United States: FINRA Proposes To Publicly Disseminate Transaction Information Regarding Rule 144A Corporate Debt Securities

FINRA has proposed a trade-reporting rule change that would result in the public dissemination of secondary market transactions in corporate debt securities sold under Securities Act Rule 144A. If adopted, this change could affect secondary market transactions in a number of assets classes, including high-yield debt securities.

Introduction

On July 8, 2013, the US Financial Industry Regulatory Authority, Inc. ("FINRA") submitted an amendment to its Rule 6750 to the Securities and Exchange Commission ("SEC"). If adopted, the amendment would allow FINRA to disseminate information on transactions effected pursuant to Rule 144A under the Securities Act of 1933 ("Rule 144A") through the Trade Reporting and Compliance Engine ("TRACE"), the principal trade-reporting system for fixed-income securities. The proposed amendment would allow FINRA to disseminate information regarding secondary transactions effected pursuant to Rule 144A. It would not require the reporting of primary transactions. The practical effect of the rule change would be for Rule 144A transaction reports in corporate bonds to become subject to public dissemination in the manner of other fixed-income secondary trading. As of July 17, 2013, the SEC has not published the amendment for comment.1

About TRACE

FINRA currently requires any member that is a party to a transaction in a "TRACE-eligible security" to report the transaction to TRACE by submitting a trade report. TRACE-eligible securities include any debt security that is US dollar-denominated and issued by a US or foreign private issuer, including those sold pursuant to Rule 144A, and any debt security that is US dollar-denominated and issued or guaranteed by a US executive agency or a Government-Sponsored Enterprise.2 FINRA Rule 6730(a) generally requires any transaction in a TRACE-eligible security, subject to certain exceptions, to be reported to TRACE within 15 minutes of the transaction. FINRA Rule 6730(c) requires the trade report to contain information on size, price, time of execution, the amount of commission and the date of settlement, among other items. Currently, FINRA Rule 6750 permits FINRA to disseminate information on all transactions in a TRACE-eligible security, subject to certain exceptions, immediately upon receipt of the report. Under FINRA Rule 6750(c), transactions excluded include those effected pursuant to Rule 144A, and primary market sale transactions sold on the first day of trading of a security, which are defined for purposes of the TRACE rules as "list or fixed offering price transactions."

The Proposal

FINRA has proposed to remove transactions effected pursuant to Rule 144A from the list of excepted transactions for which it disseminates information. Thus, under the proposed amendments, FINRA would disseminate information on secondary market transactions effected pursuant to Rule 144A. Information regarding primary transactions, on the other hand, would continue to be exempt from dissemination. The Proposal also includes changes to permit the inclusion of data regarding Rule 144A transactions in the data sets it sells to market participants, including with respect to historic Rule 144A transactions effected as of or after July 2, 2002.

Conclusion

With this proposed rule change, FINRA seeks to increase transparency in Rule 144A transactions and, in its view, to modify its rules to be consistent with changes to Rule 144A mandated by the JOBS Act. As noted above, the practical effect of this proposal would be that transaction information regarding corporate bonds sold under Rule 144A would be disseminated by TRACE. If this proposal is adopted, transactions in certain classes of fixed-income securities that are routinely sold pursuant to Rule 144A, such as high-yield securities, will now be subject to public dissemination of trade reports.3 During the short-term, transitional period after public dissemination commences, the pricing impact of publicly-available trade report dissemination will be most clearly felt.

Footnotes

1. The proposed rule change http://www.finra.org/web/groups/industry/@ip/@reg/@rulfil/documents/rulefilings/p297240.pdf is available on FINRA's website. FINRA previously published the rule for comment to its members. See Regulatory Notice 12-39 http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p163711.pdf. A number of comment letters were submitted in response to the prior notice to members, including letters from major financial trade associations. The comment letters reveal varying points of view from different market participants, including some for and some against the proposal. Once the SEC publishes the rule, the rule will be open for comment again. FINRA Regulatory Notices and NASD Notices to Members are available at FINRA's Internet website, www.finra.org.

2. TRACE-eligible security does not include a debt security that is issued by a foreign sovereign, a US Treasury security or a money market instrument. See FINRA Rule 6710(a).

3. Fixed income securities sold pursuant to Rule 144A have been reported to FINRA since July 1, 2002. See NASD Notice to Members 01 18. http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p003897.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions