NASD trade reporting under Trace expands to cover all corporate bonds

New York, Feb. 7 - Reporting of transaction and price data for all corporate bonds began Monday under the NASD's Trace (Trade Reporting and Compliance Engine) system.

Around 99% of corporate bond trades will be reported in real time with the remaining 1% reported on a delayed basis. The 1% is almost entirely infrequently traded bonds involving dealers and institutional investors.

"This is a market that has been largely a mystery to retail investors - even though two out of three corporate bond transactions are carried out at the retail level," said Doug Shulman, NASD's president of markets, services and information, in a news release.

"NASD believes there is no better way to build investor trust than for the markets to operate in total daylight. And it's hard to argue that an investor should know less when he makes a loan to a company by buying a bond than when he buys an equity stake in the same company by purchasing a stock."

The NASD said that the Trace system will create a level playing field for all investors and allow retail buyers to determine whether the bond they re interested in has traded recently, whether they are getting a fair price, whether the price has been rising or falling and whether the bond tends to trade in a pattern similar to other bonds in the overall market, in its particular industry or within the same credit rating category.

Dealers must currently report corporate bond transactions to Trace within 30 minutes. That time lag will be cut to 15 minutes in July. The NASD noted that most bond transactions are already being reported in shorter time frames. At the end of 2004, more than 82% of transactions were reported in five minutes or less.

Trace was launched in July 2002, reporting initially on 500 bonds. In April 2003 Trace increased reporting to 4,600 bonds and jumped to 17,000 bonds last October.

The NASD said Trace will cover 99% of trades in eligible securities and 95% of the par value traded.

Exceptions are:

* Newly issued BBB Trace-eligible securities, where trades will be disseminated on the third business day after pricing;

* Newly issued Trace-eligible securities rated BB and lower, where trades will be disseminated beginning on the 11th business day;

* Trades over $1 million par value in BB rated Trace-eligible securities which trade on average less than once a day; these trades will be disseminated two business days from the time of execution;

* Trades over $1 million par value in securities rated B or lower in Trace-eligible securities that trade on average less than once a day will be disseminated four business days from the time of execution.

Secondary trades in securities issued under rule 4(2) and trading under Rule 144A will not be distributed.

Corporate bond transaction data is available free of charge to retail investors at www.nasdbondinfo.com. Real-time data is also available on the Bond Market Association's web site at www.investinginbonds.com.

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