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Securities Regulator Wants Transparency in GSE Trading

The ""Financial Industry Regulatory Authority"":http://www.finra.org (FINRA) is proposing a major expansion of its ""Trade Compliance and Reporting Engine"":http://www.finra.org/Industry/Compliance/MarketTransparency/TRACE/index.htm (TRACE) to include debt issued by the GSEs, federal government agencies, and government corporations, as well as primary market transactions in new issues. Currently, TRACE reports real-time pricing and trade volume information only on corporate bonds trading in the secondary market.
FINRA contends that its proposal would bring greater transparency to the primary market, as well as government agency and GSE debt, and would improve investor confidence and participation in such trading.
Fannie Mae, Freddie Mac, and the Federal Agricultural Mortgage Corporation are among the GSEs [government-sponsored enterprises] to be included in the TRACE expansion, FINRA said. The federal agencies and government corporations issuing debt would include the Tennessee Valley Authority, the Federal Home Loan Banks, and the Financing Corporation.
Approval of the proposal by the ""Securities and Exchange Commission"":http://www.sec.gov (SEC) would nearly double the number of bonds included in TRACE reporting. Roughly 25,000 government agency, corporation, and GSE bonds would become TRACE-eligible, in addition to the approximately 30,000 corporate bonds already on TRACE.
FINRA EVP Steven Joachim said, ""We believe that transparency is an extremely important ingredient for investor participation in a market. Based on our experience with corporate bonds, this expansion should help all investors - especially retail investors - get better prices, because TRACE has shown that transparency helps to reduce bid-ask spreads. Most important, expanding TRACE into these bond markets will enhance market integrity for all participants and will help protect retail investors by putting better sales and pricing information in their hands.""
TRACE was established in July 2002 to bring transparency to the corporate bond market. It was fully phased in by February 2005, offering real-time, public dissemination of transaction and price data for all corporate bond trades - including intra-day transaction data and aggregate end-of-day statistics (most active bonds, total volume, advances and declines, and new highs and lows).
Retail investors have free access to this data at ""Finra.org/marketdata"":http://www.finra.org/marketdata. Similar information will be disseminated for government agency, corporation, and GSE bonds, upon the SEC's approval of their inclusion.
According to FINRA, the SEC is expected to publish the TRACE expansion proposal and seek public comment in the near future. If the proposal is approved, FINRA will issue a Regulatory Notice, setting an effective date within 180 days.
FINRA is an independent regulator for all securities firms doing business in the United States. The agency touches virtually every aspect of the securities business - from registering and educating all industry participants to examining securities firms; writing and enforcing rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering dispute resolution forums for investors and firms.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.

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