FINRA Receives SEC Approval to Require Member Firms to Report Treasury Transactions to TRACE

Implementation Date Set for July 10, 2017

WASHINGTON — The Securities and Exchange Commission has approved FINRA’s proposal to require its members to report certain transactions in Treasury Securities to FINRA’s Trade Reporting and Compliance Engine (TRACE). FINRA has set July 10, 2017 as the implementation date.

The requirement will apply to all Treasury securities except savings bonds. At this time, FINRA will not disseminate information on transactions in Treasuries and will not charge fees on reports for Treasuries.

“TRACE will provide an effective structure for FINRA members to report trades in Treasuries so that more information about this important market is available to regulators,” said Steven A. Joachim, FINRA’s Executive Vice President of Transparency Services. “The new requirement will significantly enhance the ability of FINRA and other regulators to understand trading activity in Treasury securities. Leveraging the existing TRACE platform will reduce the burden on firms to comply with the new reporting obligations.”

Background

In response to unexplained volatility in the Treasury market in October 2014, an interagency working group led by the Treasury Department issued a joint staff report on July 13, 2015, that included preliminary findings on the volatility, described the current state of the Treasury market, and proposed four “next steps” in understanding the evolution of the market. Included among these steps was an assessment of the data available to regulators and to the public regarding the cash market for Treasuries.

On Jan. 19, 2016, the Treasury Department published a Request for Information (RFI) seeking public comment on structural changes in the U.S. Treasury market and their implications for market functioning. The RFI expanded on the four “next steps,” and requested comment on official-sector access to data regarding the cash market for Treasuries and whether dissemination of Treasury market transaction data to the public would be beneficial.

After reviewing the comment letters, the Treasury Department and the SEC announced that they were “working together to explore efficient and effective means of collecting U.S. Treasury cash market transaction information,” and they requested that FINRA “consider a proposal to require its member brokers and dealers to report Treasury cash market transactions to a centralized repository.” In response to the request, FINRA on July 18, 2016 proposed the new reporting requirements.

FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.