MSRB Monthly Update - August 2014

Upcoming Event

MSRB Webinar: 
Request for Comment on Draft MSRB Rule G-42, Duties of Non-Solicitor Municipal Advisors
Thursday, August 14, 2014
3:30 p.m. - 4:30 p.m. EDT

The MSRB will host a webinar to review the proposed changes to the request for comment on draft Rule G-42 on standards of conduct and duties of non-solicitor municipal advisors when engaging in municipal advisory activities other than the undertaking of solicitations. 

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Did you know

The MSRB recently created a Market Structure department to support market transparency, economic analysis and research initiatives. 

MSRB Creates Online Education Center

The MSRB recently launched a new online education center to make it easier for investors and state and local governments to access digital resources about the municipal market. The new MSRB Education Center consolidates videos, fact sheets and other educational content in a single location to ensure investors and issuers have access to free, objective information they need to make informed decisions.

Education Center

The MSRB Education Center organizes resources by topic and target audience. It features content about the following topics, among others:

  • Features and risks of municipal securities
  • Preparing to invest in bonds
  • Buying and selling municipal bonds
  • Monitoring municipal securities
  • The process of issuing municipal securities
  • Issuer disclosure to investors
  • 529 college savings plans

Providing educational content is fundamental to the MSRB’s mission to protect investors, state and local government issuers, and other municipal entities.

Explore the new MSRB Education Center.


MSRB Advances Two Key Rule Proposals for Municipal Advisors

In a major milestone in its development of a federal regulatory framework for municipal advisors, the MSRB is seeking approval from the Securities and Exchange Commission of proposed MSRB Rule G-44 to establish supervisory standards and ensure compliance with all applicable securities laws. View the rule filing.

The MSRB also is requesting public comment on a revised draft rule on core standards of conduct for municipal advisors. The revised draft MSRB Rule G-42 addresses a number of issues raised by commenters on the initial draft rule published in January 2014. Comments should be submitted no later than August 25, 2014. Read the request for comment. The MSRB will host a webinar to review the proposed changes to the request for comment on draft Rule G-42 on Thursday, August 14, 2014 at 3:30 p.m.

The MSRB plans to seek comment on draft amendments to its pay-to-play rule to address the potential for pay-to-play activities by municipal advisors, as well as draft amendments to its existing gifts rule to establish limitations on gifts given by municipal advisors in their professional capacity.


MSRB Board Moves Ahead with Price Transparency Initiatives

At its recent Board of Directors meeting, the MSRB continued to focus on enhancing price transparency for municipal securities investors. The Board developed a proposal regarding disclosure of information by municipal securities dealers to their retail customers to help them better understand some of the factors associated with the costs of their transactions. The proposed approach would provide investors with information generally already publicly available on the MSRB’s EMMA website but would provide it directly to investors in connection with their transactions so they can independently assess the prices they are receiving from dealers. The proposal, which will be published for public comment this fall, will also broadly seek input on alternative regulatory approaches, including markup disclosure on confirmations for trades that could be considered riskless principal transactions.

In a related effort on price transparency, the MSRB Board approved a forthcoming request for comment on enhancing its Real-time Transaction Reporting System (RTRS) to collect additional post-trade information for public display on EMMA. MSRB market structure staff also will continue engaging in outreach with market participants to gather additional input for the first phase of an incremental approach for collecting and disseminating bid-wanted information and other pre-trade data on EMMA. 

Additionally, the Board agreed to proceed with its proposed rule establishing a “best-execution” standard for transactions in the municipal market that includes an exception for transactions with sophisticated municipal market professionals. Read more about recent MSRB Board decisions.


EMMA Updates

The MSRB recently added a graphical display of yield information on the Electronic Municipal Market Access (EMMA®) website to allow users to view historical yields over time. The new yield graphs are integrated into EMMA’s price discovery tool to enable investors and others to visually compare yield information for multiple securities with similar characteristics.

In other EMMA news, the MSRB plans to make public finance ratings from Kroll Bond Rating Agency (KBRA) available to the public through EMMA. The KBRA credit ratings will give investors another tool to make more informed decisions about municipal bonds.


Municipal Market Statistics


The MSRB published a report on municipal market trading patterns, associated pricing and the effect of price transparency on pricing. The Report on Secondary Market Trading in the Municipal Securities Market provides a baseline set of statistics about municipal bond trading to enable market stakeholders and the MSRB to make further advancements toward a fairer, more efficient and more transparent municipal securities market.

One particular analysis in the study reviewed average price differences, by year, of municipal securities transactions between customers conducted through one or two dealer intermediaries. The table below shows the average difference in prices between these customer-to-customer transactions from 2003-2010.


Average total customer-to-customer price difference dropped from 213 basis points in calendar year 2003 to 178 basis points in 2005, the year in which the MSRB implemented its Real-time Transaction Reporting System, and continued trending down until 2006.  The average price difference then rose steadily to a high of 225 basis points in 2009—the period of the U.S. financial crisis and its immediate aftermath. The analysis also showed that the average total customer-to-customer differential began to drop in 2010.

For detailed information on the methodology used to create these customer-to-customer price differences and other findings, please see Part II of the report.


Regulatory Roundup

SEC Approves Amendments to MSRB Rule G-3, on Professional Qualification Requirements August 4, 2014

Proposed Rule Change Consisting of Proposed New Rule G-44, on Supervisory and Compliance Obligations of Municipal Advisors; Proposed Amendments to Rule G-8, on Books and Records to be Made by Brokers, Dealers and Municipal Securities Dealers; and Proposed Amendments to Rule G-9, on Preservation of Records July 24, 2014

Request for Comment on Revised Draft MSRB Rule G-42, on Duties of Non-Solicitor Municipal Advisors July, 23, 2014

Proposed Rule Change Consisting of Amendments to Rule G-3, on Professional Qualification Requirements, Regarding Continuing Education Requirements July 22, 2014