U.S. Regulators Move On Plan To Cut Bond Reporting To 1 Minute
Regulators are moving ahead with a plan that could slash the amount of time that traders have to report many bond transactions.
(Bloomberg) -- US financial regulators are moving ahead with a plan that could slash the amount of time that traders have to report many bond transactions to just one minute.
The Financial Industry Regulatory Authority and the Municipal Securities Rulemaking Board sought comments on the possible reduction from the current time frame of 15 minutes. It’s an initial step in a lengthy rule-change process that also involves the Securities and Exchange Commission.
Finra, which oversees brokerages and dealers, said the plan would apply to trading in corporate bonds, asset-backed securities and certain mortgage-backed securities. The industry-backed regulator said it would create “a qualitative increase in market transparency.”
In April, SEC Chair Gary Gensler said reporting rules had failed to keep up with changes in technology. Bond trading is a notoriously opaque corner of Wall Street, with the vast majority of transactions still conducted over the phone or in private chats.
“Although the majority of trades are already being reported within one minute today, it is also clear from the data that certain types of trades are taking longer to be reported,” MSRB Chief Executive Office Mark Kim said in a statement.
Larger trades, such as those greater than $5 million, and dealers who report a smaller number of trades per year, often take longer to report, MSRB Chief Market Structure Officer John Bagley added in an interview.
The amount of time that traders have to report fixed-income transactions has been a hot-button issue for years.
During the Trump era, a controversial plan to test whether delaying disclosure of the biggest corporate bond trades would boost market liquidity was eventually shelved after strong industry opposition.
Meanwhile, faster trade reporting could give investors better insight to more accurately price the value of their bonds, or bonds with similar characteristics, the MSRB’s Bagley said.
The two regulators plan to take comments for about 60 days. The SEC will ultimately also have to signoff on any changes.
(Updates with information on proposals starting in third paragraph.)
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