Regulation

Prying Open the Asset-Backed Securities Market

FINRA's new data-tracking program will provide information on the timing, price, and volume of ABS trades.
Katie Kuehner-HebertJune 2, 2015

A new data-tracking program from The Financial Industry Regulatory Authority will finally give investors timely information on the formerly opaque asset-backed securities market.

On Monday FINRA said that it had “brought transparency to the asset-backed securities market” by providing investors with post-trade price information for asset-backed securities, including those backed by auto loans, credit card receivables, and student loans.

“The dissemination of transaction information in asset-backed securities is another milestone in making the debt markets more transparent, ensuring the integrity of markets and investor protection,” FINRA vice president Ola Persson said in a press release.

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Asset-backed securiteis data can be accessed via FINRA’s so-called “Trade Reporting and Compliance Engine,” or TRACE.

TRACE will distribute transaction information to the public such as the CUSIP, time of the trade, price, and volume (the volume will be represented by the actual number of bonds sold up to $10 million; all transactions larger than that will be represented as $10+ million).

Asset-backed security transactions will be available to the public no later than 45 minutes after the trade is executed until Dec. 4, 2015, subject to minor exceptions. After that date, asset-backed security transactions will be available to the public no later than 15 minutes after the trade is executed.

Market professionals are able to access the information via major market data vendors, while retail investors will have free access to the data through FINRA’s Market Data Center.

A Bloomberg article Monday said that many on Wall Street are criticizing FINRA, contending the initiative and others like it for certain mortgage securities and corporate bonds that have already taken effect hurt these securities’ liquidity.

Bank of America Corp. strategists led by Chris Flanagan reportedly wrote in a Monday report, “Will broker/dealers be willing to provide the same level of liquidity as they do currently when the market price of their positions will be more readily broadcast to the market? While this sounds good in theory, this transparency could have myriad effects on the market.”

FINRA also said that it is now reviewing comments that the agency received on a proposal to expand dissemination of TRACE data to include collateralized mortgage obligations, commercial mortgage-backed securities, and collateralized debt obligations.

The comment period expired on April 10.

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