The Financial Industry Regulatory Authority, or Finra, said Monday it is seeking to expand its corporate bond database to include debt issued by federal agencies, government corporations and government-sponsored enterprises such as Fannie Mae (FNM) and Freddie Mac (FRE).

The proposed expansion of Finra's database, known as the Trade Compliance and Reporting Engine, or Trace, would require approval by the Securities and Exchange Commission. Currently, Trace only reports real-time pricing and trade volume on corporate bonds in the secondary market.

Finra said that its proposed expansion will double the number of bonds included in Trace reporting by adding about 25,000 bonds to the database. It noted that retail investor activity in the GSE bond market is expected to be comparable to the corporate bond market.

"We believe that transparency is an extremely important ingredient for investor participation in a market," said Finra's executive vice president, Steven Joachim. "Based on our experience with corporate bonds, this expansion should help all investors - especially retail investors- get better prices because Trace has shown that transparency helps to reduce bid-ask spreads."

Investors reached Monday welcomed the move, but pointed out that there will be winners and losers in the change. Smaller shops in particular could be hurt, if price discovery cuts into their ability to charge mark-ups on trades.

"Everyone will be able to get a true sense of where the market has traded, (but) there definitely could be some people who benefit more from this than others," said Sean Simko, who manages just over $1 billion in agency debt at SEI.

Trace was established in 2002 to increase transparency in the U.S. corporate debt market. Finra is currently the largest independent regulator for the U.S. securities industry.

Finra said it expects the SEC to publish its proposal and seek public comments soon.

-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@dowjones.com