December 6, 2021

Volume XI, Number 340


December 03, 2021

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FINRA Modifications to TRACE Dissemination Protocols for Specified Pool Transactions (MBS)

On April 6, the Financial Industry Regulatory Authority (FINRA) announced further updates to its Trade Reporting and Compliance Engine (TRACE) dissemination protocols for specified pool transactions, as described in Regulatory Notice 21-02 published on February 2.

FINRA disseminates a Reference Data Identifier (RDID) for specified pool transactions. The RDID represents approximated values for underlying data elements, such as the Loan-to-Value (LTV) ratio, original maturity and coupon, widely used to project cash flows and prepayment rates.

As part of the February 2 release, FINRA noted that it is modifying the convention for rounding the original LTV of transactions in agency pass-through mortgage-backed securities and Small Business Administration (SBA)-backed asset-backed securities traded in specified pool transactions. LTV ratios will be segmented into eight categories between zero and 121+, and FINRA will show the LTV as the upper limit of the applicable category.

The change will become effective on May 17. On that day, the TRACE RDID Master File will be updated with the changes. Because the volume of RDID reassignments that will occur on May 17 may impact system processing, FINRA is posting a sample test MBS Master File on from April 19 to May 14. This file will allow users to test the volume of changes that will occur.

FINRA Regulatory Notice 21-02.

Further discussion of Regulatory Notice 21-02.

©2021 Katten Muchin Rosenman LLPNational Law Review, Volume XI, Number 99

About this Author

Susan Light, Katten Law Firm, Finance Law Attorney, New York

Susan Light focuses her practice on financial services regulatory matters. She counsels broker-dealers, hedge funds, investment banks and financial services clients on enforcement issues involving the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), other self-regulatory organizations (SROs) and state and federal regulatory authorities. She has particular experience related to sales practice issues, financial and operational issues, anti-money laundering, crowdfunding, cybersecurity, and cryptocurrencies.