MSRB Files Proposed NIIDS-Related Rule Changes With SEC

WASHINGTON — The Municipal Securities Rulemaking Board yesterday filed two proposed rule changes with the Securities and Exchange Commission related to a new electronic primary-market disclosure system that the board plans to require dealers to send information to by June 30. The proposed changes­ to the rules — G-14 on reports of sales or purchases, G-8 on books and records, G-9 on the preservation of records, and G-34 on Cusip numbers and new issue requirements — will effectively mandate the use of the New Issue Information Dissemination System, which the Depository Trust Clearing Corp. is developing with the MSRB and the Securities Industry and Financial Markets Association.The new system, known as NIIDS, will collect information about new muni bonds from underwriters or their intermediaries and then electronically disseminate it in a uniform manner and on a near real-time basis to information vendors and other market participants.Currently, firms report the information directly to multiple vendors and it is not always posted at the same time or in the same manner.Under the MSRB’s proposed changes to rules G-8, G-9, and G-34, dealers would have to obtain Cusip numbers for new municipal issues earlier, and submit information on the securities to the DTCC within two hours of the time of formal award of the bonds. After a minimum period of another two hours, dealers would have to notify the DTCC of their estimated time for executing the first transactions in the new securities issue. Meanwhile, the proposed rule changes regarding Rule G-14 would extend until June 30 — a three-hour exception to the board’s 15-minute transaction-reporting deadline for new municipal securities and any other munis that firms have not traded for a year. The exception, which is currently set to expire at the end of the year, was given to firms when the board’s real-time transaction reporting program started in 2005 because of concerns that if they had not traded a muni for 12 months the key information about that bond would not be in the firm’s master file and the firm would not be able to meet the 15-minute deadline. Under the real-time transaction reporting system, firms must report to the MSRB pricing and other information from most muni trades within 15 minutes after they occur. Dealers historically have had difficulties getting new-issue information out into the muni marketplace, market sources have said. Lead underwriters have used a variety of methods such as hand delivery, e-mail and faxes to send the information to a subsidiary of DTCC and information vendors. But NIIDS is designed to become a uniform and centralized electronic system for collecting and disseminating such information.