Daily Rules, Proposed Rules, and Notices of the Federal Government
The MSRB is filing with the Commission a proposed rule change consisting of amendments to Rules G-8, on books and records, G-14 RTRS Procedures, G-32, on disclosures in connection with primary offerings, G-34, on CUSIP numbers, new issue, and market information requirements, and the Electronic Municipal Market Access
The text of the proposed rule change is available on the MSRB's Web site at
In its filing with the Commission, the MSRB included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The MSRB has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The proposed rule change amends Rules G-32 and G-34 to allow underwriters to satisfy certain of their submission requirements under Rule G-32 in connection with new issues of municipal securities by their submission of data, pursuant to Rule G-34, to the New Issue Information Dissemination Service ("NIIDS") operated by the Depository Trust and Clearing Corporation ("DTCC"). In addition, the proposed rule change revises deadlines for the submission of data to NIIDS, removes certain exceptions from the NIIDS submission requirements under Rule G-34 for certain short term instruments, modifies the EMMA system to include certain elements of the NIIDS data on the EMMA Web site, and eliminates language describing auction rate securities as having a short "effective maturity," as further described below under "Summary of Proposed Rule Change" and under "Discussion of Comments."
Rule G-32 requires underwriters to submit selected information about most new issues of municipal securities to the MSRB by completing electronic Form G-32 through EMMA's Primary Market Disclosure Service. This information includes, among other items, the issuer name and issue description for the new issue and, for each maturity of the new issue, the CUSIP numbers, principal amounts and initial offering prices or yields. Separately, Rule G-34 requires underwriters for most new issues to submit comprehensive information to NIIDS. Information required to be submitted to NIIDS generally includes all of the information required for dealers to produce a "when, as and if issued"
The MSRB believes there would be significant benefits in integrating the NIIDS data into the EMMA submission process. While the information required to be submitted under Rule G-32 is less extensive than the information required for a NIIDS submission pursuant to Rule G-34, re-keying information under both Rules G-32 and G-34 is time consuming and this duplication of effort may increase the possibility of error. In addition to reducing the submission burden on underwriters, elimination of this duplicative data entry would result in improved data quality on EMMA and throughout the marketplace. It would allow both underwriters and enforcement agencies to concentrate their compliance activities on ensuring exacting data submissions through this single pipeline through which data would flow uniformly to EMMA as well as to other market data vendors receiving the NIIDS subscription feed.
The integration of the NIIDS data into the EMMA submission process also would accelerate the availability of Form G-32 data on EMMA by displaying such information in real time upon receipt from NIIDS by no later than two hours after the Time of Formal Award as provided under Rule G-34, rather than by the close of business on the date of first execution as currently provided under Rule G-32. In particular, use of the NIIDS data to populate EMMA will allow for more rapid intra-day, rather than end of day, dissemination of the maturity schedule, interest rates and initial offering prices
The proposed rule change revises Rule G-32 to provide that an underwriter's obligations to submit data about a new issue under that rule would be fulfilled through submission of such data through NIIDS as required pursuant to Rule G-34. Data for certain types of offerings not required to use NIIDS (as described below) would continue to be subject to existing Rule G-32 data submission requirements. In addition, certain data elements that are not included in NIIDS, such as underwriting spread (if not included in the official statement), the existence of a continuing disclosure undertaking and the timing for issuer submission of annual financial information, would be required to be submitted to EMMA pursuant to existing timeframes set forth in Rule G-32 and the EMMA Dataport Manual.
Rule G-34 currently requires that information about most new issues of municipal securities be submitted to NIIDS by no later than two hours following the Time of Formal Award of a new issue. Rule G-34 currently exempts certain types of short-term instruments (including variable rate instruments, auction rate products, and commercial paper), as well as municipal fund securities (such as interests in 529 college savings plans) and issues ineligible for CUSIP number assignment. The proposed rule change revises Rule G-34 to remove the exception for underwriters to submit to NIIDS information about short-term instruments such as variable rate instruments, auction rate products and notes maturing in less than nine months, but would retain this exception for commercial paper issues, municipal fund securities and issues ineligible for CUSIP number assignment. The proposed rule change adds a narrow exception from the requirement to provide a minimum of two hours advance notice of the planned Time of First Execution for offerings of variable rate instruments with a planned settlement cycle of one day or less.
The proposed rule change revises the EMMA facility by adding to the EMMA display and to the EMMA primary market subscription the Time of First Execution and Time of Formal Award.
In addition, the proposed rule change includes amendments to Rule G-8 to conform recordkeeping requirements to amended Rules G-32 and G-34, and amendments to the Rule G-14 RTRS Procedures and Rules G-32 and G-34 to make certain non-substantive technical changes. The technical amendments to Rule G-32 correct a cross-reference to Exchange Act Rule 15c2-12, correct a mis-numbered paragraph defining the term "obligated person" and eliminate section (e), which operated as a transitional provision in June 2009 from the former pre-EMMA official statement submission process under former Rule G-36 to the EMMA-based submission process under current Rule G-32. The technical amendments to Rule G-34 improve the organization of certain provisions of the rule.
Finally, the technical amendments to section (a)(ii)(B) of the Rule G-14 RTRS Procedures under Rule G-14 revise language in such RTRS Procedures that is parallel to the language regarding short-term instruments that is being removed from Rule G-34 by the amendments described above. Such amendments would more clearly describe the types of securities to which the end-of-day RTRS reporting exception for short-term instruments applies and also eliminate language describing auction rate securities as having a short "effective maturity." The MSRB believes that auction rate securities should not be characterized as having an effective short-term maturity
The MSRB requested an effective date for the proposed amendments no later than May 6, 2013, or such earlier date to be announced by the MSRB in a notice published on the MSRB Web site with at least a thirty day advance notification prior to the effective date.
The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Exchange Act, which provides that the MSRB's rules shall:
The proposed rule change is consistent with Section 15B(b)(2)(C) of the Exchange Act. There will be significant benefits in integrating the NIIDS data into the EMMA submission process that will assist in removing impediments to and perfecting the mechanism of a free and open market, and that will also improve protections to all market participants. The current requirement to re-key significant amounts of information under both Rules G-32 and G-34 is time consuming and this duplication of effort may increase the possibility of error. In addition to reducing the submission burden on underwriters, elimination of this duplicative data entry will result in improved data quality on EMMA and throughout the marketplace. It will allow both underwriters and enforcement agencies to concentrate their compliance activities on ensuring exacting data submissions through this single pipeline through which data would flow uniformly to EMMA as well as to other market data vendors receiving the NIIDS subscription feed.
The integration of the NIIDS data into the EMMA submission process will also accelerate the availability of Form G-32 data on EMMA by displaying such information in real time upon receipt from NIIDS, which will occur by no later than two hours after the Time of Formal Award as provided under Rule G-34, rather than by the close of business on the date of first execution as currently provided under Rule G-32. Furthermore, additional NIIDS data elements not currently available through EMMA, such as the Time of Formal Award and Time of First Execution as announced by the underwriter, will be displayed on EMMA.
Finally, the proposed rule change eliminates exceptions under Rule G-34 for submitting data for certain new issues to NIIDS. Thus, enhanced real-time access to primary market data would become available to the marketplace, both through NIIDS data disseminated by DTCC to information vendors and EMMA data disseminated by the MSRB to market participants and the general public, for a broader scope of new issues of municipal securities.
The MSRB does not believe that the proposed rule change would impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act, since it would apply equally to all dealers that serve as underwriters of new issues of municipal securities. The enhanced and more timely information flow resulting from the proposed rule change would make such information available to all persons on an equal and non-discriminatory basis.
The marketplace and the general public would realize the substantial benefits of more prompt, more complete and more accurate information about new issue municipal securities, resulting in greater marketplace efficiency that enhances liquidity and the quality of pricing. In addition, the proposed rule change would reduce the burden on dealers that serve as underwriters for new issues of municipal securities. Such dealers would benefit from the reduced burden of significantly diminished levels of duplicative data entry into two separate information systems--including the burden of entering such data and of undertaking appropriate quality control--with only a minimal, one-time burden of reviewing and, if necessary, making minor modifications to their internal policies and procedures with respect to data submissions under MSRB rules. In addition to the reduced burden to dealers resulting from the more efficient use of dealer resources to ensure the accuracy of data submissions through this single pipeline, the resultant improvement in data quality upon initial submission would reduce the burden of making corrections at a later time when errors are detected by market participants and would reduce the incidence of potential problems with secondary market activity that can arise from inaccuracies in the indicative data used by market participants to price and process transactions.
Some underwriters of new issues bearing short-term interest rates previously exempted from the NIIDS submission requirements under Rule G-34 would be required to modify their new issue information dissemination processes to use NIIDS for such dissemination, rather than the currently permissible use of other means of announcing relevant new issue information promptly in a manner reasonably designed to reach market participants that may trade the new issue. Such underwriters, however, have not previously been exempted from the EMMA submission requirements under Rule G-32, and the proposed rule change would provide for much of the data currently required to be provided through EMMA under Rule G-32 to instead be provided through NIIDS under Rule G-34. Thus, such underwriters would realize a reduced burden of compliance with Rule G-32
On balance, the MSRB believes that the benefits of the proposed rule change greatly exceed any potential increased burden resulting therefrom.
On April 10, 2012, the MSRB requested comment on a proposal to streamline new issue information submission requirements under Rules G-32 and G-34 by allowing underwriters to satisfy certain of their submission requirements under Rule G-32 by their submission of data to NIIDS pursuant to Rule G-34.
SIFMA stated that it "believe[s] this move towards straight-through processing will be beneficial for market participants by reducing transaction costs and increasing data integrity." TD stated that it "welcome[d] the effort to have one centralized system and one pass in establishing the information necessary to satisfy the regulations." The MSRB discusses additional comments from these commenters below.
The purpose of the required two hour advanced notification timeframe between disseminating NIIDS data and the announced Time of First Execution is to ensure that dealers with pending trades in new issues are able to receive and enter into trade processing systems NIIDS data before the first transactions in the new issue are executed. For VRDOs, there typically are not multiple dealers with pending transactions in new issues, so the two hour advanced notification timeframe is not as important as for other types of new issues with a broad distribution. However, the MSRB believes that it is important that as many types of securities as possible benefit from the centralized data collection and dissemination of information provided by NIIDS. Accordingly, the proposed rule change removes the exception for short-term instruments (including VRDOs and auction rate securities but not including commercial paper) from Rule G-34 with respect to the requirement to submit information to NIIDS and announce the Time of Formal Award and Time of First Execution, which can be done within the existing timeframes of typical VRDO offerings. However, the proposed rule change also adds a narrow exception from the requirement to provide a minimum two hours of advance notice of the planned Time of First Execution for offerings of variable rate instruments with a planned settlement cycle of one day or less.
Recognizing these operational challenges, the MSRB decided against shortening the required two hour minimum period between the time an underwriter disseminates NIIDS information and the Time of First Execution that can be set by an underwriter. However, the MSRB decided that underwriters setting a Time of First Execution for the business day following the day NIIDS data is disseminated should be able to set a Time of First Execution for the following day as early as 9:00 a.m. Eastern Time without having to wait until the full two-hour period has elapsed. Acknowledging that dealers would have sixteen hours between 5:00 p.m. Eastern Time and the earliest possible Time of First Execution at 9:00 a.m. Eastern Time to integrate disseminated NIIDS data and prepare for the underwriter's announced Time of First Execution, the MSRB believes that it would be appropriate that underwriters wanting to set a Time of First Execution as early as 9:00 a.m. Eastern Time should be able to do so.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Exchange Act. Comments may be submitted by any of the following methods:
* Use the Commission's Internet comment form (
* Send an email to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.