WASHINGTON — The Municipal Securities Rulemaking Board has filed proposed rule changes with the Securities and Exchange Commission that would require the exact par value of trades up to $5 million to be reported over EMMA on a near-real time basis.
Larger trades would be reported as MM+. The exact size of those trades would be reported over EMMA five business days after the trades were executed.
The MSRB is proposing that the changes to its Rule G-14 on trade reporting, which would provide more transparency in the muni market, take effect on Nov. 5, to coincide with other planned changes to its trade reporting system.
But the SEC must first approve the rule changes.
Currently, the par value of trades of more than $1 million are masked and designated only as "1MM+" on EMMA. The exact size of these trades is reported five business days after the trades are executed.
But the board had proposed in June that the par value of all trades over $1 million be reported on EMMA and the filing with the SEC is more restrictive than that original proposal.
Muni issuers had supported that initial proposal, but dealer and institutional investor groups had opposed it, warning it would hurt market liquidity. Dealer groups worry that reporting the exact size of trades would reveal information about the dealer and institutional investor involved in a trade as well as the dealer's inventory. They worry this information could be used by other dealers to trade against the dealer's position.
The Investment Company Institute had urged the MSRB to phase in the unmasking of the size of large trades over time so that the board could evaluate any effects on market liquidity.
"The MSRB believes disseminating the exact size of all transactions under $5 million in real time is an appropriate first step toward ensuring the fairest and most accurate pricing of municipal securities transactions," MSRB executive director Lynnette Kelly said in a press release the board issued Friday. "The MSRB plans to continue to evaluate whether this threshold can be raised further or even eliminated to achieve the goal of more complete and immediate price transparency in the municipal market."
The SEC will publish the MSRB's new proposal in the Federal Register and seek public comments on it, then decide whether to approve it.