abide. This blog marks the first of a six-part series that will explain the intricacies of reporting OTC bond transactions so that they adhere to TRACE standards.

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While stocks often trade on public exchanges, bonds trade over-the-counter (OTC), meaning they are private transactions between parties. But private prices and volume discourage market activity and hurt liquidity, and a lack of transparency can have a negative impact on bond issuers. To promote transparency in the large U.S. debt market, the Financial Industry Regulatory Authority (FINRA) developed the Trade Reporting and Compliance Engine (TRACE) in 2002 to facilitate the mandatory reporting of OTC bond transactions in eligible fixed-income securities. All broker-dealers who are FINRA member firms have an obligation to report transactions in TRACE-eligible securities under an SEC-approved set of rules.

TRACE reporting was expanded in March 2010 to include agency-backed securities and again in May 2011 to include asset-backed securities. FINRA started publicly disseminating 144A securities in 2014, and as of July 2017, firms are required to report certain transactions in U.S. Treasury Securities to TRACE. (European MiFID II regulations, which are similar to TRACE for European corporate bonds, were implemented in 2018).

Our financial services team can help your company understand and comply with TRACE. Our colleagues are well-versed not just in the requirements but also the technology and processes required to ensure financial institutions remain compliant with one of the most fluid, time-dependent, and onerous processes required by federal banking regulators.

Interested in learning more? I’ve created a guide, The What, Why, and How of TRACE Reporting Compliance, that outlines the intricacies, rules, and regulations surrounding TRACE. You can download it here.

 

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Carl Aridas

Carl is certified in the Scaled Agile Framework (SAFe), a Scrum Master, and a Six Sigma Green Belt project manager with more than 25 years of experience in financial services overseeing large-scale development global, multi-currency accounting, regulatory reporting, and financial reporting software platforms. He has hands-on experience completing, reviewing, and filing Federal Reserve, FFIEC, and IRS reports, including Call Reports, Y9C reports, 2900 reports, TIC reports, and arbitrage rebate reports.

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