5.9.3.2. Reporting System for Bonds
Unlike stocks, bonds are not generally traded on exchanges. Instead, bond trading takes place directly between broker-dealers, banks, mutual funds, and other market makers in a decentralized, over-the-counter market. Bonds have not been well suited to exchange trading because they are less uniform and more varied than stocks. A large corporation might have dozens of different bond issues. In addition, there are government and agency bonds, corporate bonds, municipal bonds, mortgage and collateralized debt obligation bonds, and foreign bonds.
The Transaction Reporting and Compliance Engine (TRACE) is FINRA’s automated system for reporting trades in OTC debt securities. TRACE does not accept quotes or execute trades; it only reports completed trades. Both the buy and the sell sides are required to report TRACE trades. The trades must be reported within 15 minutes during normal business hours. If the report is made within the 15-minute limit, it will be displayed immediately. Tr