The Financial Industry Regulatory Authority (FINRA) has significantly increased transparency in the so-called "To-Be-Announced" (TBA) market for agency pass-through mortgage-backed securities (MBS). This market represents more than $270 billion traded on an average daily basis in 8,400 trades. Through the Trade Reporting and Compliance Engine (TRACE), FINRA has begun disseminating TBA transaction information, including the CUSIP, time of transaction, price, size and other related information.
In addition to the TBA market, the Securities & Exchange Commission (SEC) has approved a FINRA proposal to publicly disseminate transaction information in agency pass-through mortgage-backed securities traded "specified." This market represents approximately $19 billion traded on an average daily basis in 3,000 trades. FINRA will announce the effective date of this proposal in a forthcoming Regulatory Notice. Together, the market for agency pass-through mortgage-backed securities traded TBA and specified represent more than 93 percent of par value traded in all asset- and mortgage-backed securities.
FINRA continues to study Collateralized Mortgage Obligations (CMO) and asset-backed securities, which together represents seven percent of par value traded in all asset- and mortgage-backed securities.
"As we look to increase transparency in CMOs and asset-backed securities, we will seek an approach that takes into account their complex nature and different market dynamics," said FINRA Vice President Ola Persson.
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.
