MSRB Ready to Launch Pilot Version of EMMA

WASHINGTON - The Municipal Securities Rulemaking Board today is expected to launch a pilot version of EMMA - a free, centralized online portal that will eventually provide investors with real-time disclosure and price information on municipal securities - just four months after it began development of the system.

The voluntary pilot portal, the first of four phases for establishing EMMA, or Electronic Municipal Market Access, will pool the vast trove of documents and data from the board's Municipal Securities Information Library and Real-Time Transaction Reporting System and test market participants' ability to access those documents.

The pilot portal will feature more than 220,000 existing offering statements that the board has stored since 1990, and about 20,000 amendments to those statements, as well as some 30,000 advance refunding documents. EMMA also includes the trade data the board has collected since Jan. 31, 2005, and will feature the documents and data for any new muni issues.

"In furtherance of our mission of investor protection, we are pleased that the MSRB can provide this important utility to investors in our market," MSRB chairman Frank Chin, managing director and manager of the public finance department at Citi, said Friday. "Upon full implementation, EMMA will provide a permanent, centralized, and comprehensive Internet-based system for free real-time public access to all primary market, secondary market, and trade price data for municipal securities submitted to the MSRB."

Today's launch of the pilot portal, which has been billed as the municipal market equivalent of the Securities and Exchange Commission's EDGAR system, is noteworthy because it marks action on the only proposal among a list of muni market initiatives unveiled last summer by SEC chairman Christopher Cox on which market participants could agree. Cox's call for a centralized repository was cautiously welcomed by critics, notably issuer groups, who objected to his other initiatives geared toward boosting municipal disclosure and accounting standards.

"Thanks to the leadership of the Municipal Securities Rulemaking Board, investors will soon have more information about municipal securities freely available on the Internet to help them make better investment decisions," Cox said Friday.

Still, the system must undergo several steps before it is complete, said Ernesto A. Lanza, MSRB senior associate general counsel and the lead staff member on the project, who described the pilot as "a first step to get our feet wet."

In the second phase of EMMA, which the MSRB refers to as the "access-equals-delivery" component that it hopes to begin operating this summer after obtaining approval from the Securities and Exchange Commission, broker-dealers will be required to electronically file official statements for new muni issues on the online site in lieu of having to send paper copies of them to investors.

The board will then move forward with the third phase, which will provide market participants with secondary market disclosure documents, sometime around the beginning of August.

The final phase, which the board hopes to launch by the beginning of December, will require submission and provide real-time dissemination of continuing disclosure documents and real-time trade data.

Before the MSRB can mandate EMMA's use, the SEC must first amend its Rule 15c2-12 on disclosure to require secondary market disclosure documents to be filed with EMMA, which will replace the four existing nationally recognized municipal securities information repositories, as well as the Central Post Office disclosure facility that is currently being operated by the Municipal Advisory Council of Texas. SEC officials have said that they would try to propose changes to 15c2-12 by today, and that it could take an additional six months for the commission to approve them.

EMMA may have a ways to go, but the system has come a long way since the first computer code for it was written the week after Thanksgiving. A prototype of the site that was shown to The Bond Buyer last week is bright and easy-to-use, with loads of features that allow searches by state, six- or nine-digit Cusips, issuer name, issuer description, maturity date, issue date, or coupon rate. Users can pull up offering documents and, at the same time, trade data for the bonds.

The system is packed with features, yet still appears vastly less cluttered than an earlier version that essentially included all of the information about a muni bond on a single page.

That is because the pilot portal neatly stores information on an individual muni bond behind tabs that the user can click on to reveal official statements, advance refunding documents, or trade activity. For searches of an issuer name, EMMA will list the results in groupings based on the six-digit Cusips for the issuers. The system also will automatically group related partial advance refundings, even if the refundings have different Cusips than the original issuance. The automated feature is needed because when partial advance refundings occur, Cusips are reassigned, resulting in three Cusips stemming from the original security: one tied to the initial issuance, one for the partially refunded bonds, and a third for the bonds that remains outstanding.

As part of the board's efforts to cater to retail investors, EMMA's search engine will utilize "fuzzy logic" to allow it to recognize near matches for words. For instance, a search for "WTR" would be recognized as "Water," and "NB" would be recognized as "Nebraska."

The search engine is designed in such a way that someone unfamiliar with the municipal market will still be able to find what he is looking for, Lanza said, while noting that EMMA features a rich library of information too, including an overview of bonds and an extensive glossary that will provide definitions for hundreds of bond-related terms.

The system is so comprehensive that it will include documents pertaining to the tax-advantaged college savings plans established by states under Section 529 of the federal tax code. It also will feature the derivatives documents that some broker-dealers have voluntarily filed with the board over the years.

In listing the derivatives documents, though, EMMA will include the same names that broker-dealers use to identify their derivatives products, which can be unexpected and a little confusing. "Merlot and Bruts" or "Putters and Drivers," for example, are some common names for the derivatives products.

EMMA also will allow users to subscribe to an alert system that will notify them when the offering statement for a bond they have purchased becomes available. Sometimes an OS is not available at primary market sale date because current board rules require that broker-dealers post the documents within one business day after receiving them from the issuer but no later than 10 days from the sale date. The board is working on compressing that deadline later in the year.

The site's web address is: http://emma.msrb.org

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