FINRA Proposes Expanded Dissemination of CMO Trade Information

As part of its phased approach to disseminating trade information in securitized products, FINRA proposed amending the FINRA Rule 6700 Series and the Trade Reporting and Compliance Engine ("TRACE") dissemination protocols to (i) require the dissemination of transactions in collateralized mortgage obligations ("CMOs") and (ii) shorten the trade-reporting timeline for CMO transactions from end-of-day to within sixty minutes of execution.

For smaller-sized CMO transactions (i.e., transactions that are valued under $1 million and are calculated based on the original principal balance), FINRA will disseminate trade-by-trade information immediately upon receipt by TRACE. Alternatively, FINRA will disseminate periodic reports for larger-sized CMO transactions (i.e., transactions that are valued at $1 million or more and are calculated based on the original principal balance) where there have been five or more larger-sized transactions reported by at least two different market participants in a given CMO security for a particular reporting period (either weekly or monthly).

Currently, CMO transactions must be reported to TRACE no later than the close of the TRACE system on the date of execution. Under the proposal, transactions in CMOs would be reported to TRACE within 60 minutes of execution, with the exception of transactions in CMOs that were executed before the date of issuance of the security, and would be reported no later than the first settlement date of the security.