MSRB Prepares for ARS-VRDO Transparency Program

Date: January 2, 2009

Contacts:           Jennifer A. Galloway, Chief Communications Officer
                         (703) 797-6600
                         jgalloway@msrb.org


ThE municipal securities rulemaking board Will Implement
transpareNcy program for Auction rate securities this month
Effective Date for Variable Rate Demand Obligation Portion Set for April 1, 2009

Alexandria, VA - The Municipal Securities Rulemaking Board (MSRB) will implement its transparency program for auction rate securities on January 30, 2009, providing the retail market with better and more immediate access to information about these bonds.  The MSRB plans an April 1, 2009 effective date for the variable rate demand obligation portion of the program, pending approval from the Securities and Exchange Commission (SEC).

"We are pleased to be nearing the day when investors can access interest-rate information about auction rate securities," said MSRB Executive Director Lynnette Hotchkiss.  "This will add a new level of disclosure to the municipal market, and be particularly helpful for the retail market."

In November, the MSRB proposed establishing an electronic transparency program that collects information about auction rate securities and variable rate demand obligations from broker-dealers and disseminates that information to the public for free through the MSRB's Electronic Municipal Market Access (EMMA) system.  The MSRB's proposal requires dealers to provide the MSRB with interest rates set for auction rate securities and indicate whether those rates are the result of successful or failed auctions, among other information.  For variable rate demand obligations, dealers will be required to provide similar interest rate re-set data and basic information about the type and term of liquidity facilities.

In letters to the SEC commenting on the MSRB's transparency proposal, industry participants supported increasing transparency of auction rate security and variable rate demand obligation rate and related information.  They noted that the nature of the variable rate demand market would require an automated compliance program, which many firms would not be able to reliably institute prior to the end of the first quarter of 2009. Thus, while retaining the planned January 30, 2009 effective date for the auction rate component of the new transparency program, the MSRB has proposed to the SEC an effective date of April 1, 2009 for the variable rate demand obligation component to allow these systems to be implemented properly.

"The large number and frequent rate resets of variable rate securities require dealers to use automated rather than manual reporting systems, which take time to put in place when done correctly, said Hotchkiss. "The MSRB expects full compliance with the variable rate program and the additional months' time will help make this program a success.  However broker-dealers will need to comply with the January 30, 2009 deadline for submitting information about auction rate securities."

The SEC is expected to respond soon to the MSRB's request.


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.