FINRA Adopts Amendments to Require Reporting of Transactions in U.S. Dollar-Denominated Foreign Sovereign Debt Securities to TRACE

Summary

FINRA has adopted amendments to the Rule 6700 series (Trade Reporting and Compliance Engine (TRACE)) to require members to report to TRACE transactions in U.S. dollar-denominated foreign sovereign debt securities. The amendments will take effect on November 6, 2023.

The amended rule text is available in the online FINRA Manual.

Questions regarding this Notice should be directed to:

• Joseph Schwetz, Senior Director, Market Regulation, at (240) 386-6170 or email;
• Alie Diagne, Senior Director, Transparency Services, at (212) 858-4092 or email; or
• for legal and interpretive questions, Adam Kezsbom, Associate General Counsel, Office of General Counsel, at (202) 728-8364 or email.

Background and Discussion

FINRA has adopted amendments to the Rule 6700 Series to require firms to report transactions in U.S. dollar-denominated foreign sovereign debt securities to TRACE.¹ “Foreign sovereign debt security” is defined as a debt security that is issued or guaranteed by the government of a foreign country, any political subdivision of a foreign country or a supranational entity.² Transaction reports in U.S. dollar-denominated foreign sovereign debt securities will not be subject to public dissemination.³

Transactions in U.S. dollar-denominated foreign sovereign debt securities generally will be subject to a same-day reporting requirement. Specifically, reportable TRACE transactions in U.S. dollar-denominated foreign sovereign debt securities executed on a business day at or after 12:00 a.m. Eastern Time (ET) through 5:00 p.m. ET must be reported the same day during TRACE system hours.⁴ Transactions executed on a business day after 5:00 p.m. ET 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 on T+1, designated “as/of” and include the date of execution.⁵ Firms that wish to report transactions in U.S. dollar-denominated foreign sovereign debt securities on an immediate basis may do so.

Consistent with FINRA’s usual approach when a new product type becomes reportable to TRACE, FINRA will update the TRACE security master list to include the securities that FINRA has identified as U.S. dollar-denominated foreign sovereign debt securities. FINRA intends to make the updated TRACE security master list available to members at least three months in advance of the effective date. Members are reminded of their obligations under TRACE rules to have systems and processes in place to determine whether a transaction in a TRACE-eligible security has occurred, even if the security was not included on the TRACE security master list at the time of the transaction.⁶ Members should consult the technical specifications for corporate and agency debt reporting in preparation for implementation of the U.S. dollar-denominated foreign sovereign debt security reporting requirement.⁷ FINRA also will make available to members a new report card covering transaction reports in U.S. dollar-denominated foreign sovereign debt securities.⁸

Below FINRA provides responses to frequently asked questions on the U.S. dollar-denominated foreign sovereign debt security TRACE reporting requirement. These FAQs also are included on FINRA’s TRACE FAQ page and may be updated from time to time.

Question 1: Can firms add a U.S. dollar-denominated foreign sovereign debt security to TRACE where a CUSIP or CINS is unavailable?

Yes. Firms may submit through the FINRA Gateway a TRACE New Issue Form requesting a symbol for a U.S. dollar-denominated foreign sovereign debt security where only an ISIN or a FIGI is available for the security.

Question 2: Is a foreign sovereign debt security considered to be “U.S. dollar-denominated” only if it was issued in U.S. dollars or can the determination also be based on the currency in which the security typically trades?

A foreign sovereign debt security is considered “U.S. dollar-denominated” only if the security was issued in U.S. dollars.

Question 3: Are transactions in U.S. dollar-denominated debt issued by a foreign municipality reportable to TRACE?

Yes. As specified in Rule 6710(kk), the term “foreign sovereign debt security” means a debt security issued or guaranteed by the government of a foreign country, any political subdivision of a foreign country, or a supranational entity. “Political subdivision” includes securities issued or guaranteed by state, provincial, or municipal governments.

Endnotes