FINRA seeks to expand reporting requirements for trades in TRACE-eligible securities – Publications



June 14, 2022

The Financial Industry Regulatory Authority recently filed two proposed rules – SR-FINRA-2022-011 and SR-FINRA-2022-013 – with the United States Securities and Exchange Commission and issued Regulatory Notice 22-12 for the purpose of expanding TRACE reporting requirements for FINRA member firms in TRACE-eligible securities.

In addition, SR-FINRA-2022-013 has potential future implications for non-member depository banks (covered depository institutions), which, pursuant to authorization from the Board of Governors of the Federal Reserve System, will begin reporting transactions. on US Treasury securities. trace[1] from September 1, 2022.

As part of Chairman Gensler’s statement earlier this year that FINRA’s TRACE and the Municipal Securities Regulatory Board’s (MSRB) real-time transaction reporting system could benefit from post-transparency improvements -negotiation, it is likely that FINRA and MSRB will be active in this area . Firms should therefore continue to closely monitor transaction reporting requirements for fixed income securities in order to adequately prepare for any necessary changes to the system that are required.


FINRA has proposed two rule changes for US Treasury securities pursuant to SR-FINRA-2022-013. First, and subject to an exception for limited trading volume, FINRA would require members to “report to TRACE electronically executed trades in U.S. Treasury securities in the finest increment captured by the system that executed the transaction. . . .” Currently, companies are allowed to use a reporting system to report execution time, which may be less accurate than the time captured by the execution system. The proposed rule would require companies to update their reporting systems, if necessary, to capture the same execution time details as the execution system.

Second, the proposal would require companies to report trades in US Treasury securities as soon as possible and within 60 minutes of the time of execution or the opening of the TRACE system for certain trades executed on a day when the TRACE system does not is not open, as the case may be.[2]

Effective September 1, 2022, as noted above, Covered Depository Institutions are required to report transactions involving US Treasury securities to TRACE. To facilitate this process, which may be new to many covered depository institutions, the FINRA website provides centralized information on TRACE reporting considerations, including FAQs and interpretive questions. Covered depository institutions may wish to begin considering potential operational changes that may be required in the future should the Commission approve the execution time proposals contained in SR-FINRA-2022-13.


FINRA currently requires companies to report transactions involving US dollar-denominated debt securities of foreign private issuers to TRACE. Under SR-FINRA-2022-11, companies would be required to report transactions in foreign sovereign debt securities denominated in U.S. dollars, which would be defined as a “debt security issued or guaranteed by the government of a foreign country means any political subdivision of a foreign country (e.g. state, provincial or municipal governments) or supranational entity. According to FINRA, the latter would include the International Bank for Reconstruction and Development (ie the World Bank), among other multinational organizations. FINRA explained that trades would be reported for regulatory purposes only and that, generally, same-day reporting would be required.


Pursuant to Regulatory Notice 22-12 and effective May 15, 2023, firms are required to use a portfolio transaction modifier when reporting corporate bond transactions that are: “(i) executed between only two parts; (ii) involving a basket of corporate bonds of at least 10 unique issues; and (iii) for a single agreed price for the entire basket. . . .” Notice 22-12 provides additional guidance in the form of FAQs on what constitutes a “basket” and a “single agreed price”. For example, the notice states that a basket of 12 different corporate bonds, including three bonds from the same issuer, would qualify for the modifier. On the other hand, if there were 12 corporate bonds and five agency bonds, the modifier would only be added for corporate bond trades. Notice 22-12 also explains that if there were 12 corporate bond trades at the time of execution, and two were subsequently cancelled, a company would not be required to submit a trade correction to remove the wallet transaction modifier.

Additional guidance is provided in Notice 22-12, and companies should remain vigilant of proposed additional rule changes in this area.


If you have any questions or would like more information about the issues discussed in this LawFlash, please contact one of the following Morgan Lewis attorneys:

David C. Boch
Timothy P. Burke
Thomas J. Hennessey
Jason S. Pinney
T. Peter R. Pound

New York
Ben A. Indek
Ariel Gursky

philadelphia cream
G. Jeffrey Boujoukos
Kelly L. Gibson

San Francisco
Susan D. Resley

washington d.c.
Margaret “Peggy” R. Blake
Russell M. Fecteau
Ivan P. Harris

[1] The Trade Reporting and Compliance Engine (TRACE) is the means created by FINRA for mandatory reporting of certain OTC debt securities.

[2] FINRA makes available on its website aggregate data on the volume of transactions in US Treasury securities reported to TRACE, but information on individual transactions in these securities is not publicly available.


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