The Securities and Exchange Commission approved a Municipal Securities Rulemaking Board rule change last week that requires broker-dealers that have sold long-term municipal securities within the past year to test the Depository Trust & Clearing Corp.'s New Issue Information Dissemination System by Sept. 15 to make sure they are prepared to begin using it on Sept. 30.

The board proposed the changes to its Rule G-34 on Cusip numbers and new-issue requirements last month.

Slated to begin operation Sept. 30, NIIDS is a centralized system for the collection and dissemination of information from new issues of municipal securities. The system is supposed to improve the timeliness and accuracy of information from these issues.

Under NIIDS, the DTCC will collect information about new bonds from underwriters or their intermediaries and then electronically disseminate it in a uniform manner and on a near real-time basis to information vendors and other market participants.

Currently, firms report the information directly to each vendor and it is not always posted at the same time or in the same manner.

The rule change exempts from NIIDS all municipal securities with effective maturities of nine months or less, because such debt is considered short term and, unlike long-term bonds, qualifies for an exemption from the board's 15-minute reporting requirement.

The MSRB estimates that 200 to 220 municipal dealers will be required to register and test NIIDS, though only 90 firms are currently in the process of doing so.

Market participants have encouraged dealers to test the new system early and often. About two weeks ago, the Securities Industry and Financial Markets Association recommended that firms planning to submit new-issue underwriting information to NIIDS via its Web platform or a spreadsheet upload feature complete testing of those kinds of submissions by Aug. 8.

Alternatively, firms planning to submit their NIIDS data via a third-party vendor, such as a book running service, should complete testing of that type of submission by July 28, SIFMA recommended.

DTCC has published a test plan that underwriters can use to gain familiarity with the system and the requirements for data submission for different types of securities. The MSRB said educational training materials are available at www.dtcc.com/leadership/issues/reengineering/underwriting/training.php.

The DTCC is providing two methods of inputting new-issue information to NIIDS. One is through a NIIDS Web interface and the other is through a NIIDS "autofeed" interface. Dealers will have to submit information from two test new issues under the NIIDS Web interface.

Underwriters planning to use the NIIDS autofeed interface are required to submit information from two test issues using computer-to-computer connections.

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