Reporting of Corporate and Agencies Debt Frequently Asked Questions (FAQ)
Section 1: Reporting
Section 2: Technical
Section 3: Testing
Section 4: Reporting of Agency Debt Securities and Primary Market Transactions
Section 5: General
|5.1||Are the TRACE Market Participant IDs the same as the ACT or FIPS MPIDs?|
|5.2||Where can I find more information on TRACE history, reporting volumes, etc.?|
Section 6: Agreements & Contracts
Section 7: Rules & Compliance
Section 1: Reporting
- 1.1 How do I sign up for TRACE reporting?
- An authorized party at your firm must sign all the appropriate agreements and return two copies to:
FINRA Market Operations
9509 Key West Avenue, 5th floor
Rockville, MD 20850
Market Operations will keep one copy and return a signed copy to the designated authorized party at your firm.
FINRA Market Operations: 866-776-0800 (toll free).
- 1.2 What is the URL for the TRACE site used for trade reporting?
- 1.3 At what time will the list of TRACE-Eligible Securities be available each day?
- The file containing the complete list of TRACE-Eligible Securities will be available beginning at 7:00 a.m., Eastern Time. This list will be available in real-time throughout the day until 8:00 p.m., Eastern Time.
- 1.4 If the TRACE system is unavailable due to system or transmission failure, how will FINRA notify the participants?
- You will receive an error message when you try to report and the system is not available. Additionally, if this occurs, please check the FINRA website or the TRACE website homepage for information about the status of the system
Note: In order to view these types of alerts on the TRACE website, Users must subscribe to the system alert messages in the "Settings" portion on the TRACE homepage.
- 1.5 Do time zone changes affect reporting time?
- No. The TRACE system requires execution time to be reported as Eastern Time, and the TRACE Rules require clearly that the regulatory reports be made in Eastern Time, even if this means converting both the time of execution and the date of execution to Eastern Time. This does not mean, however, that firms are required to confirm to their customers a trade date or execution time that is in Eastern Time.
- 1.6 How do I self-report any TRACE reporting problems to FINRA?
- In the event that FINRA members experience certain reporting problems that result in late and/or inaccurate transactions reports to TRACE, FINRA urges firms to self report these issues to the Market Regulation Department using an established email address. The firm should retain copies of these emails.
- 1.7 How do I report trades done on a non-business day?
- Firms should refer to FINRA Rule 6730(a)(1)(D) for guidance on how to report transactions executed on a non-business day. Additionally, for reporting a List or Fixed Offering Price Transaction or a Takedown Transaction, see FINRA Rule 6730(a)(2)(B); an Asset-Backed Security transaction, see FINRA Rule 6730(a)(3)(B) (ii); or a pre-issuance CMO or REMIC , see FINRA Rule 6730(a)(3)(C).
- 1.8 How do I notify market operations to set up a new issue?
- Lead underwriters (or others, if there are no lead underwrites) must provide Market Operations with required information pursuant to Rule 6760 so that new issues will be set up prior to the offering of such securities. See also Rule 6730(a)(6) for requirements pertaining to all FINRA members.
- 1.9 How do I know if my trade report was accepted by the TRAQS Web browser interface?
- You will receive a confirmation message containing a TRACE Control Number, TRACE Control Date, CUSIP, FINRA Symbol, and the name of the security. This indicates that the trade report has been accepted.
- 1.10 What is the difference between a cancel and a reversal? When can I cancel a trade and when do I have to do a reversal?
- A cancellation on a transaction can be completed during the period of T-20. A reversal is applied to a transaction on trades greater than T-20.
- 1.11 When can I perform a correction on a trade?
- Members should take particular care to report transactions into TRACE correctly and, therefore, the need for corrections should be rare. Nonetheless, where a correction is necessary, the member immediately must submit a correction to rectify inaccurate information. Information required to be corrected includes: (1) any item of information required by Rule 6730(c), and (2) any information voluntarily entered into a TRACE optional field. However, any change made to a transaction attribute that does not correspond to a TRACE trade report field should not result in a TRACE trade report correction.
For example, if only the account representative associated with a transaction changes, the TRACE trade report to FINRA should not be changed, as this information does not correspond to a TRACE trade report field.
Corrections on trades can be performed during a period of T+20. If the trade correction is greater than T+20, a reversal should be performed on the transaction. Additionally, a new "as/of" transaction report should be submitted to implement the correction.
Any change or amendment after the required reporting time (i.e., within 15 minutes from the time of execution for corporate bonds) will cause the trade report to be deemed late and reflected as such on the firm’s report card.
- 1.12 What fields can I not change using the Correction function?
- All fields are changeable with the exception of:
- TRACE Control Number
- TRACE Control Date
- 1.13 On or after February 6, 2012, how do I cancel or correct Corporate and Agency Debt trades reported before the February 6, 2012 TRACE migration to TRAQS?
- The reversal function must be used to cancel or correct trades reported prior to the February 6, 2012 migration date. If the trade needs to be corrected, an as/of transaction should be entered after the reversal has been completed to implement the correction.
Note: TRACE does not support the correction of partial quantities.
- 1.14 What happens if I modified a trade reported in TRACE, but later need to cancel it?
- A trade report that has been previously modified may be cancelled the same way as one that has not been previously modified.
- 1.15 Can anyone other than the member firm report a transaction cancel or correct to TRACE?
- A third party appointed by the member firm may cancel or correct a previously submitted transaction report.
- 1.16 Can I assume that if I report through someone else, they can take care of all my reporting responsibilities?
- No. The reporting responsibility remains with the member firm.
- 1.17 Who is responsible for resubmitting rejected trades?
- The firm that had the original reporting obligation is ultimately responsible for resubmitting corrected reports.
- 1.18 Will introducing brokers that report through their clearing broker be able to see their TRACE reports?
- No, only the firm that submits the trade report will have the capability to view the trade report later unless the introducing broker is the give-up on the TRACE report.
- 1.19 What is a firm's reporting obligation under TRACE with respect to a counterparty that is a registered BD?
- FINRA reminds firms that they must accurately identify their registered BD counterparties when reporting a transaction to TRACE, using the appropriate MPID to identify the BD. If the counterparty BD uses multiple MPIDs, the firm required to report the transaction must accurately identify the counterparty BD by the appropriate MPID. Further, if an entity, such as a hedge fund, is also a registered BD, the reporting firm must identify the entity by its MPID in the TRACE transaction report.
- 1.20 Do off-shore subsidiaries of FINRA members have to submit trade reports to TRACE?
- The TRACE reporting obligations apply only to FINRA member firms.
If the bond is transferred from a domestic FINRA member firm to a foreign subsidiary or affiliate and beneficial ownership has changed, a transaction needs to be reported by the member firm. This transaction would be reportable as a sale between the domestic B/D and the foreign entity. Similarly, if a foreign affiliate sold bonds to the FINRA member firm, the FINRA member would need to report the buy.
FINRA recognizes that firms may have different arrangements to handle global trading and that the reporting obligation may need to be assessed on an individual basis. Please email as detailed information as possible and provide the name of a contact person, that person's direct telephone number and e-mail address. Your e-mail will be forwarded to FINRA's Office of General Counsel, which will evaluate your situation on a case-by-case basis.
- 1.21 What are the reporting obligations in transactions involving hedge funds that are subsidiaries of a registered B/D?
- If the hedge funds have registered as FINRA members, or are FINRA member subsidiaries of a registered B/D, they are subject to the same dual-side reporting obligation under the Rule 6700 series as any other member firm.
- 1.22 In a transaction involving both an executing broker and an introducing broker, which member reports?
- Both parties are required to report to TRACE. For example, introducing broker A (IBA) receives an order to buy bonds from its customer and then sends that order to executing broker B (EBB) for execution. Assuming EBB sells bonds to IBA from its inventory account, the following reports would be required:
EBB reports a principal sell to IBA
IBA reports an agency buy from EBB
IBA reports an agency sell to its customer
- 1.23 In interdealer trades, the buy and sell side must be reported. For disseminated transactions, doesn't this result in double counting?
- For interdealer trades, TRACE disseminates only the sell side of the transaction. All Customer trades are disseminated.
- 1.24 How many sides of a transaction do I have to report? It is my understanding that all member firms will have to report both buys and sells, regardless of the counterparty.
- Yes. TRACE Rules require that both the buy and the sell side of eligible transactions be reported to the system in order to create a complete audit trail.
- 1.25 If I am a FINRA member and typically place orders with other firms, must the execution time that I report be the same as the execution time reported by the contra side executing broker?
- Yes. Your counter-party supplies the exact execution time when you are notified that your order has been filled. This is the execution time you should input on your TRACE report.
- 1.26 When I report a trade with a customer, should the Buy/Sell code be from the member firm's perspective or from the customer's perspective?
- The trade report information is always entered from the perspective of the member firm that is reporting.
- 1.27 When executing "reportable TRACE transactions" with a "Government Sponsored Enterprise (GSE)," "Agency" or other governmental entity, should firms use the "C" customer indicator when identifying such an entity?
- 1.28 What happens if my firm gets an order from a Customer, and my Customer wants to "Step- Out" to another firm?
- A Step-Out allows an executing broker to "Step Out," or allocate all or part of a trade to another broker-dealer. The only reportable event is the transaction between the executing firm and its customer.
The Broker-Dealer that has stepped in performs nothing more than a clearing function and does not have a reporting obligation. This scenario assumes that the position is held in a non-proprietary account used for clearing purposes only.
- 1.29 If a clearing firm executes a trade on behalf of a correspondent, and there is no give-up agreement in place, how is reporting accomplished?
- The clearing firm reports an agency buy from the Street and an agency sell to its correspondent. The correspondent reports an agency buy from its clearing firm and an agency sell to its customer (C).
- 1.30 Are service bureaus allowed to operate in a give-up arrangement?
- 1.31 If my firm is a clearing firm, but we did not execute the trade, we do not offer reporting services, and all we do is clear, do we have a TRACE reporting obligation?
- No. A clearing firm that handles post-transaction trade processing has no obligation under the TRACE Rules.
- 1.32 What is the purpose of the dissemination flag and the Rule 144A flag referred to in the specifications for obtaining the downloadable list?
- These two fields are for informational purposes only. The dissemination flag indicates the TRACE-Eligible Securities that are marked for dissemination (through the TRACE BTDS or ATDS feeds). The Rule 144A flag denotes TRACE-Eligible Securities that are purchased and sold pursuant to Rule 144A of the Securities Act (which are not subject to dissemination).
- 1.33 How do I report a bond with a sinking fund?
- Reporting of quantity for bonds involving a factor is the same as reporting quantity for a baby bond.
Example: A broker-dealer buys or sells 25 bonds with a par value of $1,000 and a pro-rata sinking fund for which the current factor is .300. To determine what quantity to enter in the TRACE report, multiply $25,000 by .300 for a quantity of $7,500. This results in a remaining principal amount held of $7,500 at this point in the sinking fund schedule instead of the original $25,000. As with price reporting, TRACE rules do not provide for rounding of quantity before reporting. Regarding quantity reporting, the system can accommodate reporting out to two decimal places. Quantity should be submitted to TRACE exactly as calculated.
- 1.34 How do I report a baby bond (less than $1,000 face value per bond)?
- Enter the amount in decimal form as a dollar amount. Examples: 1/2 a bond = $500.00; a $512.37 piece of a bond = $512.37.
- 1.35 In certain cases, TRACE-eligible securities are not quoted or traded in par value. For example, many Equity Linked Notes (ELNs) are quoted and traded in share amounts. How should price and quantity of transactions in such ELNs be reported to TRACE?
- Price: For such ELNs, price is a dollar value (instead of a percentage of par as typical for other TRACE eligible securities). The Price of such an ELN should be reported as the dollar price per share. For example, an ELN bought (or sold) at $7 per share, price should be reported as 7.00. Related, a commission should be reported as the total dollar value of commission charged as for all TRACE eligible securities. For example, if a commission of $25 is charged, the commission should be reported as 25.00.
Quantity: FINRA Rule 6730 (d)(2) requires the reporting of the total par value or principal value of bonds traded. For such ELN transactions, as principal value of bonds traded, firms should report quantity as number of shares traded times the price expressed as a dollar value (as described above). If for example 200 shares are traded at $7 per share, the quantity should be reported as 1400.00
- 1.36 How do I report an in-house cross?
- An "in-house cross" is considered two transactions. One report shows your firm buying from the customer as principal or agent, and the second report shows the sale to the customer as principal or agent.
Note: If the trade ever moves through a proprietary account, it is considered a principal trade by FINRA. Because TRACE does not currently support riskless principal, it must be reported as: "Capacity = Principal".
- 1.37 What price do I report to TRACE?
- If you have charged either a markup or markdown, report the price inclusive of the mark. If you have charged a commission, report the price without the commission. Then, report the commission in the separate field provided for commissions.
- 1.38 Is rounding permitted in the reporting of price to TRACE?
- TRACE rules do not provide for rounding of price before reporting. The system can accommodate reporting out to six decimal places for price. Price should be submitted to TRACE exactly as calculated.
- 1.39 What is weighted average pricing? How do I report a weighted average price trade?
- Weighted average pricing is a means of establishing the price per bond when a large order is filled by executing smaller transactions in the desired security during a given period by a broker-dealer in order to accumulate the total volume of bonds required to fill the order. In such cases, the price per bond is established by weighting the average of the various prices at which the partial transactions were executed. When this weighted average is reported, it may no longer be reflective of the current market price at the time of the final sale to the customer, and so the "W" modifier must be added to the trade report so TRACE will properly report to the tape.
- 1.40 What goes into the Commission field? What about miscellaneous fees or service charges?
- For interpretive guidance, please refer to this interpretive letter.
- 1.41 In a transaction involving an executing broker and an introducing broker, how is commission reported?
- Both the executing and the introducing broker must be represented in the trade report. If the executing broker were long bonds, it would report that it "sold" as principal, net to the introducing broker. If the introducing broker charged its customer a commission, the introducing broker must report the commission in the separate "commission" field.
- 1.42 My firm received an unsolicited order from a customer to purchase TRACE-Eligible Securities at the market. Having no position, I had to go to the Street to buy bonds in pieces, which I ran through my omnibus account. When I finally filled the order, I charged my customer an agency commission. How do I report what I did?
- You report an agency buy from each firm that sold you TRACE-Eligible-Securities. You report an agency sell with "C" (for the end customer), and the amount of the commission you charged in the commission box.
- 1.43 Would you explain the meaning of the modifiers and the special columns on the Time and Sales Search Results screen?
- Comm: A "Y" under the commission column indicates that this was a trade to which a commission has been added. The price reflects not only that of the security, but the actual dollar amount that the buyer paid out of his/her pocket for the bonds.
Modifiers: Modifiers are used to indicate special trade conditions some of which are indicated below.
- A = Trade was reported after the last sales were calculated.
- T = Trade reported outside normal market hours.
- Z = Trade reported during normal market hours and reported late.
- U = Trade reported outside normal market hours and reported late.
- W = "Weighted Average Price."
- "Special." A "Y" in this column indicates that a legitimate reason exists for the bond to be trading at a price outside of the normal market range. The reason must be documented in the field, "Special Memo," on the trade report.
- "As Of." This trade is for a previous execution date.
- 1.44 If I execute a trade in a bond that is trading flat, do I use the Special Price Flag?
- Yes. Members must use the Special Price Flag and indicate in the Special Memo Field that the trade was executed flat. Once the issuer announces that the bond will default, the Special Price Flag should not be used. If, however, after the official public notice of default, trades continue to occur with interest included, those TRACE reports should be flagged with the Special Price Flag and a special memo, since these are now the specified trades, executed contrary to the convention of trading the defaulted security flat.
For interpretive guidance, please see Notice to Members 02-76, Question 6, Security in Default section.
- 1.45 If I am reporting through a third party or if I have a web browser but I do a low volume of business in corporate debt securities, do I still have to pay for a daily license with CUSIP?
- Trade reports may be submitted either using the CUSIP number or the FINRA reporting symbol.
- 1.46 What is considered "substantially unrelated to the current market", since according to Rule 6730(e)(3), such transactions are not reportable?
- For interpretive guidance on Rules, please refer to Questions 9, 10, and 13 of Notice to Members 02-76.
- 1.47 In order for a debt security to be a TRACE-Eligible Security under Rule 6710(a), does it have to have a maturity of greater than one year from issuance? How are discount notes issued by an Agency or Government Sponsored Enterprise treated under Rule 6710(a)?
- As stated in Rule 6710(a), the definition of TRACE-Eligible Security does not include a Money Market Instrument. Under recent amendments to Rule 6710(o) pertaining to discount notes, "Money Market Instrument" means a debt security that at issuance has a maturity of one calendar year or less, or, if a discount note issued by an Agency, as defined in Rule 6710(k), or a Government-Sponsored Enterprise, as defined in Rule 6710(n), a maturity of one calendar year and one day or less (i.e., not later than 366 days from the date of issuance, or if a leap year, not later than 367 days from the date of issuance).
FINRA reminds firms that such determination is based on a standard calendar year analysis (January 1 to December 31).
For example, a corporate debt security issued on March 15, 2012, with a maturity date of March 15, 2013, is a TRACE-Eligible Security, because it matures one year and one day from issuance, provided the security otherwise meets the other requirements for TRACE eligibility. However, a similar corporate debt security issued on March 15, 2012, with a maturity date of March 14, 2013, would not be a TRACE-Eligible Security.
Please refer to Notice To Members 04-90, for guidance regarding issue date determination.
- 1.48 In moving a TRACE-Eligible Security from one firm principal trading account to another, is a member firm required to submit a TRACE report, or is this simply an inter-company transfer?
- If there is no change in ownership, it is merely a journal entry between accounts and is not reportable to TRACE.
- 1.49 What transactions involving the transfer of member proprietary positions are subject to the non-dissemination provisions of FINRA Rule 6750(b)(2)?
- Members must report transfers of proprietary positions in TRACE-Eligible Securities where the transfer (1) is effected in connection with a merger or direct or indirect acquisition and (2) is not in furtherance of a trading or investment strategy. However, such transactions will not be disseminated by FINRA pursuant to Rule 6750(b)(2).
For example, assume Member A acquires all of the assets of Member B. In connection with this corporate control transaction, Member A and Member B consolidate their separate sales and trading businesses onto a single platform and, along with the migration of sales and trading personnel, clients and systems and technology, Member B’s proprietary positions are transferred to Member A. The transfers of Member B’s proprietary positions must be reported to TRACE by Member A and Member B for regulatory purposes and for purposes of assessing applicable regulatory transactions fees and /or trading activity fees, but will not be subject to dissemination.
Members should refer to Regulatory Notice 09-21 (April 2009) for the specific requirements—including the requirement to provide FINRA advance written notice —that members must follow when relying on this exception. (For transfers of member proprietary positions in equity securities, see FAQ at FINRA's Trade Reporting FAQ Web page.
- 1.50 How should a firm report the size (volume) of its purchase from another firm when the bonds will be allocated subsequently to multiple customer accounts, totaling the aggregate purchase amount?
- If the transaction between two member firms was agreed upon at the aggregate amount, both firms should report the aggregate amount as the size (volume) to TRACE. For example, if Firm A sells $100,000 (par value) to Firm B, which in turn executes 10 sales to customers at $10,000 each, Firm A should report a sale of $100,000 to Firm B and Firm B should report a purchase of $100,000 from Firm A. Firm B also should report 10 sales to customers of $10,000 each. Firm B should not report 10 purchases of $10,000 each from Firm A in order to match its 10 sales to customers at $10,000 each.
- 1.51 How should a BD report a transaction to TRACE where an IA places a block order with the BD and instructs the BD to allocate the block order to various managed customer accounts?
- The response depends on whether the BD and IA are the same or separate entities. See the examples below.
Scenario 1: BD A is registered both as a BD under the Securities Exchange Act of 1934 and an IA under the Investment Advisers Act of 1940 (or is regulated as an IA in the state in which it maintains its principal office and place of business) and operates as one legal entity. For certain managed customer account(s), BD/IA A directs its trading desk to purchase a block of $100 million (par value) bonds from the Street (or otherwise obtain the bonds). BD/IA A then sells portions of the block (in accordance with the allocation instructions) to various managed customer accounts of BD/IA A, which are maintained at BD/IA A.
TRACE Reporting: BD/IA A reports the purchase (from the Street or another source) of the $100 million bonds to TRACE, including the time of execution of the block. BD/IA A also reports the sale(s) to the various managed customer accounts, which must include any markup or commission, to TRACE. When reporting the sales of securities to the various managed customer accounts, the time of execution is the time the material terms of the transaction are determined. If BD/IA A finalizes the allocation with respect to each managed customer account (thereby establishing the material terms of the transaction as to each customer) before or at the same time it submits the block order to its trading desk (to purchase from the Street), the time of execution of the sales to individual managed customer accounts is the same time of execution reported for the block purchase. If such allocations (as to the material terms with respect to each managed customer account) are not finalized before or at the same time as the block order (to purchase from the Street), the time of execution of the sales to individual managed customer accounts is the time such allocations are finalized.
Scenario 2: BD A is registered as a BD, but is not an IA. An IA in a separate legal entity (including an IA that is an affiliate of BD A or an IA selected from a list of IAs that BD A "approved") places an order with BD A to purchase a $100 million block of bonds, and instructs BD A to retain eighty percent ($80 million) for allocation to various managed customer accounts maintained at BD A, and to deliver twenty percent ($20 million) to BD B, which will be allocated to various customer accounts maintained at BD B. After the execution of the order, the IA then allocates the portion of the block retained by BD A ($80 million) to various managed customer accounts maintained at BD A. Separately, the IA allocates the portion of the block delivered to BD B ($20 million) to various managed customer accounts maintained at BD B.
TRACE Reporting: BD A reports the purchase of the $100 million block to TRACE. BD A also reports the block sale ($100 million) to the IA (as a sale to a "C" (customer)). BD A does not report to TRACE the transfer (in accordance with the allocation instructions from the IA) to the various managed customer accounts that are managed by the IA and maintained at BD A. Similarly, BD B does not report to TRACE the transfer (in accordance with the allocation instructions from the IA) to various managed customer accounts that are managed by the IA and maintained at BD B. Consistent with FAQ #1.28, the transfer of the bonds ($20 million) from BD A to BD B also is not separately reported to TRACE as FINRA considers this a "step-out" transaction whereby the executing broker may deliver all or part of a block of securities to another broker-dealer and the only reportable event is the transaction between the executing firm and its customer. The broker-dealer that has stepped in performs nothing more than a clearing function and does not have a reporting obligation.
Section 2: Technical
- 2.1 How do members report via the Computer-To-Computer Interface (CTCI)?
- Members may report directly through a computer-to-computer interface (CTCI). The method requires a dedicated circuit using the TCP/IP network protocol or IBM MQ Series product.
- 2.2 How can I get information about setting up a CTCI interface, and what is the lead time?
- You must order physical circuits to set up an interface. These circuits take approximately 6-8 weeks to be delivered. Technical details can be found in the CTCI Specifications on the FINRA TRACE Web pages, and questions can be answered by the NASDAQOMX Technical Support at (212) 231-5180. For more information on CTCI, please refer to the NASDAQOMX website.
- 2.3 Do I have to order a separate CTCI line just for TRACE?
- No. The header line of the CTCI message defines the application to which the message will be directed. Each firm should decide, based on their mixture of business and volume, if multiple lines are needed.
- 2.4 Can I use the same CTCI port for both Corporate and Agency Debt trade reporting and Securitized Products trade reporting?
- If you have a CTCI port already assigned for Securitized Products transaction reporting you may be able to use the same port for Corporate and Agency Debt trade reporting. Please contact NASDAQ Technical Support at (212) 231-5180 to determine the feasibility of adding Corporate and Agency Debt reporting to the existing CTCI port.
- 2.5 Can I report trades to TRACE via FIX?
- Yes. Members may elect to use the FIX protocol to report trades to TRACE. Technical details can be found in the FIX Specifications on the FINRA TRACE Web pages, and questions can be answered by the NASDAQOMX Technical Support at (212) 231-5180. For more information on FIX, please refer to the NASDAQOMX website.
- 2.6 Can my FIX connections share a port for both Securitized Product and Corporate and Agency Debt transaction reporting?
- No. The FIX protocol requires a single port for both Corporate and Agency Debt transaction reporting, and a second port for Securitized Products transaction reporting.
- 2.7 How can members report via the FINRA Web Browser?
- Members may report through a secure Web-based application that FINRA provides. The Web application for TRACE reporting is supported under Windows and Sun Solaris. The system supports a variety of standard web browsers. Please see the TRACE User Guides for further details.
Note: The web browser requires each individual to have a unique User ID and a digital certificate. User IDs and digital certificates will be assigned by the NASDAQOMX Web Administrator.
- 2.8 How do I report a system outage or connectivity failure?
- When an outage or technical problem occurs that may cause late reporting, a firm must immediately contact NASDAQOMX Technical Support at (212) 231-5180. A problem ticket number will be issued which should be kept in a firm's records as documented proof of a system problem.
If the problem involves a third-party reporting intermediary or is related to a malfunction in an internal system, the firm should not contact NASDAQOMX Technical Support, but rather have the appropriate party at the firm document the problem. Please refer to FINRA Member Alert. FINRA's Market Regulation Department has established an email address so that firms may register their system outage or other technology problem related to TRACE. It is suggested that the firm include its name, MPID, capacity and the telephone number of the person submitting the information in the text of the email. It is suggested that the firm retain copies of these emails for their records.
- 2.9 How do I review a trade report that I submitted, or that a clearing firm or service bureau submitted on my behalf?
- CTCI/FIX: If your firm reports trades through CTCI or FIX, FINRA will send the firm an electronic acknowledgment message for each successfully processed trade report submitted. The firm's application should retain the acknowledgements and provide appropriate review capacity.
TRACE Web: Firms reporting via the TRACE Web browser can view their transaction reports using the Trade Management function.
Reporting via another FINRA member: Firms reporting via a FINRA member clearing firm that reports using a give-up can view their transaction reports using the Trade Management function on the TRACE Web browser.
Reporting via a service bureau/non-FINRA member firm: Firms reporting via a non-FINRA member service bureau (vendor) can see their reports using the Trade Management function on the TRACE Web browser.
- 2.10 How do I get access to the list of TRACE-Eligible Securities (the Issue Master)?
- The Issue Master file is available from an Application Program Interface (API); instructions for accessing this information can be found in the API specification.
- 2.11 Is the Issue Master a full file or daily update?
- The Issue Master is a full file and is available in real-time beginning at approximately 7:00 a.m. Eastern Time each day. The Issue Master contains corporate bonds, equity-linked notes, agency and GSE debentures, church bonds and all securitized products that are reportable to TRACE. Additionally, FINRA will publish a real-time Daily List, available via the API and on the TRACE Web browser.
- 2.12 Is the Participant List a full file or daily update?
- The Participant List is a full file that is available via the API and on the TRACE Web browser. A Participant Daily Update list is also available via the API.
Section 3: Testing
- 3.1 What is the environment that is available for TRACE testing?
- The NASDAQOMX (NOMX) Testing Facility (NTF) is the service that supports FINRA client testing for TRACE transactions.
- 3.2 Once I know how my firm plans to report to TRACE, how do I arrange for testing?
- For CTCI/FIX users: Please contact NASDAQOMX Testing Facility technical support at (212) 231-5180.
Third-Party Reporting Intermediaries: If a firm plans to report through a FINRA member clearing firm or via a vendor or service bureau, it is recommended that they contact that firm directly for information regarding their services and process around corrections and managing rejected trades. Most qualified third-party reporting intermediaries already have CTCI or FIX lines in place to NASDAQOMX, FINRA's technology provider.
TRACE Web users: Please contact FINRA Operations at 866-776-0800 (toll free) or via e-mail to receive access to the NASDAQ Testing Facility (NTF) secure website. Please note, a TRACE Order Form will be required to begin the process of gaining access to the NTF secure website.
For or other questions concerning testing, please contact FINRA Product Management at (866) 899-2107.
- 3.3 Who should I contact if I experience NTF problems?
- Firms are encouraged to contact the NASDAQOMX Support Desk at 212-231-5180 and should specify whether they are calling in regards to a Production or NTF problem and whether they are a user of CTCI or FIX. If a firm is unable to resolve the testing issue through the NASDAQOMX Support Desk, the firm may contact FINRA Product Management at 866-899-2107. Please have details on hand regarding the contact name at NASDAQ OMX working to resolve the issue, the nature and duration of the problem when contacting FINRA Product Management.
- 3.4 If my service bureau or clearing firm is doing my TRACE reporting for me, do I still need to test?
- Firms are required to complete the TRACE Member Test Script regardless of the chosen reporting method.
Firms are urged to coordinate with their service bureau or clearing firm as the service bureau or clearing firm will have to report test trades using either: 1) the member firm's MPID (if a service bureau) or 2) under a "give-up" arrangement (if a FINRA member firm clearing broker/dealer).
Note: The FINRA member firm that is closest to the end customer has the obligation to report and is ultimately responsible for accurate and timely reporting, even if the trade report is submitted by a third-party intermediary. For this reason, firms should verify that the clearing firm or other third-party intermediary has successfully completed testing.
- 3.5 Where do I find the TRACE User Guide?
- The User Guide/Glossary is posted on the FINRA.org/TRACE website under TRACE Technical Documentation.
Please note there are two separate user guides, one Corporate and Agency Debt and another for Securitized Products.
Section 4: Reporting of Agency Debt Securities and Primary Market Transactions
- 4.1 How does FINRA communicate new issue CUSIPs that are added to the system intraday?
- Intraday updates to the Daily List reflect additions and deletions to the TRACE-Eligible Security list. These updates are done in real time throughout the day.
- 4.2 Up until what time can a firm register a CUSIP using the FINRA website and expect to have it included in the daily list of reportable securities sent at 7:30 p.m. Eastern Time?
- FINRA Operations will need all of the pertinent data as provided in FINRA Rule 6760 by 5:00 p.m. Eastern Time to ensure that the security will be included in the file (with the exception of CMO's, which must be received by 1:00 pm Eastern Time). As always, however, it is most beneficial for FINRA Operations to receive the information as soon as possible.
- 4.3 Are the required security details (i.e., CUSIP, maturity, etc.) for adding a new security noted somewhere on FINRA's website?
- The security details required for adding a new security are specified in FINRA Rule 6760. The TRACE New Issue Form can be used to submit the required information.
- 4.4 Are Fed buybacks of Agency Debt Securities reportable TRACE transactions?
- Yes, Fed buybacks of Agency Debt Securities as defined in Rule 6710(l) are reportable to TRACE. Agency Debt Securities means securities, except Asset-Backed Securities, that are issued by both Agencies and GSEs.
- 4.5 Are securities created by the "stripping" of an Agency Debt Security TRACE reportable?
- Yes, a security created by the "stripping" of an Agency Debt Security that otherwise meets the TRACE eligibility requirements is reportable to TRACE.
- 4.6 Are repurchase and reverse repurchase transactions involving Agency Debt Securities TRACE reportable?
- As with all TRACE-eligible securities, bona fide repurchase and reverse repurchase transactions involving Agency Debt Securities are not reportable to TRACE.
- 4.7 Is the sale from the issuer to the underwriter TRACE reportable?
- No, with one exception: a sale from a securitizer of an Agency Pass-Through Mortgage-Backed Security to any purchaser is TRACE reportable.
- 4.8 Are small sized new issues exempt from TRACE reporting?
- No. There is no exemption or exclusion from the term TRACE-Eligible Securities based on the small size of an issue, and such securities are TRACE reportable.
- 4.9 Are GSE debt securities with exactly 1 year to maturity TRACE reportable?
- Debt securities with exactly 1 year to maturity from the date of issuance are not TRACE-Eligible Securities. Only securities with a maturity greater than one year from issuance are TRACE-Eligible Securities as defined in Rule 6710(a).
- 4.10 How are unsold allotments of primary issues to be treated for TRACE reporting purposes?
- Unless such transactions meet the definition of List or Fixed Offering Price Transaction or Takedown Transaction, as defined in Rules 6710(q) and (r) respectively, transactions of unsold allotments will be subject to 15 minute reporting.
- 4.11 With regard to "best efforts" offerings, when does a TRACE reporting obligation arise?
- Generally, a transaction reporting obligation arises when there is a meeting of the minds between the parties with regard to the transaction's material terms, such as price and quantity. In a non-contingent best-efforts offering, regarding the subscription process, a TRACE reporting obligation would arise at the point when a firm sends or transmits customer funds to the issuer or designated trustee. For purposes of P1/S1 designation, the first day of trading of a new issue would be the first day that customer funds are sent/transmitted to the issuer or designated trustee.
In a contingent best-efforts offering (e.g. "mini-max" or "all or none"), regarding the subscription process, a TRACE reporting obligation would arise at the point when the contingency or contingencies are met and customer funds are sent/transmitted from escrow or otherwise to the issuer or designated trustee. For purposes of P1/S1 designation, the first day of trading of the new issue would be the first day that all contingencies are met and customer funds are sent/transmitted to the issuer or designated trustee. This guidance is for TRACE reporting only. Firms are reminded of their obligations under SEC Rules 10b-9 and 15c2-4 as well as other rules applicable to contingent offerings.
- 4.12 Do both counterparties in an interdealer, new issue transaction, have a TRACE reporting obligation?
- 4.13 In the definition of List or Fixed Offering Price Transaction, what is meant by the "first day of trading of a new issue"?
- The first day of trading of a new issue is the first calendar day of new issue sales.
- 4.14 What does FINRA consider the "time of execution" of a new issue transaction?
- Just as in secondary market transactions, the time of execution of new issue transactions would be the time of the "meeting of the minds" with regard to the material terms (e.g., price and quantity) of the transaction."
- 4.15 What is the timeframe for reporting List or Fixed Offering Price Transactions and Takedown Transactions?
- If a primary market transaction qualifies as a List or Fixed Offering Price Transaction under Rule 6710(q) or a Takedown Transaction under (Rule 6710(r), it is subject to T+1 reporting. All other primary market transactions are subject to 15 minute reporting.
- 4.16 Are re-offerings eligible for T+1 reporting with a "P1" designation? What about upsizings?
- Transactions that are part of a "re-offering" of a previous new issue may be subject to T+1 reporting with the "P1" designation if the re-offering occurs after the initial settlement date of the new issue security that is being re-offered, if the re-offering is accompanied by an offering circular or prospectus, and the transactions meet the definitions of List or Fixed Offering Price or Takedown Transactions as defined in Rule 6710(q) and 6710(r), including the requirement that they be sold on the first day of trading of the re-offering. Regarding upsizings, transactions pursuant to an upsizing may be eligible for the "P1" designation when such transactions meet the definitions of List or Fixed Offering Price or Takedown Transactions as defined in Rule 6710(q) and 6710(r), including the requirement that they be sold on the first day of trading in a new issue. A P1 designation does not apply when a deal is upsized after the first day of trading and transactions are taking place before the initial settlement date of the new issue security.
Firms are required to notify FINRA of a reoffering pursuant to Rule 6760. However, where the information provided for the initial offering pursuant to Rule 6760 such as issuer name, coupon, maturity and whether Rule 144A applies has not changed, only the following information should be provided: (i) that the offering is a re-offering and (ii) the time that the new issue is priced, and if different, the time that the first transaction in the reoffering is executed. This should be done by adding the words “reoffering” and entering the applicable time(s) in the memo field for each reoffering transaction reported with a P1 designation.
- 4.17 What is the purpose of the Trading Market Indicator field?
- The Trading Market Indicator is used to denote a List or Fixed Offering Price Transaction or a Takedown Transaction, as defined in Rules 6710(q) and (r) respectively. The value "P1" identifies a List or Fixed Offering Price Transaction or Takedown Transaction; the value "S1" identifies all other primary market transactions and all secondary market transactions. If CTCI firms choose to leave this field blank, the TRACE system assumes the trade does not qualify as a List or Fixed Offering Price Transaction or a Takedown Transaction and the field defaults to "S1."
- 4.18 Is the field for the "trading market indicator" (i. e., either "P1" or "S1") amendable or will changes to the indicator (i.e., from a "P1" to an "S1," or vice versa) require cancelling and rebilling the trade?
- A change to the trading market indicator (i.e., changing a transaction from a List or Fixed Offering Price Transaction or a Takedown Transaction (a "P1") to any other primary market transaction or a secondary transaction (an "S1"), or vice versa) will require either a correction, if made within T+ 20, or a Reversal and As/Of submission, if made later than T + 20.
- 4.19 Are transfers of TRACE-eligible securities among syndicate members for purposes of establishing the underwriting syndicate reportable to TRACE?
- A. No, a transfer of TRACE-eligible securities on the first day of trading from one member of the underwriting syndicate to another member of the underwriting syndicate that is done solely to facilitate the establishment of the syndicate is not reportable to TRACE. For example, when all the securities for an offering are delivered on the first day of trading by the issuer to one of the co-managers of the syndicate with the understanding that the firm will deliver a portion of the securities to the second co-manager to establish the syndicate, the transfer is not reportable to TRACE. FINRA reminds firms that engage in such transfers of the need to maintain and retain (e.g., for examiner review) accurate records sufficient to demonstrate that the transfers were effected to facilitate the establishment of the syndicate.
FINRA notes that this guidance does not extend to transfers of TRACE-eligible securities from a managing underwriter (or another member of the underwriting syndicate) to selling group members. Such transfers must be reported to TRACE. Also, this guidance does not extend to re-allocations, which would include transfers to syndicate members after the first day of trading. If a re-allocation occurs among syndicate members after the initial allocation is established, the transfer of such securities from one firm to another firm to effect the reallocation must be reported to TRACE.
- 4.20 If a sole underwriter, syndicate manager, syndicate member or selling group member (or in the case of a primary market sale transaction effected pursuant to Securities Act Rule 144A, an initial purchaser, syndicate manager, syndicate member or selling group member) effects a List or Fixed Offering Price Transaction as defined in FINRA Rule 6710(q), with a counterparty buyer that is a registered broker-dealer (BD), and reports the transaction to TRACE pursuant to FINRA Rule 6730(a)(2), designating the transaction "P1" as provided in FINRA Rule 6730(d)(4)(D) and the Trade Reporting and Compliance Engine User Guide, does the counterparty BD also report the transaction pursuant to FINRA Rule 6730(a)(2) and designate the transaction "P1"?
- Yes. A BD that is a counterparty buyer in a List or Fixed Offering Price Transaction must report the transaction in accordance with FINRA Rule 6730(a)(2), which requires reporting no later than the next business day during TRACE System Hours, and designate the transaction as “P1.”
- 4.21 If an underwriter opts to sell at a fixed price an offering that is described in the issuer's offering documents as a variable price offering, and provides notification to the syndicate, selling group (if applicable) and to other market participants that the offering will be sold at a fixed price, may firms report the transactions as List or Fixed Offering Price Transactions and use the "P1" indicator?
- No. The issuer’s description of the offering in the offering documents is controlling for purposes of reporting to TRACE. Thus, if the issuer’s offering documents state that the offering is a variable price offering, firms may not identify and report the transactions as List or Fixed Offering Price Transactions and may not use the “P1” indicator.
- 4.22 Are transfers of TRACE-eligible securities among syndicate members for purposes of facilitating settlement reportable to TRACE?
- No. If a transfer of TRACE-eligible securities is done solely to facilitate settlement with no change in price or other material terms, transfers from one member of a syndicate to another syndicate member would not be reportable to TRACE. For example, if a customer purchases bonds from multiple syndicate members, but designates one syndicate member to deliver the entire allotment, the transfer of the bonds to the designated syndicate member from the other syndicate members would not be reported to TRACE as long as there is no change in price or other material terms.
In addition, if the syndicate members designate one syndicate manager or another syndicate member to act as a billing and delivery agent and the agent is used to sell or deliver the securities to all "end" investors on behalf of the syndicate, the transfer of the securities from syndicate members to the billing and delivery agent also would not be reportable to TRACE in that such transfers occur solely for administrative convenience (i.e., to facilitate the creation and maintenance of accurate books and records). FINRA reminds firms that engage in these types of transactions of the need to maintain and retain (e.g., for examiner review) accurate records sufficient to demonstrate that such transfers are effected to facilitate settlement.
- 4.23 If, prior to the final pricing or determination of other material terms of a new issue debt security, a firm receives a firm commitment from a broker-dealer or a customer to purchase the new issue debt security when it is issued, has the firm entered into a transaction that must be reported to TRACE?
- No. Although firms may solicit orders or seek indications of interest from customers and other broker-dealers, and, in some instances, receive a firm commitment from a broker-dealer or a customer to purchase a quantity of a new debt security prior to its issuance and the determination of final material terms (e.g., price, coupon and quantity), for purposes of TRACE trade reporting, a transaction occurs at the "time of execution" as defined in FINRA Rule 6710(d), which does not occur until the parties have a "meeting of the minds" regarding the material terms of the transaction. This "meeting of the minds" cannot occur before the final material terms, such as price, coupon and quantity, have been established by the issuer and such terms are known by the parties to the transaction. Further, firms are reminded they should be clear in their communications regarding the final terms of the trade and how such terms will be conveyed between the parties.
- 4.24. When is a firm considered part of the selling group for purposes of the definition of “Takedown Transaction” in Rule 6710(r) and must report a transaction to TRACE with the P1 indicator under Rule 6730(d)(4)(C)?
- A firm is considered a selling group member effecting a Takedown Transaction for purposes of the TRACE rules when all the conditions set forth in the definition of “Takedown Transaction” in FINRA Rule 6710(r) have been satisfied and the syndicate has not been broken. In particular, FINRA notes that the transaction must be a primary market sale transaction on the first day of trading and the sale to the firm must be by a sole underwriter or syndicate manager to the firm (or in the case of a transaction effected pursuant to Securities Act Rule 144A, an initial purchaser or syndicate manager) at a discount from the published or stated fixed offering price. If the firm purchases the securities from a sole underwriter or syndicate manager (or in the case of a transaction effected pursuant to Securities Act Rule 144A, an initial purchaser or syndicate manager), the firm purchasing the security as well as the firm selling the security must report the transaction to TRACE with the P1 indicator.
A sale from a selling group member to another firm at a discount from the published or stated list or fixed offering price would not meet the definition of a Takedown Transaction unless the firms effecting the transaction are affiliates. For purposes of this FAQ, an affiliate means an entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the member firm.
In order to ensure proper reporting to TRACE, FINRA believes it is a best practice for the sole underwriter or syndicate manager to document the firms that it deems are dealers in the selling group and to communicate this information with its contra-parties to ensure proper usage of the P1/S1 indicators.
- 4.25. An underwriting syndicate may generate a short position as part of the initial sale of securities and, in some circumstances, one or more of the underwriters will take onto its books a portion of this short position via an intra-syndicate short sale position transfer. Are such transactions reportable to TRACE and, if so, should they be reported with the primary (P1) or secondary (S1) market indicator?
- An intra-syndicate short position transfer in a TRACE-Eligible Security is reportable to TRACE pursuant to FINRA Rule 6730. If the intra-syndicate short position transfer meets the definition of a "List or Fixed Offering Price Transaction" (i.e., is effected at the published or stated list or fixed offering price on the first day of trading by a sole underwriter, syndicate manager, syndicate member or selling group member), then firms must report the transaction using the P1 indicator.
However, where the short position transfer is not effected at the published or stated list or fixed offering price on the first day of trading by a sole underwriter, syndicate manager, syndicate member or selling group, firms must report the transaction to TRACE using the S1 indicator.
Section 5: General
- 5.1 Are the TRACE Market Participant IDs the same as the ACT or FIPS MPIDs?
- No. The TRACE Participant List is available on TRACE Web API.
- 5.2 Where can I find more information on TRACE history, reporting volumes, etc.?
- The TRACE Fact Book contains information on the universe of TRACE Eligible Securities as well as details on the roll-out of TRACE.
Section 6: Agreements & Contracts
- 6.1 How/where do I get the agreements for TRACE?
- All TRACE agreements are posted on the TRACE Legal Agreements Web page.
- 6.2 Does an introducing broker-dealer that plans to trade and report through a clearing broker-dealer need to sign a TRACE Participant Agreement?
- Yes. If a member takes an order, the member has an obligation to report the executed transaction to TRACE. It must report both its activity with the end customer and with the clearing broker/dealer. The clearing broker/dealer and the correspondent (introducing) broker/dealer firm must execute and submit two signed originals of the TRACE Participation Agreement. Under a "give-up" agreement, an introducing broker/dealer does not have to access TRACE directly and may fulfill its obligation to report both the buy trade and sell trade by authorizing the clearing firm to submit both TRACE reports on its behalf.
Important Note: Each correspondent firm must execute an Attachment B, which also must be countersigned by the clearing broker/dealer, and submit the Attachment B to FINRA in order for the third-party reporting arrangement to be valid.
- 6.3 If all I want is the API file for Securitized Products or Corporate and Agency Debt, what agreements do I have to sign?
- Anyone wishing to take the API file of TRACE-reportable issues must fill out a TRACE Order Form and specifically request permission to access the API. Firms must also have either a BTDS or TRACE Participation Agreement on file. In order to see the full list with CUSIP/CINS numbers, firms must have the proper licenses in place with Standard & Poor's.
Technical Specifications for downloading the API files are available on our site
- 6.4 How many documents must my firm submit if my firm is self-reporting?
- All users of the TRACE system, whether FINRA member firms or third-party reporting intermediaries, must complete and submit a TRACE Order Form indicating the TRACE access method selected as well as two signed originals of the TRACE Participation Agreement.
FINRA member firms that handle their own reporting must complete and sign the TRACE Participation Agreement and one or both of the following, where applicable:
- TRACE Web Access Addendum (Attachment A of the TRACE Participation Agreement) and TRACE Order Form (notifying FINRA of the access method selected and number of User IDs requested).
- NASDAQ CTCI Agreement
Instructions and Resources for NASDAQ CTCI
- 6.5 How many documents must my firm submit if my firm is using a third-party?
- FINRA member firms that delegate reporting to a third-party reporting intermediary must complete and sign the TRACE Participation Agreement and TRACE Order Form as well as complete and sign:
- The TRACE Service Bureau/Executing Broker Supplement (Attachment B of the TRACE Participation Agreement, if
- a FINRA member firm (example: a clearing firm or a member firm Alternative Trading System (ATS)) is reporting on behalf of another FINRA member, or
- A FINRA member firm (example: a clearing firm or a member ATS) that offers reporting services on behalf of another FINRA member must complete and sign the TRACE Participation Agreement and the following:
- The TRACE Service Bureau/Executing Broker Supplement (Attachment B of the TRACE Participation Agreement.
- A non-FINRA member third-party reporting intermediary (example: a Service Bureau or vendor) must sign a TRACE Participation Agreement and the following:
- The TRACE Service Bureau/Executing Broker Supplement (Attachment B of the TRACE Participation Agreement .
- The TRACE Service Bureau/Executing Broker Supplement (Attachment B of the TRACE Participation Agreement, if
- 6.6 If I already have one or more give-up agreements in place for equity reporting, and the same firm(s) will handle my TRACE reporting, do I need to sign additional give-up agreements with these firms for TRACE?
- Yes. TRACE has separate agreements.
- 6.7 How do I receive authorization for CUSIP data on TRACE?
- Email the information below to CUSIP at: email@example.com to find out if a daily license is already in place for your firm. The subject line should read: "Request for Daily License Verification for TRACE Securities."
Firm General Phone number:
Firm Contact's Role:
Firm Contact's Phone Number:
Firm Contact's Email address:
Level of service to be provided – TRACE Securities List
CUSIP staffers will receive your e-mail and will forward the request to the appropriate sales team member. CUSIP will then send an e-mail directly to FINRA notifying FINRA that your firm has requested TRACE data containing CUSIP numbers and is eligible. Once the daily license has been set up, CUSIP will authorize FINRA Operations to provide access to the files with CUSIP numbers included.
Note: The American Bankers Association has proprietary rights in and to the registered trademark CUSIP® and to the CUSIP® numbers.
Section 7: Rules & Compliance
- 7.1 Are tender offers reportable?
- Sales of bonds from bondholders directly to the issuer or a third party purchaser pursuant to a public tender offer, effected in accordance with SEC rules, are not reportable transactions. In such a tender offer, a FINRA member that acts as a dealer manager/agent for the issuer or third party purchaser would not have a reporting obligation. However, a FINRA member that acts as principal and purchases bonds and then resells them to the issuer/third party purchaser or a member that acts as agent for the seller would have a reporting obligation with respect to purchases from the bondholder.
For interpretive guidance, see Notice to Members 02-76, Question 13, "Issuer Open Market Repurchase Transactions."
- 7.2 Do I have a reporting obligation to TRACE if I am an inter-dealer broker between two firms, and the two broker-dealers write the ticket with each other?
- An inter-dealer broker ("IDB") that negotiates and/or executes a transaction is a party to the transaction and has a reporting obligation. An IDB that negotiates a transaction as an agent must report the buy from one member and the sell to the other, and these two dealer firms must submit TRACE reports.
The reporting obligation of an IDB may need to be assessed on an individual basis. Please e-mail as detailed information as possible and provide the name of a contact person, that person's direct telephone number and e-mail address. Your e-mail will be forwarded to FINRA's Chief Counsel and Senior Advisor to Market Operations and Information Services and to the Office of General Counsel, and your situation will be evaluated on a case-by-case basis.
- 7.3 Do prime brokers have any reporting obligation?
- Prime brokers that are FINRA members acting as an executing broker have a TRACE reporting obligation.
- 7.4 Who reports trades executed through electronic trading systems that are themselves broker-dealers?
- All FINRA members that are "parties to a transaction" have a trade reporting obligation under TRACE Rules. Where two FINRA members effect/execute a transaction through an electronic trading system that is registered as a broker-dealer, both members, as well as the electronic trading system would have a trade reporting obligation.
- 7.5 If my firm is a selling agent for a medium-term note issuer, and the issuer is responsible for CUSIP assignment in bulk, is my firm still responsible for provding the new issue information set forth in Rule 6760 to FINRA Market Operations?
- Yes. Firms should implement the procedures necessary to ensure that the issuer provides the firm with the CUSIP in a timely manner such that the firm can comply with its obligations under Rule 6760.
- 7.6 In a wrap fee account scenario, if a broker-dealer has an outside investment advisor ("IA") advising customer accounts, does the IA have to call the broker-dealer and inform the broker-dealer what the IA traded, so that the broker-dealer in which the IA's account resides can report?
- A member firm can serve as the domicile for the all the accounts of a customer. If the customer retains an outside, non-FINRA member advisor, and that advisor executes away from the domiciling firm, only the FINRA member that directly negotiated/executed the transaction, and/or is otherwise a party to the transaction with the IA, incurs a trade reporting obligation versus "C", the IA. If the FINRA member firm where the IA accounts are domiciled acts in a custodial capacity only and otherwise is not a party to the transaction, the member has no reporting obligation.
- 7.7 If my firm's managed account area executes a trade, does it have any reporting obligation to TRACE? (My firm owns an MAA that is not a separate asset management subsidiary or separate investment advisor. It can execute away from my desk on an agency basis only.)
- Yes. The TRACE Rules do not allow for separating any part of a firm, even if it acts like a buy-side entity, for trade reporting purposes. Either the MAA must inform your desk that it has transacted business on behalf of the accounts it manages so that the desk can report the transactions to TRACE within the mandated time frame, or the MAA must input the TRACE reports itself. There is still only one MPID representing your firm, and business transacted by the MAA runs through an account of your firm. (Essentially, the person in the MAA has his own trading desk at your firm, and the MAA is responsible for effecting a change in beneficial ownership.) The transaction activity between your firm — off any type of desk at the firm — and its end customers is subject to regulatory reporting and possible dissemination of transaction information, as well as to surveillance.
- 7.8 If a debt security is sold pursuant to Regulation S in an off-shore transaction, is a member firm required to report the transaction to TRACE?
- No. In 2009, FINRA expanded the definition of TRACE-eligible security in Rule 6710(a).1 When the amendments took effect, many securities that previously were not TRACE-eligible securities, including debt securities that were distributed other than pursuant to a registration statement, became TRACE-eligible securities. However, the definition of TRACE-eligible security was not expanded to include debt securities distributed in bona fide off-shore Regulation S transactions.
For purposes of TRACE reporting, FINRA distinguishes between debt securities that are the subject of bona fide Regulation S transactions and subsequent non-Regulation S transactions in such debt securities. Thus, if a debt security originally sold in a Regulation S transaction is subsequently purchased or sold as part of a U.S. transaction, the transactions following the Regulation S transaction must be reported to TRACE. FINRA notes that such transactions are subject to TRACE reporting whether the transactions occur during or after the applicable Regulation S distribution compliance period.
1 Securities Exchange Act Release No. 59768 (April 14, 2009), 74 FR 18271 (April 21, 2009) (SEC approval order for File No. SR-FINRA-2009-004).
- 7.9 In the event that information regarding a TRACE-Eligible Security required to be provided to FINRA under Rule 6760(b) is not available at the time that a firm submits a TRACE New Issue Form, how should a firm fully comply with its obligation to provide such information to FINRA?
- A firm that is a managing underwriter (or, if none, an underwriter or, if no underwriter, an initial purchaser) of a distribution or offering in a newly issued TRACE-Eligible Security must provide notice and information to FINRA pursuant to FINRA Rule 6760 using the TRACE New Issue Form provided on the Firm Gateway. However, FINRA recognizes that not all the information may have been determined by the deadline for notification. In such cases, there are two steps a firm must take to comply with Rule 6760(b). First, a firm must submit the TRACE New Issue Form by the deadline in Rule 6760, with certain information omitted, provided that the fields which are mandatory for submission of the TRACE New Issue Form are completed as of the time of the initial submission. Second, once the additional information required under Rule 6760(b) becomes available, the firm must promptly email the additional information not previously submitted on the TRACE New Issue Form to FINRAOperations@finra.org to fully comply with its obligation.
FINRA also reminds firms of their responsibility to facilitate timely reporting of transactions. Pursuant to FINRA Rule 6730(a)(6), if a firm enters into a transaction in a TRACE-Eligible Security and determines that the TRACE-Eligible Security is not set up in the TRACE System, the firm must promptly notify and provide FINRA Operations the information required under FINRA Rule 6760(b) in the manner detailed above, prior to reporting the transaction.