WASHINGTON — The Municipal Securities Rulemaking Board is meeting next week to discuss pennying, upcoming EMMA enhancements, and looking into financial disclosure timeliness by issuers, among other issues.
On deck
“We’re not just concentrated on what we’re doing for our market for today’s concerns, we’re also thinking about how to prepare ourselves today for the market for tomorrow,” said MSRB Chair Gary Hall.
The MSRB is focusing on an internal project — a data analytics prototype in the cloud to explore machine learning and artificial intelligence to leverage new technology tools that will extract information from unstructured data.
They are using primary market data, such as official statements on EMMA, in the prototype. The official statements are all in PDFs, meaning they’re unstructured and not machine readable. The board wants to see whether it can develop a search engine to use “natural language and free text search” to extract data.
“Modernization of the EMMA website is a priority for this Board,” MSRB board member and Technology Committee Chair Richard Ellis told the Bond Buyer last month. “Last year we focused on improving navigation and usability. This year we are improving EMMA’s search capability and the issuer-submission experience, and will continue to make necessary strategic investments to support modernization of this critical market utility.”
The Board will also see a preview of upcoming enhancements to EMMA’s search functionality next week.
Some of the changes this summer would include adopting a “wizard approach” — a guided question-and-response approach to take issuers through the process when they’re filing. It would take less time for an issuer to submit information, and it would provide infrequent issuers prompts to connect them to resources.
EMMA currently has three ways to search — advanced search, an interactive map and quick search. The MSRB has plans in the future to improve its quick search as soon as this summer. It’s useful for researching a CUSIP, but is a challenge when users don’t have the number on hand and inconsistent abbreviations and naming also make it difficult.
The MSRB wants to provide suggested terms as users type into the search box to help people find the issuer more quickly.
The Board also plans to discuss underwriter duties and comments received from its retrospective review of MSRB Rule G-17, on underwriting disclosures to issuers.
In January, dealers said in comment letters that the MSRB should amend existing Rule G-17 interpretive guidance to require that only actual rather than potential conflicts of interest be disclosed to issuers before a new issuance.
“This concept of having to disclose potential conflicts of interest has created the voluminous disclosures where dealers feel that they need to disclose many potential conflicts, which may not rise to an actual conflict to avoid a compliance risk,” said Leslie Norwood earlier this year, the Securities Industry and Financial Markets Association’s managing director and associate general counsel.
The Board is also meeting with its three advisory groups — the Compliance Advisory Group, the Municipal Fund Securities Advisory Group and the Retail Investor Advisory Group with each meeting separately with Securities and Exchange Commission Investor Advocate, Rick Fleming.
The advisory groups were established so that its board could have additional industry expertise and knowledge, said Lynnette Kelly, MSRB CEO and president.
“At the April board meeting, we wanted each advisory group to meet directly with the board and have a conversation about hot topics in the market, what they’re seeing, what the board might want to consider and just a really good discussion and conversation,” Kelly said.
The Board will also address SEC Chair Jay Clayton’s comments regarding issuer disclosure and consider potential transparency enhancements to its EMMA website.
Clayton said in prepared remarks late last year that he has asked the commission's Office of Municipal Securities to work with the MSRB to improve transparency and increase timeliness of issuer financial information.
The Board also plans to evaluate municipal market feedback and data related to pennying. The SEC met earlier this week to address
“Pennying,” sometimes also referred to as “last-look,” occurs when a dealer purchases bonds for its own account, following the dissemination of a bid-wanted (through either an alternative trading system or a broker’s broker) for a customer who is seeking to sell a municipal security, according to the MSRB.
