OPINION: Bond Tape is a Matter of Time


The discussion of whether there will be consolidated tape for fixed income products is no longer a matter of if, but when.

The wheels already are in motion for public disclosure of US Treasury trades. They are not moving quickly, but they are moving.

First came the Joint Staff Report regarding the October 2014, in which the US Department of the Treasury, Board of Governors of the Federal Reserve System, Federal Reserve Bank of New York, the Securities and Exchange Commission, and the Commodity Futures Trading Commission concluded that public reporting would be for the greater good of the market.

The SEC then approved Finra’s request to begin collecting US Treasuries trade data to enhance the regulators’ ability to understand the Treasury market in October 2016. Finra is slated to begin collecting the trade data on July 10.

The SEC and Finra also have been speaking with the CAT NMS Plan’s Operating Committee regarding expanding the support of the Consolidated Audit Trail to other asset classes, including fixed income recently.

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Although the SROs proposed and are developing the CAT to meet regulatory requirements, it is a perfect candidate for mission creep.

Once the regulators have the fixed income trading community comfortable reporting the details of their trades regularly, it is only a matter of time before the regulator’s desire and the demand by certain industry participants to disseminate this data will be overwhelming.

Disseminating the Treasury market data would not happen immediately since the CAT NMS Plan Operating Committee and Thesys CAT LLC, the plan processor, are just begging to develop the technical specifications for reporting cash equities and listed options trades by broker-dealers, exchanges, and alternative trading systems.

Yet, there is no better time for the SEC and Finra to plan the migration fixed income trade reporting from Trace to the CAT.

Assuming that the new reporting platform would use the FIX messaging protocol, it only makes sense to future-proof the CAT’s message architecture by including the necessary FIX fields that support fixed income instruments and trades.

The migration likely would not take as long as the cash equities and listed options migration due to lessons learned along the way.

Expect to hear more of this topic popping up in various industry working groups, advisory committees, and industry association meetings.

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