Frequently Asked Questions (FAQ) about the Trade Reporting and Compliance Engine (TRACE)

The following frequently asked questions provide information about the Trade Reporting and Compliance Engine (TRACE).

Access
Technical & Testing
Reporting
- 3.1 General Reporting
- 3.2 List or Fixed & Takedown Transactions
- 3.3 Corporate, Agencies & Foreign Sovereigns
- 3.4 Securitized Products
- 3.5 Treasury
Federal Reserve Depository Institution Reporting
- 4.1 Access & Agreements
- 4.2 Technical
- 4.3 Reporting
Federal Reserve Interpretive Questions

View a summary of the TRACE reporting timeliness requirements.

Section 1: Access

1.1 How do I sign up for TRACE reporting?

An authorized party at your firm must sign all the appropriate agreements. You must first onboard to FINRA’s Account Management System and establish an Account Administrator by submitting the FINRA Entitlement Agreement (“FEA”).

Then, to become a TRACE reporting participant, you must use the Participant Data Management (“PDM”) system to view and certify the terms of the FINRA Transparency Services Participation Agreement (“FPA”) (https://participants.finra.org). To access PDM users must have “use” access to the Participant Data Management entitlement in the FINRA Gateway. Please consult your organization’s Super Account Administrator (“SAA”) if a new login id or an adjustment to your entitlements is needed. The FINRA Entitlement Group can assist with determining your SAA or with resetting your password. They can be reached by calling 301‐869‐6699 or by emailing [email protected].

Updated on 7/1/22

1.2 How and where do I find the appropriate agreements for TRACE?

The PDM system allows firms to view and modify various agreements including the FINRA Participation Agreement and the Uniform Reporting Agreement. PDM also allows to:

view and modify access to TRACE;
manage MPIDs and communicate information regarding MPID changes to FINRA;
and manage TRAQS login ids.

For questions about PDM, contact FINRA Market Operations at 866-776-0800, option 2.

Updated on 7/1/22

1.3 Does an introducing broker-dealer that plans to trade and report through a clearing broker dealer need to sign a TRACE Participant Agreement?

Yes. The introducing broker-dealer and the clearing broker-dealer must execute the FINRA Transparency Services Participation Agreement (FPA) version 1.4.

Both broker-dealers must also submit the FINRA Transparency Services Uniform Reporting Agreement (“URA”, a.k.a. a “USA” or an Executing Broker Agreement). The URA allows a member firm to report trades on behalf of another FINRA member to the approved facilities on the (Attachment A), which is the second page of the URA.

Important Note: The correspondent firm must execute the URA, which also must be countersigned by the clearing broker-dealer. The fully executed agreement must be on file with FINRA prior to submitting trades on behalf of another firm.

The link to the URA is on www.finra.org/industry/trace/transparency-services-legal-agreements. Submit the agreement directly to PDM or email the form to [email protected] (depending on reporting facility).

Updated on 7/1/22

1.4 If all I want is the API file for Treasury Securities, Securitized Products or Corporate and Agency Debt, what agreements do I have to sign?

Firms must have either a Vendor or FINRA Transparency Services Participation Agreement on file. The PDM system is used to specifically request permission to access the API. For access to the files with CUSIP/CINS numbers, firms must have the proper licenses in place with CUSIP Global Services (“CGS”) through Standard & Poor’s.

Technical Specifications for downloading the API files are available on our site http://www.finra.org/industry/trace/trace-documentation

Updated on 7/1/22

1.5 How many documents must be submitted if my firm is self-reporting?

All users of the TRACE system, whether FINRA member firms or third-party reporting intermediaries, must complete agree to the terms of the FINRA Transparency Services Participation Agreement - Version 1.4 (FPA).

FINRA member firms that handle their own reporting must agree to the terms of the FPA in PDM and request a TRAQS user via PDM.

Updated on 7/1/22

1.6 How many documents must my firm submit if my firm is using a third-party?

FINRA member firms that delegate reporting to a third-party reporting intermediary must complete and sign the FINRA Transparency Services Participation Agreement (“FPA”) and the FINRA Transparency Services Uniform Executing Broker Agreement. The FPA is submitted electronically and is available via the PDM system.

FINRA member firms (example: a clearing firm or a member ATS) that report transactions on behalf of another FINRA member must complete and sign the FPA along with the FINRA Transparency Services Uniform Reporting Agreement (“URA”).

Please note: Non-member service bureaus or vendors transmitting trade reports for FINRA members (i.e., via an Order Management System) should submit the FINRA Transparency Services Service Bureau Access Authorization.

Updated on 7/1/22

1.7 FINRA Transparency Services FINRA Transparency Services Uniform Reporting Agreement (“URA”, a.k.a. a “USA” or an Executing Broker Agreement). A non-FINRA member third-party reporting intermediary (example: a Service Bureau or vendor) must sign FINRA Transparency Services Service Bureau Access Authorization form. If I already have one or more give-up agreements in place for equity reporting, and the same firm(s) will handle my TRACE reporting, do I need to sign additional give-up agreements with these firms for TRACE?

You will need to submit an updated Attachment B to add TRACE to the existing agreement.

Section 2: Technical & Testing

2.1 Which methods can firms use for testing and reporting trades in TRACE Securities?

Firms can use FIX or TRAQS to test. However, the FIX connections must route to the test environment (NTF).

2.2 If my firm uses FIX protocol to submit trade reports, will I be able to see them in the Web application and take any corrective action necessary or would I need to amend trade reports using FIX?

If a firm uses FIX the firm can view those trade reports submitted via that protocol in the TRAQS web application and can perform Cancel and Correction actions using the web application.

2.3 Can I report trades to TRACE via FIX?

Yes. Members may elect to use the FIX protocol to report trades to TRACE. Technical details can be found in the FIX Specifications on the FINRA TRACE Web pages, and questions can be answered by the NASDAQOMX Technical Support at (212) 231-5180. For more information on FIX, please refer to the NASDAQ website.

2.4 Can my FIX connections share a port for more than one product (e.g., Corporate and Agency Debt trade reporting and Treasuries trade reporting)?

No. The FIX protocol requires a single port for Corporate and Agency Debt transaction reporting, and a separate port for each of the other TRACE products.

2.5 How can a TRACE reporting participant report via the FINRA Web Browser?

TRACE reporting participants may report through a secure web-based application called TRAQS. The system supports a variety of standard web browsers. Please see the TRACE User Guides for further details.

Access to the TRAQS website is managed through the Participant Data Management system by your organization’s Super Account Administrator or authorized delegate.

For more information about using the TRAQS website, product-specific user guides can be found on the TRACE Documentation page.

Updated on 7/1/22

2.6 How do I report a system outage or connectivity failure?

When an outage or technical problem occurs that may cause late reporting, a firm must immediately contact NASDAQ Technical Support at (212) 231-5180. A problem ticket number will be issued which should be kept in a firm's records as documented proof of a system problem.

If the problem involves a third-party reporting intermediary or is related to a malfunction in an internal system, the firm should not contact NASDAQ Technical Support, but rather have the appropriate party at the firm document the problem. FINRA's Market Regulation Department has established an email address so that firms may register their system outage or other technology problem related to TRACE. It is suggested that the firm include its name, MPID, capacity and the telephone number of the person submitting the information in the text of the email. It is suggested that the firm retain copies of these emails for their records.

2.7 How do I review a trade report that I submitted, or that a clearing firm or service bureau submitted on my behalf?

FIX: If your firm reports trades through FIX, FINRA will send the firm an electronic acknowledgment message for each successfully processed trade report submitted. The firm's application should retain the acknowledgements and provide appropriate review capacity.

TRACE Web: Firms reporting via the TRACE Web browser can view their transaction reports using the Trade Management function.

Reporting via another FINRA member: Firms reporting via a FINRA member clearing firm that reports using a give-up can view their transaction reports using the Trade Management function on the TRACE Web browser.

Reporting via a service bureau/non-FINRA member firm: Firms reporting via a non-FINRA member service bureau (vendor) can see their reports using the Trade Management function on the TRACE Web browser.

2.8 How do I get access to the list of Corporate and Agency Debt TRACE-Eligible Securities (the Issue Master)?

The CA Issue Master file is available from an Application Program Interface (API); instructions for accessing this information can be found in the API specification.

2.9 Is the Issue Master a full file or daily update?

The Issue Master is a full file and is available in real-time beginning at approximately 7:00 a.m. Eastern Time each day. The Issue Master contains corporate bonds, equity-linked notes, agency and GSE debentures, and church bonds that are reportable to TRACE. Additionally, FINRA publishes a real-time Daily List, available via the API and on the TRACE Web browser.

2.10 Is the Participant List a full file or daily update?

The Participant List is a full file that is available via the API and on the TRACE Web browser. A Participant Daily Update list is also available via the API.

2.11 How does FINRA communicate new issue CUSIPs that are added to the system intraday?

Intraday updates to the Daily List reflect additions and deletions to the TRACE-Eligible Security list. These updates are done in real time throughout the day.

2.12 Up until what time can a firm register a CUSIP using the FINRA website and expect to have it included in the daily list of reportable securities sent at 7:30 p.m. Eastern Time?

FINRA Operations will need all of the pertinent data as provided in FINRA Rule 6760 by 5:00 p.m. Eastern Time to ensure that the security will be included in the file. As always, however, it is most beneficial for FINRA Operations to receive the information as soon as possible.

2.13 Are the required security details (i.e., CUSIP, maturity, etc.) for adding a new security noted somewhere on FINRA's website?

The security details required for adding a new security are specified in FINRA Rule 6760. The FINRA New Issue Form can be used to submit the required information.

2.14 Once I know how my firm plans to report to TRACE, how do I arrange for testing?

For FIX users: Please contact NASDAQ Testing Facility technical support at (212) 231-5180.

Third-Party Reporting Intermediaries: If a firm plans to report through a FINRA member clearing firm or via a vendor or service bureau, it is recommended that they contact that firm directly for information regarding their services and process around corrections and managing rejected trades. Most qualified third-party reporting intermediaries already have FIX lines in place to NASDAQ, FINRA's technology provider.

TRACE Web users: Please contact FINRA Operations at 866-776-0800 (toll free) or via e-mail to receive access to the NASDAQ Testing Facility (NTF) secure website. Please note, a FINRA Order Form will be required to begin the process of gaining access to the NTF secure website.

For other questions concerning testing, please contact FINRA Product Management at (866) 899-2107.

Testing

2.15 What is the environment that is available for TRACE testing?: The NASDAQ Testing Facility (NTF) is the service that supports FINRA client testing for TRACE transactions.
2.16 Once I know how my firm plans to report to TRACE, how do I arrange for testing?: For FIX users: Please contact NASDAQ Testing Facility technical support at (212) 231-5180.; Third-Party Reporting Intermediaries: If a firm plans to report through a FINRA member clearing firm or via a vendor or service bureau, it is recommended that they contact that firm directly for information regarding their services and process around corrections and managing rejected trades. Most qualified third-party reporting intermediaries already have FIX lines in place to NASDAQ, FINRA's technology provider.; TRACE Web users: Please contact FINRA Operations at 866-776-0800 (toll free) or via e-mail to receive access to the NASDAQ Testing Facility (NTF) secure website. Please note, a FINRA Order Form will be required to begin the process of gaining access to the NTF secure website.; For or other questions concerning testing, please contact FINRA Product Management at (866) 899-2107.
2.17 Who should I contact if I experience NTF problems?: Firms are encouraged to contact the NASDAQ Support Desk at 212-231-5180 and should specify whether they are calling in regards to a Production or NTF problem and whether they are a user of FIX. If a firm is unable to resolve the testing issue through the NASDAQ Support Desk, the firm may contact FINRA Product Management at 866-899-2107. Please have details on hand regarding the contact name at NASDAQ working to resolve the issue, the nature and duration of the problem when contacting FINRA Product Management.
2.18 If my service bureau or clearing firm is doing my TRACE reporting for me, do I still need to test?: Firms are required to complete the TRACE Member Test Script regardless of the chosen reporting method.; Firms are urged to coordinate with their service bureau or clearing firm as the service bureau or clearing firm will have to report test trades using either: 1) the member firm's MPID (if a service bureau) or 2) under a "give-up" arrangement (if a FINRA member firm clearing broker/dealer).; Note: The FINRA member firm that is closest to the end customer has the obligation to report and is ultimately responsible for accurate and timely reporting, even if the trade report is submitted by a third-party intermediary. For this reason, firms should verify that the clearing firm or other third-party intermediary has successfully completed testing.
2.19 Where do I find the TRACE User Guide?: The User Guide/Glossary is posted on the FINRA.org/TRACE website under TRACE Technical Documentation.

Section 3: Reporting

General Reporting

3.1.1 What is the URL for the TRACE site used for trade reporting?

https://www.finratraqs.org

3.1.2 At what time will the list of TRACE-Eligible Securities be available each day?

The file containing the complete list of TRACE-Eligible Securities will be available beginning at 7:00 a.m., Eastern Time. This list will be available in real-time throughout the day until 8:00 p.m., Eastern Time.

3.1.3 If the TRACE system is unavailable due to system or transmission failure, how will FINRA notify the participants?

You will receive an error message when you try to report and the system is not available. Additionally, if this occurs, please check the FINRA website or the TRAQS website for information about the status of the system

Note: In order to view these types of alerts on the TRAQS website, Users must subscribe to the system alert messages in the "Settings" portion in TRAQS.

Updated on 12/13/17

3.1.4 Do different time zones affect how members are required to report execution time?

Members are required to report execution time to TRACE as Eastern Time in Military Format if connecting to TRACE via the web browser. Members connecting to TRACE via FIX must report time as Universal Time Coordinated (consistent with FIX specifications) and the TRACE system will convert it to Eastern Time in Military Format for dissemination and audit trail purposes.

Updated on 3/8/19

3.1.5 How do I self-report any TRACE reporting problems to FINRA?

In the event that FINRA members experience certain reporting problems that result in late and/or inaccurate transactions reports to TRACE, FINRA urges firms to self report these issues to the Market Regulation Department using [email protected]. The firm should retain copies of these emails.

Updated on 12/13/17

3.1.6 How do I report trades done on a non-business day?

Firms should refer to FINRA Rule 6730(a)(1)(D) for guidance on how to report transactions executed on a non-business day. Additionally, for reporting a List or Fixed Offering Price Transaction or a Takedown Transaction, see FINRA Rule 6730(a)(2)(B); an Asset-Backed Security transaction, see FINRA Rule 6730(a)(3)(B) (ii); or a pre-issuance CMO or REMIC , see FINRA Rule 6730(a)(3)(C) .

3.1.7 How do I notify Market Operations to set up a new issue?

Lead underwriters (or others, if there are no lead underwrites) must provide Market Operations with required information pursuant to Rule 6760 so that new issues will be set up prior to the offering of such securities. See also Rule 6730(a)(7) for reporting requirements pertaining to all FINRA members.

3.1.8 How do I know if my trade report was accepted by the TRAQS Web browser interface?

You will receive a confirmation message containing a TRACE Control Number, TRACE Control Date, CUSIP, FINRA Symbol, and the name of the security. This indicates that the trade report has been accepted.

3.1.9 When can I cancel a trade and when do I have to do a reversal?

For Securitized Products, Corporate and Agency, a cancellation on a transaction can be completed during the period of T-20. A reversal is applied to a transaction on trades greater than T-20. When can I perform a correction on a trade?

Members should take particular care to report transactions into TRACE correctly and, therefore, the need for corrections should be rare. Nonetheless, where a correction is necessary, the member immediately must submit a correction to rectify inaccurate information. Information required to be corrected includes: (1) any item of information required by Rule 6730(c), and (2) any information voluntarily entered into a TRACE optional field. However, any change made to a transaction attribute that does not correspond to a TRACE trade report field should not result in a TRACE trade report correction.

For example, if only the account representative associated with a transaction changes, the TRACE trade report to FINRA should not be changed, as this information does not correspond to a TRACE trade report field.

Corrections on trades can be performed during a period of T+20. If the trade correction is greater than T+20, a reversal should be performed on the transaction. Additionally, a new "as/of" transaction report should be submitted to implement the correction.

Any change or amendment after the required reporting time (i.e., within 15 minutes from the time of execution for corporate bonds) will cause the trade report to be deemed late and reflected as such on the firm’s report card.
Updated on 12/13/17

3.1.10 What fields can I not change using the Correction function?

All fields are changeable with the exception of:

Symbol/CUSIP
TRACE Control Number
TRACE Control Date
Execution Time (moving forward)

Updated on 12/13/17

3.1.11 What happens if I modified a trade reported in TRACE, but later need to cancel it?

A trade report that has been previously modified may be cancelled the same way as one that has not been previously modified.

3.1.12 Can anyone other than the member firm report a transaction, cancel or correct to TRACE?

A third party appointed by the member firm may report a transaction, cancel or correct a previously submitted transaction report. Note: Member firm does not have the capability to repair rejects or correct a transaction originally reported by the third party.
Updated on 12/13/17

3.1.13 Can I assume that if I report through someone else, they can take care of all my reporting responsibilities?

No. The reporting responsibility remains with the member firm.

3.1.14 Who is responsible for resubmitting rejected trades?

The firm that had the original reporting obligation is ultimately responsible for resubmitting corrected reports.

3.1.15 What is a firm's reporting obligation under TRACE with respect to a counterparty that is a registered BD?

FINRA reminds firms that they must accurately identify their registered BD counterparties when reporting a transaction to TRACE, using the appropriate MPID to identify the BD. If the counterparty BD uses multiple MPIDs, the firm required to report the transaction must accurately identify the counterparty BD by the appropriate MPID. Further, if an entity, such as a hedge fund, is also a registered BD, the reporting firm must identify the entity by its MPID in the TRACE transaction report.

3.1.16 Do off-shore subsidiaries of FINRA members have to submit trade reports to TRACE?

The TRACE reporting obligations apply only to FINRA member firms.

If the bond is transferred from a domestic FINRA member firm to a foreign subsidiary or affiliate and beneficial ownership has changed, a transaction needs to be reported by the member firm. This transaction would be reportable as a sale between the domestic B/D and the foreign entity. Similarly, if a foreign affiliate sold bonds to the FINRA member firm, the FINRA member would need to report the buy.

3.1.17 What are the reporting obligations in transactions involving hedge funds that are subsidiaries of a registered Broker Dealer?

If the hedge funds have registered as FINRA members, or are FINRA member subsidiaries of a registered Broker Dealer, they are subject to the same dual-side reporting obligation under the Rule 6700 series as any other member firm.

3.1.18 In a transaction involving both an executing broker and an introducing broker, which member reports?

Both parties are required to report to TRACE. For example, introducing broker A (IBA) receives an order to buy bonds from its customer and then sends that order to executing broker B (EBB) for execution. Assuming EBB sells bonds to IBA from its inventory account, the following reports would be required:

EBB reports a principal sell to IBA
IBA reports an agency buy from EBB
IBA reports an agency sell to its customer

3.1.19 In interdealer trades, the buy and sell side must be reported. For disseminated transactions, doesn't this result in double counting?

For interdealer trades, TRACE disseminates only the sell side of the transaction. All Customer and Non-Member Affiliate trades are disseminated.
Updated on 12/13/17

3.1.20 How many sides of a transaction do I have to report? It is my understanding that all member firms will have to report both buys and sells, regardless of the counterparty.

Yes. TRACE Rules require that both the buy and the sell side of eligible transactions be reported to the system in order to create a complete audit trail.

3.1.21 If I am a FINRA member and typically place orders with other firms, must the execution time that I report be the same as the execution time reported by the contra side executing broker?

Yes. Your counter-party supplies the exact execution time when you are notified that your order has been filled. This is the execution time you should input on your TRACE report.

3.1.22 When I report a trade with a customer, should the Buy/Sell code be from the member firm's perspective or from the customer's perspective?

The trade report information is always entered from the perspective of the member firm that is reporting.

3.1.23 When executing "reportable TRACE transactions" with a "Government Sponsored Enterprise (GSE)," "Agency" or other governmental entity, should firms use the "C" customer indicator when identifying such an entity?

Yes

3.1.24 What happens if my firm gets an order from a Customer, and my Customer wants to "Step- Out" to another firm?

A Step-Out allows an executing broker to "Step Out," or allocate all or part of a trade to another broker-dealer. The only reportable event is the transaction between the executing firm and its customer.

The Broker-Dealer that has stepped in performs nothing more than a clearing function and does not have a reporting obligation. This scenario assumes that the position is held in a non-proprietary account used for clearing purposes only.

3.1.25 If a clearing firm executes a trade on behalf of a correspondent, and there is no give-up agreement in place, how is reporting accomplished?

The clearing firm reports an agency buy from the Street and an agency sell to its correspondent. The correspondent reports an agency buy from its clearing firm and an agency sell to its customer (C).

3.1.26 Are service bureaus allowed to operate in a give-up arrangement?

3.1.27 If my firm is a clearing firm, but we did not execute the trade, we do not offer reporting services, and all we do is clear, do we have a TRACE reporting obligation?

No. A clearing firm that handles post-transaction trade processing has no obligation under the TRACE Rules.

3.1.28 What is the purpose of the dissemination flag and the Rule 144A flag referred to in the specifications for obtaining the downloadable list?

These two fields are for informational purposes only. The dissemination flag indicates the TRACE-Eligible Securities that are marked for dissemination (through the TRACE data feeds). The Rule 144A flag denotes TRACE-Eligible Securities that are purchased and sold pursuant to Rule 144A of the Securities Act.

3.1.29 How do I report a bond with a sinking fund?

Reporting of quantity for bonds involving a factor is the same as reporting quantity for a baby bond.

Example: A broker-dealer buys or sells 25 bonds with a par value of $1,000 and a pro-rata sinking fund for which the current factor is .300. To determine what quantity to enter in the TRACE report, multiply $25,000 by .300 for a quantity of $7,500. This results in a remaining principal amount held of $7,500 at this point in the sinking fund schedule instead of the original $25,000. As with price reporting, TRACE rules do not provide for rounding of quantity before reporting. Regarding quantity reporting, the system can accommodate reporting out to two decimal places. Quantity should be submitted to TRACE exactly as calculated.

3.1.30 How do I report a baby bond (less than $1,000 face value per bond)?

Enter the amount in decimal form as a dollar amount. Examples: 1/2 a bond = $500.00; a $512.37 piece of a bond = $512.37.

3.1.31 In certain cases, TRACE-eligible securities are not quoted or traded in par value. For example, many Equity Linked Notes (ELNs) are quoted and traded in share amounts. How should price and quantity of transactions in such ELNs be reported to TRACE?

Price: For such ELNs, price is a dollar value (instead of a percentage of par as typical for other TRACE eligible securities). The Price of such an ELN should be reported as the dollar price per share. For example, an ELN bought (or sold) at $7 per share, price should be reported as 7.00. Related, a commission should be reported as the total dollar value of commission charged as for all TRACE eligible securities. For example, if a commission of $25 is charged, the commission should be reported as 25.00.

Quantity: FINRA Rule 6730 (d)(2) requires the reporting of the total par value or principal value of bonds traded. For such ELN transactions, as principal value of bonds traded, firms should report quantity as number of shares traded times the price expressed as a dollar value (as described above). If for example 200 shares are traded at $7 per share, the quantity should be reported as 1400.00

3.1.32 How do I report an in-house cross?

An "in-house cross" is considered two transactions. One report shows your firm buying from the customer as principal or agent, and the second report shows the sale to the customer as principal or agent.

Note: If the trade ever moves through a proprietary account, it is considered a principal trade by FINRA. Because TRACE does not currently support riskless principal, it must be reported as: "Capacity = Principal".

3.1.33 What price do I report to TRACE?

If you have charged either a markup or markdown, report the price inclusive of the mark. If you have charged a commission, report the price without the commission. Then, report the commission in the separate field provided for commissions.

3.1.34 Is rounding permitted in the reporting of price to TRACE?

TRACE rules do not provide for rounding of price before reporting. The system can accommodate reporting out to six decimal places for price. Price should be submitted to TRACE exactly as calculated.

3.1.35 What is weighted average pricing? How do I report a weighted average price trade?

Weighted average pricing is a means of establishing the price per bond when a large order is filled by executing smaller transactions in the desired security during a given period by a broker-dealer in order to accumulate the total volume of bonds required to fill the order. In such cases, the price per bond is established by weighting the average of the various prices at which the partial transactions were executed. When this weighted average is reported, it may no longer be reflective of the current market price at the time of the final sale to the customer, and so the "W" modifier must be added to the trade report so TRACE will properly report to the tape.

3.1.36 What goes into the Commission field? What about miscellaneous fees or service charges?

For interpretive guidance, please refer to this interpretive letter.

3.1.37 In a transaction involving an executing broker and an introducing broker, how is commission reported?

Both the executing and the introducing broker must be represented in the trade report. If the executing broker were long bonds, it would report that it "sold" as principal, net to the introducing broker. If the introducing broker charged its customer a commission, the introducing broker must report the commission in the separate "commission" field.

3.1.38 My firm received an unsolicited order from a customer to purchase TRACE-Eligible Securities at the market. Having no position, I had to go to the Street to buy bonds in pieces, which I ran through my omnibus account. When I finally filled the order, I charged my customer an agency commission. How do I report what I did?

You report an agency buy from each firm that sold you TRACE-Eligible-Securities. You report an agency sell with "C" (for the end customer), and the amount of the commission you charged in the commission box.

3.1.39 Would you explain the meaning of the modifiers and the special columns on the Time and Sales Search Results screen?

Comm: A "Y" under the commission column indicates that this was a trade to which a commission has been added. The price reflects not only that of the security, but the actual dollar amount that the buyer paid out of his/her pocket for the bonds.

Modifiers: Modifiers are used to indicate special trade conditions some of which are indicated below.

A = Trade was reported after the last sales were calculated.
T = Trade reported outside normal market hours.
Z = Trade reported during normal market hours and reported late.
U = Trade reported outside normal market hours and reported late.
W = "Weighted Average Price."
"Special." A "Y" in this column indicates that a legitimate reason exists for the bond to be trading at a price outside of the normal market range. The reason must be documented in the field, "Special Memo," on the trade report.
"As Of." This trade is for a previous execution date.

Note: More useful information can be found in the TRACE OTC Corporate Bonds and Agency Debt User Guide.

3.1.40 If I execute a trade in a bond that is trading flat, do I use the Special Price Flag?

Yes. Members must use the Special Price Flag and indicate in the Special Memo Field that the trade was executed flat. Once the issuer announces that the bond will default, the Special Price Flag should not be used. If, however, after the official public notice of default, trades continue to occur with interest included, those TRACE reports should be flagged with the Special Price Flag and a special memo, since these are now the specified trades, executed contrary to the convention of trading the defaulted security flat.

For interpretive guidance, please see Notice to Members 02-76, Question 6, Security in Default section.

3.1.41 If I am reporting through a third party or if I have a web browser but I do a low volume of business in corporate debt securities, do I still have to pay for a daily license with CUSIP?

Trade reports may be submitted either using the CUSIP number or the FINRA reporting symbol.

3.1.42 What is considered "substantially unrelated to the current market", since according to Rule 6730(e)(3), such transactions are not reportable?

For interpretive guidance on Rules, please refer to Questions 9, 10, and 13 of Notice to Members 02-76.

3.1.43 In order for a debt security to be a TRACE-Eligible Security under Rule 6710(a), does it have to have a maturity of greater than one year from issuance? How are discount notes issued by an Agency or Government Sponsored Enterprise treated under Rule 6710(a)?

As stated in Rule 6710(a), the definition of TRACE-Eligible Security does not include a Money Market Instrument. Under recent amendments to Rule 6710(o) pertaining to discount notes, "Money Market Instrument" means a debt security that at issuance has a maturity of one calendar year or less, or, if a discount note issued by an Agency, as defined in Rule 6710(k), or a Government-Sponsored Enterprise, as defined in Rule 6710(n), a maturity of one calendar year and one day or less (i.e., not later than 366 days from the date of issuance, or if a leap year, not later than 367 days from the date of issuance).

FINRA reminds firms that such determination is based on a standard calendar year analysis (January 1 to December 31).

For example, a corporate debt security issued on March 15, 2012, with a maturity date of March 15, 2013, is a TRACE-Eligible Security, because it matures one year and one day from issuance, provided the security otherwise meets the other requirements for TRACE eligibility. However, a similar corporate debt security issued on March 15, 2012, with a maturity date of March 14, 2013, would not be a TRACE-Eligible Security.

Please refer to Notice To Members 04-90, for guidance regarding issue date determination.

3.1.44 In moving a TRACE-Eligible Security from one firm principal trading account to another, is a member firm required to submit a TRACE report, or is this simply an inter-company transfer?

If there is no change in ownership, it is merely a journal entry between accounts and is not reportable to TRACE.

3.1.45 What transactions involving the transfer of member proprietary positions are subject to the non-dissemination provisions of FINRA Rule 6750(b)(2)?

Members must report transfers of proprietary positions in TRACE-Eligible Securities where the transfer (1) is effected in connection with a merger or direct or indirect acquisition and (2) is not in furtherance of a trading or investment strategy. However, such transactions will not be disseminated by FINRA pursuant to Rule 6750(b)(2).

For example, assume Member A acquires all of the assets of Member B. In connection with this corporate control transaction, Member A and Member B consolidate their separate sales and trading businesses onto a single platform and, along with the migration of sales and trading personnel, clients and systems and technology, Member B’s proprietary positions are transferred to Member A. The transfers of Member B’s proprietary positions must be reported to TRACE by Member A and Member B for regulatory purposes and for purposes of assessing applicable regulatory transactions fees and /or trading activity fees, but will not be subject to dissemination.

Members should refer to Regulatory Notice 09-21 (April 2009) for the specific requirements—including the requirement to provide FINRA advance written notice —that members must follow when relying on this exception. (For transfers of member proprietary positions in equity securities, see FAQ at FINRA's Trade Reporting FAQ Web page.

3.1.46 How should a firm report the size (volume) of its purchase from another firm when the bonds will be allocated subsequently to multiple customer accounts, totaling the aggregate purchase amount?

If the transaction between two member firms was agreed upon at the aggregate amount, both firms should report the aggregate amount as the size (volume) to TRACE. For example, if Firm A sells $100,000 (par value) to Firm B, which in turn executes 10 sales to customers at $10,000 each, Firm A should report a sale of $100,000 to Firm B and Firm B should report a purchase of $100,000 from Firm A. Firm B also should report 10 sales to customers of $10,000 each. Firm B should not report 10 purchases of $10,000 each from Firm A in order to match its 10 sales to customers at $10,000 each.

3.1.47 How should a BD report a transaction to TRACE where an IA places an aggregate order with the BD and instructs the BD to allocate the aggregate order to various managed customer accounts?

The response depends on whether the BD and IA are the same or separate entities. See the examples below.

Scenario 1: BD A is registered both as a BD under the Securities Exchange Act of 1934 and an IA under the Investment Advisers Act of 1940 (or is regulated as an IA in the state in which it maintains its principal office and place of business) and operates as one legal entity. For certain managed customer account(s), BD/IA A directs its trading desk to purchase an aggregate amount of $100 million (par value) bonds from the Street (or otherwise obtain the bonds). BD/IA A then sells portions of the aggregate amount (in accordance with the allocation instructions) to various managed customer accounts of BD/IA A, which are maintained at BD/IA A.

TRACE Reporting: BD/IA A reports the purchase (from the Street or another source) of the $100 million bonds to TRACE, including the time of execution of the order. BD/IA A also reports the sale(s) to the various managed customer accounts, which must include any markup or commission, to TRACE. When reporting the sales of securities to the various managed customer accounts, the time of execution is the time the material terms of the transaction are determined. If BD/IA A finalizes the allocation with respect to each managed customer account (thereby establishing the material terms of the transaction as to each customer) before or at the same time it submits the aggregate order to its trading desk (to purchase from the Street), the time of execution of the sales to individual managed customer accounts is the same time of execution reported for the aggregate purchase. If such allocations (as to the material terms with respect to each managed customer account) are not finalized before or at the same time as the aggregate order (to purchase from the Street), the time of execution of the sales to individual managed customer accounts is the time such allocations are finalized.

Scenario 2: BD A is registered as a BD, but is not an IA. An IA in a separate legal entity (including an IA that is an affiliate of BD A or an IA selected from a list of IAs that BD A "approved") places an order with BD A to purchase bonds in an aggregate amount of $100 million, and instructs BD A to retain eighty percent ($80 million) for allocation to various managed customer accounts maintained at BD A, and to deliver twenty percent ($20 million) to BD B, which will be allocated to various customer accounts managed by the IA and maintained at BD B. After the execution of the order, the IA then allocates the portion of the aggregate amount retained by BD A ($80 million) to various managed customer accounts maintained at BD A. Separately, the IA allocates the portion delivered to BD B ($20 million) to various managed customer accounts maintained at BD B.

TRACE Reporting: BD A reports the purchase of the $100 million aggregate amount to TRACE. BD A also reports the sale of $100 million to the IA (as a sale to a "C" (customer)). BD A does not report to TRACE the transfer (in accordance with the allocation instructions from the IA) to the various managed customer accounts that are managed by the IA and maintained at BD A. Similarly, BD B does not report to TRACE the transfer (in accordance with the allocation instructions from the IA) to various managed customer accounts that are managed by the IA and maintained at BD B. Consistent with FAQ #1.28, the transfer of the bonds ($20 million) from BD A to BD B also is not separately reported to TRACE as FINRA considers this a "step-out" transaction whereby the executing broker may deliver some or all of the securities to another broker-dealer and the only reportable event is the transaction between the executing firm and its customer. The broker-dealer that has stepped in performs nothing more than a clearing function and does not have a reporting obligation.

Scenario 3: BD/IA A is registered both as a BD and an IA and operates as one legal entity. For certain types of advisory programs, BD/IA A may enter into a relationship with an IA that is a separate legal entity (a “third-party IA”) in connection with BD/IA A’s customers’ investment strategies. Pursuant to this arrangement, a third-party IA may place an order with BD/IA A in TRACE-Eligible Securities in an aggregate amount on behalf of multiple BD/IA A managed customers, which must then be allocated to the respective individual managed customer accounts. For example, third-party IA may direct BD/IA A’s trading desk to purchase an aggregate amount of $100 million (par value) bonds from the Street (or otherwise obtain the bonds) on behalf of 25 managed account customers. BD/IA A then sells portions of the aggregate amount (in accordance with the allocation instructions) to the 25 individual managed customer accounts of BD/IA A, which are maintained at BD/IA A.

TRACE Reporting: BD/IA A reports the purchase of the $100 million bonds to TRACE. BD/IA A also reports the corresponding 25 sale(s) to its customers’ managed accounts, which must include any markup or commission, to TRACE, consistent with the allocation instructions from the third-party IA.

3.1.48 How do I report transactions with non-member affiliates?

FINRA Rule 6730, among other things, provides the items of information that must be included in TRACE reports, including a requirement that members identify the contra-party for each transaction. When trading with another member, a member must provide its contra-party's MPID. When reporting a transaction with a non-member, members must populate the contra-party field with either a "C" (if a customer) or "A" (if a non-member affiliate). Rule 6710 defines "non-member affiliate" as a "non-member entity that controls, is controlled by or is under common control with a member. For the purposes of this definition, 'control,' along with any derivative thereof, means legal, beneficial, or equitable ownership, directly or indirectly, of 25 percent or more of the capital stock (or other ownership interest, if not a corporation) of any entity ordinarily having voting rights. The term 'common control' means the same natural person or entity controls two or more entities."

Members generally also are required, pursuant to Rule 6730(d)(4)(E), to append the "non-member affiliate – principal transaction indicator" on TRACE reports for transactions with non-member affiliates when both the member and its non-member affiliate act in a principal capacity, and where such trade occurs within the same day, at the same price and in the same security as a transaction between the member and another contra-party (i.e., another dealer or a customer). Where a transaction report is identified with this indicator, FINRA will suppress dissemination of the trade pursuant to Rule 6750(b)(1). For additional information on the use of the "non-member affiliate – principal transaction indicator," see FINRA Rule 6730 and Regulatory Notice 15-14.

The scenarios below assume "non-member affiliate" or "A" meets the definition of "non-member affiliate" provided in FINRA Rule 6710.

Scenario 1: BD A has a non-member affiliate A1. BD A purchases 50 ABC bonds at 98 from another FINRA member BD B and, on the same trading day, sells 50 ABC bonds to A1 at 99. Both BD A and A1 trade as principal.

TRACE Reporting: BD A and BD B must report their respective buy and sell transactions with each other, and BD A must report its transaction with A1. In reporting its transaction with A1, BD A would use the "A" (non-member affiliate) contra-party type instead of "C" (for customer).

Thus, the following reports must be submitted to TRACE by BD A:

BD A, as principal, reports a purchase of 50 ABC bonds at 98 from BD B
BD A, as principal, reports a sale of 50 ABC bonds at 99 to A1

BD A would identify A1 with the "A" contra-party type. TRACE would disseminate BD A's sale to A1.

Scenario 2: BD A has a non-member affiliate A1. BD A purchases 50 ABC bonds at 98 from another FINRA member, BD B, and, on the same trading day, sells 50 ABC bonds to A1 at 98. Both BD A and A1 trade as principal.

TRACE Reporting: Because BD A engaged in a same day, same price transaction with A1 in the same security traded with another contra-party (and both BD A and A1 traded as principal), in addition to the trade reporting identified in Scenario 1 above, BD A also must append the non-member affiliate—principal transaction indicator to its TRACE report of the transaction with A1.

Thus, the following reports must be submitted to TRACE by BD A:

BD A, as principal, reports a purchase of 50 ABC bonds at 98 from BD B
BD A, as principal, reports a sale of 50 ABC bonds at 98 to A1
- BD A would identify A1 with the "A" contra-party type and BD A would append the non-member affiliate—principal transaction indicator to its TRACE report of the sale to A1.
- TRACE does not disseminate trade reports with the non-member affiliate—principal transaction indicator appended; thus, BD A's sale to A1 would not be disseminated.

If, however, BD A's purchase from BD B occurred at a different trading desk or unit within the member than the transaction with A1, BD A would not be required to append the non-member affiliate—principal transaction indicator to its TRACE report of the sale to A1, so long as each trading desk or unit within the member traded from separate principal accounts and have no knowledge of the orders held or trades executed at the other trading desk or unit.

Scenario 3: BD A has a non-member affiliate A1. BD A, as agent, purchases 100 XYZ bonds at 98 from another FINRA member, BD B, and, on the same trading day, sells, as agent, 100 XYZ bonds to A1 at 98.

TRACE Reporting: BD A and BD B must report their respective buy and sell transactions with each other, and BD A must report its transaction with A1. In reporting its sale to A1, BD A would identify A1 with the "A" contra-party type. Because BD A traded as agent in its transaction with A1, BD A would not append the non-member affiliate—principal transaction indicator to its TRACE report of the transaction with A1, notwithstanding that it engaged in a same day, same price transaction in XYZ bonds with a non-member affiliate.

Thus, the following reports must be submitted to TRACE by BD A:

BD A, as agent, reports a purchase of 100 XYZ bonds at 98 from BD B
BD A, as agent, reports a sale of 100 XYZ bonds at 98 to A1

BD A would identify A1 with the "A" contra-party type but would not append the non-member affiliate—principal transaction indicator to its TRACE report of the sale to A1 because it did not trade as principal. TRACE would disseminate BD A's sale to A1.

Scenario 4: BD A has a non-member affiliate A1. BD A purchases 50 ABC bonds at 98 from another FINRA member BD B and, on the same trading day, purchases 50 ABC bonds from A1 at 98. Both BD A and A1 trade as principal.

TRACE Reporting: Although BD A engaged in a same day, same price transaction with A1 in the same security traded with another contra-party (and both BD A and A1 traded as principal), because both transactions were on the same side of the market (both were purchase transactions), BD A would not append the non-member affiliate—principal transaction indicator. TRACE would disseminate BD A's purchase from A1. BD A would identify A1 with the "A" contra-party type, however.

Thus, the following reports must be submitted to TRACE by BD A:

BD A, as principal, reports a purchase of 50 ABC bonds at 98 from BD B
BD A, as principal, reports a purchase of 50 ABC bonds at 98 from A1

Scenario 5: BD A has a non-member affiliate A1. BD A purchases 10 VWX bonds at 98 from A1. Both BD A and A1 trade as principal. BD A expects to hold the bonds in inventory for a few days.

TRACE Reporting: Because, at the time of its transaction with A1, BD A did not reasonably expect to engage in a same day, same price transaction in VWX bonds with another contra-party, BD A would not append the non-member affiliate—principal transaction indicator to its TRACE report of the transaction with A1.

The following reports must be submitted to TRACE by BD A:

BD A, as principal, reports a purchase of 10 VWX bonds at 98 from A1

BD A would identify A1 with the "A" contra-party identifier. BD A would not append the non-member affiliate – principal transaction indicator when it reports this transaction; thus, TRACE would disseminate BD A's purchase from A1.

Later the same trading day, BD A sells 10 VWX bonds at 98 to BD B. The following reports must be submitted to TRACE by BD A:

TRACE Reporting:

BD A, as principal, reports a sale of 10 VWX bonds at 98 to BD B
Because, at the time of its purchase of VWX bonds from A1, BD A did not reasonably expect to engage in a same day, same price transaction in VWX bonds with another contra-party, BD A would not be required to correct its prior TRACE transaction report of its purchase of 10 VWX from A1 solely for the purpose of appending the non-member affiliate – principal transaction indicator.

Scenario 6: BD A has a non-member affiliate A1. BD A, as principal, purchases 50 ABC bonds at 98 from A1 and expects to engage in a same day, same price transaction in the bonds with another contra-party at 98.

TRACE Reporting:

The following reports must be submitted to TRACE by BD A:

BD A, as principal, reports a purchase of 50 ABC bonds at 98 from A1
BD A would identify A1 with the "A" contra-party type
Because BD A reasonably expects to engage in a same day, same price transaction in ABC bonds with another contra-party, BD A would append the non-member affiliate – principal transaction indicator to its TRACE report of the transaction with A1. TRACE would not disseminate BD A's purchase from A1.

However, BD A does not ultimately sell 50 ABC bonds to another contra-party and keeps the position overnight.

The following action must be taken by BD A:

BD A must correct its prior TRACE transaction report of its purchase of 50 ABC bonds from A1 to remove the non-member affiliate – principal transaction indicator Upon receiving the correction, TRACE would disseminate BD A's purchase from A1.

Likewise, if BD A ultimately sells 30 ABC bonds to another contra-party at 98 on the same trading day, the following action must be taken by BD A:

Because the transaction with the other contra-party was of a smaller size than the transaction between BD A and A1 reported with the non-member affiliate – principal transaction indicator, BD A must correct its prior TRACE transaction report of its purchase of 50 ABC bonds from A1 to remove the non-member affiliate – principal transaction indicator.

Upon receiving the correction, TRACE would disseminate BD A's purchase from A1.

However, if BD A ultimately, on the same trading day, sells 30 ABC bonds to one contra-party at 98 and 20 ABC bonds to another contra-party also at 98, a correction would not be required because the aggregate amount of ABC bonds sold at the same price as a transaction with A1 is the same, and the transaction with A1 would remain suppressed.

3.1.49 Is the sale from the issuer to the underwriter TRACE reportable?

No, with one exception: a sale from a securitizer of an Agency Pass-Through Mortgage-Backed Security to any purchaser is TRACE reportable.

3.1.50 Are small sized new issues exempt from TRACE reporting?

No. There is no exemption or exclusion from the term TRACE-Eligible Securities based on the small size of an issue, and such securities are TRACE reportable.

3.1.51 Do both counterparties in an interdealer, new issue transaction, have a TRACE reporting obligation?

Yes.

3.1.52 With regard to "best efforts" offerings, when does a TRACE reporting obligation arise?

Generally, a transaction reporting obligation arises when there is a meeting of the minds between the parties with regard to the transaction's material terms, such as price and quantity. In a non-contingent best-efforts offering, regarding the subscription process, a TRACE reporting obligation would arise at the point when a firm sends or transmits customer funds to the issuer or designated trustee. For purposes of P1/S1 designation, the first day of trading of a new issue would be the first day that customer funds are sent/transmitted to the issuer or designated trustee.

In a contingent best-efforts offering (e.g. "mini-max" or "all or none"), regarding the subscription process, a TRACE reporting obligation would arise at the point when the contingency or contingencies are met and customer funds are sent/transmitted from escrow or otherwise to the issuer or designated trustee. For purposes of P1/S1 designation, the first day of trading of the new issue would be the first day that all contingencies are met and customer funds are sent/transmitted to the issuer or designated trustee. This guidance is for TRACE reporting only. Firms are reminded of their obligations under SEC Rules 10b-9 and 15c2-4 as well as other rules applicable to contingent offerings.

3.1.53 What does FINRA consider the "time of execution" of a new issue transaction?

Just as in secondary market transactions, the time of execution of new issue transactions would be the time of the "meeting of the minds" with regard to the material terms (e.g., price and quantity) of the transaction."

3.1.54 Are transfers of TRACE-eligible securities among syndicate members for purposes of establishing the underwriting syndicate reportable to TRACE?

A. No, a transfer of TRACE-eligible securities on the first day of trading from one member of the underwriting syndicate to another member of the underwriting syndicate that is done solely to facilitate the establishment of the syndicate is not reportable to TRACE. For example, when all the securities for an offering are delivered on the first day of trading by the issuer to one of the co-managers of the syndicate with the understanding that the firm will deliver a portion of the securities to the second co-manager to establish the syndicate, the transfer is not reportable to TRACE. FINRA reminds firms that engage in such transfers of the need to maintain and retain (e.g., for examiner review) accurate records sufficient to demonstrate that the transfers were effected to facilitate the establishment of the syndicate.

FINRA notes that this guidance does not extend to transfers of TRACE-eligible securities from a managing underwriter (or another member of the underwriting syndicate) to selling group members. Such transfers must be reported to TRACE. Also, this guidance does not extend to re-allocations, which would include transfers to syndicate members after the first day of trading. If a re-allocation occurs among syndicate members after the initial allocation is established, the transfer of such securities from one firm to another firm to effect the reallocation must be reported to TRACE.

3.1.55 Are transfers of TRACE-eligible securities among syndicate members for purposes of facilitating settlement reportable to TRACE?

No. If a transfer of TRACE-eligible securities is done solely to facilitate settlement with no change in price or other material terms, transfers from one member of a syndicate to another syndicate member would not be reportable to TRACE. For example, if a customer purchases bonds from multiple syndicate members, but designates one syndicate member to deliver the entire allotment, the transfer of the bonds to the designated syndicate member from the other syndicate members would not be reported to TRACE as long as there is no change in price or other material terms.

In addition, if the syndicate members designate one syndicate manager or another syndicate member to act as a billing and delivery agent and the agent is used to sell or deliver the securities to all "end" investors on behalf of the syndicate, the transfer of the securities from syndicate members to the billing and delivery agent also would not be reportable to TRACE in that such transfers occur solely for administrative convenience (i.e., to facilitate the creation and maintenance of accurate books and records). FINRA reminds firms that engage in these types of transactions of the need to maintain and retain (e.g., for examiner review) accurate records sufficient to demonstrate that such transfers are effected to facilitate settlement.

3.1.56 If, prior to the final pricing or determination of other material terms of a new issue debt security, a firm receives a firm commitment from a broker-dealer or a customer to purchase the new issue debt security when it is issued, has the firm entered into a transaction that must be reported to TRACE?

No. Although firms may solicit orders or seek indications of interest from customers and other broker-dealers, and, in some instances, receive a firm commitment from a broker-dealer or a customer to purchase a quantity of a new debt security prior to its issuance and the determination of final material terms (e.g., price, coupon and quantity), for purposes of TRACE trade reporting, a transaction occurs at the "time of execution" as defined in FINRA Rule 6710(d), which does not occur until the parties have a "meeting of the minds" regarding the material terms of the transaction. This "meeting of the minds" cannot occur before the final material terms, such as price, coupon and quantity, have been established by the issuer and such terms are known by the parties to the transaction. Further, firms are reminded they should be clear in their communications regarding the final terms of the trade and how such terms will be conveyed between the parties.

3.1.57 An underwriting syndicate may generate a short position as part of the initial sale of securities and, in some circumstances, one or more of the underwriters will take onto its books a portion of this short position via an intra-syndicate short sale position transfer. Are such transactions reportable to TRACE and, if so, should they be reported with the primary (P1) or secondary (S1) market indicator?

An intra-syndicate short position transfer in a TRACE-Eligible Security is reportable to TRACE pursuant to FINRA Rule 6730. If the intra-syndicate short position transfer meets the definition of a "List or Fixed Offering Price Transaction" (i.e., is effected at the published or stated list or fixed offering price on the first day of trading by a sole underwriter, syndicate manager, syndicate member or selling group member), then firms must report the transaction using the P1 indicator.

However, where the short position transfer is not effected at the published or stated list or fixed offering price on the first day of trading by a sole underwriter, syndicate manager, syndicate member or selling group, firms must report the transaction to TRACE using the S1 indicator.

3.1.58 Are tender offers reportable?

Sales of bonds from bondholders directly to the issuer or a third party purchaser pursuant to a public tender offer, effected in accordance with SEC rules, are not reportable transactions. In such a tender offer, a FINRA member that acts as a dealer manager/agent for the issuer or third party purchaser would not have a reporting obligation. However, a FINRA member that acts as principal and purchases bonds and then resells them to the issuer/third party purchaser or a member that acts as agent for the seller would have a reporting obligation with respect to purchases from the bondholder.

For interpretive guidance, see Notice to Members 02-76, Question 13, "Issuer Open Market Repurchase Transactions."

3.1.59 Do I have a reporting obligation to TRACE if I am an inter-dealer broker between two firms, and the two broker-dealers write the ticket with each other?

An inter-dealer broker ("IDB") that negotiates and/or executes a transaction is a party to the transaction and has a reporting obligation. An IDB that negotiates a transaction as an agent must report the buy from one member and the sell to the other, and these two dealer firms must submit TRACE reports.

3.1.60 Do prime brokers have any reporting obligation?

Prime brokers that are FINRA members acting as an executing broker have a TRACE reporting obligation.

3.1.61 Who reports trades executed through electronic trading systems that are themselves broker-dealers?

All FINRA members that are "parties to a transaction" have a trade reporting obligation under TRACE Rules. Where two FINRA members effect/execute a transaction through an electronic trading system that is registered as a broker-dealer, both members, as well as the electronic trading system would have a trade reporting obligation.

3.1.62 If my firm is a selling agent for a medium-term note issuer, and the issuer is responsible for CUSIP assignment in bulk, is my firm still responsible for providing the new issue information set forth in Rule 6760 to FINRA Market Operations?

Yes. Firms should implement the procedures necessary to ensure that the issuer provides the firm with the CUSIP in a timely manner such that the firm can comply with its obligations under Rule 6760.

3.1.63 In a wrap fee account scenario, if a broker-dealer has an outside investment advisor ("IA") advising customer accounts, does the IA have to call the broker-dealer and inform the broker-dealer what the IA traded, so that the broker-dealer in which the IA's account resides can report?

A member firm can serve as the domicile for the all the accounts of a customer. If the customer retains an outside, non-FINRA member advisor, and that advisor executes away from the domiciling firm, only the FINRA member that directly negotiated/executed the transaction, and/or is otherwise a party to the transaction with the IA, incurs a trade reporting obligation versus "C", the IA. If the FINRA member firm where the IA accounts are domiciled acts in a custodial capacity only and otherwise is not a party to the transaction, the member has no reporting obligation.

3.1.64 If my firm's managed account area executes a trade, does it have any reporting obligation to TRACE? (My firm owns an MAA that is not a separate asset management subsidiary or separate investment advisor. It can execute away from my desk on an agency basis only.)

Yes. The TRACE Rules do not allow for separating any part of a firm, even if it acts like a buy-side entity, for trade reporting purposes. Either the MAA must inform your desk that it has transacted business on behalf of the accounts it manages so that the desk can report the transactions to TRACE within the mandated time frame, or the MAA must input the TRACE reports itself. There is still only one MPID representing your firm, and business transacted by the MAA runs through an account of your firm. (Essentially, the person in the MAA has his own trading desk at your firm, and the MAA is responsible for effecting a change in beneficial ownership.) The transaction activity between your firm — off any type of desk at the firm — and its end customers is subject to regulatory reporting and possible dissemination of transaction information, as well as to surveillance.

3.1.65 If a debt security is sold pursuant to Regulation S in an off-shore transaction, is a member firm required to report the transaction to TRACE?

No. In 2009, FINRA expanded the definition of TRACE-eligible security in Rule 6710(a).¹ When the amendments took effect, many securities that previously were not TRACE-eligible securities, including debt securities that were distributed other than pursuant to a registration statement, became TRACE-eligible securities. However, the definition of TRACE-eligible security was not expanded to include debt securities distributed in bona fide off-shore Regulation S transactions.

For purposes of TRACE reporting, FINRA distinguishes between debt securities that are the subject of bona fide Regulation S transactions and subsequent non-Regulation S transactions in such debt securities. Thus, if a debt security originally sold in a Regulation S transaction is subsequently purchased or sold as part of a U.S. transaction, the transactions following the Regulation S transaction must be reported to TRACE. FINRA notes that such transactions are subject to TRACE reporting whether the transactions occur during or after the applicable Regulation S distribution compliance period.

¹ Securities Exchange Act Release No. 59768 (April 14, 2009), 74 FR 18271 (April 21, 2009) (SEC approval order for File No. SR-FINRA-2009-004).

3.1.66 In the event that information regarding a TRACE-Eligible Security required to be provided to FINRA under Rule 6760(b) is not available at the time that a firm submits a TRACE New Issue Form, how should a firm fully comply with its obligation to provide such information to FINRA?

A firm that is a managing underwriter (or, if none, an underwriter or, if no underwriter, an initial purchaser) of a distribution or offering in a newly issued TRACE-Eligible Security must provide notice and information to FINRA pursuant to FINRA Rule 6760 using the TRACE New Issue Form provided on the FINRA Gateway. However, FINRA recognizes that not all the information may have been determined by the deadline for notification. In such cases, there are two steps a firm must take to comply with Rule 6760(b). First, a firm must submit the TRACE New Issue Form by the deadline in Rule 6760, with certain information omitted, provided that the fields which are mandatory for submission of the TRACE New Issue Form are completed as of the time of the initial submission. Second, once the additional information required under Rule 6760(b) becomes available, the firm must promptly email the additional information not previously submitted on the TRACE New Issue Form to [email protected] to fully comply with its obligation.

FINRA also reminds firms of their responsibility to facilitate timely reporting of transactions. Pursuant to FINRA Rule 6730(a)(6), if a firm enters into a transaction in a TRACE-Eligible Security and determines that the TRACE-Eligible Security is not set up in the TRACE System, the firm must promptly notify and provide FINRA Operations the information required under FINRA Rule 6760(b) in the manner detailed above, prior to reporting the transaction.

3.1.67 An ATS to which my firm subscribes has instructed me that, when reporting to TRACE, I should identify a third-party intermediary that is a FINRA member as my counterparty on the ATS, rather than the ATS. However, an exemption does not apply to the ATS or to the transaction under Rule 6731 or Rule 6732. Would reporting against the member third-party intermediary, as instructed by the ATS, violate Rule 6730 or be inconsistent with the guidance provided in Regulatory Notice 14-53?

In many instances, a transaction on an ATS involves up to three members— i.e., the seller, the buyer and the ATS. In such cases, as discussed in Regulatory Notice 14-53, member subscribers generally would be required to report against the ATS, irrespective of whether the ATS is involved in the clearance and settlement of a transaction, unless an exemption applies. However, in other instances, an ATS may adopt a structure that involves another member—a third-party intermediary—that also is a party to a transaction on the ATS. For example, the ATS may arrange for such member third-party intermediary to transact with the buying and selling parties and provide clearance and settlement services. In such cases, when reporting their transactions to TRACE, both the ATS and its member subscribers would identify the member third-party intermediary as the counterparty to the transaction on TRACE reports. Likewise, the member third-party intermediary separately would report its transactions to TRACE, identifying the ATS and the subscribers on the respective TRACE reports. If an ATS implements this type of structure, the ATS must clearly inform affected member subscribers of its arrangement, specifying the identity and role of the member third-party intermediary, the intermediary’s MPID, and such other information, as necessary, to enable all parties to a transaction on the ATS to understand their TRACE trade reporting obligations in this regard. In the absence of clear instruction from the ATS regarding the need to report against a member third-party intermediary, member subscribers generally are expected to report against the ATS, as discussed in Regulatory Notice 14-53. For additional information see Regulatory Notice 14-53.

3.1.68 FINRA member firms are required to report transactions in TRACE-eligible securities that occur on and through an Alternative Trading System (ATS). An ATS, which includes electronic communication networks, is also party to a transaction and may have a trade reporting obligation when a transaction in a TRACE-eligible security is executed through the ATS, unless the transaction is exempt from trade reporting pursuant to FINRA Rule 6732 or the ATS is exempt from trade reporting pursuant to FINRA Rule 6731. Depending on its business model, an ATS counter-party, may assess a mark-up/mark-down or commission on a transaction executed through its platform. Should a subscriber that executes a transaction on an ATS platform also report a price, inclusive of any remuneration assessed by the ATS?

An ATS subscriber executing a trade in a principal capacity must report the price inclusive of any remuneration known at the time of trade (the “all-in price”) that was assessed by the ATS on a per-trade basis.

3.1.69 When should a member report a transaction with a customer using the weighted average price modifier (“.w”)?

A member must report a transaction with the .w modifier whenever the reported price of the transaction was determined using a weighted average price method, irrespective of whether the transaction was executed in a principal or agency capacity or whether the price also reflects a mark-up or mark-down. For example, a customer may seek to effect the purchase or sale of up to a specified aggregate amount of a TRACE-Eligible Security in a single transaction. To fill this customer order, the member may effect more than one offsetting transaction with other dealers (each offsetting transaction individually reported to TRACE), and then fill the customer in the aggregate amount in a single execution at an average price. In such cases, when reporting the customer fill to TRACE, the member must submit one report for the entire amount executed at the weighted average price with the “.w” modifier as described in FAQ 3.1.39. The following scenarios are examples of when the “.w” modifier must be reported to TRACE.

Scenario 1: BD A, as agent, executes the following transactions with multiple broker-dealers (BD) and a customer (C1):

BD A, as agent, purchases 25 ABC bonds from BD B at $97.25 at 11:57:30am
BD A, as agent, purchases 25 ABC bonds from BD C at $97.50 at 11:57:50am
BD A, as agent, purchases 50 ABC bonds from BD D at $96.75 at 11:58:45am
At 12:01:24pm, BD A, as agent, sells 100 ABC bonds to C1 at a weighted average price of $97.0625

In Scenario 1, given that the price of the transaction with C1 was determined using a weighted average price method, BD A must use the “.w” modifier when reporting the transaction with C1 to TRACE.

Scenario 2: BD A, as principal, executes the following transactions with multiple BDs and C2:

BD A, as principal, purchases 25 ABC bonds from BD B at $99.25 at 1:36:53pm
BD A, as principal, purchases 50 ABC bonds from BD C at $99.35 at 1:41:23pm
BD A, as principal, purchases 75 ABC bonds from BD D at $99.05 at 1:47:55pm
At 1:54:05pm, BD A, as principal, sells 150 ABC bonds to C2 at a weighted average price of $99.183, and inclusive of the mark-up, reported a price of $99.75.

In Scenario 2, given that the price of the transaction with C2 was determined using a weighted average price method, BD A must use the “.w” modifier when reporting the transaction to TRACE, even though the transaction with C2 was executed in a principal capacity and the reported price reflected a mark-up.

Scenario 3: In other instances, a broker-dealer may effect an overall transaction with a customer in more than one execution. For example, a customer (C3) is seeking to buy $10 million of ABC bonds. BD A executes the following transactions with multiple BDs and C3:

BD A purchases $2 million ABC bonds from BD B at $99.25 at 9:06:53am
BD A sells $2 million ABC bonds to C3 at $99.30 at 9:06:54am
BD A purchases $3 million ABC bonds from BD C at $99.35 at 1:41:23pm
BD A purchases $5 million ABC bonds from BD D at $99.05 at 2:47:55pm
At 2:50:24pm, BD A sells $8 million ABC bonds to C3 at a weighted average price of $99.1625

In Scenario 3, the sale of $2 million of ABC bonds to C3 should not be reported with the “.w” modifier because the price was not determined using a weighted average price method. With respect to the remaining $8 million of ABC bonds, because BD A filled the balance of the customer order in a single execution to the customer using a weighted average price method, the “.w” modifier must be used in BD A’s trade report of the 2:50:24pm sale to C3. If BD A had separately filled the $3 million and $5 million in separate executions of ABC bonds to C3 (e.g., at 1:41:24pm and 2:47:56pm, respectively), then the .w modifier would not be used.

Scenario 4: BD A sources bonds for its retail clients from a broker-dealer affiliate (BD B). To fill BD A’s order, BD B executes the following transactions with multiple counterparties.

BD B, as principal, purchases 25 ABC bonds from BD C at $99.25 at 9:42:52am
BD B, as principal, purchases 50 ABC bonds from C1 at $99.35 at 11:32:24am
BD B, as principal, purchases 75 ABC bonds from BD D at $99.05 at 12:01:36pm
To fill BD A’s order, at 12:02:50pm, BD B, as principal, sells 150 ABC bonds to BD A at a weighted average price of $99.183

In Scenario 4, given that BD B used a weighted average price method to determine the price at which BD A’s order was filled, BD B must use the “.w” modifier when reporting its transaction with BD A to TRACE. BD A would not include the “.w” modifier when reporting its purchase from BD B because, from the perspective of BD A’s side of the transaction, there was a single purchase at a price of $99.183. Similarly, BD A would not include the “.w” modifier when reporting its sales to the retail clients because BD A did not use a weighted average pricing method in determining the price to the customer.

Updated on 6/6/19

3.1.70 Should a member use the “.w” modifier if it executed multiple trades at the same price and aggregated them to fill an order?

Yes. If the price of the aggregate trade was determined using a weighted average pricing method, then the member must use the .w modifier, even if the underlying prices happened to be the same.

Posted on 6/6/19

3.1.71 What is the “time of execution” when a customer order is filled in a single execution at a volume weighted average price (VWAP)?

The time of execution is the time when the parties to a transaction have agreed to all material terms of the transaction, including the actual price (e.g., the VWAP) and quantity. For example, at 10:00 a.m., member BD A receives a customer order to purchase 500 ABC bonds. To fill this order, BD A effects more than one offsetting transaction with other dealers, and at 1:30 p.m., the customer order is filled in a single execution at a VWAP. In this instance, the time of execution is 1:30 p.m., not 10:00 a.m.

Updated on 6/27/18

3.1.72 An ATS to which my firm subscribes has instructed that we should identify the ATS as our counterparty for all transactions on the ATS, even in instances where the ATS is not involved in the clearance and settlement of the transaction. If we report the ATS as our counterparty, may we also separately re-report the same transaction to TRACE identifying as our counterparty the non-FINRA member subscriber with which we clear the transaction?

In most instances, a transaction on an ATS involves three parties— i.e., the seller, the buyer and the ATS. As discussed in Regulatory Notice 14-53, member subscribers are required to report transactions on an ATS against the ATS (i.e., identifying the ATS as their counterparty on TRACE trade reports), irrespective of whether the ATS is involved in the clearance and settlement of the transaction, unless an exemption applies. To ensure trade reports are reflected accurately in the audit trail, a member may not report the same transaction twice. Therefore, a member subscriber may not report a transaction identifying the ATS as its counterparty (as required by Rule 6730) and then re-report the same transaction identifying a non-FINRA member subscriber as its counterparty.

In the absence of instruction from the ATS that the ATS is relying on a TRACE trade reporting exemption in Rule 6731 or Rule 6732, member subscribers are expected to report against the ATS. For additional information see Regulatory Notice 14-53.

Posted on 6/14/19

3.1.73 A member firm (BD1) has a non-member affiliate in a foreign jurisdiction (NMA). BD1’s trader executes a trade with another member firm (BD2) in the U.S. for BD1’s NMA. BD1’s trader is not an associated person of NMA, nor is BD1’s trader registered in the foreign jurisdiction. However, NMA may be directly involved in the clearance and settlement of the transaction with BD2. In reporting to TRACE, which entities are considered parties to the trade?

Under these facts, BD1 and BD2 are the parties to the trade and should enter each other’s MPIDs in the counterparty field when reporting to TRACE, irrespective of whether NMA will be involved in the clearance and settlement of the transaction with BD2. Separately, BD1 also would report a transaction with NMA, identifying NMA as a “A” (non-member affiliate) in the counterparty field.

Posted on 12/6/19

3.1.74 Should a firm append the “non-member affiliate – principal transaction” indicator on its TRACE report with a non-member affiliate where such trade occurs within the same day, at the same price and in the same TRACE-Eligible Security as a transaction between the member and another contra-party, but the quantity of its transaction with its non-member affiliate is different than the quantity of its transaction(s) with another contra-party (i.e., another dealer or a customer)?

A firm must append the “non-member affiliate – principal transaction” indicator to its TRACE report if the quantity of its transaction with another contra-party is greater than the quantity of the non-member affiliate transaction. If the firm engages in multiple transactions with another contra-party that, in the aggregate, equal the quantity of the non-member affiliate transaction, the member also must append the “non-member affiliate – principal transaction” indicator on its TRACE report.

However, a firm must not append the “non-member affiliate – principal transaction” indicator to its TRACE report if the quantity of the transaction with another contra-party is smaller than the quantity of the non-member affiliate transaction.

Posted on 1/17/20

3.1.75 Are tender option bonds reportable to FINRA?

Rule 6730 (Transaction Reporting) generally requires that members report to FINRA transactions in TRACE-eligible securities, unless an exception or exemption applies. Tender option bonds (TOBs) that have a maturity of more than one calendar year meet the definition of “TRACE-eligible security” and, therefore, secondary market transactions in TOBs generally are reportable to TRACE. To determine the maturity date of a TOB for purposes of TRACE reporting, members must use the maturity date set forth in the offering documents—irrespective of whether the TOB readjusts its rate of interest or permits investors to tender their securities in a shorter period of time.

TOB are issued by a tender option bond trust (TOB Trust) to a depositor (Depositor) in exchange for a transfer of municipal securities. The TOB Trust issues both floating rate securities (TOB Floaters) and reverse floating rate securities (TOB Residuals). As provided in Rule 6730(e)(1), the initial transfer of a TOB from the TOB Trust to the Depositor should not be reported to TRACE because it is a “[transfer] of TRACE-Eligible Securities for the sole purpose of creating or redeeming an instrument that evidences ownership of or otherwise tracks the underlying securities transferred (e.g., an exchange-traded fund).” However, any secondary market transactions in TOBs (both TOB Floaters and TOB Residuals) are reportable to TRACE.

Posted on 10/11/22

3.1.76: Is use of the “no remuneration” indicator limited to customer transactions executed in a “fee-based” account?

No. The “no remuneration” indicator must be appended whenever a commission or mark-up/mark-down is not assessed on a trade-by-trade basis at the time of the transaction or where the amount is not known at the time the trade report is due (except that the “no remuneration” indicator is not to be used in connection with an inter-dealer transaction, a List or Fixed Offering Price Transaction, or a Takedown Transaction). Transactions that occur in a fee-based account are one example of a transaction that should carry the “no remuneration” indicator; however, use of the “no remuneration” indicator is not limited to fee-based accounts.

3.1.77: Is use of the “no remuneration” indicator limited to non-institutional customer accounts?

No. The “no remuneration” indicator must be appended whenever a reported transaction with a non-member counterparty, including an institutional customer, does not reflect a mark-up/mark-down or commission.

3.1.78: Should the “no remuneration” indicator be appended to qualifying transactions with non-FINRA member broker-dealers?

Yes. Under TRACE rules, a transaction with a non-member broker-dealer must reflect a counterparty type of either “A” (if the non-member broker-dealer is an affiliate of the reporting member) or “C” (in all other cases). A trade between a FINRA member and a non-member broker-dealer is not considered to be an inter-dealer trade for purposes of TRACE reporting. Thus, any trade between a member and a non-member broker-dealer (whether identified as “C” or “A”) must be appended with the “no remuneration” indicator where the reported transaction does not reflect a mark-up/mark-down or commission. See FAQ 3.1.79 below regarding covered depository institutions.

3.1.79: Should the “no remuneration” indicator be appended to a transaction between a FINRA member and a covered depository institution that does not reflect a mark-up/mark-down or commission?

No. Neither a covered depository institution that has obtained a FINRA-assigned MPID for its reporting obligations pursuant to the Board of Governors of the Federal Reserve System’s requirements nor a FINRA member should append the “no remuneration” indicator to a transaction between a FINRA member and a depository institution that has obtained a FINRA-assigned MPID (even if no remuneration is reflected in the reported price). Please note that the TRACE system will reject trade reports if the “no remuneration” indicator is appended to any transactions where both the reporting party and the counterparty have MPIDs. See also FAQ 4.3.12 below and FINRA’s FAQs for Covered Depository Institutions.

List or Fixed & Takedown Transactions

3.2.1 How are unsold allotments of primary issues to be treated for TRACE reporting purposes?: Unless such transactions meet the definition of List or Fixed Offering Price Transaction or Takedown Transaction, as defined in Rules 6710(q) and (r) respectively, transactions of unsold allotments will be subject to 15 minute reporting.
3.2.2 In the definition of List or Fixed Offering Price Transaction, what is meant by the "first day of trading of a new issue"?: The first day of trading of a new issue is the first calendar day of new issue sales.
3.2.3 What is the timeframe for reporting List or Fixed Offering Price Transactions and Takedown Transactions?: If a primary market transaction qualifies as a List or Fixed Offering Price Transaction under Rule 6710(q) or a Takedown Transaction under (Rule 6710(r), it is subject to T+1 reporting. All other primary market transactions are subject to 15 minute reporting.
3.2.4 Are re-offerings eligible for T+1 reporting with a "P1" designation? What about upsizings?: Transactions that are part of a "re-offering" of a previous new issue may be subject to T+1 reporting with the "P1" designation if the re-offering occurs after the initial settlement date of the new issue security that is being re-offered, if the re-offering is accompanied by an offering circular or prospectus, and the transactions meet the definitions of List or Fixed Offering Price or Takedown Transactions as defined in Rule 6710(q) and 6710(r), including the requirement that they be sold on the first day of trading of the re-offering. Regarding upsizings, transactions pursuant to an upsizing may be eligible for the "P1" designation when such transactions meet the definitions of List or Fixed Offering Price or Takedown Transactions as defined in Rule 6710(q) and 6710(r), including the requirement that they be sold on the first day of trading in a new issue. A P1 designation does not apply when a deal is upsized after the first day of trading and transactions are taking place before the initial settlement date of the new issue security.; Firms are required to notify FINRA of a reoffering pursuant to Rule 6760. However, where the information provided for the initial offering pursuant to Rule 6760 such as issuer name, coupon, maturity and whether Rule 144A applies has not changed, only the following information should be provided: (i) that the offering is a re-offering and (ii) the time that the new issue is priced, and if different, the time that the first transaction in the reoffering is executed. This should be done by adding the words “reoffering” and entering the applicable time(s) in the memo field for each reoffering transaction reported with a P1 designation.
3.2.5 What is the purpose of the Trading Market Indicator field?: The Trading Market Indicator is used to denote a List or Fixed Offering Price Transaction or a Takedown Transaction, as defined in Rules 6710(q) and (r) respectively. The value "P1" identifies a List or Fixed Offering Price Transaction or Takedown Transaction; the value "S1" identifies all other primary market transactions and all secondary market transactions.
3.2.6 Is the field for the "trading market indicator" (i. e., either "P1" or "S1") amendable or will changes to the indicator (i.e., from a "P1" to an "S1," or vice versa) require cancelling and rebilling the trade?: A change to the trading market indicator (i.e., changing a transaction from a List or Fixed Offering Price Transaction or a Takedown Transaction (a "P1") to any other primary market transaction or a secondary transaction (an "S1"), or vice versa) will require either a correction, if made within T+ 20, or a Reversal and As/Of submission, if made later than T + 20.
3.2.7 If a sole underwriter, syndicate manager, syndicate member or selling group member (or in the case of a primary market sale transaction effected pursuant to Securities Act Rule 144A, an initial purchaser, syndicate manager, syndicate member or selling group member) effects a List or Fixed Offering Price Transaction as defined in FINRA Rule 6710(q), with a counterparty buyer that is a registered broker-dealer (BD), and reports the transaction to TRACE pursuant to FINRA Rule 6730(a)(2), designating the transaction "P1" as provided in FINRA Rule 6730(d)(4)(D) and the Trade Reporting and Compliance Engine User Guide, does the counterparty BD also report the transaction pursuant to FINRA Rule 6730(a)(2) and designate the transaction "P1"?: Yes. A BD that is a counterparty buyer in a List or Fixed Offering Price Transaction must report the transaction in accordance with FINRA Rule 6730(a)(2), which requires reporting no later than the next business day during TRACE System Hours, and designate the transaction as “P1.”
3.2.8 If an underwriter opts to sell at a fixed price an offering that is described in the issuer's offering documents as a variable price offering, and provides notification to the syndicate, selling group (if applicable) and to other market participants that the offering will be sold at a fixed price, may firms report the transactions as List or Fixed Offering Price Transactions and use the "P1" indicator?: No. The issuer’s description of the offering in the offering documents is controlling for purposes of reporting to TRACE. Thus, if the issuer’s offering documents state that the offering is a variable price offering, firms may not identify and report the transactions as List or Fixed Offering Price Transactions and may not use the “P1” indicator.

Corporate, Agencies & Foreign Sovereigns

3.3.1 Are firms’ transactions in TRACE-Eligible Securities with the Federal Reserve Bank of New York reportable TRACE transactions?: Yes. Member purchases or sales of corporates, agencies or any other type of TRACE-Eligible Security with the Federal Reserve Bank of New York are reportable to TRACE. When reporting these transactions to TRACE, members should identify the Federal Reserve Bank of New York (or its non-member agent) as “C” (customer) in the counterparty field. In addition, the Time of Execution to be reported to TRACE is the time of the official close of the open market operation as communicated in the Federal Reserve Bank of New York Open Market Operation Results.; Updated on 6/8/20
3.3.2 Are securities created by the "stripping" of an Agency Debt Security TRACE reportable?: Yes, a security created by the "stripping" of an Agency Debt Security that otherwise meets the TRACE eligibility requirements is reportable to TRACE.
3.3.3 Are repurchase and reverse repurchase transactions involving Agency Debt Securities TRACE reportable?: As with all TRACE-eligible securities, bona fide repurchase and reverse repurchase transactions involving Agency Debt Securities are not reportable to TRACE.
3.3.4 Are GSE debt securities with exactly 1 year to maturity TRACE reportable?: Debt securities with exactly 1 year to maturity from the date of issuance are not TRACE-Eligible Securities. Only securities with a maturity greater than one year from issuance are TRACE-Eligible Securities as defined in Rule 6710(a).
3.3.5 When is a firm considered part of the selling group for purposes of the definition of “Takedown Transaction” in Rule 6710(r) and must report a transaction to TRACE with the P1 indicator under Rule 6730(d)(4)(C)?: A firm is considered a selling group member effecting a Takedown Transaction for purposes of the TRACE rules when all the conditions set forth in the definition of “Takedown Transaction” in FINRA Rule 6710(r) have been satisfied and the syndicate has not been broken. In particular, FINRA notes that the transaction must be a primary market sale transaction on the first day of trading and the sale to the firm must be by a sole underwriter or syndicate manager to the firm (or in the case of a transaction effected pursuant to Securities Act Rule 144A, an initial purchaser or syndicate manager) at a discount from the published or stated fixed offering price. If the firm purchases the securities from a sole underwriter or syndicate manager (or in the case of a transaction effected pursuant to Securities Act Rule 144A, an initial purchaser or syndicate manager), the firm purchasing the security as well as the firm selling the security must report the transaction to TRACE with the P1 indicator.; A sale from a selling group member to another firm at a discount from the published or stated list or fixed offering price would not meet the definition of a Takedown Transaction unless the firms effecting the transaction are affiliates. For purposes of this FAQ, an affiliate means an entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the member firm.; In order to ensure proper reporting to TRACE, FINRA believes it is a best practice for the sole underwriter or syndicate manager to document the firms that it deems are dealers in the selling group and to communicate this information with its contra-parties to ensure proper usage of the P1/S1 indicators.
3.3.6 My firm executed a portfolio trade involving a basket of 12 different corporate bonds, but three of the bonds are issued by the same issuer. Should the portfolio trade modifier be appended to these trades? NEW: Yes. Assuming the other conditions of Rule 6730(d)(4)(H) are met, the portfolio trade modifier must be appended to each corporate bond trade reported to TRACE that is part of a basket of corporate bonds of at least 10 unique issues/securities (i.e., individual corporate bonds counted using security identifiers such as CUSIPs or TRACE symbols), regardless of whether the bonds are issued by the same or affiliated issuers.
3.3.7 My firm executed a portfolio trade involving a basket of five corporate bonds and five agency debt securities. Should the portfolio trade modifier be appended to these trades? NEW: No. As specified in Rule 6730(d)(4)(H), the portfolio trade modifier should be appended only where the basket consists of at least 10 unique corporate bonds. A basket of 10 that consists of a mix of corporate bonds and other securities—whether other TRACE-eligible securities or otherwise—would not warrant use of the portfolio trade modifier. However, where a basket contains at least 10 corporate bonds along with any number of other securities, the portfolio modifier should be appended to the TRACE reports of the corporate bond components (so long as the other conditions of Rule 6730(d)(4)(H) are met). (See also FAQ 3.3.8 below)
3.3.8 My firm executed a portfolio trade involving a basket of 12 corporate bonds and five agency debt securities. Should the portfolio trade modifier be appended to all 17 TRACE reports? NEW: The portfolio trade modifier should only be appended to TRACE reports of qualifying corporate bond trades, as provided for in Rule 6730(d)(4)(H). Therefore, agency debt security trade reports should not be appended with the portfolio trade modifier, even if the agency debt securities were traded as part of a basket that also included corporate bonds.
3.3.9 My firm executed a portfolio trade involving a basket of 11 corporate bonds that met the conditions of Rule 6730(d)(4)(H) and therefore appended the portfolio trade modifier. Subsequently, two of the corporate bond trades were cancelled. Should the firm correct the remaining nine trade reports to remove the portfolio trade modifier? NEW: No. Trade reports need not be corrected solely to remove the portfolio trade modifier where subsequent cancellations reduce the size of a basket to include fewer than 10 corporate bonds. However, where a basket trade did not meet the conditions of the portfolio trade modifier at the time of execution, and the firm subsequently discovers the error, the TRACE reports must be corrected to remove the modifier.
3.3.10 My firm and a counterparty entered into a trade for a basket of corporate bonds of at least 10 unique issues by agreeing on a spread to a reference price. Were these trades entered into “for a single agreed price for the entire basket” for purposes of appending the portfolio trade modifier? NEW: Yes. A portfolio trade is considered to be executed for a “single agreed price for the entire basket” where the overall price for the basket has been negotiated or agreed on an aggregate basis. This includes scenarios where the parties use a pricing list or pricing service as a starting point for negotiations and determine the final price by applying a uniform spread to all securities in the basket.; However, where the parties simply aggregate individual prices without further negotiation, including where the parties apply different spreads or other varying methodologies to determine the prices for individual securities in the basket, the basket trade would not be considered to be executed for a “single agreed price.” For example, the “single agreed price” prong would exclude normal multi-dealer list trades that originate as either an offer wanted in competition (OWIC), or bid wanted in competition (BWIC), as such protocols result in a competitively negotiated price for each security on the list.
3.3.11 Can firms add a U.S. dollar-denominated foreign sovereign debt security to TRACE where a CUSIP or CINS is unavailable? New - Effective 11/6/23: 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.
3.3.12 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? New - Effective 11/6/23: A foreign sovereign debt security is considered “U.S. dollar-denominated” only if the security was issued in U.S. dollars.
3.3.13 Are transactions in U.S. dollar-denominated debt issued by a foreign municipality reportable to TRACE? New - Effective 11/6/23: 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.
3.3.14 My firm and a counterparty entered into a trade for a basket of corporate bonds of at least 10 unique issues by agreeing on a common yield or discount margin across the basket. Were these trades entered into “for a single agreed price for the entire basket” for purposes of appending the portfolio trade modifier? New: Yes. A portfolio trade is considered to be executed for a “single agreed price for the entire basket” where the overall price for the basket has been negotiated or agreed on an aggregate basis. This includes scenarios where the parties agree to a common yield or discount margin across the basket.
3.3.15 My firm and a counterparty entered into a trade for a basket of corporate bonds of at least 10 unique issues based on an aggregate price for the entire basket. My firm calculated the aggregate price for the basket by utilizing an algorithm. Were these trades entered into “for a single agreed price for the entire basket” for purposes of appending the portfolio trade modifier? New: Yes. A portfolio trade is considered to be executed for a “single agreed price for the entire basket” where the overall price for the basket has been negotiated or agreed on an aggregate basis. As noted above, the “single agreed price” prong would exclude normal multi-dealer list trades that originated as either an OWIC or BWIC, as such protocols result in a competitively negotiated price for each security on the list (see FAQ 3.3.10). Such normal list trades are excluded because the firm provides individual, competitively negotiated prices for each security in the list, and may ultimately execute transactions in all of the securities in the list or some subset of the list, at the discretion of the counterparty, on the basis of such individual prices.; However, in the scenario described above, the firm and the counterparty agreed to execute the basket on the basis of the overall price of the basket, which was agreed on an aggregate basis. Firms may use varying methodologies to calculate the aggregate price of a basket transaction, including utilizing algorithms or other mechanisms to determine prices for components of the basket in the first instance, followed by pricing adjustments to arrive at an aggregate price for the entire basket.

Securitized Products

3.4.1 When will the TRACE amendments expanding TRACE to include ABS become effective?: As announced in Regulatory Notice 10-55, the effective date is May 16th 2011.
3.4.2 What numeric identifiers will be accepted by the TRACE system when reporting transactions in asset- and mortgage-backed securities?: Firms must report transactions to TRACE using either a CUSIP or FINRA symbol. For Agency Pass-Through securities, FINRA plans to include pool numbers, as applicable, on the TRACE Issue Master along with CUSIP numbers and FINRA symbols for reference purposes.
3.4.3 In instances where two CUSIPs are available (for example, a specified pool is also a TBA eligible pool which has both a specified pool CUSIP and a TBA CUSIP) what CUSIP should be used when reporting the transaction to TRACE?: Transaction reports should include the CUSIP used by the parties to the transaction at the time of execution.
3.4.4 In circumstances involving Agency/GSE MBS where member firms buy new pool(s) from originator, a pool number may be known, but a CUSIP for the pool may not yet be assigned. In such circumstances, how should transactions be reported where final CUSIP is not known?: Firms should report such transactions using the TBA CUSIPs. If a specific pool to be delivered is known at the time of trade execution, such transaction report should include the stipulation indicator.; In the future, FINRA will change this guidance to require firms to submit such trades with the specified pool, “.O” indicator. In a separate notice FINRA will provide the effective date for this requirement. FINRA understands that this guidance may require firms to make certain technology changes to accommodate reporting applicable transactions with a specified pool indicator. FINRA wishes to give firms necessary time to make such changes. Firms should maintain applicable books and records to insure, among other things, the ability to readily identify such transactions as specified pool transactions.
3.4.5 Is the creation of an Agency or GSE MBS through a "swap" or "guarantor swap" program reportable to TRACE?: No, where a lender selects and pools a group of conforming mortgage loans that meet a GSE’s underwriting standards and “swaps” them with no cash or other consideration for a GSE issue and guaranteed MBS, such swap is not TRACE reportable.
3.4.6 Are purchases of whole mortgage loans by an Agency or GSE under a "cash" program TRACE reportable?: No, as whole mortgage loans do not meet the definition of TRACE eligible security.
3.4.7 Are trade assignments of a TBA transaction reportable to TRACE?: Certain trade assignments that are effected to facilitate settlement obligations are not reportable to TRACE, even if there is a change in counterparty from customer to firm. Such trade assignments must not result in any changes to the material terms, such as price and quantity, of the transactions that are reportable to TRACE. Below is an example of the trade assignment process. Firms must maintain necessary and adequate books and records (e.g., Trade Assignment Notice) and relevant written policies and procedures regarding such assignments, in part to insure that assignments are not used to avoid trade reporting obligations, obscure counterparty capacity or counterparty identification.; Firm A sells an MBS to Customer X at 101
Customer X then sells the MBS to Firm B at 103; Firm A receives notice of assignment from Customer X; Firm A books offsetting buy trade to Customer X at 103
Firm A books new sell assignment trade with Firm B at 103; At settlement
Firm A and Customer X sell and buy trade is paired off with money difference paid by Firm A to Customer X
Firm A settles DVP with Firm B.; In the example above, the Firm A sale to Customer X and the Firm B purchase from Customer X would be reportable to TRACE. After receiving the notice of assignment, Firm A’s offsetting buy trade and its new sell assignment trade would not be TRACE reportable.
3.4.8 Given the fact pattern above, assume the parties utilized an automated assignment function that resulted in a non-negotiated system-generated price whose only purpose was to allow the parties to effect pair off trades. If the sole purpose of those pair off trades was to net and/or settle the original TRACE reported trades with no change to the original trade values and final settlement, and no new open positions, would such pair-off trades be reportable to TRACE?: No. As with the fact pattern above, firms must maintain necessary and adequate books and records and relevant written policies and procedures regarding such assignments, in part to insure that such assignments are not used to avoid trade reporting obligations, obscure counterparty capacity or counterparty identification.
3.4.9 In the course of an offering, is the sale of a CMO or REMIC security from the issuer to the underwriter/initial purchaser a TRACE reportable transaction?: No.
3.4.10 When a firm participates in an Agency or GSE "Mega", "Giant", "Platinum", "MACR", "RCR", or "MX" program, is the delivery of MBS to the GSE or the receipt of the new "Mega", "Giant", "Platinum", "MACR", "RCR", or "MX" MBS TRACE reportable?: No. However, regarding the Freddie Mac MACR program, the Fannie Mae RCR program and the Ginnie Mae MX program, when notifying FINRA of a new security pursuant to Rule 6760, also include required information for the MACR, RCR or MX certificates.
3.4.11 How should a trade be reported if it is executed using an estimated factor, but is settled on the published factor?: FINRA Rule 6730(d)(2) requires for amortizing Asset-Backed Securities where par value is not used to determine size(volume) of a transaction, to report the face value of the security traded and the Factor used to execute the transaction, if such Factor is not the most current Factor publically available at Time of Execution. If the estimated Factor is something other than the most current Factor publically available at the Time of Execution, then such Factor must be reported to TRACE. An amended trade report is not required to reflect trade settlement based on the then-current published Factor. However, an amended trade report would be required if settlement occurred at a factor other than the then-current published Factor.
3.4.12 How should a transaction in a Non-Economic Residual Interest ("NERI") be reported where the seller funds the purchase of the NERI?: In such circumstances, price should be reported as 1 with the Special Price indicator set to "Y", noting "NERI" or "Non-Economical Residual Interest" in the Special Price Memo field. Actual purchase price (notwithstanding any funding) should be reported as volume.
3.4.13 Should multi-leg transactions such as butterfly transactions be reported with the dollar roll indicator?: Each leg of any multi-leg transaction must be reported to TRACE. Rule 6710(z) defines a "Dollar Roll" as a simultaneous sale and purchase of an Agency Pass-Through Mortgage-Backed Security, for different settlement dates, where the initial seller agrees to take delivery, upon settlement of the re-purchase transaction, of the same or substantially similar securities. Both legs of a Dollar Roll transaction should be reported with the Dollar Roll indicator. Multi-leg transactions that do not meet the definition of Dollar Roll should not get reported with the Dollar Roll indicator.
3.4.14 What modifier should be reported to FINRA if both the weighted average price modifier (.W) and another eligible modifier specified in the Trade Modifier 4 field (.O, .N, .L or .D) apply to the same transaction?: If both the weighted average price (.W) modifier and another eligible modifier specified in Trade Modifier 4 (.O, .N, .L or .D) apply to the same transaction, do not report the weighted average price modifier.
3.4.15 For amortizing Asset-Backed Securities where par value is not used to determine the size (volume) of the transaction, Rule 6730(d)(2) requires the reporting of "the original face value of such security and the Factor used. . . if such factor is not the most current factor. . . ." Does "original face value of such security" refer to the face value of the security that is the subject of the transaction?: Yes. For example, assume the face value at issuance of an amortizing Asset-Backed Security is $100 million. The transaction is for $25 million. Report $25 million as the size (volume) of the transaction.
3.4.16 Generally, how should TBA trades be reported?: As noted in FINRA's December 22, 2009 response to comments, firms should report TBA transactions to TRACE using generic CUSIPs when the trade is executed. Except in instances where the coupon falls outside the published range for a particular TBA security, firms should adhere to the TBA CUSIP algorithm for Federal Agency Pools as set forth by CUSIP Global Services when reporting TBA transactions, Further guidance includes:; For products where the actual coupon does not conform to the ¼ point represented in the TBA CUSIP, firms are instructed to round the coupon down to the nearest quarter point for the purposes of determining which TBA CUSIP to use for TRACE reporting. For example, an ARM pool with a coupon of 5.12% should be reported on the TBA CUSIP representing a coupon of 5% and matching the characteristics for the remaining terms with regards to product, agency or GSE, maturity, and settlement month.; An IO ARM pool traded TBA should be reported on the TBA CUSIP representing ARMS (currently product code 16), and matching the characteristics for the remaining terms with regards to agency or GSE, coupon, maturity, and settlement month.; For products where the maturity does not conform to those represented by the TBA CUSIP algorithm and the product code does not include the option of "other" with regards to maturity, firms are instructed to round to the nearest maturity for the purposes of determining which TBA CUSIP to use for TRACE reporting.; For products where the coupon falls outside the range currently published by CUSIP Global Services, firms are instructed to contact Market Operations for security set up.
3.4.17 In regard to TBA trades, will amended trade reports be required when mortgage pool allocations are made during the settlement process?: Firms are not required to amend TBA trades with mortgage pool numbers when allocations are made in the settlement process, in conformity with conventions regarding permitted variances, as such allocations do not impact price and are solely a settlement function.; FINRA reminds firms that trade reports that are amended outside the required reporting time (i.e., within 15 minutes from the time of execution for Agency Pass-Through MBS Traded TBA for Good Delivery) will cause the trade report to be deemed late and reflected as such on the firm’s report card. See Reporting of Corporate and Agency Debt FAQ #1.11.
3.4.18 For ABS transactions such as TBAs with or without a stipulation, if price or face amount is modified after execution, is an amended trade report required?: Yes, as with any transaction in a TRACE Eligible Security any modifications to reported transaction information requires an amended trade report.
3.4.19 If an TBA ARM trade is executed with a stipulation (for example, variance on coupon, month to roll and/or final delivery amount) should a member report that transaction with a stipulation indicator pursuant to FINRA Rule 6730 (d)(4)(e)(ii)?: Yes.
3.4.20 If a list of specified pools of the same product/coupon is traded, can those transactions be reported in the form of a TBA with STIP (where the STIP references the list of pools traded) with a quantity of the current face of the list, or should it be reported as individual specified pool trades?: Such transactions should be reported as individual specified pool trades.
3.4.21 As part of the securitization/issuance process, an originator of ARM loans may place allowable variances on coupon and/or month to roll and/or final delivery amount applicable to the pool to be delivered. TBA ARM transactions are executed at a specific price and/or yield (coupon) however in certain circumstances, when loans are delivered, changes in coupon, month to roll and/or final delivery amounts within the variances stipulated by the originator may result in price adjustments in order to maintain the yield agreed upon at transaction execution (typically referred to as "yield maintenance"). Would such price adjustments require an amended transaction report?: Where the originator is not a “party to a transaction” as defined in FINRA rule 6710(e) and the originator’s stipulation(s) and the related price adjustment resulting from the “yield maintenance” are passed on to the final purchaser in a stipulated TBA ARM transaction, no amended transaction report would be required. The original transaction report must be inclusive of all member transaction remuneration. However, any price adjustments that occur resulting from loans delivered outside of any stipulation(s)/variance(s) would be subject to an amended transaction report. Firms must maintain accurate and adequate books and records and relevant written policies and procedures regarding such transactions, including a record of the stipulation(s) for each transaction, to insure in part, that such stipulation(s) are bona fide and not used to avoid trade reporting obligations or obscure accurate price and volume reporting.
3.4.22 As part of the securitization/issuance process, an originator of Small Business Administration (SBA) pools or Multi-Family Agency Pass-Through Mortgage-Backed Securities traded to be announced (TBA) (Multi-Family MBS TBAs) may include as a condition to a transaction an allowable variance regarding the settlement date or the final total dollar value of the pool(s) to be delivered on settlement date (final delivery amount). However, when the SBA pool transaction or the Multi-Family MBS TBA transaction is executed, the transaction is done at a specific price and/or yield (coupon), which must be reported to TRACE on the date of execution. Subsequently, when the SBA pool(s) or the pool(s) for the Multi-Family MBS TBA are delivered for settlement, if the settlement date or the final delivery amount has changed (or, if the final price is adjusted due to and based upon the change of settlement date or the change in the final delivery amount), and the changes are within the allowable variance to which the parties previously agreed, is a firm required to report the transaction again (i.e., file an amended transaction report)?: If the originator includes an allowable variance(s) regarding the settlement date or the final delivery amount in good faith as a condition in a transaction in an SBA pool or a Multi-Family MBS TBA (and is not establishing an allowable variance(s) for the purpose of avoiding trade reporting obligations), and there is a change (a variance) at settlement, a firm is not required to file an amended transaction report, as long as the change is within the allowable variance to which the parties previously agreed. For example, when there is a change in the final delivery amount that is within the allowable variance, and the parties adjust the final price to maintain the yield agreed upon on the date of execution, a firm is not required to file an amended transaction report. Also, when there is a change in the settlement date within the allowable variance, and the parties adjust the final price due to the change of the settlement date, a firm is not required to file an amended transaction report. However, if there is a change in the final delivery amount or the settlement date that is not within the allowable variance (and any price adjustments made in connection with a change in the final delivery amount and/or settlement date that is not within the allowable variance), a firm would be required to file an amended transaction report.; Firms must maintain accurate and adequate books and records and relevant written policies and procedures regarding the transactions, including a record of the allowable variances to which the parties agreed for each transaction, to evidence, among other things, that the variances are bona fide and not used to avoid trade reporting obligations or accurate price and volume reporting. FINRA also reminds firms that the original transaction report for the transactions must include all of the firm’s transaction-related remuneration.
3.4.23 Under Rule 6760(c)(2), notice must be provided to FINRA Operations regarding the set up of a CMO or a REMIC when transactions are effected prior to the issuance of the security "promptly on the date of issuance or other event that establishes the reference date that determines when a reporting period begins under Rule 6730(a)(3)(c)." When must members provide such notice in accordance with Rule 6760(c)(2)?: For purposes of compliance with the provisions of FINRA Rule 6760(c)(2) a member shall provide the required notice as soon as possible but no later than 8:00 AM ET on the next business day after the prospectus supplement or other final offering document is published and is publicly available (often referred to as “print date”) and the security’s CUSIP is assigned and publicly available. In virtually all cases, public availability of the CUSIP and “print date” are on the same day. However, the time of the day the CUSIP becomes available can range from the morning to end of the business day, which is why FINRA has set the deadline as no later than 8:00 AM ET on the next business day after “print date.” Accordingly, FINRA interprets “issuance date” for CMO reporting purposes as the next business day after “print date.”; Consistent with this interpretation, a member submitting the requisite information for the security, set forth in Rule 6760(b) and in accordance with the FINRA new issue form for ABS/CMO should provide the issuance date as the next business day following the day the CUSIP is publicly available/print date. Underwriters should refer to the Instructions for the ABS/CMO new issue form and the definitions and examples provided for each field.; In addition to notifying FINRA under Rule 6760, FINRA encourages underwriters to inform participants in the offering of the final structure of the CMO or REMIC, and when the CMO or REMIC security has been added to TRACE and is available for trade reporting.; Posted on 5/23/17
3.4.24 Under Rule 6730(a)(3)(H), members must report transactions in CMOs that are executed on or after issuance generally within 60 minutes of the transaction. When is the “issuance date” for CMO trade reporting purposes under Rule 6730?: The “issuance date” for CMO trade reporting under Rule 6730 is the same as it is for providing notice of the security set up under Rule 6760, described above. In other words, the “issuance date” for CMO transactions reported pursuant to Rule 6730 is the next business day after “print date.”; Posted on 5/23/17
3.4.25 In certain TBA with Stipulation transactions and Specified Pool transactions, an originator, as part of the securitization/issuance process, may place allowable variances de minimis in nature, relating to loan composition or size, which would affect the size (volume) of the transaction. Such variances, however, would not affect the price of the transaction. Would such volume adjustments within the stipulated variance require an amended transaction report?: No. A firm should not submit an amended or corrected transaction report where variances are de minimis and do not affect the price of the transaction. However, any price adjustments would be subject to an amended transaction report. Firms must maintain accurate and adequate books and records and relevant written policies and procedures regarding such transactions, including a record of the allowable variances for each transaction, to ensure, in part, that such variances are bona fide and not used to avoid trade reporting obligations or obscure accurate price and volume reporting.; Posted on 1/14/14
3.4.26 Where a TRACE-eligible security trades on the basis of par or face value, how should price be reported regarding transactions where such price is significantly above or below par or face value?: For most TRACE-eligible securities, the price at which the trade was executed should be reported as a percentage of par or face value. In the price field, TRACE accommodates four digits to the left of the decimal point and six to the right (i.e., 9999.999999). However, in instances where the percentage of par or face value exceeds the permitted values in the price field, the maximum or minimum value permitted should be reported. In addition, the Special Price Indicator should be selected, and the actual price should be entered in the Special Price Reason field.; For example, if the price expressed as percentage of par or face value exceeds 9,999.999999%, the price should be reported as 9999.999999, the Special Price Indicator should be selected, and the actual price should be entered in the Special Price Reason field. Similarly, if the price, expressed as percentage of par or face value, is less than .000001%, the price should be reported as .000001, the Special Price Indicator should be selected, and the actual price should be entered in the Special Price Reason field.; Posted on 5/22/14
3.4.27 Are securities issued by Freddie Mac under the Tax Exempt Bond Securitization (TEBS) program (also known as "M Bonds") within the definition of "TRACE-Eligible Security" and required to be reported to TRACE?: Yes. Securities issued by Freddie Mac under its TEBS program meet the definition of "TRACE-Eligible Security" and are subject to FINRA's rules as such, including TRACE transaction reporting pursuant to FINRA Rule 6730. For further information on the program, please reference the Freddie Mac informational materials.; Posted on 6/25/14
3.4.28 Is a Confirmation of Originator Fee (COOF) a TRACE-Eligible Security? - See more at: http://www.finra.org/industry/faq-reporting-mortgage-and-asset-backed-securities-securitized-products#1-29: A COOF evidences the right of the registered holder to receive a specified portion of each interest payment received on a specific SBA loan certificate. Generally, a COOF that has not been securitized would not meet the definition of a TRACE-Eligible Security; therefore, any member that engages in a transaction in a COOF would not be required to report the transaction to TRACE. However, if a COOF has been pooled and securitized, the resulting instrument generally will meet the definition of a TRACE-Eligible Security under FINRA rules and, as such, any member that is a party to a transaction in such a security must report the trade to TRACE.; Posted on 12/22/14
3.4.29 As part of Freddie Mac and Fannie Mae’s Single Security program, our firm is facilitating the exchange of a 45-day Freddie Mac-issued participation certificate (“PC”) for a 55-day Uniform Mortgage Backed Security (“UMBS”). Is this exchange required to be reported pursuant to Rule 6730?: No. In a FINRA member’s facilitation of an exchange of a 45-day Freddie Mac PC for a 55-day UMBS, both the leg with Freddie Mac and the leg with the customer are not reportable under Rule 6730 as long as the prices of the PC and UMBS utilized to effect the exchange only reflect and pass through the float compensation provided by Freddie Mac.; Posted on 1/8/19

Treasury

3.5.1 When did the TRACE amendments expanding TRACE to include U.S. Treasury Securities become effective?

As announced in Regulatory Notice 16-39, the effective date is July 10, 2017.

3.5.2 What securities issued by the Treasury Department are in scope for TRACE reporting purposes?

The TRACE reporting requirements apply to all marketable U.S. Treasury Securities, including Treasury bills, notes, floating rate notes, bonds, inflation-protected securities (“TIPS”), and Separate Trading of Registered Interest and Principal Securities (“STRIPS”).

3.5.3 Are repurchase and reverse repurchase transactions involving U.S. Treasury Securities TRACE reportable?

As with all TRACE-eligible securities, bona fide repurchase and reverse repurchase transactions involving U.S. Treasury Securities are not reportable to TRACE.

3.5.4 Is the Treasury leg of a US Dollar Interest Rate Swap considered reportable to TRACE even though swaps are regulated by the CFTC?

Yes.

3.5.5 Regarding the TRACE Web API, for TRACE reportable products other than U.S. Treasury Securities the “Trade Report Effective Date” is used to determine when to include a security in a firm’s master file as TRACE eligible to ensure that it should be reportable. Is the U.S. Treasury Securities be treated differently?

Yes. For U.S. Treasury Securities, the announcement date of the auction of the security marks the commencement of When Issued trading (see FINRA Rule 6710(ii)) when the security can be traded and thus is reportable to TRACE.

3.5.6 How much time do you have to report transactions in U.S. Treasury Securities? Updated

Transactions in U.S. Treasury Securities must be reported as soon as practicable, but no later than the following time periods:

a transaction executed on a business day at or after 12:00:00 a.m. Eastern Time (ET) through 7:59:59 a.m. ET must be reported the same day no later than 60 minutes after the TRACE system opens;
a transaction executed on a business day at or after the time the TRACE system opens at 8:00:00 a.m. ET through when the TRACE system closes at 6:29:59 p.m. ET (standard TRACE System Hours) must be reported within 60 minutes of the Time of Execution, except that a transaction executed on a business day less than 60 minutes before 6:30:00 p.m. ET can be reported the same day before the TRACE system closes, but must be reported no later than 60 minutes after the TRACE system opens the next business day (T+1), and if reported on T + 1, designated “as/of” and include the date of execution; and
a transaction executed on a business day at or after 6:30:00 p.m. ET through 11:59:59 p.m. ET, or a Saturday, a Sunday, a federal or religious holiday or other day on which the TRACE system is not open at any time during that day (determined using ET) must be reported the next business day (T+1) no later than 60 minutes after the TRACE system opens, designated “as/of,” and include the date of execution.

3.5.7 Do time zone changes affect the reporting time for transactions in U.S. Treasury Securities?

No. The TRACE system requires execution time to be reported as Eastern Time, even if this means converting both the time of execution and the date of execution to Eastern Time. This does not mean, however, that firms are required to confirm to their customers a trade date or execution time that is in Eastern Time.

3.5.8 Our firm will use two separate systems to facilitate trade reporting of U.S. Treasury Securities. One system (“System A”) is the system where transactions are executed electronically, which has the capability to capture the time of execution to the millisecond. The second system (“System B”) is the system used to report transactions executed on System A to TRACE. System B only captures the time of execution to the second. Is our firm required to update System B to capture the time of execution to the millisecond? New - Effective 11/6/23

Unless the firm is relying on the exception for members with limited trading volume in U.S. Treasury Securities pursuant to Rule 6730.07, Rule 6730.04 requires that, when reporting transactions in U.S. Treasury Securities executed electronically, the firm must report the Time of Execution to the finest increment of time captured by the execution system (e.g., millisecond, microsecond), but reporting must be in an increment of no longer than a second and no shorter than a microsecond. Therefore, the firm would need to update System B to ensure that its TRACE reports reflect the finest increment of time captured by the execution system (in this example, milliseconds).

If the firm is relying on the exception for members with limited trading volume in U.S. Treasury Securities pursuant to Rule 6730.07, when reporting transactions in U.S. Treasury Securities executed electronically, the firm is not required to make any updates to System B to comply with a finer time increment and may report the Time of Execution to the finest increment of time captured in the member’s system (in this example, seconds), but reporting must be in an increment of: (i) no longer than a second and (ii) no shorter than a microsecond.

3.5.9 Can I assume that if I report my transactions in U.S. Treasury Securities through someone else, they can take care of all my reporting responsibilities?

No. The reporting responsibility remains with the member firm.

3.5.10 Who is responsible for resubmitting rejected trades in U.S. Treasury Securities?

The firm that had the original reporting obligation is ultimately responsible for resubmitting corrected reports.

3.5.11 What is a firm's reporting obligation with respect to a counterparty that is a registered BD?

Firms must accurately identify their registered BD counterparties when reporting a transaction to TRACE, using the appropriate MPID to identify the BD. If the counterparty BD uses multiple MPIDs, the firm required to report the transaction must accurately identify the counterparty BD by the appropriate MPID. Further, if an entity, such as a hedge fund, is also a registered BD, the reporting firm must identify the entity by its MPID in the TRACE transaction report.

3.5.12 Do both sides of a trade in a U.S. Treasury Security involving two FINRA members have to report?

Yes. Both FINRA members are required to report their side of the transaction to TRACE.

3.5.13 In a transaction involving both an executing broker and an introducing broker, which member reports?

Both parties are required to report to TRACE. For example, introducing broker A (IBA) receives an order to buy a U.S. Treasury Security from its customer and then sends that order to executing broker B (EBB) for execution. Assuming EBB sells the securities to IBA from its inventory account, the following reports would be required:

EBB reports a principal sell to IBA
IBA reports an agency buy from EBB
IBA reports an agency sell to its customer

3.5.14 How many sides of a transaction in a U.S. Treasury Security do I have to report? It is my understanding that all member firms will have to report both buys and sells, regardless of the counterparty.

Yes. TRACE Rules require that both the buy and the sell side of eligible transactions be reported to the system in order to create a complete audit trail.

3.5.15 How do I report an in-house cross transaction in a U.S. Treasury Security?

3.5.16 When I report a trade in a U.S. Treasury Security with a customer, should the Buy/Sell code be from the member firm's perspective or from the customer's perspective?

The trade report information is always entered from the perspective of the member firm that is reporting.

3.5.17 My firm received an unsolicited order from a customer to purchase U.S. Treasury Securities at the market. Having no position, I had to go to the Street to buy the securities in pieces, which I ran through my omnibus account. When I finally filled the order, I charged my customer an agency commission. How do I report what I did?

You report an agency buy from each firm that sold you U.S. Treasury Securities. You report an agency sell with "C" (for the end customer), and the dollar amount of the commission you charged in the commission field.

3.5.18 Is rounding permitted in the reporting of price to TRACE for U.S. Treasury Securities transactions?

TRACE rules do not provide for rounding of price before reporting. The system can accommodate reporting out to 11 places after the decimal for price. Price should be submitted to TRACE exactly as calculated and truncated beyond 11 decimal places.

3.5.19 Will all the modifiers that apply to corporate bonds apply to U.S. Treasury Securities?

Yes. The Weighted Average Price (“W”) modifier will apply to both corporate bonds and U.S. Treasury Securities.

3.5.20 What is weighted average pricing? How do I report a weighted average price trade in a U.S. Treasury Security?

Weighted average pricing is a means of establishing the price when a large order is filled by executing smaller transactions in the desired security during a given period by a broker-dealer in order to accumulate the total volume of securities required to fill the order. In such cases, the price is established by weighting the average of the various prices at which the partial transactions were executed. When this weighted average is reported, it may no longer be reflective of the current market price at the time of the final sale to the customer, and so the "W" modifier must be added to the trade report.

3.5.21 Are there specific modifiers or indicators for U.S. Treasury Securities? Updated

Yes. Under Rule 6730(d)(4)(G), four modifiers and indicators apply specifically to transactions in U.S. Treasury Securities.

First, the WI indicator must be selected when reporting a When-Issued Transaction.

Second, two modifiers are used to indicate particular transactions that are part of larger trading strategies in U.S. Treasury Securities and therefore, may be executed at prices away from the market at the time of the transaction. Firms must select the modifier:

“.B,” if the transaction is part of a series of transactions where at least one of the transactions involves a futures contract (e.g., a “basis” trade); or
“.S,” if the transaction is part of a series of transactions and may not be priced based on the current market (e.g., a fixed price transaction in an “on-the-run” security as part of a transaction in an “off-the-run” security).

Finally, firms must select the “.H” modifier if reporting a transaction executed to hedge a List of Fixed Offering Price Transaction or Takedown Transaction.

See FAQs 3.5.19, 3.5.20, 3.5.26, 3.5.28, 3.5.30, 3.5.31, and 3.5.36 through 3.5.36.10 for more information about modifiers and indicators for U.S. Treasury Securities.

In addition to the modifiers and indicators that are applicable only to U.S. Treasury Securities, other modifiers and indicators may apply to TRACE-Eligible Securities generally, including transactions in U.S. Treasury Securities that meet required conditions.

3.5.22 With regard to Treasury Inflation-Protected Securities (TIPS), we understand we will NOT be required to provide the factor on each trade. Will factor information be a consideration if there is a discrepancy in matching?

No, the trade management page on TRACE does not use factor as a matching criteria.

3.5.23 How do I self-report any TRACE reporting problems in U.S. Treasury Securities to FINRA?

In the event that FINRA members experience certain reporting problems that result in late and/or inaccurate transactions reports to TRACE, FINRA urges firms to self-report these issues to the Market Regulation Department using [email protected]. The firm should retain copies of these emails.

3.5.24 Are U.S. Treasury Security trades be disseminated via BTDS, ATDS or SPDS, or will there be a new TRACE feed?

U.S. Treasury Security trades reported to TRACE will not be subject to dissemination with the release effective July 10th.

3.5.25 Treasury bills and Floating Rate Notes (FRNs) are quoted and traded in terms of their discount rate (discount margin for FRNs) or interest rate based on a 360-day year, even after the auction and issue dates of the securities. The interest rate is a function of the purchase price, the face value of the security, and the time remaining until maturity. How should firms report the “price” of these securities that trade based on a discount rate/margin? New - Effective 11/6/23

Firms must report the dollar price for transactions in Treasury bills and FRNs executed after the auction (using the price type of “decimal”).

As discussed in FAQ 3.5.33, for transactions executed on the day of an auction, members may continue to report the yield in lieu of price for the remainder of the day of the auction. Members must begin reporting the dollar price on the next business day.

3.5.26 FINRA defines a “When-Issued transaction” as a transaction in a U.S. Treasury Security that is executed before the issuance of the security, and firms must include the WI indicator on When-Issued transactions. Should transactions executed on the issue date include the WI indicator?

No. Transactions should be reported with the WI indicator up until, but not including, issue date.

3.5.27 A member firm submits a competitive or non-competitive bid in an auction for a U.S. Treasury Security on behalf of its customer. In the event the customer is awarded securities in the auction, is a “sell trade” by the firm to a customer, for the purpose of delivering the customer’s auction award, reportable to TRACE?

No. Treasury auction awards, including the delivery of awarded securities to a member’s customer after the auction, should not be reported to TRACE. FINRA Rule 6710(hh) defines an “Auction Transaction” to mean “a transaction in which a member is awarded a U.S. Treasury Security in an auction.” This includes all auction awards for its customer accounts. Similarly, a transaction between a member and its customer for the purpose of delivering securities awarded to the customer in an auction is excluded from TRACE transaction reporting requirements under FINRA Rule 6730(e)(8).

Updated on 1/9/19

3.5.27.1 Should U.S. Treasury auction awards be reported to TRACE? If a FINRA member is awarded securities in a U.S. Treasury auction and then sells the security in the secondary market, is the transaction reportable? Should auction awards associated with when-issued transactions be reported to TRACE?

No. Treasury auction awards, whether a FINRA member’s proprietary (“house”) award or its customers’ (“indirect bidder”) awards, should not be reported to TRACE. In addition, the delivery of securities after the auction to the indirect bidder that represents an auction award should not be reported to TRACE. Secondary market transactions in U.S. Treasury Securities after an auction that are not related to the original auction award from Treasury must still be reported to TRACE, including when-issued transactions. However, auction awards themselves, whether or not they are intended to settle when-issued transactions, should not be reported to TRACE.

Posted on 1/9/19

3.5.27.2 My firm erroneously has been reporting to TRACE Treasury auction awards ― both house awards and awards on behalf of customers. Do we need to correct this?

Yes. Member firms should promptly cancel or reverse trade reports that represent Treasury auction awards. Neither house awards nor awards on behalf of customers (as well as the associated delivery) are reportable to TRACE (see Rule 6730(e)(8) and FAQs 3.5.27.1 and 3.5.27.2). Cancellation of a transaction can be completed during the period T through T+2. A reversal is necessary for trades older than T+2. Questions regarding how to cancel or reverse trades should be directed to FINRA Market Operations at (866) 776-0800.

Posted on 1/9/19

3.5.28 In the course of a Treasury reopening, are firms required to append a When Issued indicator when reporting transactions between the auction and the issuance of the security that is subject to the reopening?

FINRA generally requires transactions in a U.S. Treasury Security that is the subject of an auction to be reported with the When Issued (WI) indicator up until, but not including, issue date. FINRA recognizes that Treasury reopenings are unique given the fungibility of the WI and non-WI security, and that many firms’ systems do not distinguish between WI and non-WI after the auction day. Accordingly, FINRA will not require firms to append the WI indicator on transactions in a reopened CUSIP executed after the day of the auction. However, for reopenings, firms must still append the WI indicator to applicable transactions executed prior to or on the day of the auction.

Updated on 11/3/23

3.5.29 The results of an auction can result in the unscheduled reopening of an existing U.S. Treasury Security. Should firms amend transactions reported in the previously announced security to reflect the reopened security?

No. Transactions reported in the CUSIP of the announced security do not have to be cancelled and resubmitted using the CUSIP of the reopened security.

3.5.30 When should firms use an “.S” modifier for reporting trades in Treasury securities?

Beginning February 5, 2018, Rule 6730 requires firms to use an “.S” modifier on a trade report if the transaction in a U.S. Treasury Security that is being reported is part of a series of transactions and may not be priced based on the current market (e.g., a fixed price transaction in an “on-the-run” security as part of a transaction in an “off-the-run” security). However, as noted in Regulatory Notice 16-39, the “.S” modifier applies to a transaction in a particular strategy that meets the .S criteria regardless of whether the transaction is, in fact, off market. The “.S” modifier must therefore be used when a transaction is part of a series and could be, but need not be, priced away from the market. Because transactions in U.S. Treasury securities are often undertaken in connection with other transactions and may be priced based on factors other than the current market, the “.S” modifier may appear on a substantial number of trade reports; however, firms must have criteria in place to ensure they are appending a “.S” modifier only when appropriate.

3.5.31 For transactions in U.S. Treasury Securities, what modifier should be reported to TRACE if both the weighted average price modifier (.W) and another eligible modifier specified in the Trade Modifier 4 field (.S or .B) apply to the same transaction?

Due to TRACE system limitations on how many modifiers can be appended to a transaction report, FINRA asks that members prioritize as follows. If both the .W modifier and the .B modifier apply to the same transaction, report the .B modifier. If both the .W modifier and the .S modifier apply to the same transaction, report the .W modifier.

Updated on 6/27/18

3.5.32 I am a FINRA member operating an electronic platform that only trades Treasury Securities, and am not required to file a Form ATS with the SEC. Am I still required to comply with FINRA’s separate MPID requirement for alternative trading systems (ATSs) reporting to TRACE?

Rule 300(a) of SEC Regulation ATS generally defines an ATS as any organization, association, person, group of persons, or system: (1) that constitutes, maintains, or provides a marketplace or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange within the meaning of Rule 3b-16 under the Exchange Act; and (2) that does not: (i) set rules governing the conduct of subscribers other than the conduct of such subscribers’ trading on such organization, association, person, group of persons, or system; or (ii) discipline subscribers other than by exclusion from trading.

Member platforms that meet this definition may not be required to file a Form ATS with the SEC in reliance on an exception from Regulation ATS’s filing requirements, such as the exclusion in Rule 301(a)(4) for an ATS trading solely government and related securities. Notwithstanding the ability of a member to rely on an exclusion from the Form ATS filing requirement, any member that falls within the scope of Regulation ATS’s definition of “alternative trading system” (summarized above) is required to comply with FINRA rules applicable to ATSs as defined in Rule 300 of SEC Regulation ATS. This includes the separate MPID requirement of FINRA Rule 6720(c).

3.5.33 Rule 6730(c)(3) requires members to report the yield (in lieu of price) for when-issued transactions in U.S. Treasury Securities that are executed before the Auction. Thereafter, the dollar price of the transaction must be reported to TRACE. Because an Auction is typically conducted intra-day, is my firm required to start reporting the dollar price of the transaction intraday, immediately following the Auction, or can my firm start reporting the dollar price on the next business day?

Members may continue to report the yield in lieu of price for the remainder of the day of the Auction. Members must begin reporting the dollar price on the next business day. Therefore, while an intraday switchover from reporting yield to price is permissible, reporting the dollar price of the transaction to TRACE is not required until the day following the Auction.

Posted on 8/7/19

3.5.34 Are firms’ transactions with the U.S. Treasury Department as part of a Treasury Department Debt Buyback (Redemption) Operation of U.S. Treasury Securities reportable TRACE transactions?

Yes. A member’s sales of “U.S. Treasury Securities,” as defined in Rule 6710(p), as part of a Treasury Department Debt Buyback (Redemption) Operation are reportable to TRACE. The “sale” is the amount of the offer(s) that Treasury accepts after the closing time for receipt of offers, regardless of whether the offer was submitted on behalf of the member or on behalf of a customer or affiliate. When reporting these sales to TRACE, members should identify the Treasury Department as “C” (customer) in the counterparty field.

As a reminder, Treasury auction awards, including the delivery of awarded securities to a member’s customer after the auction, should not be reported to TRACE. See FAQ 3.5.27, 3.5.27.1 and 3.5.27.2.

Updated on 6/8/20

3.5.34.1 Are firms’ transactions with the Federal Reserve Bank of New York as part of Open Market Operations reportable TRACE transactions?

Yes. A member’s purchases or sales of “U.S. Treasury Securities,” as defined in Rule 6710(p), as part of a Federal Reserve Bank of New York Open Market Operation are reportable to TRACE. When reporting these transactions to TRACE, members should identify the Federal Reserve Bank of New York as “C” (customer) in the counterparty field.

Posted on 6/8/20

3.5.35.1 What does FINRA consider the “Time of Execution” for a member’s transaction in U.S. Treasury Securities as part of a Treasury Department Debt Buyback (Redemption) Operation?

Under Rule 6710(d), the “Time of Execution” for a transaction in a TRACE-Eligible Security, including a “U.S. Treasury Security,” is the time when the Parties to a Transaction agree to all of the terms of the transaction that are sufficient to calculate the dollar price of the trade. In the context of member sales of U.S. Treasury Securities in a Treasury Department Debt Buyback (Redemption) Operation, the Time of Execution is the time of the official close of the operation as communicated in the Treasury Debt Buyback (Redemption) Operation Announcement.

Updated on 6/8/20

3.5.35.2 What does FINRA consider the “Time of Execution” for a member’s transaction in U.S. Treasury Securities as part of a Federal Reserve Bank of New York Open Market Operation?

Under Rule 6710(d), the “Time of Execution” for a transaction in a TRACE-Eligible Security, including a “U.S. Treasury Security,” is the time when the Parties to a Transaction agree to all of the terms of the transaction that are sufficient to calculate the dollar price of the trade. In the context of member purchases or sales with the Federal Reserve Bank of New York in an Open Market Operation, the Time of Execution is the time of the official close of the operation as communicated in the Federal Reserve Bank of New York Open Market Operation Results.

Posted on 6/8/20

3.5.36 A syndicate manager sells a new issue corporate debt security to a syndicate member as a Takedown Transaction and the syndicate member in turn sells to customers at the List Offering Price. If the syndicate member that is selling to customers in P1 trades effects Treasury hedge transactions for those customers, may it avail itself of the additional time and append the Treasury hedge modifier?

Yes. The syndicate member’s Treasury hedge transactions for customers in connection with the P1 trades are in scope; therefore, the syndicate member must append the modifier (pursuant to Rule 6730(d)(4)(G)(iii)) and may avail itself of the additional reporting time (pursuant to Rule 6730(a)(4)(B)).

Posted on 9/18/19

3.5.36.1 Same facts as above, except instead, the syndicate manager, who is not executing the P1 transactions directly with customers, effects the Treasury hedges for the customers. Can the syndicate manager report the Treasury hedge on T+1 and use the Treasury hedge modifier?

Yes. Because the syndicate manager’s Treasury hedge transactions are in connection with the customers’ P1 positions (even though acquired from the syndicate member), then the syndicate manager’s hedge transactions also would be in scope.

Posted on 9/18/19

3.5.36.2 A sole underwriter sells to Firm A at the List Offering Price. Firm A is trading for its proprietary account. Both parties report the trade as P1 transactions. Firm A then effects a Treasury hedge transaction for its corporate bond position with the sole underwriter. Is the Treasury hedge transaction in scope for the additional reporting time and Treasury hedge modifier?

Yes. Because Firm A’s Treasury hedge transaction with the underwriter is hedging a position acquired in a P1 trade, both the underwriter and Firm A must append the Treasury hedge modifier and may avail themselves of the additional reporting time.

Posted on 9/18/19

3.5.36.3 Firm A bought corporate bonds from a sole underwriter in a P1 transaction and sold these bonds to a customer at a price above the List Offering Price. If Firm A also executes a Treasury hedge transaction for the customer in connection with the corporate bond transaction, would the Treasury hedge trade by Firm A qualify for the modifier?

No. In the above scenario, Firm A’s sale to the customer was not at the List Offering Price, and, therefore, was not a P1 transaction. As a result, the Treasury hedge transaction in connection with the corporate bond trade would not be eligible for the additional time provided for under Rule 6730(a)(4)(B) and would not be appended with the Treasury hedge modifier pursuant to Rule 6730(d)(4)(G)(iii).

Posted on 9/18/19

3.5.36.4 At the request of customers, my firm effects Treasury trades to hedge positions acquired by customers in P1 transactions. However, my firm also hedges with Treasuries its own existing positions that were not P1 transactions. Can my firm’s proprietary hedges carry the new Treasury hedge modifier under Rule 6730(d)(4)(G)(iii)?

No. The additional reporting time and modifier provided for under Rules 6730(a)(4)(B) and Rule 6730(d)(4)(G)(iii), respectively, would not be available where a member’s Treasury hedging activity is not related to a new issue transaction that meets the definition of List or Fixed Offering Price or Takedown Transaction for a non-Treasury, TRACE-Eligible Security.

Posted on 9/18/19

3.5.36.5 My firm executed a Treasury hedge transaction in connection with a P1 trade and reported the Treasury hedge transaction on trade date prior to the close of TRACE system hours. May my firm omit the Treasury hedge modifier since we did not avail ourselves of the extra trade reporting time provided by the rule?

No. Members must append the Treasury hedge trade modifier when reporting to TRACE any transaction in a U.S. Treasury Security that is executed to hedge a P1 transaction, irrespective of when the trade was reported.

Posted on 9/18/19

3.5.36.6 For transactions in U.S. Treasury Securities, what modifier(s) should be reported to TRACE if both the Treasury hedge modifier (.H) and the modifier indicating that the transaction is part of a series and may not be priced based on the current market (.S) apply to the same transaction?

If both the .H modifier and the .S modifier apply to the same transaction, report the .H modifier in the Trade Modifier 2 field and the .S modifier in the Trade Modifier 4 field. See also FAQ #3.5.31 regarding the priority of modifiers reported in Trade Modifier 4 field.

Posted on 2/14/20

3.5.36.7 A syndicate manager effects a Treasury hedge transaction prior to the first day of trading in anticipation of a new issue corporate debt offering. May the syndicate manager avail itself of the additional time and append the Treasury hedge modifier?

No. Because the syndicate manager’s Treasury hedge transaction is not related to a P1 trade, the syndicate manager’s Treasury hedge transaction is not in scope of the additional reporting time and modifier provided for under Rules 6730(a)(4)(B) and 6730(d)(4)(G)(iii)).

Posted on 2/14/20

3.5.36.8 A syndicate manager sells a new issue municipal security to customers at the List Offering Price (LOP). If the syndicate member that is selling the municipal security to customers at the LOP effects Treasury hedge transactions for those customers, may it avail itself of the additional time and append the Treasury hedge modifier?

No. The additional reporting time and modifier provided for under Rules 6730(a)(4)(B) and Rule 6730(d)(4)(G)(iii)) relate only to the hedging of a new issue transaction in a TRACE-Eligible Security that meets the definition of List or Fixed Offering Price or Takedown Transaction, and cannot be used in connection with hedges of municipal securities.

Posted on 2/14/20

3.5.36.9 A firm purchases a U.S. Treasury Security to cover a short position that was created when it effected a Treasury hedge in connection with a P1 trade. Should the firm append the Treasury hedge modifier to its purchase of a U.S. Treasury Security in this scenario?

No. In the above scenario, the firm’s purchase of a U.S. Treasury Security is not in connection with a P1 trade and, therefore, is not in scope of Rule 6730(d)(4)(G)(iii)).

Posted on 2/14/20

3.5.36.10 My firm effects a single Treasury hedge trade to hedge a basket transaction that includes both P1 and non-P1 positions. Must my firm append the Treasury hedge modifier in this scenario?

Yes. Since the member’s Treasury hedge transaction is, at least in part, executed to hedge a new issue transaction that meets the definition of List or Fixed Offering Price or Takedown Transaction for a non-Treasury, TRACE-Eligible Security, the firm must append the Treasury hedge modifier pursuant to Rule 6730(d)(4)(G)(iii) and also may avail itself of the additional reporting time under Rule 6730(a)(4)(B).

Posted on 2/14/20

3.5.37 Is rounding permitted when reporting the Time of Execution of a U.S. Treasury Security transaction to TRACE?

No. Members must accurately report a transaction’s Time of Execution and are not permitted to round when reporting to TRACE. The TRACE system can accommodate reporting up to the microsecond and, where the firm captures time in an increment finer than microseconds, the firm must truncate when reporting to TRACE.

Posted on 4/9/20

Section 4: Federal Reserve Depository Institution Reporting

Access & Agreements

4.1.1 How do I obtain a TRACE Market Participant Identifier (MPID)?

Covered Depository Institutions should contact FINRA Market Operations at (866) 776-0800 or [email protected] to obtain a TRACE MPID.

4.1.2 How do I sign up for TRACE reporting?

Covered Depository Institutions must first onboard to FINRA’s Account Management System and establish an Account Administrator by submitting the FINRA Entitlement Agreement (“FEA”). Please view the onboarding checklist below for links to the FEA and other onboarding instructions.

Then, to become a TRACE reporting participant, Covered Depository Institutions must use the Participant Data Management (“PDM”) system to view and certify the terms of the FINRA Transparency Services Participation Agreement (FPA) (https://participants.finra.org). PDM users must have the Participant Data Management entitlement in the FINRA Account Management System. Please consult your organization’s Account Administrator (“AA”) if a new login id or an adjustment to your entitlements is needed. The FINRA Entitlement Group can assist with determining your AA or with resetting your password. They can be reached by calling 301‐869‐6699 or by emailing [email protected].

4.1.3 Where do I find the appropriate agreements?

The PDM system allows Covered Depository Institutions to view and modify various agreements including the FINRA Participation Agreement and the Uniform Reporting Agreement. PDM also allows Covered Depository Institutions to:

View and modify access to TRACE;
Manage MPIDs and communicate information regarding MPID changes to FINRA; and
Manage TRAQS login ids.

For questions about PDM, contact FINRA Market Operations at 866-776-0800, Option 2.

4.1.4 If my clearing firm reports on my behalf, do I still need to sign up for TRACE?

Yes, even Covered Depository Institutions whose clearing firms report on their behalf must submit a new TRACE participation agreement and receive a TRACE MPID.

4.1.5 How can I get access to the API master files and Daily List?

Access is by subscription, and users can request this by contacting FINRA Operations. API queries to retrieve data and respondent data sets are described in the Web API Specification.

Technical

4.2.1 Which methods can Covered Depository Institutions use for testing and reporting trades?: Covered Depository Institutions can use FIX or TRAQS. For testing, FIX connections must route to the test environment (NTF).
4.2.2 Can I report trades to TRACE via FIX?: Yes. Covered Depository Institutions may elect to use the FIX protocol to report trades to TRACE. Technical details can be found in the FIX Specifications on the FINRA TRACE Web page, and questions can be answered by Nasdaq Technical Support at (212) 231-5180. For more information on FIX, please refer to the Nasdaq website.
4.2.3 Can my FIX connections share a port for more than one product (e.g., Corporate and Agency Debt trade reporting and Treasuries trade reporting)?: No. The FIX protocol requires a single port for Corporate and Agency Debt transaction reporting, and a separate port for each of the other TRACE products.
4.2.3 How can Covered Depository Institutions report via the FINRA Web Browser?: Covered Depository Institutions may report through a secure web-based application called TRAQS. Access to the TRAQS website is managed through the Participant Data Management system by your organization’s Account Administrator or authorized delegate.; For more information about using the TRAQS website, product-specific user guides can be found on the TRACE Documentation page. Participant Data Management demonstration videos and other training materials can be found on the Participant Data Management Training Materials/Timeline page.
4.2.4 If I use FIX protocol to submit trade reports, will I be able to see them in the Web application and take any corrective action necessary or would I need to amend trade reports using FIX?: Covered Depository Institutions can view those trade reports submitted via either protocol in the TRAQS web application and can perform Cancel and Correction actions using the web application.
4.2.5 Will FINRA distribute a file with all reportable Covered Securities?: Yes, the Security Master and Daily List are available through an API and on the TRAQS web application.
4.2.6 Is the master list of Covered Securities available for TRACE reporting updated dynamically during the trading day?: FINRA updates the Security Master List dynamically and additions and deletions are also communicated via the Daily List.
4.2.7 Will FINRA supply a list of Covered Securities available for testing?: Securities available for testing will be made available in the Security Scan on the TRAQS website (NTF version) and via the API Master List (NTF version).
4.2.8 Once I know how my Covered Depository Institution plans to report to TRACE, how do I arrange for testing?: For FIX users: Please contact NASDAQ Testing Facility technical support at (212) 231-5180.; Third-Party Reporting Intermediaries: If a Covered Depository Institution plans to report through a FINRA member clearing firm or via a vendor or service bureau, it is recommended that they contact that firm directly for information regarding their services and process around corrections and managing rejected trades. Most third-party reporting intermediaries providing TRACE reporting services already have FIX lines in place to NASDAQ, FINRA's technology provider.; TRACE Web users: Please contact FINRA Operations at 866-776-0800 or via e-mail ([email protected]) to receive access to the NASDAQ Testing Facility (NTF) secure website. Please note, a FINRA Order Form submitted through PDM CT will be required to begin the process of gaining access to the NTF secure website.; For other questions concerning testing, please contact FINRA Product Management at (866) 899-2107.

Reporting

4.3.1 When will the TRACE reporting requirement for Covered Depository Institutions become effective?: As announced in the Federal Reserve Notice, the effective date is September 1, 2022.
4.3.2 How much time do I have to report transactions in Covered Securities to TRACE?: See the Federal Reserve Supporting Statement for applicable reporting timeframes.
4.3.3 Can I assume that if I report my transactions in Covered Securities through someone else, they will take care of all of my reporting responsibilities?: No. The reporting responsibility remains with the Covered Depository Institution who has the reporting obligation.
4.3.4 Who is responsible for resubmitting rejected trades in Covered Securities?: The Covered Depository Institution that had the original reporting obligation is ultimately responsible for resubmitting corrected reports.
4.3.5 What is a Covered Depository Institution's reporting obligation with respect to a counterparty that is a registered broker-dealer (BD) or another Covered Depository Institution?: Covered Depository Institutions must accurately identify their registered BD or Covered Depository Institution counterparties when reporting a transaction to TRACE, using the appropriate MPID. If the counterparty uses multiple MPIDs, the Covered Depository Institution required to report the transaction must accurately identify the counterparty by the appropriate MPID.
4.3.6 Will both sides of a trade in a Covered Security involving reporting participants (i.e., FINRA members and/or Covered Depository Institutions) have to report?: Yes. Both FINRA members and Covered Depository Institutions are required to report their side of the transaction to TRACE, whether a buy or a sell.
4.3.7 In a transaction involving both an executing broker and an introducing broker, which member reports?: Both parties are required to report to TRACE. For example, introducing broker A (IBA) receives an order to buy a Covered Security from its customer and then sends that order to executing broker B (EBB) for execution. EBB sells the securities to IBA from its inventory account. The following reports would be required:; EBB reports a principal sell to IBA
IBA reports an agency buy from EBB
IBA reports an agency sell to its customer
4.3.8 How do I self-report any TRACE reporting problems in Covered Securities to FINRA?: In the event that a Covered Depository Institution experiences a reporting problem that results in late and/or inaccurate transactions reports to TRACE, FINRA encourages such Covered Depository Institutions to self-report these issues to FINRA’s Market Regulation Department using [email protected].
4.3.9 Will report cards be generated by FINRA and provided to Covered Depository Institutions?: Yes, report cards will be generated by FINRA and provided to Covered Depository Institutions via the FINRA Gateway. Access to such report cards requires entitlement establishment through the FINRA Account Management System.
4.3.10 What steps should be taken by a covered depository institution that no longer meets the threshold?: A depository institution that no longer meets the thresholds must inform FINRA Operations so that its assigned MPID can be inactivated. Such depository institution should also communicate to its counterparties that they should no longer use the inactivated MPID when reporting transactions with the depository institution.; A depository institution that no longer meets the thresholds may not voluntarily report transactions in Covered Securities to TRACE.
4.3.11 When buying for one’s own account, does a sale to the portfolio need to be reported?: Any transactions representing changes in beneficial ownership should be reported to TRACE. A Covered Depository Institution buying for its own portfolio needs to report the purchase if it is made on the secondary market from an external counterparty. It should not report a sell for the transfer to the portfolio, so long as the portfolio belongs to the same legal entity.
4.3.12: Should the “no remuneration” indicator be appended to a transaction between a FINRA member and a covered depository institution that does not reflect a mark-up/mark-down or commission?: No. Neither a covered depository institution that has obtained a FINRA-assigned MPID for its reporting obligations pursuant to the Board of Governors of the Federal Reserve System’s requirements nor a FINRA member should append the “no remuneration” indicator to a transaction between a FINRA member and a depository institution that has obtained a FINRA-assigned MPID (even if no remuneration is reflected in the reported price). Please note that the TRACE system will reject trade reports if the “no remuneration” indicator is appended to any transactions where both the reporting party and the counterparty have MPIDs. See also FAQ 3.1.79 above and FINRA’s FAQs for Covered Depository Institutions.

Section 5: Federal Reserve Interpretive Questions

5.1 Which depository institutions are subject to the new Federal Reserve reporting rule?: Every national bank, state member bank, state non-member bank, savings association, or U.S. branch and agency of a foreign bank that files a Notice by Financial Institutions of Government Securities Broker or Government Securities Dealer Activities (Form G-FIN) with average daily transaction volumes over $100 million, for U.S. Treasury debt, or over $50 million, for agency-issued debt and MBS, during the 12-month period ending September 30 of the prior year is subject to the new reporting rules, regardless of the type(s) of trading activity such entity engages in (e.g., dealer or non-dealer activity).
5.2 Does FR2956 apply to my firm if our GFIN status has changed?: FR2956 applies to firms based on their current GFIN status. A firm reporting under FR2956 that withdraws its filing of its Form G-FIN is no longer required to report, while a firm that files a new Form G-FIN is required to immediately begin reporting if it meets the reporting thresholds.
5.3 What are the timeframes for determining whether a depository institution meets the reporting thresholds?: 2022 – Depository institutions must determine if they meet the thresholds based on all applicable transactions for each business day from 10/1/2020 through 9/30/2021, inclusive. Depository institutions that meet the thresholds during this period must begin reporting on 9/1/2022.

2023 – Depository institutions must determine if they meet the thresholds based on all applicable transactions for each business day from 10/1/2021 through 9/30/2022, inclusive. Depository institutions that meet the thresholds during this period must begin reporting on 1/3/2023.

Every Year Thereafter – Depository institutions must determine if they meet the thresholds based on all applicable transactions for each business day during the 12-month period ending 9/30 of the prior year for each subsequent year. Depository Institutions that meet these thresholds must begin reporting on the first business day in the subsequent year.
5.4 What transactions should be included to determine whether my firm exceeds the reporting thresholds for transactions under FR2956?: The transactions used to determine whether your firm exceeds the reporting thresholds are: in respect to Part 1 of FR2956, all secondary-market transactions in U.S. Treasury Securities; and in respect to Part 2 of FR2956, all secondary-market transactions in TRACE-Eligible Securities issued by an Agency or a Government-Sponsored Enterprise as defined in FINRA Rule 6710. Transactions for which there is no beneficial change in ownership should not be included in the calculations.
5.5 How should transactions be valued to determine whether my firm exceeds the reporting thresholds for transactions under FR2956?: For U.S. Treasury Securities, volume should be calculated as the transaction value of the trade. For Agency Mortgage-Backed Securities, volume should be calculated as the remaining principal balance of the trade (original face value times the factor at the time of execution), or, if this information is not available, as the final settlement amount. Once chosen, the pricing methodology should be uniformly applied across all trades in the review period.
5.6 Does FR2956 apply to transactions in which there is no beneficial change of ownership?: No. FR2956 threshold calculations and reporting should exclude transactions in which there is no beneficial change of ownership. These transactions should be excluded even if they involve multiple MPIDs or price differentials.
5.7 If a depository institution exceeds the reporting threshold for one category of securities (e.g. U.S. Treasury debt) but not the other (i.e., in this example, agency-issued debt and MBS), is the depository institution subject to TRACE reporting for both categories or only the one for which it exceeds the threshold?: A depository institution is subject to TRACE reporting only for the specific category(ies) of securities for which the institution has exceeded the reporting threshold. If a depository institution exceeds the reporting threshold for only one category of securities, it is subject to TRACE reporting only for securities in that category. If a depository institution exceeds the reporting threshold for both categories of securities, it is subject to TRACE reporting for securities in both categories.
5.8 If a depository institution trades as riskless principal, should both the buy and sell transactions be counted towards the firm’s daily transaction volumes when assessing the reporting thresholds or should only one side be counted?: The buy and the sell transactions should both be counted towards the firm’s assessment of the reporting thresholds.
5.9 Should repos and reverse repos be included in a depository institution’s volumes for purposes of determining if the depository institution exceeds the reporting thresholds?: No.