FINRA proposed a rule change that would expand the definition of "Agency Debt Securities," as used in the Trade Reporting and Compliance Engine ("TRACE") rules, to include credit risk transfer securities ("CRTs") issued by Fannie Mae- or Freddie Mac-sponsored trusts.
Currently, Agency Debt Securities include those issued or guaranteed by Government Sponsored Entities ("GSEs"). As a result of changes made by Fannie Mae and Freddie Mac in their issuance structures, CRTs will no longer be issued as direct debt obligations of the GSEs; instead, they will be issued by sponsored trusts, with proceeds from CRT sales managed by a third-party trustee. Under the current rules, such transactions would be defined as corporate debt, and thus subject to a lower transaction size dissemination cap – i.e., for corporate debt, sizes of transactions over $1 million are not disclosed, while for CRTs, transaction size is currently disclosed up to $5 million. Expanding the definition of Agency Debt Securities would allow for continued public dissemination of trade sizes up to $5 million.
FINRA is requesting comment from the public on the proposed rule change, which was filed with the SEC for immediate effectiveness.
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