MSRB NOTICE 2002-24 (JULY 3, 2002)

PROPOSED RULE CHANGE CONCERNING PUBLIC REPORTING OF TRANSACTIONS IN MUNICIPAL SECURITIES: RULE G-14

On July 3, 2002, the MSRB filed with the Securities and Exchange Commission a proposed change to the service which provides the Daily Comprehensive Report (the “Report”) of municipal securities transactions.  The transaction information on the Daily Comprehensive Report comes from reports made to the MSRB by brokers, dealers and municipal securities dealers (“dealers”) under Rule G-14, which governs reports of sales or purchases.  This rule currently requires dealers to report essentially all inter-dealer and customer transactions in municipal securities to the MSRB by midnight of trade date. 

    The current Daily Comprehensive Report provides details of municipal securities transactions effected on the trading day two weeks previous to the day of the report.  In contrast, the proposed Report would provide the details of transactions effected on the trading day one week previous.  The proposed Report would continue to be available by  subscription.  Each business day, the Report would be made available electronically to subscribers by File Transfer Protocol (“FTP”) via the Internet.  The subscription fee would continue to be $2,000 per year.

Background

The MSRB has a long-standing policy to increase price transparency in the municipal securities market, with the ultimate goal of disseminating comprehensive and contemporaneous pricing data.  Since 1995, the MSRB has expanded the scope of the public transparency reports in several steps.  Each step has provided industry participants and the public successively more information about the market.[1]

In May, 2001, the MSRB announced its plan to begin reporting trades in “real time” on a schedule coordinated with the industry’s timetable for migration to an environment of next-day settlement of securities transactions.[2]  To attain real-time reporting, the MSRB intends in the future to file an amendment to Rule G-14 to require dealers to report their trades within 15 minutes of the time they are effected.  The planned implementation date for real-time reporting is now set for mid-2004.

Prior to the implementation of real-time transaction reporting, the MSRB intends to continue to increase transparency in the market using the currently available data.  As its next step, the MSRB is now proposing to disseminate the Daily Comprehensive Report with a one-week delay.  The proposed Report would contain details of all municipal securities transactions that were effected during the trading day one week earlier.  Data about each trade on the proposed Report would be the same as that on the current report.  For each trade, the proposed Report, like the current report,  would show the trade date, the CUSIP number of the issue traded, a short issue description, the par value traded, the time of trade reported by the dealer, the price of the transaction, and the dealer-reported yield of the transaction, if any.  Each transaction would be categorized as a sale by a dealer to a customer, a purchase from a customer, or an inter-dealer trade.

The current Daily Comprehensive Report began operation on November 1, 2001.[3]  The proposed Report, with a one-week delay, would replace the current report that has a two-week delay.

The Proposed Service

Like the current two-week delayed report, the new Report will be available daily to subscribers.  Subscribers to the current two-week delayed report would continue to access the proposed Report via the Internet and download copies from the MSRB’s computer using a password-protected FTP account.  The MSRB expects that the proposed Report would be available within two weeks of approval by the Commission.

The MSRB will continue the established annual fee for the Service of $2,000.  The fee is structured approximately to defray the MSRB’s costs for production of daily data sets, operation of telecommunications lines, and subscription maintenance.  Subscription fees that have been paid for the two-week delayed report will be applied toward the one-week delayed report.

To enable the MSRB to compile a comprehensive trades database for enforcement purposes, dealers report a small amount of data after trade date, and a few trades may be added, deleted or amended as late as a few weeks after trade date.[4]  To ensure that subscribers to the report have access to those trades, the MSRB will make available each day an “updated” report containing all trades effected one month previously.  This will enable subscribers to see the effect of changes reported by dealers after the one-week report was disseminated.

July 3, 2002


[1] The MSRB’s report summarizing prices for issues that are frequently traded on the inter-dealer market began operation in 1995; in 1998, dealer-customer prices were added in a second summary report; in January 2000, a report with details of trades in frequently traded issues was added; in October 2000, a monthly comprehensive report, covering all transactions effected during the previous month, began operation; and in November 2001, a daily comprehensive report was begun, with trades effected two weeks earlier.

[2] See “Real-Time Reporting of Municipal Securities Transactions,” MSRB Reports, Vol. 21, No. 2 (July 2001) at 31-36.

[3] See Release No. 34-44894 (October 2, 2001), 66 FR 51485 (October 9, 2001).

[4] See Release No. 34-43060 (July 20, 2000), 65 FR 46188-46189 (July 27, 2000) at note 7.  Approximately one percent of the trades in the database have data submitted between one week and one month after trade date.