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Regulation and Compliance > Federal Regulation > FINRA

FINRA Updates Business Continuity, Disaster Recovery Guidance

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The Financial Industry Regulatory Authority has issued guidance to state that firms reporting a “significant volume” of transactions in Treasury securities to TRACE must now participate in FINRA’s annual business continuity and disaster recover test.

In 2015, FINRA adopted Rule 4380, requiring member firm participation in business continuity and disaster recovery (BC/DR) testing.

The rule authorizes FINRA to designate firms that must participate in FINRA’s annual BC/DR test based on established standards, which FINRA published in Regulatory Notice 15-43.

Since FINRA published Notice 15-43, the broker-dealer regulator started collecting transaction reports for U.S. Treasury securities.

Regulatory Notice 18-09, issued Wednesday, updates the criteria to include criteria for designating firms that report a significant volume of transactions in U.S. Treasury securities to TRACE for mandatory BC/DR testing participation.

With respect to Trade Reporting and Compliance Engine, or TRACE, for Treasuries, FINRA states that it “will designate participants that account for at least 5% or more of the average dollar volume over the six-month period immediately preceding designation, provided that the cumulative dollar volume represented by designated firms amounts to at least 50% of all dollar volume in Treasury securities reported to TRACE during the applicable six-month period.”

The criteria contained in Notice 15-43, including the criteria for designating TRACE participants that account for specified activity in corporate and agency debt securities and securitized products, remain otherwise unchanged, FINRA said.

The designation process and test-related guidance in Notice 15-43 also remain unchanged, FINRA states, adding that it expects that the designation and test schedule will be similar in 2018 to 2017, with designation occurring in April and the test occurring in October.


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