Regulatory transparency into the US Treasury secondary market hit another milestone as the Federal Reserve Board has entered into negotiations with the Financial Industry Regulatory Authority to collect trade data on its behalf.
The potential relationship would deepen FINRA’s view into the secondary market after the SEC recently approved a FINRA rule change that will require broker-dealers to report their US Treasury transactions to the SRO.
“The collection of this data would allow the U.S. official sector a more complete view of Treasury securities trading in the secondary market,” said Federal Reserve Governor Jerome Powell, in the statement. “Enhanced data collection was a key recommendation by the Inter-Agency Working Group’s Joint Staff Report on the market events of October 15, 2014.”
“FINRA looks forward to the potential opportunity to assist the Federal Reserve Board with its Treasury transaction data-collection plans,” a FINRA spokesperson told Markets Media. “This effort will complement the previously announced initiative by the Treasury Department, Securities and Exchange Commission and FINRA, together creating a comprehensive official repository for transactions in the Treasury market that can be used for regulatory purposes.”
A Federal Reserve Board spokesperson declined to offer further details citing that the discussions are still in the early stages.
In the meantime, FINRA plans to have broker-dealers submit their transactions in all Treasury securities, except for savings bonds, to the SRO’s Trade Reporting and Compliance Engine starting on July 10, 2017.
Broker-dealers will need to submit the CUSIP or another numeric identifier or FINRA symbol of the instrument traded; the transaction’s price and size; its date of execution; counterparty identifiers; whether the party is acting as a principal or agent; and the trade’s commission and settlement date as well as the reporting-side broker or the contra-party introducing broker in case of a ‘give-up’.
FINRA has no plans to disseminate the transaction data nor charge fees for the mandated reporting of those trades, according to officials.
However, eventual dissemination of the trade data would be a logical conclusion, according to David Weiss, a senior analyst with research firm Aite Group.
“As a wise general once said, ‘A journey of 1,000 miles begins with a single step,'” he noted. “I think those market participants, whether banks or broker-dealers, would be wise to consider that. I’d be shocked if they didn’t consider it.”
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