The Municipal Securities Rulemaking Board has filed its 2024 fees for dealers and municipal advisors with the Securities and Exchange Commission, with underwriting and municipal advisor fees rising and transaction and trade count fees coming down.
The board's underwriting fee went up 25% to $0.0371 from $0.0297 for every $1,000 par underwritten and the municipal advisor professional fee saw a 9% increase to $1,160 from $1,060 for every covered professional. The board's transaction fee dropped 15% to $0.0091 from $0.0107 for every $1,000 transacted, and trade count fees fell 48% to $0.57 per trade, down from $1.10.
"Under the rate card model, the MSRB annually adjusts fees to better manage the organization's revenue and reserve levels needed to deliver value to the municipal market through regulatory protections, technology infrastructure and data services," said Mark Kim, chief executive officer of the MSRB. "This formulaic rate-setting process reflects feedback we have received from stakeholders regarding our reserve management. It is more transparent and predictable for the MSRB's stakeholders, while also allowing us to quickly adapt to changing market conditions and ensuring the MSRB does not collect more fees than it needs to operate."
The filing marks the board's first since it switched to its new rate card model. The changes go into effect on Jan. 1, 2024 and are expected to net $3 million in surplus revenue to regulated entities.
The MSRB's rate card model also stipulates a 25% cap on rate increases, which the underwriting fee was subject to this year, with no floor on rate reductions.
"The tough year in underwriting along with the higher-than-expected trade volume are the reasons we are raising some fees while lowering others," said Bo Daniels, MSRB board member and chair of the finance committee. "While our new rate card approach does not fully cure the challenge of having to make predictions about market activity volume in the year ahead, it does help ensure that excess revenue collected is returned to dealers and municipal advisors timelier and with more predictability."
The fee changes were somewhat expected, but there are still larger concerns within the muni market about how the board manages its budget.
"The Rate Card itself is in line with expectations," said Michael Decker, senior vice president, federal policy and research at the Bond Dealers of America. "We are looking at broader issues related to the budget and the MSRB's budget process. The MSRB has budgeted itself a 5.5% increase in 2024. That's on top of 5.1 and 4.2% increases in 2023 and 2022. This pace of growth in the budget is not sustainable."
Susan Gaffney, executive director of the National Association of Municipal Advisors said NAMA will be diving deeper into the issue through a formal comment letter.
"This MA fee increase on a stand alone basis may not be burdensome, but there is a greater need to focus on the larger issues of MSRB's budget expenditures and transparency, especially when there is a pattern of raising fees on MAs and other regulated entities," Gaffney said.
