MSRB Seeks Input on Pre- and Post-Trade Transparency

The Municipal Securities Rulemaking Board is seeking input from market participants on whether it should collect and publicly disseminate pre-trade pricing information over its online EMMA system.

In a concept release published Wednesday, the board also asked what pre-trade and post-trade pricing information it should consider publicly disseminating over the central transparency platform it plans to develop.

The board asked for public comments to be filed by Nov. 1.

"The MSRB is taking an incremental approach to the development of an expanded, interactive and real-time display of pricing-related market data on the EMMA website," said MSRB executive director Lynnette Kelly. "We want to make useful information available but also need to take into account industry practices and technology in the development of the next generation price transparency system."

There is currently no central location where muni market participants can access pre-trade pricing data. Such information is often available to institutional investors through broker's brokers, alternative trading systems, or other systems. But it is not really available to retail investors. In its release, the MSRB suggests two ways to tackle the "incomplete, piecemeal" pre-trade data.

"The [Securities and Exchange Commission] could consider amendments to its Regulation ATS to require an ATS with material transaction or dollar volume in municipal securities to publicly disseminate its best bid and offer prices and, on a delayed and non-attributable basis, responses to 'bids wanted' auctions."

In addition, "the MSRB could consider rules requiring a brokers' broker with material transaction or dollar volume in municipal securities to publicly disseminate the best bid and offer prices on any electronic network it operates and, on a delayed and non-attributable basis, responses to 'bids wanted' auctions," the MSRB said in its concept release.

The MSRB already collects and publicly disseminates secondary market trade data and prices over EMMA, but wants to know what improvements can be made.

The board is especially interested in whether it should require reporting of so-called "conditional trade commitments," a practice in which dealers often solicit, accept, and conditionally allocate orders prior to the signing of a bond purchase agreement. The prices agreed upon at that time often do not reflect market conditions at the time of the formal award.

Because trades cannot officially be executed until the bonds are formally awarded to the underwriter, conditional commitments appear on EMMA the same day as the day the bonds are issued and initially sold. There is no easy way to distinguish between conditional commitments and bonds sold the first day. The board wants to know if it should develop a new indicator for conditional trading commitments.

The MSRB also asks if it should develop a new indicator for retail orders placed during retail order periods.

The board wants market participants to comment on whether there are other venues for providing public access to this information.

For both pre- and post-trade transparency, the MSRB seeks feedback on what data could be collected, how it could be reported, and virtually all other aspects of the process, including costs, burdens and benefits.

The concept release stems from the MSRB's Long-Range Plan for Market Transparency Products, which last year envisioned developing an integrated display of relevant pricing-related data. The release also attempts to address concerns raised in the SEC's July 2012 report on the municipal market.

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Law and regulation Washington
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