FINRA Proposes Adding Bond Pricing Reference Data on Confirms
FINRA has proposed a new rule that would require broker-dealers to include reference pricing information on certain customer confirmations for fixed income trades. The proposed rule would apply to transactions with a face value of up to $100,000 (or 100 bonds). The rule would require the firm to disclose the pricing differential between the customer order and any offsetting trades placed by the firm during the same trading day. FINRA notes that retail investors may already find this data in the TRACE system. FINRA acknowledges that the proposed rule would have significant technology systems and compliance costs. FINRA believes “this additional pricing information will better enable customers to evaluate the cost and quality of the services firms provide” and assist them “in detecting practices that are possibly improper, which would supplement FINRA’s own surveillance and enforcement program.” Comments are due January 20.
OUR TAKE: Changing confirms requires a great deal of internal systems work. Figuring out how to populate the reference pricing data field will challenge most firms. We are wondering whether customers really want/need this data. Or, is this really to help FINRA’s enforcement efforts?