MSRB Seeks to Expand Transparency of Variable Rate Securities

Date: March 10, 2010

Contact:             Jennifer A. Galloway, Chief Communications Officer
                         (703) 797-6600



Alexandria , VA – The Municipal Securities Rulemaking Board (MSRB) today filed a proposal with the Securities and Exchange Commission (SEC) to expand information that is publicly available about variable rate demand obligations and auction rate securities.  If approved, the MSRB would publish on its EMMA website information such as documents that provide for bank liquidity support for variable rate demand obligations and auction rate securities bidding information that would allow investors to determine whether auctions are being supported by dealers.

“The MSRB continues to require greater transparency in the municipal market,” said MSRB Executive Director Lynnette Kelly Hotchkiss. “By expanding the available information about auction rate securities and variable rate demand obligations, the investing public will have even more information with which to make investment decisions.”

Under the proposal, the MSRB would collect from municipal securities dealers liquidity facility documents for variable rate demand obligations (VRDOs) such as Letters of Credit and Stand-by Purchase Agreements.  These documents provide for different forms of liquidity support for VRDOs and set forth the potential implications of credit downgrades on VRDO liquidity. 

Dealers also would be required to report auction rate securities bidding information – including data on whether an auction succeeds through market bids or through dealer support – as well as interest rate setting mechanisms and documents that define auction procedures. All information would be made available on the MSRB’s Electronic Municipal Market Access (EMMA) website, already provides free public access to interest rate information for VRDOs and ARS.

If approved, the MSRB will provide at least 60 days’ notice prior to the effective date.

The MSRB protects investors, state and local governments and other municipal entities, and the public interest by promoting a fair and efficient municipal securities market. The MSRB fulfills this mission by regulating the municipal securities firms, banks and municipal advisors that engage in municipal securities and advisory activities. To further protect market participants, the MSRB provides market transparency through its Electronic Municipal Market Access (EMMA®) website, the official repository for information on all municipal bonds. The MSRB also serves as an objective resource on the municipal market, conducts extensive education and outreach to market stakeholders, and provides market leadership on key issues. The MSRB is a self-regulatory organization governed by a 21-member board of directors that has a majority of public members, in addition to representatives of regulated entities. The MSRB is overseen by the Securities and Exchange Commission and Congress.