FINRA Proposes Major Expansion of TRACE System to Include Government Bonds
FINRA has proposed expanding the Trade Compliance and Reporting Engine (TRACE) to include debt sponsored by federal government entities, representing approximately 25,000 bonds. The TRACE system requires the delivery of real-time price and volume data in order to expand transparency, thereby reducing bid-ask spreads. Currently, the TRACE system is only used for corporate bonds. The proposal would go live within 180 days after publication for comment by the SEC.
OUR TAKE: Providing TRACE data is a significant operational burden on market participants. We hope that the SEC examines empirical data on whether the TRACE system truly reduces bid-ask spreads before approving the proposal.
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