WASHINGTON - The Municipal Securities Rulemaking Board will give broker-dealers an extra 90 days to test the New Issue Information Dissemination System in response to complaints from two market groups that the original June 30 implementation date for NIIDS-related rule changes was untenable because of ongoing market turmoil, MSRB chairman Frank Chin announced Friday.
Testing of NIIDS, which is designed to improve the accuracy and timeliness of information disseminated about new muni bond issues, will now be conducted through the middle of September so that the system can be finalized by Sept. 30, Chin said during a conference call with reporters Friday in which he talked about the board's meeting in Boston last week.
The MSRB is working on NIIDS in conjunction with the Depository Trust & Clearing Corp., which is designing it, and the Securities Industry and Financial Markets Association, which has formed a group of broker-dealers to review the Web component of the system at DTTC's request. Chin said the board decided that launching the system at the end of the third quarter "would be appropriate," in light of the concerns.
In a March 28 letter to the Securities and Exchange Commission, SIFMA stressed its strong support for NIIDS, but argued that there have been numerous problems with the software and that broker-dealers have not had enough time to learn how to use and test the system, particularly amid the ongoing auction-rate securities market turmoil.
A separate letter that the Regional Bond Dealers Association sent to the board early last week also warned the June 30 implementation date is "unrealistic" and asked the board to extend the effective date of its associated rule changes to "late 2008 or early 2009."
Both SIFMA and RBDA said Friday that they are pleased with the additional time.
"This delay will assist the industry by providing additional time to undertake the essential amount of education, training, and testing necessary to ensure the successful implementation of a new system of this magnitude," Leslie Norwood, SIFMA's managing director and associate general counsel, said in a written statement. The delay will "minimize disruption to the market," she added.
Michael Decker, co-chief executive officer of RBDA, also applauded the move, and said: "Giving the market an extra three months to test and implement NIIDS will help ensure the success of the new system. We look forward to working with the DTCC over the coming months to help make NIIDS as robust and efficient as possible."
Under NIIDS, DTCC will collect information about new muni bond issues from underwriters or their intermediaries and then electronically disseminate it in a uniform manner and on a real-time basis to information vendors and other market participants. Currently, firms report the information separately to each information vendor, and it is not always posted at the same time or in the same manner. The board sent the commission its proposed NIIDS-related rules changes in November. The new date for their implementation will not entail any substantive changes to the filing, Chin said.
DTCC spokesman Edward Kelleher said the company is willing to work with broker-dealers to help them comply with the implementation schedule. Last week DTCC said the schedule would be guided by the MSRB and the SEC.
Meanwhile, the board also announced Friday that Chin, managing director and manager of the public finance department at Citi in New York, and James A. Posthauer, director of municipal trading at SunTrust Capital Markets in Atlanta, will replace two bank representatives that recently left the 15-member board.
Posthauer returns to the board after completing a three-year term at the end of September, and Chin will serve an additional year to his existing board term, which was to expire later this year. They will replace Ramiro Albarran, who has left Banc of America Securities LLC in New York, and is no longer working in munis; and Alan Murphy, who left Popular Securities Inc. following the bank's closure of its North American broker-dealer subsidiary in late December, to join Duncan-Williams Inc. Chin said he has not yet decided if he will seek an additional one-year term as chairman.
Chin said the board has received mostly favorable feedback in reaction to EMMA, or Electronic Municipal Market Access, the board's free, centralized repository that was launched Monday in a pilot format. The board plans to make EMMA a repository for primary- and secondary-market disclosures, as well as trade data, by the end of the year, pending SEC approval.
The board also discussed its proposal to establish a centralized system for the collection and dissemination of critical information from auction-rate securities transactions to increase the amount of information available to market participants, Chin said.
Board members will decide after the public comment period on the proposal ends later this month whether to require broker-dealers to enter additional ARS information into the board's Real-Time Transaction Reporting System, he said. Following that decision, the board will consider whether to include variable-rate demand obligation information in the RTRS system, he added.
Meanwhile, Chin said the board plans to soon issue a public comment letter on syndicate practices for proprietary trading desks.
"A lot of the broker-dealers have what we call prop desks, or proprietary trading desks, within their firms and we're trying to understand how they are treated from a customer perspective in syndicates and are therefore asking comment from the industry about how that's done" and how it relates to the board's Rule G-17 on fair dealing, he said.
Chin also said that a board subcommittee continues to review the MSRB's fair pricing rules and hopes to draft any recommended changes to them by the MSRB's July meeting in Denver.
