The Securities and Exchange Commission has approved the Financial Industry Regulatory Authority’s amendments to its Trade Reporting and Compliance Engine (TRACE) rules to provide for reporting of transactions in “US Treasury securities,” which includes all securities issued by the US Treasury Department, with the exception of savings bonds. As a consequence, the TRACE reporting requirements will apply to transactions in Treasury bills, notes, bonds and inflation-protected securities (referred to as “TIPS”), as well as separate principal and interest components of a US Treasury security that have been separated pursuant to the Separate Trading of Registered Interest and Principal of Securities (STRIPS) program operated by the Treasury Department. (The Corporate & Financial Weekly Digest edition of July 22, 2016 summarized FINRA’s proposed amendments.)
The amendments provide an exemption from TRACE reporting for purchases of a US Treasury security from the Treasury Department as part of an auction. However, “when-issued transactions”—which can take place after the Treasury Department’s announcement of an auction but before the auction and issuance of the securities—are reportable under the new reporting requirements. The amendments also clarify that repurchase and reverse repurchase transactions are not reportable to TRACE.
FINRA also has adopted a new trade indicator for “when-issued transactions,” as well as two new trade modifiers for package transactions involving US Treasury securities as follows: 1) a “.B” modifier, if the transaction being reported is part of a series of transactions where at least one of the transactions involves a futures contract; and 2) an “.S” modifier, if the transaction being reported is part of a series of transactions and may not be priced based on the current market.
The reporting requirements for US Treasury securities transactions will go into effect on July 10, 2017, with the exception of the use of the two new modifiers. FINRA has not adopted an implementation date for the new modifiers at this time. FINRA will not disseminate information on transactions in US Treasury securities and will not charge transaction-level fees on transactions in US Treasury securities reported to TRACE.
More information on FINRA Regulatory Notice 16-39 is available here.