TRACE System Enhancement to Support Trade Reporting of Primary Market Transactions and Agency Debt Securities

Currently, FINRA's Trade Reporting and Compliance Engine (TRACE) System accepts reports of trades in TRACE-Eligible Securities executed in the secondary market (currently, TRACE-Eligible Securities generally include corporate bonds, other corporate debt, certain convertible debt and equity-linked notes). As stated in Regulatory Notice 09-57 (September 2009), effective March 1, 2010, member firms will be required to report trades executed in the primary market for securities defined as TRACE Eligible-Securities, which, as of the effective date, will also include Agency Debt Securities.

 

The file changes supporting the implementation are detailed in the TRACE User Guide and Instructions for SFTP Downloading of TRACE Data Files documents. Please refer to each specific Technical Document for further details regarding the changes.

 

Agency Debt Securities

 

Agency Debt Securities generally includes U.S. dollar denominated debt securities issued (or guaranteed) by a U.S. federal agency or a GSE, such as Fannie Mae or Freddie Mac, but excludes all asset-backed and mortgage-backed securities.

 

Impact on TRACE Reporting Participants

  • Transactions in Agency Debt Securities will be reportable using the same CTCI input and output messages and TRACE Web interfaces firms currently use.
  • Reporting of transactions in Agency Debt Securities for Regulatory reporting may be submitted through the RTTM interface via the FICC Corporate, Municipal and UITs (CMU) system (please note Agency Debt Securities trades reported via RTTM for Regulatory purposes must be marked DEST03 only).

 

Impact on BTDS Data Vendors

  • The Bond Trade Dissemination Service (BTDS) will NOT support the real-time dissemination of Agency Debt Securities transactions. Instead, a new real-time feed will be introduced. This new real-time feed will be called the "Agency Debt Trade Dissemination Service" or "ATDS." ATDS will utilize the same IP Multicasting architecture and messaging layouts as BTDS.

    Please note: Data vendors currently subscribing to BTDS who wish to capture ATDS data will be required to execute an amendment to their existing BTDS vendor agreement. Please contact TRACE Data Services at (888) 507-3665 for more information.

 

TRACE Data Files

  • The TRACE Issue Master available via download from the TRACE website and through the NASDAQ Security Framework SFTP facility will be expanded to include all TRACE-Eligible Agency Debt Securities. The Security Type field will identify Agency Debt Securities by the value "A." In addition, the file will be modified to include each security's Trade Report Effective Date.

 

Primary Market Transactions

 

All primary market transactions in TRACE-Eligible Securities will be required to be reported. Two special categories of primary market transactions—List or Fixed Offering Price Transactions and Takedown Transactions—will be subject to modified reporting and dissemination requirements: (1) Reportable no later than TRACE system close on the following business day from the security's Trade Report Effective Date (T+1), and (2) Not subject to dissemination. All other primary market transactions must be reported subject to the general reporting requirements and will be disseminated.

 

Impact on TRACE Reporting Participants

  • A new field, "Trading Market Indicator", will be introduced for TRACE trade reporting.
  • Firms reporting to TRACE via CTCI will need to modify inbound and outbound message processing to accommodate the Trading Market Indicator. The value "P1" will denote the two special categories of primary market transactions discussed above. For secondary market trades and primary trades other than the two special categories identified above, firms can elect to submit the "S1" indicator, or omit the value in the Trading Market Indicator field which TRACE will then default to "S1."
  • The Trading Market Indicator will be available on the TRACE Web screens, including Trade Report and Trade Scan functionality.
  • The TRACE/RTTM interface will support reporting of primary and secondary market executions.

 

Impact on BTDS Data Vendors

  • The two special categories of primary market transactions discussed above reported to TRACE will not be disseminated, therefore the Trading Market Indicator will not be added to the BTDS message formats. As a result, BTDS subscribers will not be required to make changes to their data handling and processing.

 

TRACE Data Files

  • The TRACE Issue Master available via download from the TRACE Web site and through the NASDAQ Security Framework SFTP facility will be modified to include each security's Trade Report Effective Date. This field will denote the date that a security is first eligible for TRACE trade reporting. For the two special categories of primary transaction discussed above, firms will be required to report those trades no later than TRACE system close of the following business day from the Trade Report Effective Date (T+1).

 

Technical Documentation

 

The TRACE User Guide, CTCI, RTTM and SFTP File Downloading Specifications have been revised to reflect the system changes described above. In addition, a new ATDS Messaging Specifications document has been created for data vendors wishing to subscribe to the ATDS data feed.

 

Testing

 

Weekday testing via the NASDAQ Test Facility (NTF) will be available during the month of February 2010. In addition, FINRA will conduct at least one weekend production User Acceptance Test of these system changes in February 2010. Reporting firms and data vendors are encouraged to participate in the test in order to prepare for the March 1, 2010, implementation. FINRA will issue subsequent Technical Notices with details.

 

Questions

 

Questions concerning these system modifications and testing should be directed to:

  • Orlando Cortes at (212) 858-5143; or
  • FINRA Product Management at (866) 899-2107.

 

Questions concerning the reporting requirements of primary market and Agency Debt Securities trades should be directed to:

  • TRACE Feedback;
  • Elliot Levine, Chief Counsel, Transparency Services, at (202) 728-8405; or
  • Office of General Counsel, at (202) 728-8071.