The Municipal Securities Rulemaking Board has asked market participants how to improve the timeliness, fairness and efficiency of price transparency in the muni market, and whether dealers should be required to report trades in less time than the currently-required 15 minutes from execution.
In a request for comment released Thursday, the board asked market participants what changes dealers would have to make in order to report trades in five or ten minutes, as well as what would be their associated costs and burdens.
The board said the request is part of a broad effort to solicit feedback and suggestions about its plan to replace the Real-time Transaction Reporting System with a new so-called “central transparency platform,” or CTP.
Comments are due March 15.
“The MSRB has made a long-term commitment to enhance municipal market transparency and we want to ensure that we take into account industry practices and technology in the development of the next generation trade reporting system,” MSRB Executive Director Lynnette Kelly said in a release.
Many of the board’s questions for market participants focused on potential changes to the MSRB’s Rule G-14, which requires dealers to report most trades to the RTRS system within 15 minutes of execution.
The board noted that 99% of trades required to be reported in 15 minutes were reported on time during the last fiscal year, which ended Sept. 30.
But dealers tended to report larger trades later than smaller trades, the MSRB noted. For instance, only 97% of large trades — those with par amounts of more than $1 million — were reported within 15 minutes.
Likewise, 96% of trades with par values of less than $100,000 were reported within 5 minutes, while only 86% large trades were reported in 5 minutes.
The board asked market participants if dealers deliberately delay large trade reports, and if such delays benefit institutional investors at the expense of individual investors.
The board noted a January report from the Government Accountability Office which found that institutional investors sometimes obtain trade information before trades are reported to RTRS.
“Are the longer timeframes for reporting of large trades ... in any way related to the GAO’s findings?” the board asked.
The board added that the Financial Industry Regulatory Authority already addressed similar concerns. That self-regulator reduced its deadline for reporting over-the-counter equities to 30 seconds from 90 seconds in 2009 to keep firms from withholding information for competitive reasons.
The MSRB is also considering doing away or modifying the “end of day exceptions” in G-14.
Those exceptions allow dealers to report, at the end of the day, certain types of trades made on the first day of trading of a new issue. Such trades include “list offering price transactions,” which are between underwriters or syndicate members and customers, and “RTRS takedown transactions,” which are sales of discounted munis between underwriters and other syndicate or selling-group members.
G-14 also allows end-of-day reporting of auction-rate, variable-rate and other short-term securities.
The board also asked if there are better ways for dealers to report trades, or new technologies that could improve the trade reporting process.
Currently, dealers can report trades through an RTRS portal of the Real-Time Trade Matching system, both operated by the National Securities Clearing Corporation, a subsidiary of the Depository Trust & Clearing Corp. They may also submit trades manually through an RTRS portal.
The central transparency platform is central to the board’s long-range plan for market transparency and will be the “core” of the next generation of the MSRB’s EMMA system, called EMMA 2.0, the board said.
EMMA 2.0 will eventually provide public access to pre- and post-trade prices, as well as real-time prices, the board said.