WASHINGTON — The Municipal Securities Rulemaking Board on Tuesday proposed rule changes that would eliminate some duplicative reporting requirements faced by underwriters of new-issue muni securities.
The proposal, part of the board's long-range plan for market transparency, would allow underwriters to report information on new munis to the MSRB's online EMMA system by submitting it directly to the New Issue Information Dissemination Service, which is operated by the Depository Trust and Clearing Corp. The MSRB would then transfer the NIIDS data directly to EMMA.
The board said the move will increase transparency and reduce reporting errors.
"The MSRB recognizes the need to simplify requirements for municipal securities dealers where appropriate, and this proposal will dramatically improve efficiency for dissemination of new issue information," MSRB executive director Lynnette Kelly said in a release.
The board is accepting comments on the proposal through May 8.
In addition to improving transparency, the move will make new-issue prices and yields available on the Electronic Municipal Market Acess platform within two hours after an underwriter receives a new-issue award, the board said.
Currently, underwriters have until the end of the first day of trading to report the data. During that period, prices and yields are often unavailable, replaced by dealers with an "NRO," or "not-offered," designation.
The plan would also make more information available on EMMA, such as time of formal award and first execution. It also would require underwriters to report to NIIDS information about securities with short maturities, such as variable-rate instruments, auction-rate products and commercial paper.
Currently, an underwriter of new munis must report on the MSRB's Form G-32 a description of the security and information such as the issuer's name, the CUSIP number, principal amount, and initial prices and yields. The form is due by the end of the day on which it first sells the bonds.
Rule G-34 also requires underwriters to report identical information to NIIDS within two hours of when the bonds are awarded.
The board would change those rules to give underwriters a "straight-through process" for reporting new-issue information. Data will flow "uniformly" from NIIDS to EMMA.
"Re-keying information under both Rules G-32 and G-34 is time consuming, and this duplication of effort may increase the possibility of error," the MSRB said in its proposal.
Dealer groups say they need time to study the plan, but they generally support it.
"They call them fat-finger errors. If you are requiring a human to enter data into two different systems, there is a chance something could go wrong," said Leslie Norwood, co-head of the muni division at the Securities Industry and Financial Markets Association. "Entering information once and using that information for multiple purposes is a safer and cheaper option. We are very pleased the MSRB is making this change."
Mike Nicholas, chief executive of Bond Dealers of America, said the plan could reduce dealers' workload. "By removing the requirement that dealers send the same information to both EMMA and NIIDS, this proposal will reduce the administrative burden on underwriters when submitting information regarding new bond issues," he said.
MSRB had planned to integrate NIIDS data with EMMA data earlier, but was unable to complete the project because of difficulties merging the systems, the proposal said.
