FINRA member participation in TRACE is mandatory and obligates members to submit transaction reports in TRACE-eligible securities to conform with the Rule 6700 Series. Getting started requires a member to complete a FINRA Transparency Services Participation Agreement (FPA) version 1.4, found on the FINRA website, and then submit the signed form via the FINRA Firm Gateway. Access to the Firm Gateway and FPA Form is provided by your firm’s Super Account Administrator (SAA).
If your firm is an introducing broker-dealer that plans to trade and report through a clearing broker-dealer, both the introducing broker-dealer and the clearing broker-dealer must execute the FPA. In addition, both broker-dealers must also submit the FINRA Transparency Services Uniform Service Bureau/Executing Broker Agreement (USA). The USA allows a member firm to report trades on behalf of another FINRA member to the approved facilities included on page two of the USA. Note that the correspondent firm must execute the USA, 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. Once FINRA receives and executes the TRACE Participant Application Agreement, a TRACE participant may input the trade information in TRACE-eligible securities. Participants may access the service via a FINRA-approved facility during TRACE system hours. Similar to how banks secure wire rooms and compliance control rooms, TRACE brokers must ensure the physical security of the equipment located on premises to prevent unauthorized entry of information into TRACE. Participants must also self-report non-compliance with, or changes to, any of the participation requirements to FINRA.
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.