The Municipal Securities Rulemaking Board is expected to discuss a new mission statement and vision based on input from municipal market participants when it holds its quarterly board meeting next week.
The MSRB announced that and other agenda items Thursday morning ahead of its Jan 27-28 meeting. The meeting will be held virtually, as have the last several because of the pandemic.
This will be MSRB’s first board meeting of the calendar year. The 17-member board will focus on its strategic plan for the next three to five years. Its previous strategic plan was created in 2017.
Municipal advisors, broker-dealers, climate groups and others responded to a request for comment on the MSRB’s strategic plan earlier this month. An overwhelming theme of those comments was a request that the MSRB focus on its role as a
The MSRB has the congressional authority to develop rules for broker-dealers and MAs, and disseminate market data, education and outreach.
Some market participants said the MSRB should focus on its ongoing retrospective rule review, such as updating rules and matching its rules to those of the Financial Industry Regulatory Authority. The pandemic has highlighted the challenges of outdated rules and the need to modernize rules through technology, the Securities Industry and Financial Markets Association said in its letter.
The MSRB also will discuss its organizational reserves next week.
“The board will discuss potential approaches to maintaining reserve levels that strike a balance between a fair and equitable fee structure while ensuring reserve levels remain adequate to weather uncertainty regardless of market conditions,” the MSRB said.
The MSRB ended its fiscal year 2020 with a surplus of about $3.3 million following a tumultuous year in the municipal market. Specifically, that surplus was due to elevated levels of primary issuance and secondary market trading after a brief period of volatility in March.
The MSRB is also considering making changes to fees charged to broker-dealers. Dealer fees account for a majority of the MSRB’s revenue.
The MSRB plans to modernize its Rule G-27 on dealer supervision and will consider amendments to Rule G-3, on professional qualification requirements. Some broker-dealers are hopeful that virtual compliance inspections will become permanent. Due to the pandemic, the MSRB extended the deadline for onsite inspections to Dec. 31, 2021.
The MSRB will also discuss “pennying” in the municipal market next week and will meet with FINRA’s President and CEO Robert Cook.
Pennying, which is sometimes called “last look,” occurs when a dealer places a retail client’s bid-wanted out to the market and determines the winning bid, but then rather than executing the trade with the winning bidder marginally outbids the high bid and buys the bonds for its own account.
The practice can appear beneficial in isolation because the dealer technically provides the customer a price equal to or better than the best bid. But the MSRB has said it is concerned that widespread pennying disincentivizes participation in the bid-wanted process, discourages bidders from giving their best price in a bid-wanted and may harm the efficiency of the market.
