MSRB Clarifies Guidance on Dealers Posting Bids on Multiple Platforms

Date: February 7, 2019

Contact: Jennifer A. Galloway, Chief Communications Officer


Washington, DC – The Municipal Securities Rulemaking Board (MSRB) today clarified existing guidance on MSRB Rule G-18, which requires dealers to seek the most favorable terms reasonably available for retail customer transactions in municipal securities. The updated guidance specifically addresses the practice of dealers posting a solicitation for bids simultaneously through multiple trading platforms or broker’s brokers as it relates to dealers’ best-execution obligations.

“Clarifying guidance is always important to help ensure understanding of and regulatory compliance with our rules,” said MSRB Chief Regulatory Officer Lanny Schwartz. “In the years since the best-ex rule took effect, we’ve had the opportunity to engage with market participants about its practical implications. Today we are amending our guidance appropriately as a result of feedback we received, both informally and through the formal comment process.”

Since best-execution requirements in the municipal securities market went into effect in 2016, some market participants have communicated that the practice of soliciting a bid-wanted for a municipal security simultaneously on multiple alternative trading systems (ATSs) or via multiple broker’s brokers may have harmful effects on dealers, investors and the municipal market. A bid-wanted is an announcement of an investor’s plan to sell a security in order to solicit bids from interested parties. This simultaneous posting is not prohibited by Rule G-18 and the practice—depending on the specific situation—may be consistent with a dealer’s best-execution obligation and be beneficial to customers.

The MSRB today is amending existing guidance to further clarify that a dealer is not required to put out a bid-wanted with multiple fixed income ATSs or broker’s brokers to meet its best-execution obligations (though this may be warranted in some cases) or subscribe to every ATS. The amended guidance also addresses the fact that a single ATS or broker’s broker can provide exposure to multiple dealers and therefore multiple markets under Rule G-18.

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.