Back to top
Date:

Contact: Jennifer A. Galloway, Chief Communications Officer
       202-838-1500
       jgalloway@msrb.org

MSRB CHIEF ECONOMIST EXAMINES IMPACT OF MUNICIPAL BOND ETFS
ON MUNICIPAL BOND MARKET LIQUIDITY  

Washington, DC – The Chief Economist of the Municipal Securities Rulemaking Board (MSRB), the self-regulatory organization that oversees the municipal securities market, today shared his analysis on municipal bond exchange-traded funds’ relationship to municipal bond market liquidity. The MSRB’s analysis indicates that to date, there is no statistical relationship between the growth of ETFs and municipal bond market liquidity.

“Despite the steady growth of municipal bond ETF assets since 2007, we found no evidence of an impact on municipal market liquidity,” said MSRB Chief Economist Simon Wu. “However, the impact could certainly change over time with the continued growth of municipal bond ETFs, which, even after an explosive decade of growth, still represent less than one percent of all municipal securities-related investments.”

Today’s analysis seeks to provide municipal market participants and other stakeholders with additional perspective on the relationship between municipal bond ETFs and the underlying bonds and promote further research on the topic. The MSRB studies market structure issues related to municipal securities as part of its mission to promote a fair and efficient market. Access MSRB data reports and analysis.

Municipal Bond ETFs: Liquidity Impact on the Municipal Bond Market summarizes existing research and emerging issues affecting all ETFs, including municipal bond ETFs. It also proposes considerations for future research as market conditions evolve, particularly in a rising interest rate environment.
 

The Municipal Securities Rulemaking Board (MSRB) protects and strengthens the municipal bond market, enabling access to capital, economic growth, and societal progress in tens of thousands of communities across the country. The MSRB fulfills this mission by creating trust in our market through informed regulation of dealers and municipal advisors that protects investors, issuers and the public interest; building technology systems that power our market and provide transparency for issuers, institutions, and the investing public; and serving as the steward of market data that empowers better decisions and fuels innovation for the future. The MSRB is a self-regulatory organization governed by a 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.

Print