Reporting Bond Trades Gets Easier
Fixed Income Clearing Corporation (FICC) has added some flexibility to how corporate and municipal bond trades get matched and reported through the Real-Time Trade Matching (RTTM) engine. And according to one operations manager, having the ability to modify trades after they’re submitted makes it a lot easier for his firm to comply with stringent regulatory reporting requirements.
The new RTTM capabilities allow trader firms to modify data elements on unmatched trades after the date of the trade – something not previously possible. In addition, RTTM now makes a dealer’s correspondent broker’s symbol a basic part of the matching process for muni bond trades. RTTM reports all firm-designated muni bond trade data to the Municipal Securities Rulemaking Board (MSRB).
Both changes in RTTM reporting functions come at an opportune time. With interest rates hovering near historic lows, state and local government agencies sold more than $409 billion worth of bonds in 2009, according to Thomson Reuters. This year, volume is expected to climb even higher, aided in part by the federal government’s Build America Bonds program, which offers higher interest rates and is likely to expand the market for municipal bonds. Corporations, hoping to expand as the economy regains footing and looking to take advantage of low interest rates, are also expected to issue more debt.Listening to customers
“We made these changes in RTTM at the request of our customers,” said Edmund Fanning, DTCC director, Clearance and Settlement/Fixed Income. “Many were frustrated that they couldn’t modify their trades to correct erroneous information after the trade date. As a result, if there was an error, they had to cancel the trade and resubmit it after trade date, resulting in late trades, possible fines and further processing delays.”
Another side effect was that the trading firms had to dedicate staff time to research and document municipal bond trades that matched in RTTM despite differences in the correspondent broker symbols that the MSRB requires.
FICC began developing the necessary systems changes in the second quarter of 2009, undertook user acceptance and connectivity testing later in the year, and launched the revised RTTM functions in the last quarter of the year.
“These changes have removed the regulatory exceptions for mismatched contra symbols,” said David Moore, vice president, Roosevelt & Cross, Inc., a firm that specializes in municipal bond underwriting and trading. “We used to have to cancel and correct trades after the fact to remedy the compliance problem. Now RTTM’s enhanced matching requirement forces both counterparts to take action sooner in order to attain a successful matched report,” Moore added. “This is much better.” @