FINRA Requests Comment on Enhancements to TRACE Reporting for U.S. Treasury Securities

FINRA recently issued a request for comment on Enhancements to TRACE Reporting for U.S. Treasury Securities. TRACE is the FINRA-developed vehicle that facilitates the mandatory reporting of over-the-counter transactions in eligible fixed income securities. In 2017, FINRA members began reporting information on transactions in U.S. Treasury securities to TRACE.

FINRA is now seeking comment on potential changes to TRACE reporting for U.S. Treasury securities that would require: (1) more granular execution timestamps; (2) a shortened trade reporting timeframe; (3) new indicators to identify non-alternative trading system (ATS) trading venues and method of execution, the trading unit within a firm executing a trade, and the method used to clear and settle a transaction; (4) new modifiers to identify additional multi-leg transactions and whether a transaction is priced at the current market; (5) standardized price reporting; and (6) separate reporting of per-transaction ATS fees. FINRA also is soliciting views on whether these proposed changes should apply to all TRACE-eligible securities uniformly, if applicable.

TRACE reporting requirements currently apply only to FINRA members. Notably, FINRA worked on its proposal in consultation with the U.S. Department of the Treasury and mentions that TRACE reporting could be extended to banks if the SEC approves of such a filing. This proposal, along with the SEC’s recent proposal to eliminate the exemption from Regulation ATS for venues that are limited to government securities or repurchase and reverse repurchase agreements on government securities, indicate an increased focused on the ability to surveil the treasuries market.