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ATTACHMENT TO NOTICE 2004-21
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SUMMARY: HOW TO TESTAll dealers registered with the MSRB that effect transactions subject to Rule G-14 must be certified to report trades via RTRS, MSRB’s Real-Time Transaction Reporting System. Certification covers both clearing brokers and introducing (correspondent) dealers. Each clearing broker that has a direct telecommunications connection to FICC’s Real-Time Trade Matching (RTTM) system, which is the vehicle for reporting data to RTRS, must conduct the full certification test. If all of a dealer’s transaction reports are submitted and updated by an agent (a clearing broker or service bureau), then the dealer will be certified when its agent is certified. All dealers must complete Form RTRS, which informs the MSRB of the dealer’s trade reporting method.
DETAILED TEST PROCEDUREThis document describes the MSRB’s Real-time Transaction Reporting System Dealer Certification Test (“RTRS Test”). It is written for municipal securities dealers as well as service bureaus and other vendors that assist dealers in reporting transactions. For this document, a “service bureau” is a vendor that supports more than one dealer in transaction reporting. BackgroundAll dealers[2] will be required to report municipal securities trades in real-time by January 2005, the planned effective date of revised Rule G-14, and to submit inter-dealer trades for real-time comparison beginning on the same date, as required by revised Rule G-12(f).[3] Before real-time reporting and comparison rules become effective, dealers must be certified by the MSRB by successfully testing their trade reporting systems. Certified dealers will have the option to begin operational reporting using new formats before the required date. Goal The MSRB’s overall goal in conducting the RTRS Test is to ensure that the municipal securities industry will be able to report transactions in real-time. Prior to the date for system operations, all dealers must be able to submit data to and obtain feedback from RTRS. Dealers will submit trades, receive feedback, and make necessary corrections or cancellations, using electronic messages, Web-based screens, or both. Who Must TestEvery dealer that effects transactions subject to Rule G-14 must be certified to report trades to the MSRB.[4] Some dealers (typically, high-volume dealers) must be certified by testing the message-based input method themselves. Some dealers whose agents are certified will not have to conduct tests themselves to become certified for inter-dealer trade reporting. MSRB encourages dealers to test, especially using the RTRS Web method, even if they are not required to conduct tests.
MSRB encourages dealers, even if not required to go through all the certification tests, to conduct testing themselves, in addition to monitoring testing done by the agent. This is because, once testing is complete and real-time reporting is required, dealers are responsible for correct reporting of trades no matter how much testing was conducted, or by whom. The MSRB reminds dealers that, under the amendments to Rules G-12(f) and G-14 expected to be in effect in 2005, the primary responsibility for timely and accurate submission remains with the dealer that effects transactions. Dealers that report trades for other dealers will also have specific responsibilities under the proposed amendments.[6] Note that a dealer that does inter-dealer trades must be certified to report those trades to FICC’s RTTM system before submitting test messages to RTRS. Optional Use of RTRS WebDealers that are not required to conduct tests may nonetheless wish to try out the RTRS Web interface. The Web screen will display all test trades submitted by, or on behalf of, the dealer. Dealers may, therefore, find it useful to use the RTRS Web as a display-only method. RTRS Web will not display operational trade data until real-time reporting is required in 2005. Who Must Submit Form RTRSEvery dealer registered with the MSRB must complete and submit Form RTRS, even if another party conducts testing on its behalf. Simplified Test for Low-Volume DealersA dealer that has averaged five or fewer trade submissions per week during the year that began July 2003 may choose a simplified submission method and, therefore, a simplified test. For its customer trades and changes to regulatory data of its inter-dealer trades, the low-volume dealer may choose to provide all real-time input manually via the RTRS Web Browser. Such dealers will not be involved with the “message” aspects of testing (defined in the next paragraph) and will not have to test message formatting and other message-based features. (The dealer tests its capability to report inter-dealer trades by testing its ability to send reports of such trades to its clearing broker. The clearing broker submits data via RTTM on behalf of the correspondent, so the correspondent does not directly test the interface with RTTM.) Testing that Involves Service BureausDealers may have agents, such as service bureaus, submit trade data for reporting purposes. If a dealer uses a service bureau to submit test data, the service bureau is an agent as well. To do this the dealer must designate the service bureau as its agent.[7] The service bureau will contact the MSRB for an Submitter Identifier and will include this identifier in all submissions to RTRS. (The service bureau may use the same Submitter Identifier in connection with all dealers that it assists.) Interfaces to be TestedRTRS has a message-based and a Web-based interface. The message-based interface transmits SWIFT 15022 messages from and to the dealer via RTTM. The Web-based interface transmits data between RTRS and the dealer using a Web browser.[8] Low-volume dealers that elect to use only the Web-based interface and that have averaged five or fewer trade submissions during the year beginning July 2003 must complete the test by December 1, 2004. Other dealers may use both interfaces; these dealers must be prepared to test by October 1, 2004 and must either have completed testing by that date or must have scheduled testing with the MSRB by that date. Functions TestedThe full range of RTRS functions that apply to the dealer’s business activities will be tested. The full range of functions involves:
In addition to the above, specific objectives for testing correspondents (i.e., introducing dealers) are:
Test CustomizationNot every dealer conducts the full range of activities that can be reported via RTRS. The test procedure will be customized to fit the dealer’s anticipated business. For example, a dealer that never trades as a member of a syndicate or selling group, and has no plans to do so, does not have to test extended deadlines for syndicate trade reporting.[12] MSRB encourages dealers to test activities that may be added in the future, but only requires the dealer to test activities actually in use. Any future changes in the dealer’s business activities would require additional testing. Dealers may test major reporting components independently. A dealer may test inter-dealer regulatory reporting at the same time it tests customer trade reporting, or it may test the two types at separate times. RTRS will send e-mail error messages to dealers who indicate on Form RTRS that they wish to receive them. Dealers electing to use e-mail instead of SWIFT messages are (like other dealers) responsible to make corrections to erroneous input as soon as possible. Trade Date to be UsedThe RTTM Test System generally uses a “current” date that is different than the true date. To avoid receiving RTRS messages stating that test messages were submitted “late,” dealers must check the MSRB Web site (www.msrb.org) to determine the current test date and must submit test messages with this as the trade date. MSRB Assistance During TestingDealers who have questions or encounter problems during testing may call the MSRB at (703) 797-6600 for assistance. For help regarding the required content of input MT515 messages or explanation of feedback, ask for a Transaction Reporting Assistant. To receive assistance on correctly formatting MT515 messages, ask for Denta Williams or Jason Peace. For assistance with connectivity to RTRS Web, ask for the Technical Support group. The Technical Support Group can be reached during business hours at (703) 797-6600 and outside of business hours at (703) 549-9505. You may also send e-mail to RTRSWebSpt@msrb.org. (For questions regarding MQ connectivity, contact your Service Representative at NSCC.) Test MilestonesIn order to be certified as ready to report trades in real-time, a dealer must pass the following milestones.
A dealer that has been RTRS-certified may voluntarily switch to messaging to report inter-dealer or customer trades. The MSRB encourages dealers to convert to operational real-time reporting before the required date. Submissions in SWIFT message formats will satisfy current regulatory reporting requirements. (RTRS Web will be available only for test purposes until 2005. Thereafter, it will be available for operational reporting and trade display.) A dealer using the new formats before the real-time reporting requirement becomes effective must report trades by 8:00 pm Eastern time on trade date (the closing time at RTTM for receipt of messages). Dealers are not required to report trades in 15 minutes until the requirement goes into effect in January 2005. TimelineJanuary 2005 is the RTRS operational start date. The timeline is:
Selecting Test DatesThe MSRB and the dealer will schedule test dates together, within the deadlines. This will level the workload for MSRB and FICC and will schedule test dates that are convenient for dealers, to the extent possible. Testing facilities for dealers using the message-based submission method will be made available in July 2004, six months prior to the announced start-up date for RTRS operations. Message-based submitters must be ready to test by October 1, 2004 – three months prior to the announced RTRS start-up date – and will be required to schedule test dates at that time if successful tests have not already been completed. All message-based submitters must successfully test and be certified by December 15, 2004. Because of the simplicity of Web-based submission, testing will not be as extensive as for message-based submission. Submitters planning to use only the Web-based function for transaction reporting, and who currently submit an average of more than five transactions per week to the existing transaction reporting system, will be required to complete Web-based testing by October 1, 2004.[13] Dealers with transaction volume of five or fewer trades per week must complete Web-based tests by December 1, 2004 – one month prior to the RTRS start-up date. Testing procedures for the Web-based trade reporting function will be made available on the MSRB Web site, www.msrb.org. (As noted, these will include procedures for testing RTRS Web and for testing regulatory components of RTTM Web.)
Note that, as stated above, message-based submitters must be ready to test by October 1, 2004. If the dealer has not started testing by October 1, MSRB may assign a start date as early as Monday, October 5. Other types of submitters must also comply with the deadlines above. Scenarios for Self-Clearing Dealers and Clearing BrokersDifferent scenarios have been defined to test the dealer’s ability to modify and cancel trade submissions. A scenario is a set of messages involving an Instruct and one or more Modify or Cancel messages. The dealer conducting the scenario may modify any field(s) of its choice if the field is changeable as described in the systems specification. The dealer can choose whether to modify a trade initially submitted with an error, or to change one valid value (e.g., capacity = agent) to another (capacity = principal). Scenarios for a dealer that clears its own street trades and does not clear trades for correspondents will test the dealer’s ability to (1) submit Instruct messages, (2) submit Modify and Cancel messages and/or (3) use the RTTM and RTRS Web interfaces to modify and cancel regulatory data. Scenarios for a dealer that clears its own trades and also clears trades for correspondents assume that the correspondent will submit modifications to RTRS via RTRS Web. If the correspondent submits changes exclusively through the agent’s system and never submits data via the RTRS Web interface, these scenarios will not be used. The clearing broker should conduct equivalent scenarios with correspondents, using its own system. These scenarios will test the above and also (1) the ability of the correspondent and its clearing broker to report the correspondent’s street trades and (if appropriate) the correspondent’s customer trades, and (2) the ability of the correspondent to modify regulatory data submitted by its clearing broker. Scenarios for Correspondent DealersScenarios for a correspondent dealer (i.e., introducing dealer) will test the ability of the correspondent to report and modify trades through its clearing broker, as stated in the preceding paragraph, and (if appropriate) the ability of the correspondent to report its own customer trades or to report them through a service bureau. As noted, if the correspondent submits changes exclusively through the agent’s system and will never submit data via the RTRS Web interface, these scenarios will not be used. Need for Specific RTRS TestingClearing brokers have asked why they must test and be certified for RTRS once they are RTTM-certified. The reason is that there are RTRS features not covered in RTTM testing. These include: reporting of trades with a deadline, and using the Special Price code to indicate which deadline applies (if not 15 minutes); reporting and flagging trades at prices away from the market; understanding and responding to RTRS error messages; and correctly reporting the following data elements:
ERROR CONDITIONS THAT WILL BE INCLUDED IN SCENARIOS
CONTENTS OF “RTRS TESTING DOCUMENTS.XLS” ON WWW.MSRB.ORG.
[1] Form RTRS will be available on www.msrb.org on July 1, 2005. [2] “Dealer” in this document denotes a broker, dealer or municipal securities dealer. [3] MSRB filed proposed amendments to Rules G-14 and G-12(f) on June 1, 2004. See MSRB Notice 2004-13 on www.msrb.org. [4] Dealers that effect trades in municipal fund securities, but no other municipal securities, are exempted from testing because Rule G-14 does not require such trades to be reported. [5] A clearing broker has a direct connection to RTTM if it submits messages to RTTM without the aid of a service bureau. The dealer may obtain support from a vendor, but if the vendor does not support other dealers the vendor is not considered as a service bureau and the dealer has a “direct” connection. [6] The proposed amendment to Rule G-14 states, “A dealer that acts as a submitter for another dealer has specific responsibility to ensure that transaction reporting requirements are met with respect to those aspects of the reporting process that are under the Submitter’s control. A dealer that submits inter-dealer municipal securities transactions for comparison, either for itself or on behalf of another dealer, has specific responsibility to ensure that transaction reporting requirements are met with respect to those aspects of the comparison process that are under the Submitter’s control.” [7] Dealers will designate agents on Form RTRS, which is discussed below under “Coordination with MSRB.” [8] RTRS and RTTM each have a Web browser. The RTTM Web browser is operated by NSCC for comparison purposes and may be used only by NSCC participants. It may be used to report or correct both “comparison data” (CUSIP number, par, price, etc.) and “regulatory reporting data” (time of trade, etc.), if that data is associated with an inter-dealer transaction. The RTTM Web is not available to report or correct customer or IDRO trade records. [9] Dealers must pass RTTM tests before testing inter-dealer trade reporting with RTTM. This is because real-time trade comparison in RTTM is a prerequisite to inter-dealer trade reporting. Dealers are responsible to work with FICC to satisfy RTTM requirements. For RTTM testing information, contact FICC Participant Services at (212) 855-7664. [10] An “inter-dealer regulatory only” trade report, or “IDRO,” is a report that a fully disclosed introducing broker submitted a customer order to its clearing broker for execution, and the clearing broker executed and settled directly with the introducing broker’s customer. Only clearing brokers will report IDROs. [11] See, e.g., MSRB Notice 2003-23 (June 13, 2003), note 15, on www.msrb.org. [12] For example, test messages 14.3 and 14.4 are reports of sales by a syndicate member. These tests are marked “A,” meaning that a dealer must do them only if “Appropriate,” i.e., the dealer does syndicate sales. [13] October 1 is the deadline for submitters that use only the Web for transaction reporting. Submitters that initially report trades by SWIFT message and use the Web for corrections are subject to the December 15 deadline for both types of testing. |
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