WASHINGTON — The Municipal Securities Rulemaking Board will elect new officers and members at its board meeting Thursday and Friday in Chicago, the first for its new executive director, Lynnette Hotchkiss. Hotchkiss, tapped as the board’s top staff official in late May after serving as managing director and associate general counsel at the Securities Industry and Financial Markets Association, replaced Christopher Taylor, who departed a month ago after 29 years at the board. “I’m very excited about working with the board and seeing what the process is like,” Hotchkiss said last week. The 15-member board must elect a new chairman and vice chairman, as well as five new board members — one securities firm official, two public representatives, and two bank dealer officials — to replace five members whose terms are expiring. The new officers and members will assume their new posts at the beginning of the board’s next fiscal year on Oct. 1. The board is made up of five securities firm officials, five bank-dealer officials, and five members of the public, including a representative of the issuer community and a representative of investors, who serve three-year staggered terms. Each year it elects a new chairman and vice chairman, as well as five new members. The new chairman will replace John Lawlor, the director of municipal markets at Merrill Lynch & Co. in New York. The vice chairman will replace James M. Rogers, chief operating officer and executive vice president at J.J.B. Hilliard, W.L. Lyons Inc. in Louisville, Ky. The three other members leaving the board at the end of September are: Thomas J. Fetter, a retired vice president of director of municipal investments at Eaton Vance Management, who now lives in South Carolina; Steven Kaplan, a senior partner at Arnold & Porter LLP here; and James A. Posthauer, director of municipal trading at SunTrust Capital Markets in Atlanta. Hotchkiss said the MSRB probably will announce the new chairman, vice chairman, and five new board members later this month or in early August. Meanwhile, one of the key topics of discussion will be market feedback on rules for the New Issue Information Dissemination System that the Depository Trust and Clearing Corp. plans to begin operating later this year, she said. Under NIIDS, the DTCC will collect information about new muni bond issues from underwriters and then electronically disseminate it on a real-time basis to information vendors and other market participants. The system is expected to make trade confirmation, clearing, and data reporting easier, faster, more efficient, and more accurate, according to industry officials. In March, the MSRB proposed changes to its Rule G-14 on reports of sales and purchases, and its Rule G-34 on Cusip numbers and new-issue requirements, to help implement NIIDS. The proposed rules would require underwriters to provide information from new bond issues to NIIDS within two hours of the time of formal award of the bonds. But market reaction to the system, while generally supportive, has been somewhat tentative. In May, SIFMA told the board: “Until dealers have actual operating experience with NIIDS in its final form, it is difficult to predict what time periods will actually work. If NIIDS functions efficiently, it may be appropriate to shorten the two-hour period.” Also slated for discussion are public comments on a proposed primary market disclosure system called “access equals delivery,” under which underwriters should be able to electronically post official statements and other bond offering documents on one or more widely available Web sites in lieu of having to send investors paper copies of the documents. The Securities and Exchange Commission has a similar system for corporate issuers known as EDGAR. Some market participants have expressed concerns about the proposal. In March, DPC Data Inc., one of four nationally recognized municipal securities information repositories, told the MSRB in a nine-page comment letter that the access equals delivery system may be “prejudicial to the economic interests” of commercial information vendors in the market. Finally, the board will also review comments it has received since March on a proposal detailing how broker-dealers should report conditional trading commitments, which are informal commitments for trades made before the bonds are officially awarded to the underwriter. The MSRB is proposing to amend its Rule G-14 to require broker-dealers to use a special CTC indicator for conditional trading commitments. However, the dealers would be allowed to report information from CTC trades at the end of the trading day rather than 15 minutes after the trade occurs. Specifically, the board asked for comments on how to make sure pricing and other information from conditional trading commitments is reported on a timely basis. The notice defined a conditional trading commitment as “any transaction that is based upon a priced trading commitment made prior to the 'time of formal award’ for a new issue.” The MSRB wants to distinguish these trades from trades done after the bonds are awarded. While dealers must report information from both kinds of trades at the same time, the information from conditional trading commitments may be days old and stale. Under MSRB rules, trades are not official until after the bonds are awarded. The board also asked market participants how much lead time would be needed to implement a new CTC indicator.
