Trade Reporting and Compliance Engine (TRACE)

What Is Trade Reporting and Compliance Engine (TRACE)?

Trade Reporting and Compliance Engine (TRACE) is a program developed by the National Association of Securities Dealers (NASD), which is currently known as FINRA, that considers the reporting of over-the-counter (OTC) transactions relating to eligible fixed-income securities. Brokers, who are FINRA individuals and deal with specific fixed-income securities, are required to report their transactions by the Securities and Exchange Commission (SEC) rules.

Understanding Trade Reporting and Compliance Engine (TRACE)

As indicated by FINRA, the utilization of the TRACE program is intended to lay out a level playing field for all market participants. This is achieved by giving them real-time access to bond price data in a complete fashion. The distribution of timely trading data is planned to guarantee there is equivalent access accessible on solid bond data on corporate, agency, and structured products.

From 1998-2001, the SEC approved rules adopted by the NASD in regards to the transactions in all U.S. corporate bonds and secondary OTC fixed-income transactions. These rules were developed to bring greater price transparency to bond markets. Hence, TRACE was brought into play in 2002 to follow the recently approved rules. The program supplanted the previous Fixed Income Pricing System (FIPS) utilized starting around 1994.

TRACE is presently worked by the Financial Industry Regulation Authority (FINRA). The program furnishes individual investors and market professionals with access to data on practically all OTC public and private fixed income trading activity. The TRACE program offers a consolidation of transaction data for public and private corporate bonds, agency debt, and securitized products. That incorporates asset-backed securities and mortgage-backed securities.

What the TRACE Provides to the Market and Regulators

FINRA says that TRACE's services further improve the integrity of the market. Investors receive access to such real-time data to better comprehend and measure the performance of their dealer deals. Furthermore, FINRA affirms that TRACE helps regulators with the monitoring of the market, pricing, and execution quality.

There are various tiers of service accessible through TRACE that are paid and nonpaid. Personal, noncommercial access is free for real-time data displays of transaction data. Access for an individual professional client or a venture level license for those displays requires payments. Access to displays of TRACE data accessible through major market data sellers and a few financial sites.

Other TRACE Data

Other data services and feeds accessible through TRACE incorporate finish of-day transaction and activity reports, market activity and performance indicators, and enhanced historical data.

For instance, TRACE's enhanced historical data incorporates [transaction-level information](/transaction, for example, the price of the transaction, date and time of execution, transaction size, and yield. The data likewise incorporates data like purchase/sell indicators and counterparty data. Those subtleties were not previously accessible to the public.

Features

• Since OTC markets are frequently less liquid, not so much regulated, but rather more opaque than listed trading on exchanges, TRACE gives genuinely necessary data to give a more transparent and fair marketplace.
• TRACE is worked by FINRA (formerly known as NASD) and sent off in 2002, supplanting the previous FIPS reporting system.
• Trade Reporting and Compliance Engine (TRACE) is a facility for reporting OTC bond market trades and data.