WASHINGTON – The Municipal Securities Rulemaking Board has released its criteria to determine which registered entities it will designate to participate in Securities and Exchange Commission-mandated business continuity and disaster recovery plan testing.
The testing will be done to comply with the SEC's Regulation Systems Compliance and Integrity (Reg SCI), which mandates that at least once a year certain self-regulatory organizations, alternative trading systems, and other firms operating in the capital markets test and review their own automated systems, as well as inform members and participants about system issues.
The MSRB complied with the regulation on Nov. 2, 2015 by filing its Rule A-18 requiring mandatory participation in the testing. The MSRB's plan is for it to choose participants that, when taken as a whole, account for a meaningful percentage of the data submission volume required from entities registered with the MSRB. The MSRB plans to choose and notify the participants at least 45 days before a functional and performance test. It will provide information about the manner of testing and requirements for mandatory participation.
The self-regulator has designated what a "meaningful percentage" will mean for the different types or levels of activity found on each of its systems. For its Real-Time Transaction Reporting System, the MSRB will designate the top five MSRB registrants in terms of number of muni trades as reported to RTRS during a calendar month before the testing, provided that the registrants account for at least 30% of the muni trades reported during that month.
It will similarly test its Short-term Obligation Rate Transparency system by designating the top five registrants acting as program dealers for auction rate securities or marketing agents for variable rate demand obligations that participated in interest rate resets as reported to SHORT during a calendar month before the testing. Those designees will also have to account for at least 30% of the interest rate resets reported to SHORT during the month.
The top five registrants that engaged in underwriting activity in terms of par amount underwritten during a calendar month before testing will be designated for testing primary market data and document submission to the MSRB's EMMA system.
For 529 College Savings Plan information submitted to EMMA, the top five registrants that reported to EMMA in terms of total assets of plans during a calendar quarter prior to testing will be designated. Designees for primary market data and 529 plan reporting will also have to meet the 30% threshold.
If the top five registrants do not represent 30% of the relevant activity, the number of top designees will be expanded until the threshold is met, according to the MSRB.
