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MSRB Notice

Request for Comment on Elimination of Large Trade Size Masking on Price Transparency Reports

The Municipal Securities Rulemaking Board (“MSRB”) is seeking comment on enhancing the transaction data publicly disseminated in real-time by including the exact par value on all transactions disseminated from the MSRB Real-Time Transaction Reporting System (“RTRS”).  Currently, transaction information disseminated from RTRS includes the exact par value on all transactions with a par value of $1 million or less but includes an indicator of “1MM+” in place of the exact par value on transactions where the par value is greater than $1 million.  The exact par value of such transactions is disseminated from RTRS five business days later.  The MSRB proposes to discontinue the practice of masking the exact par value on transactions where the par value is greater than $1 million and including the exact par value on all transactions disseminated in real-time from RTRS.

Comments should be submitted no later than July 2, 2012 and may be submitted in electronic or paper form.  Comments may be submitted electronically by clicking here.  Comments submitted in paper form should be sent to Ronald W. Smith, Corporate Secretary, Municipal Securities Rulemaking Board, 1900 Duke Street, Suite 600, Alexandria, VA 22314.  All comments will be available for public inspection on the MSRB’s website.[1]


MSRB Rule G-14, on transaction reporting, currently requires brokers, dealers and municipal securities dealers (collectively “dealers”) to report all transactions in municipal securities to RTRS within fifteen minutes of the time of trade, with limited exceptions.  Since the implementation of RTRS in 2005, the MSRB has made transaction data available to the public through subscription services designed to achieve the widest possible dissemination of transaction information with the goal of ensuring the fairest and most accurate pricing of municipal securities transactions.

In addition to subscription services, MSRB makes publicly available for free transaction data on the Electronic Municipal Market Access (EMMA®) website.  Since the launch of EMMA as a pilot in 2008, MSRB has incorporated into the display of market-wide and security specific information all transaction data disseminated from RTRS so that transaction information would be available on the EMMA website simultaneously with the availability of information to subscribers to the RTRS subscription service.


In connection with the MSRB’s predecessor end-of-day trade reporting system and the subsequent development of RTRS, MSRB received comments that, given the prevalence of thinly traded securities in the municipal securities market, it sometimes is possible to identify institutional investors and dealers by the exact par value included on trade reports.  It was noted that, where the market for a specific security is thin and only one or two dealers are active, revealing the exact par amount also may convey information about a dealer’s inventory (i.e., size of position and acquisition cost) and allow other dealers to use this information to trade against the dealer’s position, thus reducing the incentive for a dealer to take large positions in these circumstances.

To address these concerns, transaction information disseminated through RTRS subscription services and displayed on EMMA includes an indicator of “1MM+” for any trade with a par value greater than $1 million.  The exact par value of such transactions is disseminated from RTRS five business days later.  The MSRB implemented this approach to help to preserve the anonymity of trading parties while not detracting in a substantial way from the benefits of price transparency.[2]  The MSRB noted that it would review this masking policy as it gains experience with real-time transparency.[3]

In January 2012, the Government Accountability Office (“GAO”) published a report on municipal securities market structure, pricing, and regulation, as required by Section 977 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.[4]  In this report the GAO, among other conclusions, concluded that individual investors generally have less information about transaction prices than institutional investors.  The GAO, which had interviewed a broad range of market participants, including institutional investors, observed that: “Some of these [institutional] investors said that even though MSRB’s RTRS system did not disclose total transaction amounts for trades over $1 million – which the system reports as trade amounts of ‘$1+ million’ – they typically were aware of the amount and the price of these large transactions through their relationships with broker-dealers.”


A foundational principal of RTRS is that all market participants would have equal access to transaction information.  The GAO observation that certain market participants are able to determine, through their relationships with dealers, the par amount of large transactions for which the par value is masked in RTRS subscription services and on EMMA undermines the purpose of masking the exact par value.  Further, if certain market participants are able to determine exact par values yet the information disseminated by RTRS masks exact par values, then the foundational principal of RTRS has been compromised since the equality of access to transaction information is lost for the five business day period that certain institutional customers have access to the exact par value while the rest of the marketplace must await the unmasking of such information by RTRS five business days after the trade was reported.

To ensure that all market participants have access to the same amount of information about each transaction disseminated from RTRS, the MSRB is proposing to discontinue masking of the exact par value on transactions where the par value is greater than $1 million, with the result that RTRS subscription services and EMMA would include the exact par value on all transactions when initially disseminated to the public.  The discontinuation of price masking would not require any changes in the information reported to RTRS or in the methods used by dealers to report such information, but instead would entail a change in the manner in which RTRS processes such reported trade information for dissemination to the public and would eliminate the need for recipients of the RTRS subscription product to refresh trade reports that initially include masked trade sizes with the actual par value five business days later.

The MSRB requests comments on all aspects of this proposal.  In particular, the MSRB seeks comments on whether the masking of trade size has been effective at achieving its initial purpose and whether the benefits, if any, of retaining such masking outweigh the potential negative effects of withholding such information known to certain institutional investors from the broader marketplace.  Are there methods, other than receiving direct information from a dealer regarding trade size, for market participants to determine the exact or relative size of large trades and to infer the identity of parties to the transaction from the RTRS trade data history, public filings by certain institutional investors through the SEC’s EDGAR system or other sources that otherwise undermine the effectiveness of trade size masking in achieving its initial purpose?  To the extent that market participants believe that such masking should be continued, the MSRB seeks comment on the justification for doing so in light of the GAO findings and the foundational principles for RTRS, and also seeks suggestions for alternatives to discontinuing par value masking that would further the initial purpose of such practice while reducing or eliminating the selective dissemination of such information.

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Questions about this notice may be directed to Justin R. Pica, Director, Product Management - Market Transparency, or Karen Du Brul, Associate General Counsel, at 703-797-6600.

June 1, 2012

[1] Comments are posted on the MSRB website without change.  Personal identifying information such as name, address, telephone number, or email address will not be edited from submissions.  Therefore, commenters should submit only information that they wish to make available publicly.

[3] See MSRB Notice 2004-13 (June 1, 2004)See also Exchange Act Release No. 49902 (June 22, 2004), 69 FR 38925 (June 29, 2004), approved Exchange Act Release No. 50294 (August 31, 2004), 69 FR 54170 (September 7, 2004).

[4] U. S. Government Accountability Office, Municipal Securities: Overview of Market Structure, Pricing, and Regulation, GAO-12-265, January 17, 2012.