MSRB Publishes Issue Brief on Regulatory Framework for Municipal Market Derivatives

Date: April 9, 2018

Contact: Jennifer A. Galloway, Chief Communications Officer


Washington, DC –  The Municipal Securities Rulemaking Board (MSRB) today published an issue brief on the regulatory framework for municipal market swaps and other derivatives. The information is intended as a resource for all market participants, including municipal securities issuers that may be considering such alternative structures in light of the elimination of tax-exempt advance refunding bonds in the Tax Cuts and Jobs Act of 2017. The issue brief also covers the intersection of derivatives regulation with MSRB rules for municipal advisors.

“Municipal derivatives may become a more common alternative to issuing tax-exempt advance refunding bonds,” said MSRB President Lynnette Kelly. “We want to complement existing resources available from the Government Finance Officers Association and the National Association of Bond Lawyers with a primer on the regulation of municipal market derivatives.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act established the regulatory framework for derivatives, granting authority to the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to adopt rules for the various participants in the swaps and derivatives market. The derivative products most commonly used in the municipal securities market are regulated by the CFTC, and some of the CFTC’s regulatory requirements are more stringent when the client is a state or local government entity.  

“Municipal entities that engage in swap transactions should be aware of the important protections afforded to them by the Dodd-Frank Act and federal regulations,” Kelly said. “Today’s issue brief provides a good overview.”

Read the issue brief. View additional issues briefs, reports and commentary from the MSRB.

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 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.