The Municipal Securities Rulemaking Board, at its board meeting in Orlando this week, plans to discuss a handful of big-ticket projects it is currently developing, including the new issue information dissemination system, or NIIDS, that is to begin operating June 30, MSRB executive director Lynnette Hotchkiss said yesterday.
The board will also discuss the municipal Edgar system, which the board is developing and plans to begin hosting by as early as the end of the year. Hotchkiss said the board has recently hired outside consultants to help design the look and feel of the system, and is also close to selecting a formal name for it.
“We’re working very efficiently and diligently,” Hotchkiss said, referring to the muni-Edgar. “It’s a very exciting initiative and there’s a lot of energy here.”
Still, she stressed that the development of the muni-Edgar remains dependent on the Securities and Exchange Commission drafting changes to its Rule 15c2-12 on disclosure, to allow the board to replace the four existing national recognized repositories with the system.
Meanwhile, the board is developing NIIDS with the Depository Trust Clearing Corp., which 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.
Currently, the firms report the information directly to multiple vendors and it is not always posted at the same time or in the same manner. In late November, the board filed with the SEC proposed changes to its rules G-14 on reports of sales or purchases, G-8 on books and records, G-9 on the preservation of records, and G-34 on Cusip numbers that will effectively mandate the use of NIIDS by June 30, barring “any unforeseen issues,” Hotchkiss said.
The system is expected to make trade confirmation, clearing, and data reporting easier, faster, more efficient, and more accurate, industry officials have said. Though DTCC originally planned to unveil the project last year, the firm delayed its implementation because dealers involved in a pilot test of the system complained that its Web component was clunky and hard to use. DTCC has since hired an outside firm that specializes in writing graphical-user interfaces to redesign the Web application. A spokesman for DTCC, Edward C. Kelleher, said yesterday that NIIDS is on schedule to begin broader testing next month and to complete testing in April.
Hotchkiss said the board also planned to discuss access-equals-delivery, a primary market system in which underwriters will be able to electronically post official statements and other bond offering documents on an MSRB-hosted “portal” in lieu of having to send investors paper copies of the documents. The MSRB plans to develop the muni-Edgar as an add-on component to access-equals-delivery system.
In November, the MSRB asked the SEC to authorize the creation of a pilot Internet-based portal that would be the first step in creating an access-equals-delivery system. It said at the time that the pilot port could become operational by March 10 at the earliest and also issued revised draft amendments that specify how dealers should comply with the finalized version of such a system.
Separately, the board also plans to discuss the possibility of amending its Rule G-14 to boost the transparency of auction-rate and variable-rate demand securities, Hotchkiss said.
Auction-rate securities are floating-rate instruments whose interest or dividend rate is periodically reset by an auction. Currently, trades of such securities are reported at par, without their clearing rates. MSRB officials have said that they would like to improve transparency by requiring the reporting of auction-rate yields at the end of the day or at some other interval. The board has not yet proposed any new rules, though.
Meanwhile, the board is also soliciting nominees to succeed five members whose terms expire at the end of September. The 15-member board must elect two representatives from securities firms, two representatives from the public, and one bank representative who will serve three-year terms. They will replace chairman Frank Chin, managing director and manager of the public finance department at Citi in New York; vice chairman Donald S. O’Brien, managing director and national syndicate manager at Morgan Stanley in New York; Milroy A. Alexander, executive director and chief executive officer of the Colorado Housing and Finance Authority in Denver; John E. Hull, financial vice president and chief investment officer at the Andrew W. Mellon Foundation in New York; and Michael F. Imhoff, managing director of Stifel, Nicolaus & Co. in Denver.
Nominations should be sent to O’Brien, who is heading the search committee, by March 14, MSRB officials said.