MSRB NOTICE 2003-04 (FEBRUARY 7, 2003)


Over the past several weeks, there has been substantial discussion about the Municipal Securities Rulemaking Board's proposal filed with the Securities and Exchange Commission that would provide authority for the MSRB, in coordination with the SEC, to “close” the municipal securities market in the event of a catastrophic failure of a system or systems critical to the operation of the market.

·    The proposal is intended to provide a tool to deal with any such catastrophic market emergency.  It is important for the protection of investors and the integrity of the marketplace that plans to deal with such market emergencies be formulated in advance.  The proposal is in response to the SEC’s concerns that there currently is no legal mechanism for a trading halt in the municipal securities market.

·    The MSRB commits to be fully informed at the time any decisions on market emergencies are made.  To that end, the MSRB will make every effort to contact a wide range of industry participants, including trade organizations associated with the industry, such as the Bond Market Association, Securities Industry Association, and Investment Company Institute.

·    The MSRB recognizes that its filing, as part of a national plan to deal with market emergencies, has engendered debate within the fixed-income industry regarding the advisability of market closings for not just the municipal market individually but also for the fixed-income industry as a whole. Today the MSRB has agreed to a request by the SEC to extend the comment period for an additional 30 days to help ensure that there is sufficient time for the industry to comment to the SEC on this filing.

·    The MSRB hopes that this additional time will allow market participants to carefully consider the issue of how to respond to a catastrophic failure of a system or systems critical to the operation of the market should it occur.