The SEC recently approved amendments to the Trade Reporting and Compliance Engine (TRACE) rules. FINRA Rule 6730 will require member firms to report the TRACE-eligible transactions (mostly trades in bonds) as soon as practicable, but no later than within 15 minutes of the time of execution. This revision and guidance presents an opportunity to review the TRACE rules and regulations. FINRA’s notice to members is here.

Q: When must firms report transactions in TRACE-eligible securities?

A: Once the new rule goes into effect, transactions must be reported as soon as practicable, but not later than 15 minutes after the time of execution when the TRACE system is open.

An exception is available for transactions executed less than 15 minutes prior to the TRACE system closing (i.e. at 6:15 p.m. or later) which may be reported within 15 minutes after the TRACE system opens the next business day (T + 1), and if reported on T + 1, designated “as/of” the trade date, but this report must still be filed as soon as practicable.

Q: What are the TRACE system hours?

A: The TRACE system is open from 8:00:00 a.m. Eastern Time through 6:29:59 p.m. Eastern Time each business day.

Q: What is a TRACE-eligible security?

A: TRACE-Eligible Securities include U.S. Dollar denominated debt securities issued by corporations (e.g. corporate bonds), agencies (Ginnie Mae), GSEs (Freddie Mac or Fannie Mae) and asset-backed securities. Transactions in Trace-eligible securities effected via Rule 144A transactions must be reported to TRACE.

Q: What securities are not TRACE-eligible?

A: Certain transactions in debt securities are not reported to TRACE, including transactions in debt securities issued by the US Treasury (T-bonds, T-Notes, T-bills); sovereign foreign governments (e.g. Mexico, Germany, etc); and money market instruments

Q: Can a firm purposely withhold trade reports until the end of the reporting period? For example, design its system to delay trade reporting until 14 minutes and 59 second following a trade?

A: No. This would be a violation of the letter and the spirit of FINRA Rule 6730 (Transaction Reporting) as well as the New Supplementary Material that specifically clarifies that this type of reporting delay is prohibited. Trades in Trace-eligible securities must be reported as soon as practicable.

Knopman Note

When preparing for a FINRA exam it is important to stay abreast of all recent rule changes and clarifications. Please visit the Knopman blog, login and download your study supplements, and contact your instructor as a part of your study process to make sure you are in the best position to pass your exam.

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Written by Dave Meshkov
Dave's mission (and job: Managing Director of Course Design) is to make FINRA exam training engaging, approachable, and dare he even say, enjoyable. Having trained and coached over ten thousand students to exam success he knows how to present complex subjects in memorable and understandable ways. Prior to joining Knopman Marks in 2011, Dave practiced bankruptcy law at Weil, Gotshal & Manages and served as a law clerk in a the Southern District of New York Bankruptcy Court working on the General Motors and Lehman Brothers bankruptcies. Building on his legal expertise and training allows him to keep all our courses updated with the latest legislative and rule-making changes. Dave currently trains for the Securities Industry Essentials (SIE) exam and the Top-Off Series 6, 7, 24, 57, 63, 65, 66, 79, 86, 87, and 99 exams. He also delivers executive one-on-one training and shares his passion for learning outside of work as a ski instructor and yoga teacher. Dave graduated magna cum laude from Fordham Law School, and cum laude with a BA from the University of Pennsylvania.