In August 2016, the Financial Industry Regulatory Authority, Inc. ("FINRA") released Regulatory Notice 16-30. The notice reiterates the requirement that member firms accurately report the time of execution for transactions on their Trade Reporting and Compliance Engine ("TRACE") trade reports. The notice emphasizes that the "time of execution" of the transaction usually occurs when the parties "agree to all of the material terms sufficient to calculate the dollar price of the trade" or, more generally, when there has been a "meeting of the minds" as to the material terms of the transaction, including price and quantity.7
Regulatory Notice 16-30 highlights certain occasions where the time of execution reporting does not occur at the time the trade is entered into the firm's system. These instances include where the trade is made after business hours, or where a firm sends an electronic notice to its counterparty, but the details of the transaction have already been agreed before the firm sends that notice. FINRA indicates that the time at which the material terms were agreed, rather than the time at which the firm sends the notice, is the time that would be reported on the TRACE report.
The notice contains a discussion relevant to the issuance of structured notes that are offered on a set calendar. The notice states that, for a new issuance, the time of execution is determined in the same manner as it would be for a secondary issuance namely, when there is a meeting of the minds as to the material terms of the transaction. Consequently, where a firm receives "a firm commitment to purchase a TRACE-eligible security when it is issued, but prior to the final pricing or determination of other material terms of the new issue, the time of execution has not yet occurred." 8 The notice confirms that a 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." As firm orders for structured notes are taken before the final terms of the notes are set on the applicable pricing date, the correct time of execution for the report will be on the pricing date, once the material terms have been finalized.