RTRS & TRACE

tamer hamed 1:32:00 AM
TRACE is a trade reporting system for purposes of providing timely market information to participants and for providing documentation of trades for compliance purposes. The TRACE system does not accept quotes; it does not provide clearing/ settlement of trades. It doesn't process trades at all it merely reports them to the market and keeps a record for regulatory purposes. Also, while participation in other systems is voluntary, participation in the TRACE system is mandatory for member firms.

Transactions in corporate debt securities are reported through TRACE, which stands for the Trade Reporting and Compliance Engine. Trade reports are filed within 15 minutes of execution nowhere near as fast as equity trades are reported through ACT (30 seconds). Securities eligible for and subject to TRACE reporting are called TRACE-eligible securities. These include:

•    most corporate bonds
•    church bonds
•    agency bonds
•    mortgage, asset-backed securities
•    all securities issued by the Treasury Department except savings bonds

TRACE-eligible securities do not include:
•    Debt issued by a foreign sovereign
•    Money market instruments
•    Debt securities in physical form/not "Depository Trust Company-eligible"
•    Convertible bonds (these are reported through the ACT system)

To start using the TRACE system member firms must submit a TRACE Participant application agreement and comply with all provisions, plus all SEC and FINRA rules and operating procedures. If member firms do not comply with all requirements, they can end up having their TRACE service terminated by FINRA. Failing to comply would include failure to make timely payment to the system for its services.
The TRACE system displays the following information concerning a transaction in debt securities:
•    execution date and time
•    quantity
•    price
•    yield
•    whether price includes a commission
•    special settlement/conditions affecting price, if any
•    whether trade reported late

For the trading systems involving equity trades, the seller reports. With TRACE, how-ever, in a trade between two member firms, both the buy and sell side file a report. In a trade between a member and a non-member (including a customer) only the member firm files a report.

If securities are being underwritten, they are also about to be traded on the secondary market among investors. Therefore, the managing underwriter must provide notice to FINRA containing the following information:
•    CUSIP # (or other identifying #)
•    Name of issuer
•    Coupon rate
•    Maturity
•    Whether 144A applies
•    Time that new issue is priced
•    Brief description of the issue (senior subordinated note, senior note, etc.)
Generally, this notice must be provided to FINRA Operations before the execution of the first transaction of the offering.

Municipal securities transactions are reported by dealers through an electronic reporting system known as RTRS for Real-Time Transaction Reporting System. As the MSRB (Municipal Securities Rule-making Board) states, RTRS is a trade reporting facility "operated by the MSRB. RTRS receives municipal securities transaction reports submitted by dealers, disseminates price and volume information in real time for transparency purposes, and otherwise processes information."

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