WASHINGTON — The Municipal Securities Rulemaking Board wants to talk to third-party vendors in coming months to see if they could make certain data products or services available through EMMA to improve transparency for retail investors and other market participants.
The products could be made available for free or at a price, Ernesto Lanza, the MSRB’s deputy executive director and chief legal officer, said during in an interview about some of the online data products envisioned by the board’s recently released long-range plan to improve transparency in the muni market.
“It’s not happening tomorrow. We don’t have specific products targeted. It’s just to be clear to the marketplace that we are open to having those dialogues and to potentially creating those services,” he said.
Lanza said the board is seeking to obtain muni bond data and sophisticated analytic tools from third-party information venders.
The MSRB’s goal is to make some of the data and tools available to retail investors, as well as other municipal market participants, over time.
One way to do that, Lanza said, is for the board to create tiers of data and services.
“There’s the baseline tier that the Dodd-Frank Act expects us to make for free, and that we’ve always intended to make for free, that is available to retail investors and everyone,” he said.
“But we’re also beginning to build in the concepts — and we don’t have an exact time but we’re already in the process of working out the logic of this — for free, public user accounts,” he added.
Retail investors or other market participants could open accounts and save their preferences, such as specific portfolios of bonds they are following or searches they typically run, so that in the future they can have quick access to the information, Lanza said.
There could be another tier for municipal issuers or other entities that would provide a baseline level of free information and then potentially some value-added services.
Issuers, for example, could organize securities according to type, and view all of their water and sewer bonds in one place. This would be a change from the current system, which is CUSIP-based and only provides information for queries about specific bonds.
An example of a value-added service would be one that allows an issuer to see comparative prices for similar bonds, according to Lanza.
A third web-based tier could be targeted to dealers, some of which lack the infrastructure needed to access data from third-party vendors.
Those dealers could get some of that data by signing into a section of the online EMMA system.
“Some above-baseline services may be priced services. There may be professional tiered accounts,” Lanza said. “It’s the additional ability to do things with [the data] that may result in some price.”
Retail investors may also benefit from the MSRB’s plans.
Currently, many of those investors are disadvantaged when it comes to information and analysis. Few can afford the expensive analytic tools sold by information vendors.
“We hope to be able to get some of these third-party vendors to provide some level of service to retail investors,” Lanza said.
He stressed that any paid products would supplement, not replace, the free information already available.
“Even with those priced services ... there will always be some core set of data that will be available to everyone,” he said.
EMMA already provides official statements and refunding documents, secondary market disclosure documents, pricing and other trade data as well as muni market statistics.
Lanza said information venders have approached the MSRB about partnerships, though he declined to name the firms or discuss specific details. He said the board is working to make its data systems more compatible with systems operated by private data vendors.
The changes are part of the MSRB’s long-range plan to improve transparency, which was released last week.
The plan, which could take five to seven years to implement, calls for a series of upgrades to the board’s online information products, including the launch of the next generation of the Electronic Municipal Market Acess platform, EMMA 2.0.
While the board approved the long-range plan last month, the specific initiatives developed from it will have to be approved by the MSRB’s board of directors and the Securities and Exchange Commission after public input. The board also wants to develop the initiatives in the plan without having to increase its annual budget.
The MSRB is also considering customizing the data it sells to information venders, and may eventually sell subsets of data and subscriptions.
Currently, the board sells feeds of trade data, variable-rate securities data, primary market disclosure documents, and continuing disclosure documents to information vendors and others.
The MSRB charges between $2,500 and $45,000 yearly for some data feeds.
Meanwhile, the MSRB, for the first time, is formally seeking public feedback as part of its planning process.
It plans to accept public comments through March 23 and will use them to help craft priorities for fiscal 2013, which begins Oct. 1.
The board is asking for feedback about specific market risks that warrant attention, including activities by brokers, dealers and advisors that pose risks to investors, municipal entities or the integrity of the entire market. The MSRB also is asking how it can promote fairness and efficiency.
The planning process will take into account issues such as price transparency and material disclosure information, the operation of EMMA, regulatory enforcement support, market leadership and outreach, and education programs.
The board will take the comments into account in crafting its future goals, including initiatives described in the Long Range Plan for Market Transparency Products, which was released Feb. 23.
“The result of the MSRB’s annual planning exercise will be the development of a work plan with specific initiatives prioritized for the upcoming fiscal year,” the notice said.
In addition, the planning process will include a review of rulemaking for municipal advisors, which has been shelved until the Securities and Exchange Commission defines the term municipal advisor. Comments can be submitted on a feedback page on the MSRB’s website.
