MFA Letter to FINRA on Proposed Block Trade Dissemination Pilot Program

On June 11, MFA submitted comments to FINRA, raising concerns that its proposed bond block trade dissemination pilot program would harm investors, and urging FINRA to abandon the pilot program.

FINRA’s proposed pilot program is based on recommendations from the SEC’s Fixed Income Market Structure Advisory Committee and is designed to study: (1) an increase to the current dissemination caps from $5 million to $10 million for investment grade (“IG”) corporate bonds, and from $1 million to $5 million for non-IG corporate bonds; and (2) delayed dissemination of any information about trades above the proposed $10 million and $5 million caps for 48 hours.

MFA’s letter argues that immediate dissemination of post-trade data has been beneficial for investors by providing greater price transparency, decreasing transaction costs, and enhancing market efficiency—saving public investors an estimated $1 billion/year.  MFA concludes based on existing data that the likely harm to investors and overall degradation of markets from the pilot program is not worth the value of conducting it and, thus, recommended that FINRA abandon the pilot program.  In the alternative, MFA recommended that FINRA increase the current dissemination caps and reevaluate in a year whether a simpler and smaller pilot to test a dissemination delay of one-to-two hours is necessary.