[12963]
December 22, 2000
TO: FIXED-INCOME ADVISORY COMMITTEE No. 16-00
RE: ICI COMMENT LETTER ON NASD’S PROPOSED "TRACE" AMENDMENTS
The Institute has filed a comment letter with the Securities and Exchange Commission in
connection with the NASD’s proposed amendments to its TRACE proposal. The letter is
attached, and it is substantially similar to the draft letter we previously sent to you.1 The
comment letter supports the NASD’s proposed amendments, but notes that several issues that
were raised in our previous comment letter on the original proposal2 were not reflected. The
letter thus urges the NASD to reconsider those comments in the current rulemaking process.
The letter then discusses the NASD’s proposal to create a new committee, the Bond
Transaction Reporting Committee (“Committee”), that will monitor TRACE operations and
advise the NASD Board of Governors on TRACE-related issues, including, among other things,
the setting of fees for, and the effects on liquidity associated with, disseminating real-time
TRACE data to the public. The letter supports this initiative but expresses concern that the
proposed 8-member Committee, which would consist of four persons recommended by the
NASD staff and four recommended by The Bond Market Association, would likely result in
eight “sell-side” members.
The letter therefore urges the NASD to modify its proposal to include equal “buy-side”
representation, and emphasizes the importance of having the views of both market constituents
considered and reflected in all significant TRACE-related developments. The letter points out
that the composition of the Committee could be modeled after the Nasdaq Quality Markets
Committee, which focuses on equity market structure issues and whose members reflect equal
buy-side and sell-side representation. Finally, the letter emphasizes that given the important
role the Committee will have in monitoring TRACE operations, it is all the more imperative that
investor representatives participate in the process. Their involvement will only enhance the
effectiveness of the Committee and ultimately allow TRACE to achieve its important objectives.
Barry E. Simmons
Associate Counsel
Attachment
1 See Memorandum to Fixed-Income Advisory Committee No. 14-00, dated December 15, 2000.
2 See Memorandum to Fixed-Income Advisory Committee No. 3-00, dated February 11, 2000.
2Attachment (in .pdf format)