text: FINRA And MSRB Issue Guidance On New Trade Confirmation Requirements - Finance and Banking - United States
  United States: FINRA And MSRB Issue Guidance On New Trade Confirmation Requirements
  FINRA and the MSRB issued guidance, in the form of Frequently Asked Questions, on new confirmation disclosure requirements that apply to transactions with retail customers in corporate debt, agency debt and municipal securities. These requirements will go into effect on May 14, 2018.
  As previously covered, the changes to FINRA Rule 2232 and MSRB Rule G-15 will require a broker-dealer to disclose its markup or markdown on principal transactions in corporate debt, agency debt and municipal securities on trade confirmations for retail customers. The disclosure will be required if a firm enters into an offsetting principal transaction (or transactions) on the same day in an amount at least equal to that of the retail customer transaction. In addition, retail customer confirmations for transactions in corporate debt, agency debt and municipal securities will be required to include (i) the time of execution of the transaction, to the nearest second, and (ii) a security-specific URL that contains trade-price data regarding the relevant security.
  The FINRA and the MSRB FAQs address interpretive questions relating to the new disclosure requirements, including:
  the scope of transactions subject to the markup disclosures, including offsetting transactions triggering the markup disclosure, the treatment of offsetting transactions with affiliates, the content and form of the markup disclosure, and exceptions to the markup disclosure requirement;
  determination of the prevailing market price of a security for purposes of calculating markup, which incorporates the application of FINRA Rule 2121 (Fair Prices and Commissions) "waterfall" analysis in determining the appropriate benchmark to use; and
  compliance with the time-of-execution and security-specific URL disclosures.
  Confirmation requirements are discussed in good detail in the Communications Chapter of the Broker-Dealer Guide. Firms should very carefully test their confirmation disclosure under the new requirements because the required technology is not trivial and will require constant checking to determine that purchases and sales are being properly matched.