Securities Law

Market Indices, Benchmarks Coming to EMMA

JAN 28, 2013 10:58am ET
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The Municipal Securities Rulemaking Board will soon make muni market yield curves and other benchmark data available on the EMMA website to help market participants determine fair prices.

MSRB officials, recapping a quarterly board meeting held last week in Orange County, Calif., said the new data will help investors and issuers better assess trading activity.

“It’s about trying to provide the investor community and issuer community with more and more data as they are trying to make decisions,” said Jay Goldstone, MSRB’s board chair and chief operating office of San Diego.

MSRB officials declined to say when the data would be made available on EMMA or if they would pay for it, but said it will come from private data providers.

Leading providers include Municipal Market Data, a division of Thomson Reuters, the Securities Industry and Financial Markets Association and Municipal Market Advisors. MMD did not immediately respond to a request seeking comment. 

MMA Chief Executive Officer Tom Doe said the MSRB asked the firms in August if they would provide free data. He was unaware if there were takers, but said the MSRB has not followed up with MMA.

Benchmarks and indices could mislead investors because of tight market liquidity and should be accompanied by thorough education materials, Doe said.

“I’m not a proponent of 10 different yield curves” on EMMA, he said. “If you put up data, it’s important to be able to educate investors on how the data behaves and what it communicates.”

SIFMA applauded the MSRB’s efforts to improve transparency by publishing benchmark data, said an email from Leslie Norwood, SIFMA’s co-head of municipal securities.

“If the MSRB can utilize this data for benchmark purposes that would be useful for market participants, SIFMA would be supportive of that initiative,” she said.

The board also said Monday it will consider reorganizing into principles-based rule changes, or eliminating, some of the interpretative guidance on Rule G-17 on fair dealing.

“It’s a one-sentence rule with 37 to 40 pages of interpretive notices to provide guidance,” said Goldstone. “The board decided its fairly confusing” to both market participants and enforcement agencies. MSRB rules are enforced by the Financial Industry Regulatory Authority.

The board also will review its most recent G-17 interpretive guidance that requires underwriters’ make new disclosures to issuers. That guidance, which took effect in August 2012, could be clarified with additional notices, Goldstone said, noting that some underwriters have submitted lengthy and complicated disclosures to issuers.

“Being an issuer, when I get a five-, 10- or 15-page disclosure letter, is it really covering what the board’s intent was?” asked Goldstone. “Or has it expanded beyond that?”

Issuers could also be provided with clarifications on issues such as whether they should acknowledge receipt of disclosures, and if they might waive rights by doing so, Goldstone said. “Those are the kinds of things we will look at,” he said.

The board agreed to submit three rule proposals to the Securities and Exchange Commission for approval.

One would create a database of 529 college savings plan information, such as plan assets, contributions, distributions, fees, expenses and performance data. That information will help the board better oversee the market and determine whether additional regulations are required, the board said in a release.

The board will also file a rule amendment requiring underwriters to tell all dealers involved in a bond sale about the terms of issuers’ retail order periods. Dealers would need to report the existence of retail order periods and collect information about each customer order.

“The board approved regulations ... that give the issuer the flexibility to define what a retail order period is and ... the obligations of the dealer in terms of complying with the requirements,” said Goldstone.

The MSRB will file changes to Rule G-11 on primary offering practices that would limit underwriters’ ability to consent to changes in bond authorizing document during the brief period when they are the majority bondholders. Such consents can adversely affect holders of parity bonds, which were sold separately but have equal claim on the same source of payment, the board has said. The changes would ensure only bondholders with long-term interest in the bonds make consents, the MSRB said.

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