FINRA Proposes Adding Asset-Backed Securities to Data Reporting

FINRA Proposes Adding Asset-Backed Securities to Data Reporting - 10/1/2009

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FINRA Proposes Adding Asset-Backed Securities to Data Reporting
Jody Shenn and David Scheer

Bloomberg. October 1, 2009
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EXCERPT: Securities firms may be forced to begin reporting trading data for asset-backed securities after the opaqueness of that market helped create the worst financial crisis since the Great Depression, the U.S. brokerage industry’s main regulator said. The Financial Industry Regulatory Authority’s proposal for expanding its Trade Compliance and Reporting Engine to notes including mortgage bonds and collateralized debt obligations doesn’t include a plan to publicly disclose the information, the regulator said today in a statement. Finra’s pursuit of price and volume data for transactions involving asset-backed bonds follows the Securities and Exchange Commission’s approval this week of a complete broadening of Trace to “agency” notes and new corporate debt, which expanded a system that Wall Street brokers say has made it harder to trade bonds while cutting into their profits. “For regulators, there is a demonstrated need for ABS market information,” Finra’s chief executive officer, Richard Ketchum, said in the statement. “Greater disclosure around these securities directly linked to the credit crisis will allow for more effective oversight with a deeper understanding of market dynamics.” The Obama administration, in its June outline for steps that may be needed in an overhaul of the financial system, and former SEC Chairman Arthur Levitt have called for an expansion of Trace to asset-backed securities, after uncertainty about their values helped cause investors and lenders to question the health of banks and investment funds. SEC approval on ABS data would leave Finra with trading information on all parts of the U.S. debt market aside from Treasuries and money-market instruments, allowing it to better detect fraud, market manipulation and other illegal activity, according to today’s statement. It would get data on about 70 percent of U.S. notes, including municipal bonds under a separate system, up from 27 percent before the expansion already approved gets put into effect in March, Finra said.

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