A TRACE-eligible security does not include a debt security that is issued by a foreign, sovereign government or a money market instrument. A money market instrument is, other than a U.S. Treasury Security, a debt security that at issuance has a maturity of one calendar year or less, or if an agency or government-sponsored enterprise (GSE), a maturity of one calendar year and one day or less.
With such an exhaustive list of what must be reported in TRACE transactions, here’s a comprehensive list of what not to include:
- Transfers of TRACE-eligible securities for the sole purpose of creating or redeeming an instrument that exhibits ownership or otherwise tracks the underlying securities transferred (e.g., an exchange-traded fund)
- Transactions in TRACE-eligible securities that are listed on a national securities exchange, including the NYSE, when such transactions are executed on and reported to the exchange, and the transaction information is disseminated publicly (no sense reporting something that is already being reported)
- Transactions where the buyer and the seller have agreed to trade at a price substantially unrelated to the current market for the TRACE-eligible security (this could be to allow the seller to make a gift, or more likely as compensation)
- Transactions resulting from the exercise or settlement of an option or a similar instrument, or the termination or settlement of a credit default swap, another type of swap, or a similar instrument
- Transfers of securities made pursuant to an asset purchase agreement (APA) that is subject to a hearing in a bankruptcy court
- Repurchase and reverse repurchase transactions (Repos) that include TRACE-eligible securities
- Auction bond transactions
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This marks the sixth and final blog of The What, Why, and How of TRACE Reporting Compliance blog series. Be sure to check out the preceding posts, linked below:
- What is TRACE Reporting? (Part 1 of 6)
- Preparing to Report TRACE Transactions (Part 2 of 6)
- Considerations for Alternative Trading Systems (Part 3 of 6)
- When and by Whom Should TRACE Transactions Be Reported? (Part 4 of 6),
- What Information Must Be Included in a TRACE Trade Report? (Part 5 of 6)
And, to have all of this information in one easy-to-access place, you can download our corresponding guide, The What, Why, and How of TRACE Reporting Compliance, here.