WASHINGTON — The Municipal Securities Rulemaking Board is exploring whether to raise the fees it charges market participants, including for subscriptions to market data it collects.
It also has put on the back burner a proposal to require disclosure of certain political contributions made by bank and bank holding company political action committees.
MSRB chairman Peter Clarke, managing director and vice chairman of tax-exempt capital markets at JPMorgan, announced the actions taken by the board at its quarterly meeting last week in Austin in a conference call with reporters yesterday.
He said the board is not abandoning the bank PAC proposal, which would alter Rule G-37 to require the disclosure of contributions of $250 or more.
Instead, Clarke said, the board is “continuing to evaluate” the proposal and trying to work through jurisdictional and other questions raised about the proposal by industry groups opposed to it. G-37 is aimed generally at limiting pay-to-play activities in the municipal market.
“We have to do more homework on the bank PAC contributions to discover if there really is any sort of connection [to a bond deal] and discover where we want to go,” he said. “So it’s still in the discovery phase.”
Industry groups complained last year that the MSRB does not have jurisdiction over PACs that are not controlled by municipal bond dealers, even if those committees are controlled by bank holding companies affiliated with dealers.
In contrast to the PAC proposal, Clarke said there is a much more of a direct bond connection to related proposed rule changes that became effective yesterday and cover contributions dealers make to bond ballot election campaigns.
The changed rules generally would require dealers to disclose contributions of $250 or more to such campaigns, which are organized in states where voter approval is required for bond issuances.
The board began to consider the bond ballot proposal a year ago after three of the largest underwriters of negotiated bond transactions, including a former MSRB chairman, asked the board to address the issue “out of an abundance of caution,” Clarke said. But he suggested there is little indication that market participants feel strongly about bank PAC contributions.
“Without the board saying, 'Let’s march forward with this,’ we basically have to do a more thorough job of putting the facts out there and making sure we do a thorough job,” he said. “Otherwise it would be chaos.”
Clarke also said the board is reviewing the fee structures for its subscription services as well as for new issues and transactions of muni bonds, citing dramatic development, usage and backup costs for its information systems, which collectively constitute its expansive Electronic Municipal Market Access site.
Clarke said there is high demand for its information systems, but joked that “demand is another word for cost.”
“We reviewed all of our fees at this meeting. We’re looking at every source of revenue that the board has,” he said, adding the board is particularly keen to raise fees for data sold on a subscription basis to information vendors and others.
“These fees are low, relative to the cost of making [the data] available,” he said. “There are people out there using the data for very, very low amounts of money, and we just want to make sure that we’re doing the right thing for everybody.”
Currently, the board charges $5,000 annually for a near-real-time feed for trade data from all muni transactions, $2,000 annually for comprehensive daily reports of transaction data for the past five days, and $600 for a one-year collection of historical customer and inter-dealer trades. It also charges $20,000 annually for a real-time feed of primary market disclosures submitted to EMMA and $45,000 annually for a real-time feed of continuing disclosures.
However, Clarke said the board is not considering charging individuals to access EMMA or other systems that are currently free.
Meanwhile, Clarke said the MSRB will move forward with a “priority of orders” proposal, which would require dealers acting as syndicate managers or sole underwriters on new issues to follow written provisions for the allocation of the bonds during a retail order period. With few exceptions, they would be required to give priority to customers orders over orders for their own or related accounts, he said.
The board approved three clarifications to the proposal, including one sought by the Regional Bond Dealers Association to clarify that customer “priority provisions” in the board’s rules would be in addition to any priority of order provisions in a so-called AAU, or agreement among underwriters.
The MSRB also agreed to remove the word “generally” from an interpretive notice tied to the proposal, so that it would not be perceived to be any less rigorous than the proposed rule amendments. The action comes in response to a comment from the Securities Industry and Financial Markets Association, which was critical of the overall proposal.
In addition to removing the word, the board will clarify that the there are only three exemptions to the priority of order rules: if an order is not consistent with the orderly distribution of securities, not in the best interest of the syndicate, or if the issuer permits the dealer to deviate from the priority provisions.
Clarke said the board continues work to include bond ratings on EMMA, explaining generally that the MSRB has prioritized four different approaches. He said it is continuing to discuss the issue with the three major rating agencies that rate municipal debt.