FINRA Brings Transparency to Asset-Backed Securities Market

WASHINGTON — The Financial Industry Regulatory Authority (FINRA) today brought transparency to the asset-backed securities market, providing investors with post-trade price information for asset-backed securities, including those backed by auto loans, credit card receivables and student loans. Transactions in this market represent approximately 400 trades, totaling $3.5 billion in original principal balance, on an average daily basis.

Through TRACE (Trade Reporting and Compliance Engine), investors now have access to information regarding transactions in asset-backed securities, including transactions in asset-backed securities effected pursuant to Securities Act Rule 144A (144A transactions). 144A securities are considered private placements and can only be purchased by an institutional investor.

"The dissemination of transaction information in asset-backed securities is another milestone in making the debt markets more transparent, ensuring the integrity of markets and investor protection," said FINRA Vice President Ola Persson. "Like with other products, we have adjusted the dissemination protocol to reflect the characteristics of these securities, and we will continue on this path with other more complex products in the near future."

TRACE will distribute transaction information to the public such as the CUSIP, time of the trade, price and volume (the volume will be represented by the actual number of bonds sold up to $10 million; all transactions larger than that will be represented as $10+ million). Asset-backed security transactions will be available to the public no later than 45 minutes after the trade is executed until December 4, 2015, subject to minor exceptions. After that date, asset-backed security transactions will be available to the public no later than 15 minutes after the trade is executed.

Market professionals are able to access the information via major market data vendors. Retail investors will have free access to this data through FINRA's Market Data Center starting today. In addition to making transaction information available, FINRA has developed a comprehensive online learning center – Smart Bond Investing – where retail investors can become familiar with the full range of bond types, features and considerations when investing in bonds.

In addition to today's increased transparency in asset-backed securities, FINRA recently issued a Regulatory Notice soliciting comment on a proposal to expand dissemination of TRACE data to include additional Securitized Products, specifically, collateralized mortgage obligations (CMOs), commercial mortgage-backed securities (CMBSs) and collateralized debt obligations (CDOs). The comment period expired on April 10, 2015, and FINRA is currently reviewing comments received.

TRACE was established in July 2002 to create a regulatory database and bring transparency to the corporate bond market. Transparency in non-144A transactions was fully phased in by January 2006, offering real-time, public dissemination of transaction and price data for all publicly traded corporate bonds – including intra-day transaction data and aggregate end-of-day statistics (most active bonds, total volume, advances and declines, and new highs and lows). Agency debentures were added in March of 2010 and are subject to real-time dissemination. On November 12, 2012, FINRA began disseminating transaction information for agency pass-through mortgage-backed securities traded "to-be-announced" (TBA). FINRA began disseminating information for so-called specified pool transactions in agency pass-through mortgage-backed securities and SBA-backed securities in July 2013.

FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.