WASHINGTON — The Municipal Securities Rulemaking Board yesterday filed a request with the Securities and Exchange Commission to allow it to post credit ratings directly on the board’s Electronic Municipal Market Access site.
SEC permission is one of the initial legal hoops the MSRB would need to jump through to be able to begin posting ratings. The board also would need to come to an agreement with the three major agencies that rate municipal debt — Standard & Poor’s, Moody’s Investor Service, and Fitch Ratings — with whom the board is in discussion.
“Today’s filing brings us a step closer to putting real-time municipal bond ratings on EMMA,” said MSRB chairman Peter Clarke, managing director and vice chairman of tax-exempt capital markets at JPMorgan. “This enhancement will provide all market participants with another key data element for evaluating municipal bonds. The availability of ratings on EMMA, together with trade data and market disclosures, will elevate EMMA to a new level of transparency and usefulness.”
Issuers currently are required to report their securities’ rating changes in material event notices filed with EMMA but have complained they are never formally notified of the changes by the rating agencies.
Sources have said that while Fitch and Moody’s support the idea of directly feeding their ratings to EMMA, Standard & Poor’s is refusing to participate unless it is compensated for the use of its intellectual property. But the MSRB is only willing to display ratings if they are made available to the board for free.
Market participants have noted that Standard & Poor’s operates the Cusip Service Bureau, under the direction of the American Bankers Association, which has been aggressive in extracting licensing fees from muni market participants. They speculate that Standard & Poor’s is objecting to linking its ratings to Cusip numbers without an additional licensing fee from the MSRB, which is already paying an undisclosed annual fee to use Cusips for EMMA.