Real-Time Transaction Reporting System

Corbin Municipal Securities executes a customer purchase of Ashfield general obligation bonds at 10:14 in the morning on a normal trading day. Under MSRB rules, when and to whom must the transaction be reported?

1. A.To FINRA's TRACE system within 15 minutes of execution.Wrong system. TRACE covers corporate and agency debt, not municipal securities.
2. B.To the MSRB's Real-Time Transaction Reporting System within 15 minutes of the time of trade, with limited exceptions.Correct. Municipal trades are reported to RTRS within 15 minutes and feed the MSRB's public price transparency service.
3. C.To the MSRB by the close of business on the day the trade occurs.Wrong. End-of-day reporting predates real-time reporting; the current standard is 15 minutes.
4. D.To the MSRB on settlement date, since municipal prices are disseminated only once the trade has settled.Wrong. Reporting and dissemination occur near the time of trade, not at settlement.

Why: Municipal securities dealers report transactions to the MSRB's Real-Time Transaction Reporting System within 15 minutes of the time of trade, subject to narrow exceptions for specified transaction types. The reports feed the MSRB's public price transparency service, which is what allows a retail customer to see recent trade prices in an otherwise opaque market. TRACE performs the parallel function for corporate and agency debt but is administered by FINRA and does not cover municipals.

Ardmore Securities trades corporate bonds, agency notes, general obligation municipal bonds, and NYSE-listed common stock. Which of these secondary market transactions must it report to TRACE?

1. A.The municipal bond trades onlyMunicipal transactions are reported to the MSRB's RTRS system. TRACE does not accept them.
2. B.All four categories, since TRACE captures all secondary market activityTRACE is limited to eligible debt securities. Equity trades and municipal trades run through entirely different reporting systems.
3. C.The corporate bond and agency note tradesCorporate debt and agency debt are TRACE-eligible securities, and their over-the-counter secondary market transactions are reported there.
4. D.The corporate bond and NYSE-listed stock tradesEquity transactions are never TRACE-reportable; TRACE is a fixed income facility.

Why: TRACE is FINRA's reporting facility for over-the-counter transactions in eligible fixed income securities, principally corporate debt, agency debt, and securitized products. Municipal securities go instead to the MSRB's Real-Time Transaction Reporting System, and equity transactions are reported through exchange systems or a FINRA trade reporting facility. Ardmore therefore reports its corporate bond and agency note trades to TRACE.