Monday, March 1 marks a major expansion of the Financial Industry Regulatory Authority (Finra) Trade Reporting and Compliance Engine (Trace) - to include debt issued by federal government agencies, government corporations and government-sponsored enterprises (GSEs), as well as primary market transactions in new corporate debt issues.
With this expansion of TRACE, broker-dealers will report all primary and secondary transactions in non-mortgage related debt instruments issued by federal government agencies such as Fannie Mae, Freddie Mac, Federal Home Loan Banks and Federal Farm Credit, among others.
"March 1 is an important day for the U.S. fixed income markets," said FINRA Chairman and Chief Executive Officer Richard G. Ketchum. "Providing trade data for government agency debt and primary market transactions represents a 50 percent increase in the number of debt securities subject to TRACE reporting requirements. The benefit to investors is an abundance of new information on an important segment of the debt market, while regulators gain new tools for market surveillance. Also, all market participants will benefit from more detailed trading data and increased market efficiency."
Prior to this change, TRACE encompassed real-time pricing and trade volume information only on corporate bonds trading in the secondary market. The additional transaction information will significantly enhance the transparency in the debt markets. Collecting agency and primary market transaction data will also enhance FINRA's ability to detect fraud, manipulation, unfair pricing and other misconduct that violate the federal securities laws and FINRA rules. FINRA will also publish end-of-day aggregate information, including total volume and number of securities traded.
There is approximately $3 trillion outstanding in U.S. agency debt securities that will be eligible for trade reporting on March 1, compared to over $6 trillion for the corporate debt market. The trading volume in agency debt is estimated to be three to four times higher than the corporate universe, measured by par value traded.
TRACE transaction data is available free to the public on the Market Data Bond Center on FINRA's Web site, www.finra.org.
To assist retail investors in understanding bond markets and the intricacies and special language of bond investing, FINRA has produced a comprehensive online learning tool called Smart Bond Investing. Also helping retail investors operate more effectively in the corporate debt market are the FINRA-Bloomberg Active U.S. Corporate Bond Indices.