ASF, SIFMA Urge Reforms to MBS-Reporting Proposal
The American Securitization Forum (ASF) and the Securities Industry and Financial Markets Association (SIFMA) issued a joint letter to the Securities and Exchange Commission (SEC) addressing a proposal to expand the scope of certain reporting requirements regarding securitization. The Financial Industry Regulatory Authority (FINRA) proposed a rule change to define mortgage-backed securities (MBS) and other securities as Trade Reporting and Compliance Engine (TRACE)-eligible securities. The proposal would require firms to report transactions in such securities to TRACE. ASF and SIFMA indicated a "generally supportive" reception of the proposed rule change, but said FINRA could implement a few changes to reduce compliance burdens on the reporting broker-dealers. The joint letter (available to download here) urged FINRA to update the TRACE Issue Master file with information for all available outstanding asset-backed securities (ABS) before reporting is implemented for securitized products. FINRA could lessen the compliance burden on dealers trying to report supplementary data where the reference data from other sources like the agencies and vendors is incomplete. The letter asked FINRA to do this by having commercially available data feed into the TRACE system on an automatic basis. If FINRA acts as the only source gathering and verifying information available from commercial sources, manual errors can be reduced and efficiency will be improved from the current process with multiple reporting sources. ASF and SIFMA also urged FINRA to reconsider the process that generates the symbol used in reporting trades. The FINRA symbol could be revitalized to provide more information regarding the referenced security's asset class and issuance year. They asked FINRA to consider an earlier cutoff time than 5 p.m. EST for reporting trade information to TRACE. Write to Diana Golobay.