Co-authored by Michelle S. McIntosh.
The Securities and Exchange Commission approved amendments to Financial Industry Regulatory Authority (1) Rule 6700 Series and Trace Reporting and Compliance Engine (TRACE) dissemination protocols and (2) Rule 7730 regarding TRACE fees. The effective date of the amendments is November 5, 2012.
FINRA’s TRACE rules and dissemination protocols require the dissemination of agency pass-through mortgage-backed securities that are traded “to be announced” (TBA transactions) immediately upon receipt of a transaction report. As amended, such FINRA rules and protocols increase transparency in the TBA market and reduce the reporting periods for TBA transactions.
Pursuant to the amendments, FINRA has instituted a pilot program that expires on May 10, 2013. During the pilot program, TBA transactions for which good delivery (GD) may be made must be reported no later than 45 minutes from the time of execution and TBA transactions that are not traded for good delivery (NGD) must be reported no later than 120 minutes from the time of execution, in each case, subject to certain limited exceptions. After the pilot program has expired, TBA transactions GD must be reported no later than 15 minutes from the time of execution and TBA transactions NGD must be reported no later than 60 minutes from the time of execution.
Moreover, the amendment of FINRA Rule 7730 establishes fees for current market data for TBA transactions and aged TBA transaction data (i.e., historic TRACE data). The fees are the same as are currently in effect for other TRACE market data and historic TRACE data, respectively.
Click here to read the full FINRA Regulatory Notice.