MSRB Provides Transparency for Variable Rate Demand Obligations

Date: April 1, 2009

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

Availability of Interest Rate Data Is a Milestone for the Market

Alexandria, VA - Interest rate information for municipal variable rate demand obligations is available to investors for the first time today as part of an overall market transparency program provided by the Municipal Securities Rulemaking Board (MSRB). The MSRB is publishing interest rate reset data for these short-term securities on its Electronic Municipal Market Access (EMMA) system, joining similar information available for municipal auction rate securities.

Variable rate demand obligations have nominal long-term maturities but have coupon rates that reset periodically. In the municipal market, hundreds of thousands of these rate resets occur each year. But these interest rates never have been publicly available. The lack of transparency on variable rate demand obligations has limited investors' ability to compare rates they receive with similar securities or with rates being set by other dealers. 
"Making VRDO interest rates available on EMMA is a milestone for the municipal market," said Ronald A. Stack, Chair of MSRB. "The breadth and granularity that EMMA is providing on VRDOs is a first for the market, and will give investors much-needed transparency."   

Beginning today, municipal securities dealers must provide the MSRB with interest rate data on variable rate demand obligations on the day that an interest rate reset occurs. They have been required to do the same for municipal auction rate securities since January 30, 2009. The MSRB collects this information and, in real-time, processes and posts it on EMMA (, the MSRB's free website that houses municipal security disclosure documents, trade prices and market statistics. The addition of VRDO interest rate data on EMMA will allow investors to perform a side-by-side comparison across securities. In addition, investors can view trade data and official statements for each security.

The MSRB is engaged in a larger, longer-term project to increase transparency of both auction rate securities and variable rate demand obligations. Subsequent phases may provide for the collection and dissemination of bidding information for auction rate securities and key documentation relating to auction rate securities and variable rate demand obligations, none of which is readily available. This additional information will provide investors with greater insight into the securities they own and should promote greater liquidity in this critical sector of the municipal securities market.  

EMMA is the MSRB's free website that houses official statements, advance refunding documents, 529 college savings plan offering documents and real-time and historic trade data for municipal bonds. Beginning July 1, 2009, EMMA will publish continuing disclosures submitted by municipal bond issuers, providing investors with a single source of comprehensive disclosure and transparency information about municipal securities. 

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.