TRACE for Treasuries Frequently Asked Questions (FAQ)
Section 1: Access & Agreements
1.1 When can I start getting my firm signed up to report U.S. Treasury Security trades to TRACE?
The FINRA participation agreement will be updated with U.S. Treasury Security reporting authorizations and made available under Forms and Filings in the FINRA Firm Gateway on April 10th. At that time, both new TRACE participants and existing TRACE participants must submit the agreement online in order to be able to report U.S. Treasury Security transactions to TRACE.
1.2 If I am already reporting to TRACE, do I have to file any forms to get signed up to report U.S. Treasury Security trades?
Yes, both new and existing users will need to submit a TRACE Order Form to create a new user or update an existing user ID with Treasury entitlements. Such requests can be submitted on the TRACE Order Form in the FINRA Firm Gateway starting April 10th.
1.3 If I am a new TRACE participant and my clearing firm reports on my firm’s behalf, do I still need to sign up for TRACE?
Yes, even firms whose clearing firm reports on their behalf must submit a new TRACE participation agreement and receive a TRACE MPID.
1.4 How can I get access to the API master files and Daily List?
Access is by subscription, and users can request this by contacting FINRA Operations. API queries to retrieve data and respondent data sets are described in the TRACE Treasuries Web API Specification.
1.5 If I have USA agreements in place with other firms for TRACE reporting, do I need to do anything to have those agreements apply to reporting of U.S. Treasury Security trades?
No. The USA agreements your firm has in place for reporting to TRACE will apply to TRACE for Treasuries reporting.
Section 2: Technical
2.1 Which methods can firms use for testing and reporting trades in U.S. Treasury Securities?
Firms can use FIX, CTCI or TRAQS to test. However, the FIX and CTCI connections must route to the test environment (NTF).
2.2 If my firm uses FIX protocol to submit trade reports, will I be able to see them in the Web application and take any corrective action necessary or would I need to amend trade reports using FIX?
Whether a firm uses FIX or CTCI, the firm can view those trade reports submitted via either protocol in the TRAQS web application, and can perform Cancel and Correction actions using the web application.
2.3 Will FINRA distribute a file with all reportable U.S. Treasury Securities?
Yes, the Security Master and Daily List will be available on a daily basis through an API and on the TRAQS web application. The first security master via the API and TRAQS for U.S. Treasury Securities will be available on the July 10 effective date.
2.4 Does the master list of U.S. Treasury Securities available for TRACE reporting get updated dynamically during the trading day?
Yes, anytime there is an addition, deletion, or change to a security, the master security list is dynamically updated. Additions and Deletions are communicated via the Daily List.
2.5 Will FINRA supply a list of U.S. Treasury Securities available for testing?
Securities available for testing will be made available in the Security Scan on the TRAQS website (NTF version) and via the Treasuries API Master List (NTF version).
Section 3: Reporting
3.1 When will the TRACE amendments expanding TRACE to include U.S. Treasury Securities become effective?
As announced in Regulatory Notice 16-39, the effective date is July 10, 2017.
3.2 What securities issued by the Treasury Department will be in scope for TRACE reporting purposes?
The TRACE reporting requirements will apply to all marketable U.S. Treasury Securities, including Treasury bills, notes, floating rate notes, bonds, inflation-protected securities (“TIPS”), and Separate Trading of Registered Interest and Principal Securities (“STRIPS”).
3.3 Are repurchase and reverse repurchase transactions involving U.S. Treasury Securities TRACE reportable?
As with all TRACE-eligible securities, bona fide repurchase and reverse repurchase transactions involving U.S. Treasury Securities are not reportable to TRACE.
3.4 Is the Treasury leg of a US Dollar Interest Rate Swap considered reportable to TRACE even though swaps are regulated by the CFTC?
3.5 Regarding the TRACE Web API, for TRACE reportable products other than U.S. Treasury Securities the “Trade Report Effective Date” is used to determine when to include a security in a firm’s master file as TRACE eligible to ensure that it should be reportable. Will U.S. Treasury Securities be treated differently?
Yes. For U.S. Treasury Securities, the announcement date of the auction of the security marks the commencement of When Issued trading (see FINRA Rule 6710(ii)) when the security can be traded and thus is reportable to TRACE.
3.6 How much time do you have to report transactions in U.S. Treasury Securities?
Transactions executed on a business day at or after 12:00:00 a.m. Eastern Time through 5:00:00 p.m. Eastern Time must be reported the same day during TRACE system hours.
Transactions executed on a business day after 5:00:00 p.m. Eastern Time but before the TRACE system closes must be reported no later than the next business day (T+1) during TRACE system hours, and, if reported T+1, designated “as/of” and include the date of execution.
Transactions executed on a business day at or after 6:30:00 p.m. Eastern Time through 11:59:59 p.m. Eastern Time—or on a Saturday, a Sunday, a federal or religious holiday or other day on which the TRACE system is not open at any time during that day (determined using Eastern Time)—must be reported the next business day (T+1) during TRACE system hours, designated “as/of”, and include the date of execution.
3.7 Do time zone changes affect the reporting time for transactions in U.S. Treasury Securities?
No. The TRACE system requires execution time to be reported as 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.
3.8 Our firm will use two separate systems to facilitate trade reporting of U.S. Treasury Securities for different business lines. One system (“System A”) has the capability to capture the time of execution to the millisecond; however, the second system (“System B”) will only capture the time of execution to the second. Will our firm be required to update System B to capture the time of execution to the millisecond?
No. The rule requires members to report the time of electronic executions to the finest increment of time captured in the member's system (e.g., millisecond, microsecond), but at a minimum, in increments of seconds. Since the firm would be reporting the time of execution to the finest increment captured by each system, the firm would not need to make any updates to System B to comply with a finer time increment.
3.9 Can I assume that if I report my transactions in U.S. Treasury Securities through someone else, they can take care of all my reporting responsibilities?
No. The reporting responsibility remains with the member firm.
3.10 Who is responsible for resubmitting rejected trades in U.S. Treasury Securities?
The firm that had the original reporting obligation is ultimately responsible for resubmitting corrected reports.
3.11 What is a firm's reporting obligation with respect to a counterparty that is a registered BD?
Firms 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.
3.12 Will both sides of a trade in a U.S. Treasury Security involving two FINRA members have to report?
Yes. Both FINRA members are required to report their side of the transaction to TRACE.
3.13 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 a U.S. Treasury Security from its customer and then sends that order to executing broker B (EBB) for execution. Assuming EBB sells the securities 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
3.14 How many sides of a transaction in a U.S. Treasury Security 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.
3.15 How do I report an in-house cross transaction in a U.S. Treasury Security?
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".
3.16 When I report a trade in a U.S. Treasury Security 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.
3.17 My firm received an unsolicited order from a customer to purchase U.S. Treasury Securities at the market. Having no position, I had to go to the Street to buy the securities 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 U.S. Treasury Securities. You report an agency sell with "C" (for the end customer), and the dollar amount of the commission you charged in the commission field.
3.18 Is rounding permitted in the reporting of price to TRACE for U.S. Treasury Securities transactions?
TRACE rules do not provide for rounding of price before reporting. The system can accommodate reporting out to 11 places after the decimal for price. Price should be submitted to TRACE exactly as calculated and truncated beyond 11 decimal places.
3.19 Will all the modifiers that apply to corporate bonds apply to U.S. Treasury Securities?
Yes. The Weighted Average Price (“W”) modifier will apply to both corporate bonds and U.S. Treasury Securities.
3.20 What is weighted average pricing? How do I report a weighted average price trade in a U.S. Treasury Security?
Weighted average pricing is a means of establishing the price 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 securities required to fill the order. In such cases, the price 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.
3.21 Will there be any new modifiers for U.S. Treasury Securities?
Yes. Two new modifiers will be used to indicate particular transactions that are part of larger trading strategies in U.S. Treasury Securities and therefore, may be executed at prices away from the market at the time of the transaction. Firms must select the modifier:
- ".B," if the transaction is part of a series of transactions where at least one of the transactions involves a futures contract (e.g., a “basis” trade) ;
- ".S," if the transaction is part of a series of transactions and may not be priced based on the current market (e.g., a fixed price transaction in an “on-the-run” security as part of a transaction in an “off-the-run” security).
FINRA will announce the implementation date for the requirement to attach “.B” or “.S” trade modifiers, if applicable, at a later date. However, firms will be permitted to append the modifiers beginning July 10, 2017.
3.22 With regard to Treasury Inflation-Protected Securities (TIPS), we understand we will NOT be required to provide the factor on each trade. Will factor information be a consideration if there is a discrepancy in matching?
No, the trade management page on TRACE does not use factor as a matching criteria.
3.23 How do I self-report any TRACE reporting problems in U.S. Treasury Securities 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 firstname.lastname@example.org. The firm should retain copies of these emails.
3.24 Will U.S. Treasury Security trades be disseminated via BTDS, ATDS or SPDS, or will there be a new TRACE feed?
U.S. Treasury Security trades reported to TRACE will not be subject to dissemination with the release effective July 10th.
3.25 Certain U.S. Treasury Securities, including Treasury bills and Floating Rate Notes (FRNs), are issued at a discount to face value and mature at face value rather than making interest payments. These securities are quoted and traded in terms of their discount rate (discount margin for FRNs) or interest rate based on a 360-day year, even after the auction and issue dates of the securities. The interest rate is a function of the purchase price, the face value of the security, and the time remaining until maturity. How should firms report the “price” of these securities that trade based on a discount rate/margin?
For transactions in U.S. Treasury Securities that trade based on discount rate/ margin, either the discount rate/margin or the dollar price of the transaction may be reported as the price. When reporting the discount rate/margin in the Price field, the price type of “Yield” should be selected in the Price Type field. When reporting the discount rate or discount margin, percentage units should be entered in the price field (e.g., a discount rate of 0.97% should reflect an entered price of 0.97). Firms choosing to report the dollar price of the transaction instead of the discount rate/margin must use the price type of "Decimal."
3.26 FINRA defines a “When-Issued transaction” as a transaction in a U.S. Treasury Security that is executed before the issuance of the security, and firms must include the WI indicator on When-Issued transactions. Should transactions executed on the issue date include the WI indicator?
No. Transactions should be reported with the WI indicator up until, but not including, issue date.
3.27 In some circumstances, a firm’s customers may wish to submit competitive or non-competitive bids in an auction for a U.S. Treasury Security. Member firms, whether acting as an intermediary or submitter, can submit customer bids, with the required information, directly in the Treasury Automated Auction Processing System (TAAPS). In the event the customers’ bids are accepted and awarded in the auction, on the issue or settlement date, firms may then execute (or “book”) a transaction as agent or principal for the purpose of delivering the securities to the customer. Is a sell trade by the firm, for the purpose of delivering securities awarded to a customer in an auction, reportable to TRACE?
Under FINRA Rule 6730(e)(8), members are not required to report auction transactions to TRACE, and FINRA Rule 6710(hh) defines an “Auction Transaction” to mean “a transaction in which a member is awarded a U.S. Treasury Security in an auction.” FINRA exempted these transactions from the TRACE reporting requirements because Treasury maintains transaction data for Auction Transactions as part of the auction process and this data is readily available to regulators. When firms submit a bid on behalf of a customer, this information is also available to regulators. Consequently, FINRA considers a transaction between a member and its customer, for the purpose of delivering securities awarded to the customer in an auction, to be exempt from the TRACE reporting requirements. Any transaction related remuneration that a firm may choose to charge, such as a commission, commission equivalent and/or miscellaneous fee, must have been disclosed, separately from the auction price, to the customer.
3.28 In the course of a Treasury reopening, are firms required to append a When Issued indicator when reporting transactions between the auction and the issuance of the security that is subject to the reopening?
FINRA generally requires transactions in a U.S. Treasury Security that is subject of an auction to be reported with the When Issued (WI) indicator up until, but not including, issue date. FINRA recognizes that Treasury reopenings are unique given the fungibility of the WI and non-WI security, and that many firms’ systems do not distinguish between WI and non-WI after the auction. Accordingly, FINRA will not require firms to append the WI indicator on transactions in a reopened CUSIP executed after an auction but prior to issue date.
3.29 The results of an auction can result in the unscheduled reopening of an existing U.S. Treasury Security. Should firms amend transactions reported in the previously announced security to reflect the reopened security?
No. Transactions reported in the CUSIP of the announced security do not have to be cancelled and resubmitted using the CUSIP of the reopened security.
3.30 When should firms use a “.S” modifier for reporting trades in Treasury securities?
Beginning February 5, 2018, Rule 6730 requires firms to use a “.S” modifier on a trade report if the transaction in a U.S. Treasury Security that is being reported is part of a series of transactions and may not be priced based on the current market (e.g., a fixed price transaction in an “on-the-run” security as part of a transaction in an “off-the-run” security). However, as noted in Regulatory Notice 16-39, the “.S” modifier applies to a transaction in a particular strategy that meets the .S criteria regardless of whether the transaction is, in fact, off market. The “.S” modifier must therefore be used when a transaction is part of a series and could be, but need not be, priced away from the market. Because transactions in U.S. Treasury securities are often undertaken in connection with other transactions and may be priced based on factors other than the current market, the “.S” modifier may appear on a substantial number of trade reports; however, firms must have criteria in place to ensure they are appending a “.S” modifier only when appropriate.