SEC Approves FINRA Rules for Further Price Disclosure on Retail Transactions

The pricing disclosure would include a dealer’s mark-up and mark-down on retail‑sized transactions.

The Securities and Exchange Commission (SEC) has approved new rules, proposed by the Financial Industry Regulatory Authority (FINRA), requiring members to disclose mark-ups and mark-downs for certain fixed-income securities on retail customer’s trade confirmations.

The new reporting obligations, which will be implemented at a date to be announced later in a separate regulatory notice, is designed to help retail customers understand and compare transaction costs in corporate and agency debt securities.

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The disclosure requirement will provide meaningful pricing information that helps retail investors monitor costs and get useful insights into their brokers’ pricing practices. In addition, it should help individual traders avoid paying higher costs than others do for similar trades.

More specifically, if a firm engages in a principal trade with a retail customer in a corporate or agency debt security and then executes a transaction with one or multiple parties for the same security within the same trading day, it would be required to disclose its mark up or mark-down from the prevailing market price for the security on the customer confirmation. In addition, the member firm will have to include the execution time and a reference to trade-price data in the security from TRACE, FINRA’s Trade Reporting and Compliance Engine.

Municipal Securities Rulemaking Board has also proposed amending the existing rules to require the disclosure of various pricing information for certain retail transactions in debt securities. The SEC approved the MSRB’s proposal to harmonize the requirements with FINRA’s rulebooks and eases implementation for the securities industry.

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