Both MSRB and FINRA Propose to Shorten Trade Reporting Times

The MSRB proposed rule amendments to shorten the time allowed for post-trade reporting to within one minute; separately, FINRA proposed rule amendments to reduce the 15-minute TRACE reporting timeframe to one minute, with exceptions for de minimis reporting activity and for manual trades.

The MSRB proposed amending MSRB Rule G-14 ("Reports of Sales or Purchases") to shorten the time allowed for post-trade reporting to within one minute. As previously covered, MSRB Rule G-14 had been amended to require trade prices to be publicly reported within 15 minutes of the trade. The proposed amendments would now shorten the timeframe for trades to be reported to the MSRB from 15 minutes to "as soon as practicable, but no later than one minute, subject to certain exceptions for firms with limited trading volume in municipal securities and for manual trades." Among the revisions, the MSRB included two new exceptions to the new one-minute reporting requirement, consisting of (i) a 15-minute exception for dealers with "limited trading activity" and (ii) a phased-in approach for implementation from 15 minutes to an eventual five-minute reporting requirement for "trades with a manual component." MSRB stated that the amendments were drafted after "extensive research" among market participants. In the proposal, the MSRB described the barriers that may prevent reporting of trades within one minute, particularly among smaller or less active firms, along with improvements in reporting information and access for all investors.

Separately, FINRA proposed amendments to FINRA Rule 6730 ("Transaction Reporting") on TRACE-eligible transaction reporting to reduce the time to report from within 15 minutes to one minute. The proposed amendments would allow for delayed reporting of TRACE-Eligible Securities by member firms with de minimis reporting activity and for manual trades. In the proposal, FINRA said that for firms qualifying for the de minimis exception with trading activity limited to fewer than 4,000 transactions, reporting must happen within 15 minutes of execution. FINRA said that if, for two years in a row, the firm exceeds the 4,000 transactions, then it will no longer qualify for the exception. As to the manual trades' exception, FINRA specified that a "15-minute outer limit would apply for the first year following implementation; a 10-minute outer limit would apply for the second year; and a five-minute outer limit would apply thereafter."

FINRA stated that the proposal would (i) modernize reporting timeframes that haven't been changed since 2005, (ii) provide timelier data and increased transparency and (iii) eliminate the practice of late reporting which is considered to be "conduct inconsistent with high standards of commercial honor and just and equitable principles of trade, in violation of Rule 2010, absent 'reasonable justification.'"