FINRA, MSRB Shorten Fixed-Income and Municipal Securities Trade Reporting Times to One Minute

On September 20, 2024, the SEC approved proposed rule changes submitted by FINRA and the MSRB to require reporting of trades in most fixed-income securities and municipal securities to FINRA’s TRACE or the MSRB’s RTRS “as soon as practicable” but no later than one minute from the time the trade was executed, subject to certain exceptions for manual trades and firms with limited trading activity. These rule changes represent a departure from the current reporting standards, where reportable trades are generally required to be reported “as soon as practicable,” within 15 minutes of execution. 

FINRA and the MSRB will announce the effective dates of the amended rules in forthcoming regulatory notices. FINRA and the MSRB anticipate implementing the rule changes approximately 18 months from SEC approval.¹

Key Takeaways

Both FINRA and the MSRB provided data indicating that firms are already reporting a significant majority of transactions subject to the existing 15-minute reporting periods within one minute of execution.² As a result, many firms may already be in compliance with the shortened reporting timeframes under the new rules and should continue to report their eligible trades promptly, as soon as practicable within the new one-minute period. The reductions in transaction reporting time are intended to improve the price discovery process in the fixed-income and municipal securities markets by reducing any existing delays in the reporting and public availability of execution price data.

Firms that are not currently reporting their eligible transactions within one minute and are not eligible for the new limited trading activity or manual trading exceptions will need to consider what changes must be made to their systems or trade reporting policies and procedures in order to comply with the new reporting timeframes. However, we emphasize that regardless of the applicable reporting timeframe, transaction reports must be submitted to TRACE or RTRS, as applicable, “as soon as practicable.” Examiners may scrutinize delays in reporting even if within the prescribed timeframe if the firm reasonably could have reported the trade more rapidly. For instance, if a firm reports a significant portion of its transactions close to the one minute requirement, FINRA could investigate to make sure that reporting is not inappropriately delayed.

Summary of the Changes

FINRA Rule 6730

Amended FINRA Rule 6730(a)(1) will require that any transaction in a TRACE-eligible security during TRACE system hours be reported as soon as practicable but no later than within one minute after the time of execution (One Minute Requirement), unless otherwise provided in Rule 6730.³

New Supplementary Material .08 to FINRA Rule 6730 will provide an exception to the One Minute Requirement for a firm with limited trading activity, which is a firm that, during one of the prior two calendar years, reported to TRACE fewer than 4,000 transactions in TRACE-eligible securities subject to the One Minute Requirement. To rely on this exception, the firm will be required to confirm annually that it meets the applicable criteria and retain such confirmation as part of its books and records.

New Supplementary Material .09 to FINRA Rule 6730 will provide an exception to the One Minute Requirement for trades that are manually executed or where a firm must manually enter any trade details or information necessary to report the trade. Trades subject to this exception must be reported as soon as practicable but no later than within a time period that will initially be 15 minutes and subsequently phased down to five minutes over the course of three calendar years after the effectiveness of the amended rule.⁴

MSRB Rule G-14 RTRS Procedures

Similar to the FINRA Rule, the MSRB’s amended Rule G-14 RTRS Procedures Section (a)(ii) will require that any reportable transaction in a municipal security executed during the RTRS business day be reported as soon as practicable but no later than within one minute after the time of execution unless otherwise provided in the Rule G-14 RTRS Procedures.⁵ The explicit requirement that a transaction be reported to RTRS “as soon as practicable,” while consistent with the existing FINRA Rule, is new to the MSRB Rules. New Supplementary Material .03 to the Rule G-14 RTRS Procedures will require firms to adopt policies and procedures for complying with the “as soon as practicable” requirement.

New Section (a)(ii)(c)(1) and Supplementary Material .01 to the Rule G-14 RTRS Procedures will provide an exception to the One Minute Requirement for a firm with limited trading activity, which is a firm that, during one of the prior two calendar years, reported to RTRS fewer than 1,800 transactions in municipal securities subject to the One Minute Requirement. To rely on this exception, the firm will be required to confirm annually that it meets the applicable criteria and retain such confirmation as part of its books and records.

New Section (a)(ii)(c)(2) and Supplementary Material .02 to the Rule G-14 RTRS Procedures will provide an exception to the One Minute Requirement for trades that are manually executed or where a firm must manually enter any trade details or information necessary to report the trade. Trades subject to this exception must be reported as soon as practicable but no later than within a time period that will initially be 15 minutes and subsequently phased down to five minutes over the course of three calendar years after the effectiveness of the amended rule.⁶

Firms should revise their policies, procedures, reviews, and surveillance to comply with the new requirements. Relevant order management and execution systems along with recordkeeping requirements will need to be enhanced accordingly. Finally, if a firm intends to rely on any of the exceptions, the firm should establish appropriate surveillance and documentation to allow the firm and FINRA to determine that the exception requirements are met.

¹ See Exchange Act Release No. 101121, at 47 (Sept. 20, 2024), https://www.sec.gov/files/rules/sro/finra/2024/34-101121.pdf; MSRB Notice 2024-12, at 1 n.2 (Sept. 20, 2024), https://www.msrb.org/sites/default/files/2024-09/2024-12.pdf.

² See Exchange Act Release No. 99404, at 16 (Jan. 19, 2024), https://www.sec.gov/files/rules/sro/finra/2024/34-99404.pdf (“FINRA found that [in 2022] 83 percent of trades across TRACE-Eligible Securities currently subject to the 15-minute reporting timeframe were reported within one minute of execution”); Exchange Act Release No. 99402, at 40 (Jan. 19, 2024), https://www.sec.gov/files/rules/sro/finra/2024/34-99404.pdf (“Out of all reportable municipal securities trades [in 2022] that are not subject to another end of day reporting exception or a post-trade day reporting exception, approximately 73.7 percent were reported within one minute”). 

³ Similar to the existing rules, there will be different reporting guidelines for transactions executed when the TRACE System is closed or less than one minute before the TRACE System closes. See FINRA Rule 6730(a)(1)(A)-(D). FINRA Rule 6730(a)(2)-(5) also provides different reporting timeframes for list or fixed offering price transactions and takedown transactions, certain securitized products transactions, U.S. Treasury securities, and foreign sovereign debt securities.

⁴ Firms will also be required to append a new manual trade indicator to the transaction report for such trades. See FINRA Rule 6730(d)(4)(I). A firm is not permitted to purposefully handle a trade manually or introduce a manual step in order to delay reporting of a transaction. See FINRA Rule 6730.09(a).

⁵ The Rule G-14 RTRS Reporting Procedures provide certain exceptions for end of trade day reporting and post-trade day reporting. See Rule G-14 RTRS Reporting Procedures Section (a)(ii)(A)-(B). Transactions executed outside the hours of the RTRS business day will continue to be reported no later than 15 minutes after the beginning of the next RTRS business day. See Rule G-14 RTRS Reporting Procedures Section (a)(iii).

⁶ Firms will also be required to append a new manual trade indicator to the transaction report for such trades. See Rule G-14 RTRS Procedures Section (b)(iv)(B)(4). A firm is not permitted to purposefully handle a trade manually or introduce a manual step in order to delay reporting of a transaction. See Supplementary Material .02(a) to the Rule G-14 RTRS Procedures.