WASHINGTON The Municipal Securities Rulemaking Board proposed amendments Friday to its Rule G-34 on Cusip numbers and new-issue requirements that are intended to help dealers meet the accelerated trade reporting obligations under the Real-Time Transaction Reporting Program that is scheduled to start up Jan. 1.
The real-time program generally will require dealers, for most municipal securities, to report prices and other trade data within 15 minutes after a trade occurs, rather than at the end of the day, as is the case under the current transaction-reporting program.
In its 14-page notice, the MSRB asked market participants to comment on the proposed amendments by Aug. 18. Once the comments are received, the board will finalize its proposal and submit it to the Securities and Exchange Commission for approval.
A Cusip which stands for the Committee on Uniform Securities Identification Procedures is the nine-digit or letter identifier of each individual bond. The current Rule G-34 states that dealers must apply for Cusips as promptly as possible but no later than, in the case of negotiated sales, a time sufficient to ensure assignment of a Cusip number or numbers on, or prior to, the business day on which the contract to purchase the securities from the issuer is executed. In the case of negotiated sales, it is the date of the award.
The rule also requires the lead underwriter to inform the syndicate and selling group members of the initial trade date, along with the Cusip numbers. The word date is used because under the current transaction-reporting program, dealers report trade data at the end of the day and the MSRB makes it available to subscribers and regulators on a next-day basis.
The initial trade date is defined, for negotiated issues, as the date the bond purchase agreement is executed or the date that allocations are first made by the underwriter, whichever is later. For competitive sales, the term is defined as the date the official award is made by the issuer or the date that allocations are first made by the underwriter, whichever is later.
The amendments would change the initial trade date to time of formal award, focusing on time instead of date, because dealers reporting requirements will be accelerated and based on a 15-minute period after the trade, rather than at the end of the day.
Under the amendments to the rule, the time of formal award will be defined, for negotiated issues, as the time that the bond purchase agreement is executed. For competitive issues, it will be defined as the issuers official announcement of the award.
The MSRB pointed out in its notice that it has proposed exceptions to the 15-minute reporting requirement that will affect most new issues of municipal securities.
One exception would allow syndicate and selling group members that trade new-issue bonds at the list offering price to continue to report trade data by the end of the first trading day. Under this exception, the amendments to G-34 will not be significant because dealers will still be reporting trade data at the end of the day.
The other exception would allow non-syndicate and selling member dealers that have not traded an issue during the previous year and do not have the security in their master database file to report the trade data within three hours after the trade. The G-34 amendments will affect trades of these securities because dealers will still have to report the trade data on an accelerated basis, even though they have more time than 15 minutes.
