SEC Approves FINRA Rule 6730, MSRB One-Minute Trade Reporting

A Step Toward Greater Market Transparency

The Securities and Exchange Commission (SEC) approved changes to FINRA Rule 6730 (Transaction Reporting) proposed by the Financial Industry Regulatory Authority (FINRA) and Municipal Securities Rulemaking Board (MSRB) that will modernize and accelerate the reporting of bond transactions in the U.S. fixed income market. This amendment reduces the current 15-minute reporting window for TRACE-Eligible Securities, such as corporate bonds, agency debt, mortgage-backed securities (MBS), and municipal securities reported to MSRB’s Real-time Transaction Reporting System (RTRS) to a one-minute timeframe.

FINRA Rule 6730 – Key Amendments and Exceptions

The primary rationale behind this change is to enhance transparency and provide market participants with more timely access to critical pricing information. FINRA’s data indicates that the vast majority of these trades, around 83%, are already being reported within one minute of the time under the existing 15 minute requirement. As such, the regulator believes that reducing the outer limit to one minute will meaningfully improve the timeliness of trade dissemination without imposing an undue burden on the industry.

The new rule includes some critical exceptions designed to accommodate firms that may face operational challenges in meeting the one-minute reporting requirement. This includes a “de minimis” exception and a phased in approach for “manual trades” reducing the reporting window to five minutes over a three-year period. This would provide FINRA and MSRB members additional time to adapt their systems and workflows.

De Minimis Reporting Activity

FINRA members who report fewer than 4,000 trades annually to TRACE and MSRB dealers who report fewer than 2,500 trades annually to RTRS will be exempt from the one-minute rule. These firms will continue to report trades within the existing 15-minute window, ensuring that small firms with limited trade activity are not overburdened by compliance costs.

Manual Trades

Firms handling trades that require manual entry will also be exempt, with a phased reduction of reporting timeframes. These trades must be reported as soon as practicable, but

• no later than 15 minutes from the time of execution up to one calendar year from the effectiveness of the proposed amendments;
• within 10 minutes in calendar years 2-3; and,
• within five minutes following the conclusion of the third calendar year and thereafter.

Trade with a Manual Component

The manual trades exception would apply to transactions that

1. require manual intervention, at any point, to complete the trade execution or
2. where a member firm must manually enter any of the trade details or information necessary for reporting the trade or into a system that facilitates trade reporting to Trade Reporting and Compliance Engine (TRACE) and RTRS.

Additionally, a trade meeting the definition for a “trade with a manual component” would be required to append a new trade indicator so that FINRA and MSRB can identify manual trades. The indicator must be included in any manual trade, regardless of whether the member reports outside of the one-minute timeframe in reliance on the manual trade exception. The indicator would not be included in publicly disseminated TRACE/MSRB data.

These exceptions aim to balance market transparency with the operational realities of small firms and manual trading processes. The phased implementation of the rule, along with the included exceptions, ensures that the rule is both effective and manageable for market participants.

5 Steps to Prepare for One Minute Trade Reporting

To ensure compliance with the new one-minute reporting regulation, FINRA and MSRB member firms should consider the following recommendations:

1. Conduct a thorough review of existing reporting systems to identify gaps in their ability to meet the new requirements. Consider whether current systems can be upgraded or if new technology is needed.
2. Enhance or establish a robust data governance framework to ensure data integrity and accuracy. This includes policies for data collection, validation, and reporting.
3. Implement strong internal controls to minimize the risk of errors in reporting. This includes checks and balances, automated alerts for anomalies, and regular audits of reported data.
4. Create a comprehensive compliance monitoring program that regularly assesses adherence to the reporting requirements. This should include periodic reviews and updates to compliance strategies as needed.
5. Collaborate with technology vendors to stay updated on the latest innovations that can enhance reporting capabilities. This partnership can provide insights into best practices and emerging tools that support compliance.

The Trade Reporting Partner You Need

The financial industry now awaits the regulatory notice that will specify the timeline for implementation, expected to take place over an 18-month period.  Oyster Consulting’s trade reporting and compliance experts can assist with gap analysis, planning, or implementation of remediation plans. Our team can review your existing trading systems and reporting systems to identify gaps in their ability to meet the new requirements and provide guidance in technology platform selection.  Our consultants have the expertise you need to help your firm establish policies for data collection, validation, and reporting, and controls to minimize the risk of errors in reporting. They can also establish a compliance monitoring program and perform testing.

Trade Reporting Solutions

Oyster Solutions allows you to efficiently manage the surveillance, trade supervision and regulatory compliance of your client and employee trade activity. The automated trade supervision tool alerts supervisors to activity that falls outside of the firm’s customized parameters in the alert engine.

Oyster Solutions software provides visibility, tracking and scheduling for your firm’s risks, policies, procedures, tasks, regulations, trade monitoring, portfolio monitoring and mutual fund suitability. Your trade reporting, FINRA reporting and compliant documentation are all in one central location. Oyster Solutions can also integrate data feeds from back-office platforms, CRMs, aggregators, and order management systems through APIs and batch processes to create efficiency.