November 15, 2009
Re: File Number SR–FINRA–2009–065
Timeliness and Urgency
FINRA is correct to amend the rules and designate Asset-Backed Securities (ABS) as TRACE eligible securities but there appears to be a certain lack of urgency in the way that FINRA suggests that it be implemented. As you know, our inability to properly value these securities a year ago helped bring our financial system to the brink of collapse. And it was that crisis that prompted the Treasury Department to suggest in the White Paper: Financial Regulatory Reform (bottom of page 45) that ABS transactions be reported on TRACE.
While TARP money stabilized the financial system by propping up our banks, their core ABS assets still remain difficult to value. If the markets return to a period of high volatility and fear those assets will once again become impossible to value and the system will be vulnerable to another panic. The Treasury Department suggested adding ABS to TRACE to mitigate that problem and they probably intended for it to happen quickly. However the inclusion of Rules 6730(a) (6) and 6750 delays its implementation indefinitely and pushes off to some undisclosed time in the future the transparency that we need today.
In an increasingly wired world it is difficult to understand why FINRA needs a year to study the data and even then will only release it privately on a limited scope. It is also difficult to understand why FINRA isn't going to require the information in near real-time and why the data is not going to be shared with the public. Limiting which types of ABS are required to be reported and excluding the public from sharing in the ABS data as laid out in rule 6750 only makes sense if the financial markets believe that our government is infallible. Indeed, unless Rule 6730(a) (6) and Rule 6750 are amended or stricken, the American tax payer will be at risk for as long as FINRA delays implementation.