Notice to Member Summaries Continued

NTM 05-77

The NASD provided interpretive guidance on the obligation of members to report to the Trade Reporting and Compliance Engine (TRACE) transactions in TRACE-eligible securities, including the exercise or settlement of options; the termination, settlement of or other events triggering a transaction in TRACE-eligible securities in credit default swaps or other types of swaps; or the exercise, termination, settlement of or other events triggering a transaction in TRACE-eligible securities for other similar instruments.

The term "TRACE-eligible security" shall mean all United States dollar denominated debt securities that are depository eligible securities, Investment Grade or Non-Investment Grade, issued by United States and/or foreign private issuers, and: (1) registered under the Securities Act of 1933; or (2) issued pursuant to the Securities Act of 1933 and purchased or sold pursuant to Rule 144A of the Securities Act of 1933. The term "TRACE-eligible security" excludes debt issued by government-sponsored entities, mortgage- or asset-backed securities, collateralized mortgage obligations, and money market instruments. For purposes of the TRACE reporting rules, the term "money market instrument" means a debt security that at issuance has a maturity of one year or less. RETURN TO INDEX