SUBMITTED ELECTRONICALLY

February 15, 2024

Vanessa A. Countryman
Secretary
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549

Re: File Number SR-MSRB-2024-01; Release No. 34-99402; Notice of Filing of a Proposed Rule Change to Amend MSRB Rule G–14 to Shorten the Timeframe for Reporting Trades in Municipal Securities to the MSRB.

File Number SR-FINRA-2024-04; Release No. 34-99404; Notice of Filing of a Proposed Rule Change to Amend FINRA Rule 6730 (Transaction Reporting) to Reduce the 15-Minute TRACE Reporting Timeframe to One Minute.

Dear Ms. Countryman,

The Securities Industry and Financial Markets Association,1 jointly with its Asset Management Group2 (collectively, “SIFMA”), appreciates this opportunity to comment on SR-MSRB-2024-01 (the “MSRB Proposal”) filed with the SEC by the Municipal Securities Rulemaking Board (the “MSRB”) and SR-FINRA-2024-04 (the “FINRA Proposal” and together with the MSRB Proposal, the “Proposals”) filed with the SEC by the Financial Industry Regulatory Authority (“FINRA” and, together with the MSRB, the “SROs”).

The Proposals include a request for comment on shortening the trade reporting timeframe for transactions in covered fixed income securities required to be reported to each of the SRO’s respective trade reporting system. The Real-Time Transaction Reporting System (“RTRS”) is the system operated by the MSRB for the reporting of trades in most municipal securities,3 and the Trade Reporting and Compliance Engine (“TRACE” and, together with RTRS, the “Reporting Systems”) is the system operated by FINRA for the reporting of trades in most dollar-denominated debt securities of corporate issuers, federal agencies, government-sponsored enterprises and the U.S. Treasury (collectively, “TRACE-Eligible Securities”).4 Except where otherwise specifically provided, our comments in this letter apply to both Proposals and with respect to both Reporting Systems.

I. Executive Summary

Improvements to transparency in fixed-income markets should be implemented thoughtfully so as to enhance transparency to market participants while balancing costs and preserving smooth market function. We believe the current transparency framework achieves timely reporting and strikes an appropriate balance between benefits to market participants against associated burdens. The proposed transition to one-minute reporting has neither been adequately examined or justified, nor do we believe that the proposed one-minute reporting rule can be adopted without exposing the broker-dealer community to significant liability and creating risk to the function of some fixed income markets. Nonetheless, we provide our comments in the context of this proposal that would implement a one-minute requirement for many markets.

Fundamentally, subjecting the fixed income market to trade reporting requirements that appear to be inspired by the equities markets is misguided. The fixed income markets, including the municipal securities market, are not the equity market, and over-the-counter execution, where elements of trading and post-execution processing rely on manual processes, or are subject to still developing and non-comprehensive automation, remains common. We do not believe an across-the-board one-minute reporting requirement is feasible due to the lack of full post-trade automation stemming from the importance of bilateral negotiation in many fixed income markets. SIFMA believes a robust manual trade exemption, as well as a de minimis exemption to protect smaller dealer members,would be required if the Proposals move forward. The manual trade exemption as proposed, however, is not a panacea, and further, as we note, even one minute reporting for certain fully-electronic trades remains unworkable.

In sum, we believe FINRA and MSRB should reconsider if a 1-minute trade reporting requirement is appropriate for fixed income markets, and if a decision is made to proceed with this proposal, they should:

• Implement a broad exemption for manual trades;
• Provide relief for certain electronic trades where system processing limitations prevent one-minute reporting, including allocation trades;
• Examine impacts to liquidity, depth, concentration, and transparency prior to stepping reporting times to shorter intervals to ensure markets are not harmed by shorter trade reporting timeframes; and
• Implement the proposed de-minimis exemption.

 

1 SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate for legislation, regulation and business policy, affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).

2 SIFMA’s Asset Management Group (SIFMA AMG) brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management firms whose combined assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds. For more information, visit http://www.sifma.org/amg.

3 Reporting of trades in municipal securities to RTRS is governed by MSRB Rule G-14, on Reports of Sales or Purchases.

4 TRACE-Eligible Securities are defined in, and the reporting of trades in TRACE-Eligible Securities to TRACE is governed by, the FINRA Rule 6700 Series, on Trade Reporting and Compliance Engine (TRACE).