Sell-Side Prepares to Meet FINRA Reporting

Terry Flanagan

New guidelines apply to securitized products.

Sell-side firms active in fixed income are scrambling to meet compliance requirements for reporting to the Financial Industry Regulatory Authority (FINRA).

With Dodd-Frank and other industry reforms on the horizon, firms are reviewing future requirements while considering the workflow of front, middle and back office professionals.

“From an operational perspective, sell-side fixed income firms are now required to have significantly better workflows in place to report eligible transactions to FINRA, accurately and on a timely basis,” Mike Wood, global head of Bloomberg’s Trade Order Management Solutions (TOMS), told Markets Media.

“From a market perspective, the increased transparency resulting from FINRA mandates has led to a narrowing of bid-ask spreads for reportable instruments,” he said.

TOMS automates workflow from trade capture to inventory management to post-trade processing and reporting.  It can help firms streamline integration between disparate technology platforms that pose integration issues or reporting delays.

“By hosting direct, real-time connectivity to FINRA, TOMS customers are able to report transactions as part of their standard workflow, increasing their operational efficiency,” Wood said.

More than 100 sell-side fixed income firms are using TOMS to address Trade Reporting and Compliance Engine (TRACE) guidelines for securitized products mandated by FINRA.
The latest FINRA mandates issued require broker-dealers to report trades of securitized products such as asset backed securities (ABSs), mortgage-backed securities (MBSs) and collateralized debt obligations (CDOs).

TOMS helps address these requirements by automating all aspects of trade capture, inventory and risk management and straight-through processing. The solution also provides integration with the data, news and analytics on the Bloomberg Professional service.

“Just before the last FINRA mandates were issued, we saw a big surge in interest in our TRACE solution. Now, we have more than 100 fixed income dealers up and running on the system,” Wood said.

“The expanded guidelines significantly increased the volume of transactions we needed to report to FINRA,” said Patricia Angelone, a managing director at Sandler O’Neill + Partners, LP, a Bloomberg client. We could have engineered our own technical solution, but the cost and time commitment was significant, while the deadline was rapidly approaching.”

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