The Municipal Securities Rulemaking Board issued guidance yesterday that will streamline the disclosure of so-called backer information on electronic trade confirmations sent to institutional investors in municipal securities transactions.
The guidance essentially allows dealers to fulfill their obligations under the board’s Rule G-15 on confirmations when they use a clearing agency or qualified vendor to send institutional clients a Web link to the “backer” information, the often extensive legal details about the security that appear on the back of a trade confirmation and is different for each dealer.
The front of a confirmation, which includes the bond’s economic details such as the trade and settlement dates, is already sent electronically. But dealers currently send paper versions of their backer information, which may amount to several pages of legal disclosures and may be dated or unneeded by the time it arrives by mail. A market participant said that dealers may save millions each year by sending electronic links to the backer information rather mailing paper copies of the disclosures.
The board’s notice piggybacks on a no-action letter the SEC provided earlier this year to Omgeo LLC, a joint venture of the Depository Trust & Clearing Corp. and Thomson Reuters, that allows Omgeo’s clients to rely on its electronic confirmations to meet the SEC’s Rule 10b-10 on confirmations of non-municipal securities transactions.
The MSRB’s action comes after Omgeo had asked the board to allow its 10b-10 no-action letter to apply to muni confirmations for the purposes of fulfilling G-15.
Though sources said Omgeo is currently the only vendor that is providing electronic links to backer information on muni confirmations, the MSRB guidance was written specifically to allow dealers to fulfill their G-15 obligation with other vendors that have received SEC no-action letters concerning Rule 10b-10.