The Securities and Exchange Commission said on Wednesday it approved the Financial Industry Regulatory Authority's proposal to require its members to report their trades of US government securities. FINRA plans to implement the reporting program on July 10, 2017, the largest independent regulator of all securities firms that do business in the United States said in a statement.
The data are intended to help regulators oversee the $13 trillion US Treasuries market following the "flash" rally two years ago during which bond prices swung wildly within minutes. The cause of the event remains unclear and has raised concerns that such disruptions could become more frequent in the US Treasury market, which has been seen as the world's safest.
In the proposal by Wall Street-funded FINRA, members would report their trades on the Trade Reporting and Compliance Engine (TRACE) for regulators to review and the reporting would not be shared publicly. "This marks the first time a regulatory trade reporting regime has been established for a significant segment of the US Treasury market, which will enable regulators to better understand market dynamics and exercise their oversight function," SEC Chair Mary Jo White said.
FINRA said the reporting requirement will apply to all Treasury securities excluding saving bonds. US regulators have examined whether the growth of algorithmic, high-speed trading in Treasuries might have played a role in the flash rally. Reporting data on Treasuries trades may help shed light on structural changes in the market, proponents said. "The more information regulators have about the market's functioning, participants and asset prices the better. Furthermore, we don't believe additional transparency will have any impact on liquidity," said Kevin McPartland, head of market structure and technology research at Greenwich Associates in Stamford, Connecticut.