FINRA Boosts Transparency in the Mortgage-Backed Securities Market
Jul 25, 2013 (Close-Up Media via COMTEX) --
The Financial Industry Regulatory Authority (FINRA) on July 22 significantly increased transparency in mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae, as well as in securities backed by loans guaranteed by the Small Business Administration.
According to a release, through TRACE (Trade Reporting and Compliance Engine), FINRA will begin to disseminate information for so-called specified pool transactions in agency pass-through mortgage-backed securities and SBA-backed securities. This represents approximately 3,500 trades, totaling $18 billion in par value, on an average daily basis.
"With today's announcement, TRACE has brought historic transparency to the mortgage-backed market, and we will shortly file with the SEC to bring transparency also to asset-backed securities, including those backed by auto loans, credit card receivables and student loans," said FINRA Vice President Ola Persson.
FINRA said TRACE will disseminate transaction information such as the time of the trade, price and volume. For security identification, in lieu of the CUSIP, FINRA will provide the key characteristics of the security. Transactions must be reported to TRACE within two hours of execution, and are disseminated as soon as received (the reporting timeframe will be reduced to one hour after six months).
On November 12, 2012, the authority noted, FINRA began disseminating transaction information for agency pass-through mortgage-backed securities traded "to-be-announced" (TBA). Together, the market for agency pass-through mortgage-backed securities traded either TBA or specified and SBA-backed securities represent over 90 percent of the par value traded in all asset- and mortgage-backed securities.
Market professionals are able to access the information via market data vendors. Retail investors will have free access to this data through FINRA's Market Data Center starting next Monday, July 29. In addition to making transaction information available, FINRA has developed an online learning center - Smart Bond Investing - where retail investors can become familiar with the full range of bond types, features and considerations when investing in bonds.
In addition to the increased transparency in agency pass-through mortgage-backed securities, FINRA recently announced that it will soon file proposed rule amendments with the SEC to disseminate transactions in additional types of asset-backed securities, such as those backed by credit card receivables, automobile and student loans, and a variety of other credits.
TRACE was established in July 2002 to create a regulatory database and bring transparency to the corporate bond market. It immediately created the database and was fully phased in by February 2005, offering real-time, public dissemination of transaction and price data for all corporate bond trades - including intra-day transaction data and aggregate end-of-day statistics (most active bonds, total volume, advances and declines, and new highs and lows). Agency Debentures were added in March of 2010 and are subject to real-time dissemination. FINRA started collecting transaction information in all asset- and mortgage-backed securities in May 2011.
FINRA, the Financial Industry Regulatory Authority, is an independent regulator for all securities firms doing business in the United States.
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