FINRA Alert! Notice of Filing of a Proposed Rule Change to Expand TRACE Reporting Requirements to Trades in U.S. Dollar-Denominated Foreign Sovereign Debt Securities. Currently, US dollar-denominated debt of foreign sovereign issuers NOT subject to TRACE
SR-FINRA-2022-011 34-94891
Notice of Filing of a Proposed Rule Change to Expand TRACE Reporting Requirements to Trades in U.S. Dollar-Denominated Foreign Sovereign Debt SecuritiesComments due: 21 days after publication in the Federal RegisterAdditional Materials: Exhibit 2a, Exhibit 2b, Exhibit 5
- Submit Comments on SR-FINRA-2022-011
RedAs of December 31, 2021, the total amount outstanding of marketable U.S. dollar denominated foreign sovereign debt was approximately $2.0 trillion across 2,400 securities issued by 163 foreign sovereign governments. This compares to approximately $22.6 trillion, $1.4 trillion, and $10.1 trillion, respectively, in marketable U.S. Treasury Securities, Agency Debt Securities, and U.S. corporate debt.
In 2021, U.S. and foreign sovereign governments issued in aggregate approximately $6.1 trillion of marketable U.S. dollar-denominated debt. Foreign sovereign governments issued $259 billion of it, representing approximately 4.3% of the total amount, and the U.S. Government (U.S. Treasury Securities and Agency Debt Securities) issued the remaining amount, $5.83 trillion. By comparison, foreign and domestic private issuers issued a total of $1.96 trillion in U.S. dollar-denominated corporate debt in 2021.
Requiring members to report transactions in U.S. dollar-denominated foreign sovereign debt securities to TRACE would benefit regulatory oversight of the fixed income markets by providing FINRA with important data regarding member activity in this space. In particular, the receipt of the transaction price, par value traded, and other transaction information in TRACE would create a better-informed surveillance program to help detect fraud, manipulation, unfair pricing, and other potential misconduct. Academic studies have found a positive empirical relationship between the strength of market regulation and market quality in multiple jurisdictions, including the United States.
