FINRA Adopts Amendments to TRACE Reporting Rule to Require Identification of Portfolio Trades
Effective May 15, 2023 if you trade in TRACE-eligible securities and those securities are part of a portfolio trade, you will be required to input an appropriate modifier. The Sale Condition 4 modifier, available via the TRAQS secure web browser and the TRACE FIX protocol (Tag 22004), will be available for this designation. Regulatory Notice 22-12 provides information on the new requirement and considerations for compliance.
Background
FINRA has amended Rule 6730 to require members to append a new portfolio trade modifier when reporting corporate bond trades that are part of a portfolio trade to TRACE. Specifically, new paragraph (d)(4)(H) of Rule 6730 requires that a member must append the portfolio trade modifier if reporting a transaction in a corporate bond:
- executed between only two parties;
- involving a basket of corporate bonds of at least 10 unique issues; and
- for a single agreed price for the entire basket.
The effective date to append these transactions with the modifier begin May 15, 2023. FINRA will disseminate the transaction immediately upon receipt. FINRA will make specifications available at least 270 days in advance of the May 15, 2023, effective date.
FAQ’s
FINRA provides further information relating to the portfolio trade modifier requirement. The FAQs will also be available on the TRACE page (TRACE FAQ Page). These FAQs provide information on how/when to use the modifier in instances including but not limited to:
- Trades issued by the same issuer
- Corporate bonds and agency debt securities within the same portfolio
- Cancelled Trades
- Single agreed pricing
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