How to Clean Enhanced TRACE Data

Abstract

This note is a supplement to Liquidity biases in from the Journal of Fixed Income, 2009. The note updates the transaction data filter to handle Enhanced Historic TRACE data and provides SAS code for the new filter (now including the 2012 change). As an example, there are 6.7 mill raw transaction reports in 2007. 440,000 are deleted as known errors. 780,000 are deleted as agency transactions. Finally, 1.6 mill are deleted as interdealer double counted transactions. In total the filter deletes almost 35% of the raw transactions.