What Is Real-Time Trade Reporting?

Real-time trade reporting refers to a regulatory requirement that market makers (MMs) publicly report each transaction immediately after it is completed. Real-time trade reporting improves efficiency and transparency in the market.

Real-time trade reporting should be confused with real-time quotes (RTQs), which instead provide bid and offer information about an asset's price and does not report trade details or trading activity.

Key Takeaways

  • Real-time trade reporting is a regulation mandating market makers and specialists on exchanges to disseminate trade details to the public within 90 seconds of execution.
  • Near-immediate trade data improves market transparency, accountability, and efficiency for stock exchanges.
  • Automated electronic systems such as TRACE allows OTC trades to be reported in real-time as well.

Understanding Real-Time Trade Reporting

Real-time trade reporting is a requirement for market makers to publicly report a transaction within 90 seconds of its execution. Traded stocks are subject to real­-time trade reporting, and such reporting is enforced by the Financial Industry Regulatory Agency (FINRA), formerly known as the National Association of Securities Dealers (NASD). 

FINRA is a private corporation that acts as a self-regulatory organization. It is a non-governmental organization that regulates member exchange markets and brokerage firms. The government agency that acts as the ultimate regulator of the securities industry, including FINRA, is the Securities and Exchange Commission (SEC).

Real-time trade reporting is recorded in the Trade Reporting and Compliance Engine (TRACE). TRACE provides individual investors and market professionals with access to information on nearly all over-the-counter (OTC) public and private trading activity. The TRACE program offers a consolidation of transaction data for public and private corporate bonds and agency debt, which includes asset-backed securities and mortgage-backed securities.

The TRACE system requires execution time to be reported as Eastern Time in Military Format. The TRACE Rules also require regulatory reports be made in Eastern Time, even if this means converting both the time and date of execution to Eastern Time. Firms, however, are not required to confirm to their customers a trade date or execution time that is in Eastern Time.

Why Real-Time Reporting Matters

Real-time trade reporting strengthens price transparency in the market. Price transparency refers to the availability of information about the bid and ask prices, as well as trading quantities, for a specific stock. Price transparency matters because knowing what others are bidding, asking, and trading can help determine the supply and demand of a security, good, or service, and further determine its true value. If the information proves to be insufficient or inaccessible, that specific market may be deemed inefficient.

At its core, market efficiency measures the availability of market information to provide the maximum number of opportunities for purchasers and sellers of securities to effect transactions without increasing transaction costs. A lack of price transparency puts consumers and investors at a disadvantage. For example, in health care, patients often do not know what a specific medical procedure actually costs, leaving them without much, if any, opportunity to negotiate a better price.