MSRB NOTICE 2007-07 (FEBRUARY 2, 2007)



Standard & Poor’s CUSIP Service Bureau (“CSB”)[1] is establishing a new category of securities: securities paying tax-exempt interest that are other than municipal securities.  Dealers must ensure that they do not report to the Real-Time Transaction Reporting System (“RTRS”) events that are not transactions in municipal securities.[2]  RTRS will send new error messages to dealers if it receives reports of trades in an “Other Tax-Exempt” security.


In a notice dated November 15, 2006, the CSB stated that, at the request of the industry, it will add a new “Other Tax-Exempt” issue type value to its database services.[3]  The CSB noted that Other Tax-Exempt issues are non-municipal debt securities that pay tax-exempt interest, consisting primarily of tender option bonds and also certain other security types including tribal bonds, student loan bonds, military housing bonds, fire station bonds and church bonds.  In its notice, the CSB described its plan to reclassify certain existing CUSIP numbers, currently coded as Municipal or Corporate, as Other Tax-Exempt, and to add an indicator that securities are Other Tax-Exempt at the issuer level and in some cases at the issue level of its database.  All existing CUSIP numbers to be reclassified as Other Tax-Exempt will remain the same.  At this time, the CSB plans to make a file of reclassified CUSIP numbers available to its customers on March 1, 2007.[4]

The CSB will use its best reasonable efforts to classify a financial instrument as Other Tax-Exempt at the time of new CUSIP assignment based on the preliminary offering document and other information provided by the underwriter, financial advisor or bond counsel submitting a CUSIP request.


The MSRB reminds dealers that Rule G-14 requires the reporting of all municipal securities transactions with very limited exceptions[5] and that each transaction submitted to RTRS is presumed to be a municipal securities transaction.  Dealers must ensure that they do not report to RTRS events that are not transactions in municipal securities.  The new “Other Tax-Exempt” indicators provided by the CSB may assist dealers in ensuring that non-municipal securities transactions are not reported to RTRS.

Dealers must ensure that they report their transactions in municipal securities in an accurate and timely manner.  Inaccurate or untimely reporting of municipal securities transactions may result in inaccurate or delayed public dissemination of transaction information or inaccuracies in the “audit trail” available to enforcement authorities.


When the new CSB indicators become available, RTRS will use this information to detect any reports of transactions that appear to be in issues that are not municipal securities.  When it detects such a report, RTRS will send one of the following new “Questionable” error messages to the dealer that submitted the report:

Q35J “QUESTIONABLE – CUSIP appears to be a corporate or government security, not a municipal security.”  This will be sent for transactions in which the issuer is identified as type “C” (Corporate) or “G” (Government) by the CSB.

Q31J “QUESTIONABLE - CUSIP appears to be other tax exempt security, not a municipal security.”  This will be sent for transactions in which the issue is identified as Other Tax-Exempt by the CSB.

The MSRB reminds dealers that any “questionable” error code requires prompt dealer attention and that if an error is found, prompt dealer action is required to correct the submission.[6]  If a dealer receives error code Q35J or Q31J on a trade report, and after reviewing the security determines that the security reported is not a municipal security, the dealer must cancel or reverse the trade report.

Questions about this notice may be directed to Larry Lawrence, Policy and Technology Advisor, or Sara Pranio, Uniform Practice Assistant.

February 2, 2007

[1] The CUSIP® Service Bureau is operated by Standard & Poor's for the American Bankers Association.

[2] MSRB regulation extends only to transactions in municipal securities, as defined in section 3(a)(29) of the Securities Exchange Act of 1934.

[3] CUSIP Service Bureau, “New Other Tax-Exempt Issuer Type for CUSIP_db Services:  Change in CUSIP_db Services -- Programming Changes Needed” (November 15, 2006) on

[4] Should the date of availability of reclassified CUSIP numbers change, the MSRB will provide additional advice to dealers.

[5] The exceptions to the requirement to report all municipal securities transactions include: (a) transactions in issues that do not have CUSIP numbers assigned by the CUSIP Service Bureau;  (b) inter-dealer transactions that are not eligible for comparison a clearing agency registered with the Securities and Exchange Commission; and (c) transactions in municipal fund securities.  See Rule G­­-14 (b)(vi) and Specifications for Real-Time Transaction Reporting, Section 1.2.1.

[6] See, e.g., “Real-Time Transaction Reporting Update:  Upcoming Changes in Rule G-14 and RTRS and Reminders on Existing Requirements Under Rule G-14,” MSRB Notice 2006-35 (December 6, 2006).