MSRB quarterly board meeting won't be typical

The Municipal Securities Rulemaking Board is holding its quarterly meeting virtually next week, and will adopt an annual budget, hold elections for its chair and vice chair, and possibly make changes to rule guidance.

At the meeting, scheduled for July 29 to 30, the board of directors will vote on a new chair and vice-chair. The elected officers will start their new roles on Oct. 1, the start of the new fiscal year.

The board will not be selecting a new incoming class of board members this year, since the size of its board could decrease, as part of proposed changes to MSRB Rule A-3 on governance. Six board members’ terms are set to expire this year.

The MSRB put off board member recruitment for 2020 to facilitate the possible transition to a proposed smaller board size, 15 from the current 21. The Securities and Exchange Commission is currently reviewing that change and others to the MSRB’s governing board.

Six board members' four-year terms will end this year, so the remaining 15 members will meet the board’s requirements if the proposed changes to a smaller board are implemented.

To transition to 15 members, the MSRB is considering a three-year plan where all board members elected during the transition would be appointed to four-year terms. The board would then resume electing new members in fiscal year 2022.

During its quarterly meeting, the board will also discuss "pennying," and review in-house analysis aimed to assess its prevalence.

“Pennying,” sometimes 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.

The board will also prioritize changes to interpretive guidance in its rule book, as part of its ongoing 2012 retrospective rule review. The board, under that review, will discuss dealers’ supervisory obligations under MSRB Rule G-27 on supervision.

The board will preview EMMA labs next week — a new platform the MSRB is building so stakeholders can beta test potential EMMA features. EMMA is the MSRB’s site for municipal securities disclosures and market data.

EMMA labs is part of the MSRB’s efforts to migrate to the cloud and to explore ways to increase market transparency. After the review, the MSRB will collect feedback from its Market Transparency Advisory Group and other stakeholders on prototypes of potential transparency tools, such as a search functionality that led to the MSRB releasing weekly reports of coronavirus-related disclosures.

As of this week, there have been 12,873 COVID-19-related disclosures filed to the MSRB. However, for the month of July the number of disclosures has slowed.