Subject: File No. SR-FINRA-2009-004
From: Robert F Anderson, CFA
Affiliation: Senior Managing Director, Fixed Income Trading

April 17, 2009

TRACE for Non-Agency MBS not GSE Debt

Comment on SEC/FINRA File No. SR-FINRA-2009-004 submitted to the Federal Register on 4/14/2009

The initiation of this File No. SR-FINRA-2009-004 transparency rule regarding Agency issue debt may not address the real problem in our financial system. A more pressing issue is the lack of transparency in the non-agency structured mortgage market. Non Agency Whole Loan bond transactions are the securities responsible for a breakdown in trust between financial institutions and should be the ones required to be put on TRACE.

It is all too easy to determine valuations on GSE issued debt. Tradeweb, Bloomberg, ICAP and many other electronic platforms provide real time pricing in virtually every sector of this market. Adding GSE issued debt to TRACE will probably make a minimal difference to the marketplace.

The real issue for TARP managers, Bank managers, Government officials and the Administration is the issue of creating transparency in the "Toxic Asset" sector of the mortgage backed securities (MBS) markets. This would be in the area of sub-prime, Alt-A, mezzanine, prime, near prime and other classes of whole loan backed structured bonds. These are the bonds that are hurting our financial sector and these are the bonds that regulators and portfolio managers need help in valuing.

Billions of dollars worth of "Toxic Assets" trade every day on Wall Street and "Toxic Assets" are really no different than the high yield corporate bonds that must be reported on TRACE. A saying in the bond business is there are no bad bonds just bad prices.

FINRA has the right idea regarding improved transparency and price discovery only they may have chosen the wrong asset class. The TRACE rules need to be extended to non-agency structured securities. Only then will there be a fair and efficient way to value these assets.