Thursday, August 1, 2013

FINRA's Market Data Center

By Tim Dulaney, PhD and Tim Husson, PhD

FINRA has a number of useful web-based tools on their website.  We mention their BrokerCheck tool quite often, as it allows investors to check on the professional background and disciplinary history of any particular broker or firm registered with the agency.  Another very useful tool is their Market Data Center, which provides a wide variety of market data for free.

Perhaps the most useful aspect of the Market Data Center is the the TRACE (Trade Reporting and Compliance Engine) database.  TRACE tracks the trade history of corporate bonds, both investment grade and high yield, in a similar fashion as the MSRB's EMMA (Electronic Municipal Market Access) system tracks municipal bonds.  We've written a whole series of posts about EMMA, which allows investors to assess whether or not they have been charged excessive markups on municipal bond trades.

Investors can use a similar method to assess corporate bond trades using TRACE.  In the Bond Section, you can type in an issuer or CUSIP to find a variety of data and metrics for any particular bond, including its trade history (see an example trade history here).  This free tool offers investors a great deal of information and transparency that would otherwise require a (very expensive) Bloomberg subscription or other proprietary data source.

In fact, just this Monday FINRA expanded its TRACE system to include agency pass-through mortgage-backed securities (MBS) and Small Business Administration (SBA) backed securities.  They also have plans to expand their database even further, adding securities "backed by credit card receivables, automobile and student loans, and a variety of other credits."  These efforts to increase market transparency help retail investors and market analysts understand these relatively complex securities.

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