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SECURITIES AND EXCHANGE COMMISSION
Securities and Exchange Commission
DOCUMENT ID: [Release No. 34-57002; File No. SR-MSRB-2007-07]
NOTICE: NOTICES
ACTION: Self-regulatory organizations; proposed rule changes:
SUBJECT CATEGORY: Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Rule G-14, Reports of Sales or Purchases, to Extend the Expiration Date of the Three-Hour Exception to the Fifteen-Minute Reporting Deadline
DOCUMENT SUMMARY: December 20, 2007.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b4 thereunder,\2\ notice is hereby given that
on November 27, 2007, the Municipal Securities Rulemaking Board
(``MSRB'' or ``Board''), filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') the proposed rule change as
described in Items I, II and III below, which Items have been prepared
by the MSRB. The MSRB has filed the proposal as a ``noncontroversial''
rule change pursuant to section 19(b)(3)(A)(iii) of the Act,\3\ 3 and
Rule 19b4(f)(6) thereunder,\4\ which renders the proposal effective
upon filing with the Commission. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b4(f)(6).
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The MSRB is filing with the Commission a proposed rule change
consisting of an amendment to MSRB Rule G14, Reports of Sales or
Purchases (the ``proposed rule change''). The proposed rule change
would extend the expiration date of the threehour exception to the
fifteenminute reporting deadline for certain when, as and if issued
transactions under Rule G14 RTRS Procedures, paragraph (a)(ii)(C).
Under the current language of this provision, the threehour reporting
exception will automatically expire December 31, 2007. The proposed
rule change provides that the threehour exception will expire on June
30, 2008 in order to coincide with the effective date of other proposed
changes to MSRB rules designed to improve transaction reporting of new
issue municipal securities. The MSRB proposes an effective date for
this proposed rule change of December 31, 2007. The text of the
proposed rule change is available on the MSRB's Web site (http://www.msrb.org ), at the MSRB, and at the Commission's Public Reference
Room.
II. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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. A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
MSRB Rule G14, on transaction reporting, requires all brokers, dealers and municipal securities dealers (``dealers'') to report all transactions in municipal securities to the MSRB RealTime Transaction Reporting System (``RTRS'') within fifteen minutes of the time of trade execution, with limited exceptions. One exception listed in Rule G14 RTRS Procedures, paragraph (a)(ii) is a ``threehour exception'' that allows a dealer three hours to report a transaction in a when, as and if issued (``whenissued'') security if all of the following conditions apply: (i) The CUSIP number and indicative data of the issue traded are not in the securities master file used by the dealer to process trades for confirmations, clearance and settlement; (ii) the dealer has not traded the issue in the previous year; and (iii) the dealer is not a syndicate manager or syndicate member for the issue.
The threehour exception was designed to give a dealer time to add
a security to its ``securities master file'' so that a trade can be
reported through the dealer's automated trade processing systems. A securities master file
[[Page 73940]]
contains the information about a municipal security issue that is
necessary for a dealer to be able to process transactions in the issue.
It includes such items as the interest rate, dated date, interest
payment cycle, and put and call schedules. The dealer's securities
master file often contains information only for securities held in
custody for customers and for securities that have been recently
traded. If a dealer trades a security that is not in its securities
master file, the relevant securities information must be obtained by
the dealer from an information vendor before the trade can be processed and reported.\5\
\5\ Many dealers use service bureaus for various trade
processing functions, including the maintenance of securities master
files. Securities master file update procedures for service bureaus are the same as those described for dealers.
For new issue transactions, a dealer's access to necessary
securities information depends not only on its link with an information
vendor but also on whether that vendor itself has the information on
the new issue. Vendors currently obtain much of their new issue
information through voluntary cooperation from underwriters. This
process does not always result in all the vendors having the necessary
securities information by the time trade executions begin. Dealers
trading a new issue for the first time need the threehour exception
from the fifteenminute trade reporting requirement for their first
trades in a new issue because the securities information is not always available at the time the trade is executed.\6\
\6\ In the new issue market, information vendors seek to collect
information on each issue and deliver it to customers in time for
trade reporting in the new issue. There are several challenges for
vendors and dealers to meet the reporting deadlines. For example,
there are approximately 15,000 new municipal issues that must be set
up in databases each month. Another problem for the industry is the
fact that approximately 85 different information fields for each
issue must be successfully gathered, which in large part depends on the timely cooperation of the underwriters.
To address inefficiencies in the collection of new information
securities data, Securities Industry and Financial Markets Association
(``SIFMA''), industry members, securities information vendors, and
other service providers in the municipal securities market have worked
extensively with The Depository Trust and Clearing Corporation
(``DTCC'') to develop a centralized system for collecting and
communicating new issue securities information. The system, called the
``New Issue Information Dissemination System'' (``NIIDS''), will be
operated by DTCC and will act as a central collection point for
standardized electronic files of new issue information provided by
underwriters which will be disseminated in realtime to information vendors. DTCC plans to implement NIIDS in early 2008.\7\
\7\ In addition to providing an improved mechanism for
disseminating the new issue information necessary for trade
processing, the system also would use the information for purposes
of establishing depository eligibility for new issues. DTCC plans to
require use of the New Underwriting System (``NUWS''), of which NIIDS is a component, beginning in April 2008.
MSRB has filed with the SEC another proposed rule change designed to improve new issue transaction reporting that includes requiring underwriter participation with NIIDS.\8\ The proposed effective date for these changes is June 30, 2008. NIIDS, in conjunction with MSRB rules, should make it possible for dealers to report new issue trades earlier and thus eliminate the need for the threehour exception for whenissued trade reports. Accordingly, an extension of the threehour exception for whenissued transactions to June 30, 2008 will allow time for NIIDS to be implemented and will ensure that the threehour exception is available up to the effective date of MSRB rules designed to improve new issue transaction reporting.
\8\ See File Number SRMSRB200708.
The proposed rule change would revise MSRB Rule G14 RTRS Procedures (a)(ii)(C) by deleting the language regarding the expiration of the threehour exception on December 31, 2007 and replacing the language to state that for whenissued transactions, the threehour exception to the fifteen minute reporting rule will expire on June 30, 2008.
2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with section 15B(b)(2)(C) of the Act,\9\ which provides that the MSRB's rules shall:
\9\ 15 U.S.C. 78o4(b)(2)(C).
Be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in municipal securities, to remove impediments to and perfect the mechanism of a free and open market in municipal securities, and, in general, to protect investors and the public interest.
The Board believes that the proposed rule change is consistent with
the Act because it will allow the municipal securities industry to produce more accurate trade reporting and transparency.
B. SelfRegulatory Organization's Statement on Burden on Competition
The Board does not believe that the proposed rule change will
impose any burden on competition since it would apply equally to all brokers, dealers and municipal securities dealers.
C. SelfRegulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others
Although the MSRB did not publish for comment an exposure draft of
the proposed rule change, the MSRB received one letter requesting that
the expiration of the threehour exception be extended to no earlier
than the time that changes to MSRB rules to require underwriter participation with NIIDS become effective.\10\
\10\ See letter from Leslie M. Norwood, Managing Director and
Associate General Counsel, SIFMA to Harold Johnson, Deputy General
Counsel, and Justin Pica, Uniform Practice Policy Advisor, MSRB dated October 16, 2007.
III.Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Because the proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) does not become
operative for 30 days from November 27, 2007, the date on which it was
filed, and the MSRB provided the Commission with written notice of its
intent to file the proposed rule change at least five business days
prior to the filing date, the proposed rule change has become effective
pursuant to section 19(b)(3)(A) of the Act \11\ and Rule 19b4(f)(6) thereunder.\12\
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b4(f)(6).
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.\13\
\13\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of the following methods:
[[Page 73941]]
Electronic comments:
Paper comments:
All submissions should refer to File Number SRMSRB200707. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the MSRB. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SRMSRB200707 and should be submitted on or before January 18, 2008.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\14\
\14\ 17 CFR 200.303(a)(12).
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E725184 Filed 122707; 8:45 am]
BILLING CODE 801101P
SUMMARY: Municipal Securities Rulemaking Board,
DOCUMENT BODY 2: December 20, 2007.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b4 thereunder,\2\ notice is hereby given that
on November 27, 2007, the Municipal Securities Rulemaking Board
(``MSRB'' or ``Board''), filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') the proposed rule change as
described in Items I, II and III below, which Items have been prepared
by the MSRB. The MSRB has filed the proposal as a ``noncontroversial''
rule change pursuant to section 19(b)(3)(A)(iii) of the Act,\3\ 3 and
Rule 19b4(f)(6) thereunder,\4\ which renders the proposal effective
upon filing with the Commission. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b4(f)(6).
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The MSRB is filing with the Commission a proposed rule change
consisting of an amendment to MSRB Rule G14, Reports of Sales or
Purchases (the ``proposed rule change''). The proposed rule change
would extend the expiration date of the threehour exception to the
fifteenminute reporting deadline for certain when, as and if issued
transactions under Rule G14 RTRS Procedures, paragraph (a)(ii)(C).
Under the current language of this provision, the threehour reporting
exception will automatically expire December 31, 2007. The proposed
rule change provides that the threehour exception will expire on June
30, 2008 in order to coincide with the effective date of other proposed
changes to MSRB rules designed to improve transaction reporting of new
issue municipal securities. The MSRB proposes an effective date for
this proposed rule change of December 31, 2007. The text of the
proposed rule change is available on the MSRB's Web site (http://www.msrb.org ), at the MSRB, and at the Commission's Public Reference
Room.
II. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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. A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
MSRB Rule G14, on transaction reporting, requires all brokers, dealers and municipal securities dealers (``dealers'') to report all transactions in municipal securities to the MSRB RealTime Transaction Reporting System (``RTRS'') within fifteen minutes of the time of trade execution, with limited exceptions. One exception listed in Rule G14 RTRS Procedures, paragraph (a)(ii) is a ``threehour exception'' that allows a dealer three hours to report a transaction in a when, as and if issued (``whenissued'') security if all of the following conditions apply: (i) The CUSIP number and indicative data of the issue traded are not in the securities master file used by the dealer to process trades for confirmations, clearance and settlement; (ii) the dealer has not traded the issue in the previous year; and (iii) the dealer is not a syndicate manager or syndicate member for the issue.
The threehour exception was designed to give a dealer time to add
a security to its ``securities master file'' so that a trade can be
reported through the dealer's automated trade processing systems. A securities master file
[[Page 73940]]
contains the information about a municipal security issue that is
necessary for a dealer to be able to process transactions in the issue.
It includes such items as the interest rate, dated date, interest
payment cycle, and put and call schedules. The dealer's securities
master file often contains information only for securities held in
custody for customers and for securities that have been recently
traded. If a dealer trades a security that is not in its securities
master file, the relevant securities information must be obtained by
the dealer from an information vendor before the trade can be processed and reported.\5\
\5\ Many dealers use service bureaus for various trade
processing functions, including the maintenance of securities master
files. Securities master file update procedures for service bureaus are the same as those described for dealers.
For new issue transactions, a dealer's access to necessary
securities information depends not only on its link with an information
vendor but also on whether that vendor itself has the information on
the new issue. Vendors currently obtain much of their new issue
information through voluntary cooperation from underwriters. This
process does not always result in all the vendors having the necessary
securities information by the time trade executions begin. Dealers
trading a new issue for the first time need the threehour exception
from the fifteenminute trade reporting requirement for their first
trades in a new issue because the securities information is not always available at the time the trade is executed.\6\
\6\ In the new issue market, information vendors seek to collect
information on each issue and deliver it to customers in time for
trade reporting in the new issue. There are several challenges for
vendors and dealers to meet the reporting deadlines. For example,
there are approximately 15,000 new municipal issues that must be set
up in databases each month. Another problem for the industry is the
fact that approximately 85 different information fields for each
issue must be successfully gathered, which in large part depends on the timely cooperation of the underwriters.
To address inefficiencies in the collection of new information
securities data, Securities Industry and Financial Markets Association
(``SIFMA''), industry members, securities information vendors, and
other service providers in the municipal securities market have worked
extensively with The Depository Trust and Clearing Corporation
(``DTCC'') to develop a centralized system for collecting and
communicating new issue securities information. The system, called the
``New Issue Information Dissemination System'' (``NIIDS''), will be
operated by DTCC and will act as a central collection point for
standardized electronic files of new issue information provided by
underwriters which will be disseminated in realtime to information vendors. DTCC plans to implement NIIDS in early 2008.\7\
\7\ In addition to providing an improved mechanism for
disseminating the new issue information necessary for trade
processing, the system also would use the information for purposes
of establishing depository eligibility for new issues. DTCC plans to
require use of the New Underwriting System (``NUWS''), of which NIIDS is a component, beginning in April 2008.
MSRB has filed with the SEC another proposed rule change designed to improve new issue transaction reporting that includes requiring underwriter participation with NIIDS.\8\ The proposed effective date for these changes is June 30, 2008. NIIDS, in conjunction with MSRB rules, should make it possible for dealers to report new issue trades earlier and thus eliminate the need for the threehour exception for whenissued trade reports. Accordingly, an extension of the threehour exception for whenissued transactions to June 30, 2008 will allow time for NIIDS to be implemented and will ensure that the threehour exception is available up to the effective date of MSRB rules designed to improve new issue transaction reporting.
\8\ See File Number SRMSRB200708.
The proposed rule change would revise MSRB Rule G14 RTRS Procedures (a)(ii)(C) by deleting the language regarding the expiration of the threehour exception on December 31, 2007 and replacing the language to state that for whenissued transactions, the threehour exception to the fifteen minute reporting rule will expire on June 30, 2008.
2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with section 15B(b)(2)(C) of the Act,\9\ which provides that the MSRB's rules shall:
\9\ 15 U.S.C. 78o4(b)(2)(C).
Be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in municipal securities, to remove impediments to and perfect the mechanism of a free and open market in municipal securities, and, in general, to protect investors and the public interest.
The Board believes that the proposed rule change is consistent with
the Act because it will allow the municipal securities industry to produce more accurate trade reporting and transparency.
B. SelfRegulatory Organization's Statement on Burden on Competition
The Board does not believe that the proposed rule change will
impose any burden on competition since it would apply equally to all brokers, dealers and municipal securities dealers.
C. SelfRegulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others
Although the MSRB did not publish for comment an exposure draft of
the proposed rule change, the MSRB received one letter requesting that
the expiration of the threehour exception be extended to no earlier
than the time that changes to MSRB rules to require underwriter participation with NIIDS become effective.\10\
\10\ See letter from Leslie M. Norwood, Managing Director and
Associate General Counsel, SIFMA to Harold Johnson, Deputy General
Counsel, and Justin Pica, Uniform Practice Policy Advisor, MSRB dated October 16, 2007.
III.Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Because the proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) does not become
operative for 30 days from November 27, 2007, the date on which it was
filed, and the MSRB provided the Commission with written notice of its
intent to file the proposed rule change at least five business days
prior to the filing date, the proposed rule change has become effective
pursuant to section 19(b)(3)(A) of the Act \11\ and Rule 19b4(f)(6) thereunder.\12\
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b4(f)(6).
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.\13\
\13\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of the following methods:
[[Page 73941]]
Electronic comments:
Paper comments:
All submissions should refer to File Number SRMSRB200707. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the MSRB. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SRMSRB200707 and should be submitted on or before January 18, 2008.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\14\
\14\ 17 CFR 200.303(a)(12).
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E725184 Filed 122707; 8:45 am]
BILLING CODE 801101P
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