MSRB Improves Calculation of ARS Bid-to-Cover Ratio

Date: December 10, 2012

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


Alexandria, VA ‒ The Municipal Securities Rulemaking Board (MSRB) today announced it has improved its calculation of bid-to-cover ratios for auction rate securities (ARS) to provide a ratio that is more consistent with bid-to-cover ratios calculated for Treasury auction results.

The MSRB’s Electronic Municipal Market Access (EMMA®) website has since 2011 displayed bid-to-cover ratios, which provide an indication of demand for ARS in ARS auctions. The ratio initially reflected the aggregate par amount of securities bid relative to the aggregate par amount of securities offered for sale in an auction. The calculation did not take into account the par amount of securities held that were not tendered for sale. The MSRB recently obtained additional data about ARS allowing it to complete its planned development of an improved bid-to-cover calculation.

Today’s changes also include the removal of orders from program dealers from the MSRB’s calculation to more closely reflect investor activity in ARS. Although the calculation of bid-to-cover ratios will no longer factor in such program dealer orders, the EMMA website continues to display data on all orders placed in connection with ARS auctions, including orders placed by program dealers.

“The MSRB has worked to offer investors a more meaningful and understandable calculation of bid-to-cover ratios for auction rate securities,” said MSRB Executive Director Lynnette Kelly. “The MSRB also encourages ARS investors to look at the underlying data available on the EMMA website for more detailed information.”

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.