Financial Services

Moving to One Minute TRACE Reporting: A Review of FINRA Proposed Changes to Rule 6730

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Background

  • FINRA has been collecting and disseminating fixed income transaction information through TRACE since 2002.
  • Fixed income markets have continued to change dramatically since 2002, becoming more global while an increasing percentage of trades are made on or by electronic trading platforms.
  • With the move to electronic trading and increased trade volume, FINRA has been considering ways to provide more timely and detailed data to the marketplace and regulators.

Current Time Requirements

In place since 2005, a 15-minute outer limit reporting timeframe currently applies to transactions in:

  • Corporate bonds
  • Agency debt securities
  • Asset-backed securities (ABS)
  • Agency pass-through mortgage-backed securities (MBS)
  • Traded to-be-announced (TBA) for good delivery (GD).

Proposed Change

On August 2, 2022, FINRA published a proposal to amend Rule 6730(a)(1) to provide that for corporate bonds, agency debt securities, asset-backed securities (ABS), agency pass-through mortgage-backed securities (MBS), and traded to-be-announced (TBA) for good delivery (GD) securities:

  • Transactions executed on a business day at or after 12:00:00 a.m. ET through 7:59:59 a.m. ET, firms would be required to report the trade the same day, no later than one minute after the TRACE system opens;
  • For transactions executed on a business day at or after 8:00:00 a.m. ET through 6:29:59 p.m. ET, firms would be required to report the trade as soon as practicable, but no later than one minute of the time of execution, except that, for transactions executed on a business day less than one minute before 6:30 p.m. ET, firms would be required to report the trade no later than one minute after the TRACE system opens on T+1 (and, if reported on T+1, designated “as/of” with the date of execution);
  • And, for transactions executed on a business day at or after 6:30:00 p.m. ET through 11:59:59 p.m. ET, or for trades executed on a Saturday, a Sunday, a federal or religious holiday, or any other days on which the TRACE system is not open at any time, firms would be required to report the trade on T+1 no later than one minute after the TRACE system opens (and must designate the trade “as/of” and include the date of execution).

What Is Not Impacted

The proposal did not address a reduction in reporting time for transactions involving the following debt instruments:

  • List or Fixed Offering Price Transactions and Takedown Transactions
  • Collateralized debt obligations (CDO) and commercial mortgage-backed securities (CMBS)
  • Collateralized mortgage obligation (CMO) transactions before, on, or after the issuance date

Anticipated Time of Change

After announcing the proposed change, FINRA adjusted the online version of the rulebook to expire on May 14, 2023. It is suggested that TRACE report filers be prepared to comply with the reduced timeframes in the second quarter of 2023.

Opportunity to Comment

Comments may be made directly to FINRA online using the “Submit a Comment” button for Regulatory Notice 22-17, by emailing comments to pubcom@finra.org, or via direct mail to: Jennifer Piorki Mitchell, Office of the Corporate Secretary, FINRA, 1735 K Street, NW, Washington, DC 20006-1506.

The comment period expires on October 3, 2022.

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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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