Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change To Establish the MSRB Academic Historical Transaction Data Product, 47211-47217 [2016-17094]
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Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices
While the Exchange states that the
proposed rule change describes the
system changes necessary to implement
the Pilot, the Commission notes that the
scope of the proposed changes extends
beyond those required for compliance
with the Plan, and would eliminate
certain order types for Pilot Securities
during the Pilot Period, or modify their
operation in ways not required by the
Plan. For example, the Exchange
proposes not to accept Market Pegged
Orders, Discretionary Orders, and
Supplemental Peg Orders, and certain
types of Mid-Point Peg Orders, in some
or all Test Groups of Pilot Securities for
the duration of the Pilot Period.51 These
proposals appear designed to permit the
Exchange to avoid the costs of
modifying these order types to comply
with the Plan. The Exchange notes that
these order types are infrequently used
in Pilot Securities, and takes the
position that ‘‘[t]he limited usage and
execution scenarios do not justify the
additional system complexity which
would be created by modifying the
System to support such order types in
order to comply with the Plan.’’ 52 At
the same time, the Exchange also does
not appear prepared to propose to
eliminate these order types indefinitely.
By contrast, the Exchange proposes to
modify, in ways not required by the
Plan, the operation of Market Pegged
Orders and Non-Displayed Orders, and
certain orders subject to the DisplayPrice Sliding process, in some or all
Test Groups of Pilot Securities, and to
incur the associated system change
costs, in order to increase the
‘‘execution opportunities’’ for these
order types for the duration of the Pilot
Period.53
The Commission is concerned that
proposed rule changes, other than those
necessary for compliance with Plan, that
are targeted at Pilot Securities, that have
a disparate impact on different Test
Groups and the Control Group, and that
are to apply temporarily only for the
Pilot Period, could bias the results of the
Pilot and undermine the value of the
data generated in informing future
policy decisions. Accordingly, the
Commission is concerned that the
proposed rule change may not be
consistent with Act, including Section
6(b)(5) thereof and Rule 608 of
Regulation NMS, or with the Plan.
Comments may be submitted by any
of the following methods:
51 The
Exchange also proposes to cancel certain
orders subject to the Display-Price Sliding process
in certain Pilot Securities for the duration of the
Pilot Period.
52 See supra Item II.A.2.
53 See supra Item II.A.1–2.
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Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BatsEDGX–2016–26 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BatsEDGX–2016–26. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
BatsEDGX–2016–26, and should be
submitted on or before August 10, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.54
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2016–17091 Filed 7–19–16; 8:45 am]
BILLING CODE 8011–01–P
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78323; File No. SR–MSRB–
2016–09]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing of a Proposed
Rule Change To Establish the MSRB
Academic Historical Transaction Data
Product
July 14, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule
19b–4 thereunder,2 notice is hereby
given that on June 30, 2016, the
Municipal Securities Rulemaking Board
(the ‘‘MSRB’’ or ‘‘Board’’) filed with the
Securities and Exchange Commission
(the ‘‘SEC’’ or ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the MSRB. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The MSRB filed with the Commission
a proposed rule change to the MSRB’s
facility for the Real-Time Transaction
Reporting System (‘‘RTRS’’) to establish
an historical data product to provide
institutions of higher education
(‘‘academic institutions’’) with posttrade municipal securities transaction
data collected through RTRS (‘‘MSRB
Academic Historical Transaction Data
Product,’’ hereafter referred to as ‘‘RTRS
Academic Data Product’’) for purchase
(‘‘proposed rule change’’). If approved
by the Commission, the MSRB will
announce the effective date of the
proposed rule change in a regulatory
notice to be published no later than 90
days following Commission approval.
The effective date will be no later than
270 days following publication of the
regulatory notice announcing
Commission approval.
The text of the proposed rule change
is available on the MSRB’s Web site at
www.msrb.org/Rules-andInterpretations/SEC-Filings/2016Filings.aspx, at the MSRB’s principal
office, and at the Commission’s Public
Reference Room.
1 15
54 17
CFR 200.30–3(a)(12).
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2 17
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CFR 240.19b–4.
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
MSRB included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The MSRB has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The MSRB is the federal regulatory
entity with primary responsibility under
the Exchange Act for rulemaking for the
municipal securities market. Under the
Exchange Act, the MSRB is charged
with adopting rules with respect to
transactions in municipal securities
effected by brokers, dealers and
municipal securities dealers (‘‘dealers’’)
and the municipal advisory activities of
municipal advisors.
In addition to developing its
comprehensive body of rules governing
the activities of dealers and municipal
advisors, the MSRB has undertaken to
create various market transparency
products in furtherance of its statutory
duties and its mission, which is, in part,
to promote a fair and efficient municipal
securities market through the collection
and dissemination of market
information. Historically, the MSRB has
operated information systems to collect
key disclosure documents and
transaction data to create a central
warehouse of information that made
most of these documents and data
available to the market—the Electronic
Municipal Market Access (‘‘EMMA®’’) 3
Web site. The MSRB makes post-trade
transaction data available to the general
public through the EMMA Web site at
no cost, and to data vendors, industry
utilities and others on a subscription
basis through a real-time data feed and
on a delayed basis.
MSRB Rule G–14, on transaction
reporting, requires dealers to report all
executed transactions in municipal
securities to RTRS within 15 minutes of
the time of trade, with limited
exceptions.4 RTRS serves the dual
3 EMMA®
is a registered trademark of the MSRB.
4 Transactions in securities without CUSIP
numbers, transactions in municipal fund securities
and certain inter-dealer securities movements not
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objectives of price transparency and
market surveillance. While a
comprehensive database of transactions
is needed for the surveillance function
of RTRS, the MSRB does not believe
that all information or transactions
reported to RTRS are necessary to serve
the transparency objective of the system
and, therefore, such information does
not qualify for public dissemination.
Among other information, the executing
broker symbol, which provides the
identity of each dealer that executed a
transaction reported to RTRS, is not
publicly disseminated. The information
facility for RTRS serves to outline the
high-level parameters by which the
MSRB operates the system.
While currently used by researchers
from academic institutions
(‘‘academics’’), through subscription
services or in historical data sets, the
RTRS data available on the EMMA Web
site do not include any identifying
information regarding the dealer
reporting each transaction. Thus, the
information disseminated from RTRS
would not allow such an academic to
attribute transactions to the dealers that
facilitated them—even anonymously. As
a result, some academics have asked
whether the MSRB could make an
enhanced version of RTRS trade data
available that includes dealer
identifiers. Further, on July 15, 2014,
the MSRB published a Report on
Secondary Market Trading in the
Municipal Securities Market that
utilized dealer identifiers to gain a
better understanding of secondary
market trading practices in the
municipal securities market, including
basic patterns of trading, pricing
differentials associated with trading
patterns and the impact of price
transparency on pricing differentials.
However, academics wishing to
replicate the methodology employed in
this report are unable to do so, as it
relies, in part, on dealer identifiers.
In July 2015, in response to these
requests from academics, the MSRB
published a request for comment,
proposing to create a new RTRS
Academic Data Product that would
include anonymized dealer identifiers
(‘‘draft proposal’’).5 In response to the
Request for Comment, the MSRB
received 13 comment letters, mostly
supporting the draft proposal.6 After
carefully considering all of the
comments received, the MSRB
determined to file this proposed rule
eligible for comparison through a clearing agency
are the only transactions exempt from the reporting
requirements of Rule G–14.
5 MSRB Notice 2015–10 (July 16, 2015) (‘‘Request
for Comment’’).
6 See infra note 11.
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change to the RTRS facility to create the
RTRS Academic Data Product, which
would be made available only to
academic institutions and would
include the same transactions included
in the current RTRS historical
transaction data sets, with the exclusion
of list offering price and takedown
transactions, which can be used to
identify primary market transactions.7
While the MSRB understands that
anonymized dealer identifiers may be
highly useful to academic institutions in
connection with their research
activities, the MSRB also recognizes that
dealers may be concerned with the
potential for reverse engineering of
anonymized dealer identifiers to
determine dealer identities. To address
this issue, in addition to anonymizing
dealer identifiers, the MSRB would take
additional measures, including:
• Providing unique data sets with
different anonymized dealer identifiers
to each academic;
• excluding list offering price and
takedown transactions;
• explicitly requiring subscribers to
agree that they will not attempt to
reverse engineer the identity of any
dealer;
• prohibiting the redistribution of the
data in the RTRS Academic Data
Product;
• requiring users to disclose each
intended use of the data (including a
description of each study being
performed and the names of each
individual who will have access to the
data for the study);
• requiring users to ensure that any
data presented in work product be
sufficiently aggregated so as to prevent
reverse engineering of any dealer or
transaction;
• requiring that the data be returned
or destroyed if the agreement is
terminated; and
• aging all the transactions included
in the RTRS Academic Data Product for
no less than 36 months.
The establishment of the RTRS
Academic Data Product would add to
the MSRB’s current offering of data
products and further the MSRB’s
mission to improve the transparency of
the municipal securities market by
facilitating access to municipal market
data for academic institutions. While
academic institutions currently have
access to the post-trade municipal
securities transaction data disseminated
from RTRS, the RTRS Academic Data
Product would improve the usefulness
7 In addition, the MSRB intends to establish a fee
for the RTRS Academic Data Product prior to the
effective date of the proposed rule change. The fee
will be established pursuant to a separate rule
filing.
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of this data by enabling academics to
distinguish transactions executed by
different dealers.
2. Statutory Basis
Section 15B(b)(2) of the Exchange
Act 8 provides that:
[T]he Board shall propose and adopt rules
to effect the purposes of this title with
respect to transactions in municipal
securities effected by [dealers] and advice
provided to or on behalf of municipal entities
or obligated persons by [dealers] and
municipal advisors with respect to municipal
financial products, the issuance of municipal
securities, and solicitations of municipal
entities or obligated persons undertaken by
[dealers] and municipal advisors.
Section 15B(b)(2)(C) of the Exchange
Act,9 provides that the MSRB’s rules
shall:
be designed to prevent fraudulent and
manipulative acts and practices, to promote
just and equitable principles of trade, to
foster cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with respect
to, and facilitating transactions in municipal
securities and municipal financial products,
to remove impediments to and perfect the
mechanism of a free and open market in
municipal securities and municipal financial
products, and, in general, to protect
investors, municipal entities, obligated
persons, and the public interest.
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The MSRB believes that the proposed
rule change is consistent with Sections
15B(b)(2) and 15B(b)(2)(C) of the
Exchange Act because it would prevent
fraudulent and manipulative acts and
practices, promote just and equitable
principles of trade, and remove
impediments to and perfect the
mechanism of a free and open market in
municipal securities. Specifically, the
RTRS Academic Data Product would
enable subscribers of the product to
better understand the pricing of certain
transactions, as well as how such
transactions were executed, which
should, in turn, facilitate higher quality
research and analysis. Overall, the
proposed rule change would contribute
to the MSRB’s continuing efforts to
improve market transparency and to
protect investors, municipal entities,
obligated persons and the public
interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Section 15B(b)(2)(C) of the Exchange
Act 10 requires that MSRB rules not be
designed to impose any burden on
competition not necessary or
appropriate in furtherance of the
8 15
U.S.C. 78o–4(b)(2).
U.S.C. 78o–4(b)(2)(C).
10 Id.
9 15
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purposes of the Act. In determining
whether these standards have been met,
the MSRB was guided by the Board’s
Policy on the Use of Economic Analysis
in MSRB Rulemaking. In accordance
with this policy, the Board has
evaluated the potential impacts on
competition of the proposed rule
change, including in comparison to
reasonable alternative regulatory
approaches, relative to the baseline. The
MSRB also considered other economic
impacts of the proposed rule change and
has addressed comments relevant to
these impacts in other sections of this
document.
The MSRB believes that the
availability of this data may further
research, which could help the MSRB
and other regulators: Prevent fraudulent
and manipulative acts and practices;
facilitate transactions in municipal
securities and municipal financial
products; remove impediments to and
perfect the mechanism of a free and
open market in municipal securities and
municipal financial products; and
protect investors, municipal entities,
obligated persons and the public
interest.
The MSRB acknowledges the
potential for reverse engineering of
anonymized dealer identifiers to
determine dealer identities and has
taken a number of measures to reduce
this risk and mitigate any potential
impact. Given these measures and the
aforementioned benefits, the MSRB does
not believe that the proposed rule
change will impose any additional
burdens on competition, relative to the
baseline, that are not necessary or
appropriate in furtherance of the
purposes of the Act.
summarized below by topic, and the
MSRB’s responses are provided.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
General Comments
BDA expressed concern that the draft
proposal would allow reverse
engineering of a dealer’s trading/
investment strategy and the
requirements of the subscription
agreement would not sufficiently
protect dealers, thus, exposing them to
an ‘‘unnecessary business risk.’’ BDA
further stated that data on municipal
The MSRB received 13 comment
letters in response to the Request for
Comment.11 The comment letters are
11 See letters from: Robert Doty, American
Governmental Financial Services (‘‘AGFS’’), dated
August 24, 2015; Robert Kravchuck, et al.,
Association for Budgeting and Financial
Management (‘‘ABFM’’), dated September 13, 2015;
Michael Nicholas, Chief Executive Officer, Bond
Dealers of America (‘‘BDA’’), dated August 24,
2015; Daniel Bergstresser (‘‘Bergstresser’’),
Associate Professor of Finance, Brandeis University,
International Business School, dated September 14,
2015; Chris Melton, Executive Vice President,
Coastal Securities (‘‘Coastal’’) dated August 5, 2015;
Patrick J. Cusatis (‘‘Cusatis’’), Associate Professor of
Finance, Penn State Harrisburg, School of Business
Administration, dated September 10, 2015;
Jonathan L. Gifford (‘‘Gifford’’), Professor and
Director of Center for Transportation P3 Policy,
George Mason University, dated September 1, 2015;
Andrew Glassberg (‘‘Glassberg’’), dated August 17,
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Support for the Proposed Rule Change
In response to the Request for
Comment, several commenters
expressed strong general support for the
creation of the RTRS Academic Data
Product. ABFM, AGFS, Bergstresser,
Cusatis, Glassberg, NYU Stern and
Ramsey believe it would improve the
quality of academic research on, and
contribute to enhanced transparency in,
the municipal securities market.
Further, Gifford opined that the draft
proposal would allow for better costbenefit analysis of public-private
partnership projects that access the
municipal securities market, and
Coastal stated that trade data that would
be made available by the draft proposal
would contribute to academic research
of the municipal securities market and
that it should be supported. Finally,
Harris strongly supports the RTRS
Academic Data Product and commented
that the draft proposal would ‘‘allow the
MSRB to better regulate markets for the
public good.’’
Risk of Reverse Engineering Trade Data
In the Request for Comment, the
MSRB recognized that dealers may be
concerned with the potential for reverse
engineering of anonymized dealer
identifiers to determine dealer identities
from the data provided by the RTRS
Academic Data Product, and it proposed
several measures to prevent and deter
those that would try to reverse engineer
the trade data. Several commenters
addressed this issue and proposed
modifications to the draft proposal for
purposes of preventing reverse
engineering.
2015; Lawrence Harris (‘‘Harris’’), Professor of
Finance and Business Economics, University of
Southern California, Marshall School of Business,
dated September 6, 2015; John Mousseau
(‘‘Mousseau’’), dated July 29, 2015; Norman White
et al., New York University, Leonard N. Stern
School of Business (‘‘NYU Stern’’), dated September
16, 2015; James R. Ramsey (‘‘Ramsey’’), President,
University of Louisville, dated September 4, 2015;
Sean Davy, Managing Director, Capital Markets
Division, and David L. Cohen, Managing Director
and Associate General Counsel, Municipal
Securities Division, Securities Industry and
Financial Markets Association (‘‘SIFMA’’), dated
September 11, 2015.
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securities transactions that are currently
available to the public for academic
research ‘‘include a sufficient level of
detail to support rigorous study.’’
SIFMA also expressed concern that the
proposed anonymization of dealer
identifiers would not effectively protect
dealer identities. Harris commented that
use of the RTRS Academic Data Product
may result in some reverse engineering,
which may cause some level of harm to
dealers, but he also stated that, while he
believes engaging in reverse engineering
would be inappropriate, it may ‘‘serve
the public interest’’ by revealing ‘‘price
differentials (known as markups by
many) . . . to [dealers’] customers.’’
ABFM commented that the planned
terms of the subscription agreement
intended to prevent reverse engineering
would be a sufficient deterrent.
Since the inception of this rulemaking
initiative, the MSRB has been acutely
aware of the potential for reverse
engineering the trade data that would be
included in the RTRS Academic Data
Product. Indeed, the MSRB
acknowledges that the data provided in
the RTRS Academic Data Product could
be reverse engineered. However, the
MSRB believes that the measures it
would take—e.g., anonymizing dealer
identifiers, imposing liability on
subscribers of the data for breaching the
terms of the subscription agreement
(which would, among other things,
include a provision prohibiting reverse
engineering), and limiting subscribers to
academic institutions—, on balance,
sufficiently reduce the risk of reverse
engineering, and of harm resulting
therefrom. Further, in response to the
concerns raised by commenters, the
MSRB is now proposing to: Increase the
aging requirement for the trade data
from 24 to 36 months prior to its release;
provide unique data sets with different
anonymized dealer identifiers to each
academic, which may both help guard
against coordinated efforts at attempting
reverse engineering dealer identities, as
well as assist in identifying the source
of conduct that violates the subscription
agreement; exclude list offering price
and take down transactions, which can
be used to identify primary market
transactions; require users to ensure the
sufficient aggregation of any data
presented in work product, which
would protect against reverse
engineering by readers of published
works; and not include primary offering
trades in the trade data. Overall, the
MSRB has proposed numerous
measures that should mitigate the risk of
reverse engineering, and the residual
risk is warranted by the benefits to the
municipal securities market that would
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result from creation of the RTRS
Academic Data Product and greater
transparency of dealer behavior. The
MSRB may consider amending or
discontinuing the RTRS Academic Data
Product, as currently proposed, if future
experience shows that anonymized
dealer identifiers are reverse engineered
by researchers.
Aging Trade Data
As noted above, as part of the MSRB’s
effort to prevent and deter reverse
engineering of dealer identities, the
draft proposal required that the trade
data made available to subscribers of the
RTRS Academic Data Product would be
for trades that were executed at least 24
months prior to the date that they were
provided to the subscriber. SIFMA
stated, in combination with other
concerns about the draft proposal, that
24 months is too short of a time period
to adequately protect against reverse
engineering, and, instead, suggested that
the MSRB age the trade data for 48
months. In contrast, ABFM believed 12
months, rather than 24, would be a
sufficient time period to ensure that
trades could not be reverse engineered,
and Ramsey also suggested 12 months
would be preferable to 24 months to
ensure the data is timely. Harris argued
that 24 months would be more than
sufficient for aging the data to remove
the usefulness of that data for the
purpose of reverse engineering, in part,
because he believes dealer positions
change in no more than two months,
and he also noted that as few as six or
up to 12 months would be a better
length of time because it would allay the
concerns of dealers and allow for the
‘‘identifying [of] parasitic trading
strategies as quickly as possible.’’
Coastal believes 12 months would be
too short a time period to sufficiently
mitigate the reverse engineering risk but
that 24 months would be appropriate
and would not encumber research
because, in its opinion, municipal
securities market practices and
conditions are ‘‘slow to evolve,’’ making
the data still relevant to academics
studying market behavior.
Based on careful consideration of all
of the diverse comments on this issue,
the MSRB believes, at this time, that a
36-month period is appropriate to
protect against, and mitigate the risk
and potential harm from, any reverse
engineering, while still providing useful
trade data for academics to study.
Grouped Versus Individual Dealer
Identifiers
In the draft proposal, the MSRB
proposed anonymizing identifiers for
each individual dealer for the trade data
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made available through the RTRS
Academic Data Product to protect
against the potential of subscribers
reverse engineering the data to
determine dealer identities. A few
commenters suggested alternative
methods to anonymize dealer identities.
Specifically, BDA stated that grouping
dealers by size, as opposed to issuing
individual anonymized identifiers,
would better protect the trade data from
reverse engineering if the MSRB does
not plan on changing the dealer
identifiers on a regular basis because,
without periodic changes, it would
become easier to identify dealers based
on trading data over a long period of
time. SIFMA similarly supported
making the trade data available through
‘‘groupings of comparable dealers,’’
arguing that the MSRB and FINRA
should ‘‘adopt the peer group criteria
used in MSRB and FINRA report cards
to aggregate dealers into reportable
groups.’’ Further, Coastal stated that, if
dealers were not grouped by size, then
reverse engineering would likely occur,
while grouping by size would not
substantially encumber research uses of
the trade data. Coastal also argued that
contracting with subscribers to prevent
reverse engineering would not be
effective, and BDA noted that any
subscription agreement would not
extend to readers of studies produced by
subscribers.
In support of individual identifiers,
Harris stated that the ‘‘empirical work
[of academics] requires high quality data
that can inform their analyses as to what
dealers do. Dealer identities thus need
to be revealed, at a minimum in
anonymized form, so that academics can
understand how dealer trading
decisions relate to their previous trading
decisions.’’ To this point, Harris stated
that grouping dealers would likely
provide better trade data than is
currently available to academics, but
that such grouped data would not
provide academics with the information
needed to understand specific dealer
behavior. He stated, ‘‘[D]ealer decisions
to offer, not offer, and take liquidity are
made by individual dealers in response
to their individual needs and inventory
conditions. Groups of dealers acting in
concert do not make these decisions. To
better understand these decisions, you
must see who is making them.’’
Additionally, Bergstresser argued that
grouping dealers by size would
substantially hinder the purpose of the
RTRS Academic Data Product because it
would reduce ‘‘the information content
of the data [and] would negate the entire
purpose of having (anonymized) dealer
identities, which is to be able to identify
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round-trip transactions.’’ Similarly,
Ramsey stated that anonymizing dealer
identifiers would be reasonable if it
allowed tracking unique trades, which
groupings by size or volume would not,
and ABFM commented that the
potential beneficial research that could
result from the RTRS Academic Data
Product with individual dealer
identifiers would likely be much greater
than if ‘‘the dealer identifier is less
precise (e.g., a categorical identifier
based on dealer size or average daily
trading volume).’’
The MSRB believes, at this time, that
it would better further the principal
purpose of creating the RTRS Academic
Data Product—namely, to foster detailed
research and analysis of municipal
securities trading—if the trade data
identifies dealers individually rather
than by group. The MSRB believes that
grouping dealers would result in too
great a reduction in the usefulness of the
RTRS Academic Data Product, and, as
previously mentioned, that the
protections incorporated in the
proposed rule change, including, but
not limited to, the 36-month aging of the
data, and terms planned to be included
in the subscription agreement will, on
balance, adequately mitigate the risk of
reverse engineering without the
grouping of dealers.
mstockstill on DSK3G9T082PROD with NOTICES
Primary Offering Data
As proposed in the Request for
Comment, the RTRS Academic Data
Product would make trade data
available from transactions in both the
primary and secondary markets. SIFMA
believes that the potential for reverse
engineering primary market trade data is
particularly acute because, in its view,
the currently available public data that
does not have dealer identifiers is
already subject to reverse engineering.
SIFMA recommended that, if made
available on a dealer-by-dealer basis, the
data provided by the RTRS Academic
Data Product exclude primary trades
from the data set and periodically
scramble dealer identifiers.
The MSRB agrees with SIFMA
regarding primary market trades, in light
of trade data products currently offered
by the MSRB to provide academics and
other interested parties with
information about the primary market
for municipal securities. Therefore, the
RTRS Academic Data Product would
not include list offering price and
takedown transactions, which can be
used to identify primary market
transactions.
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Release of Full Trade Sizes in RTRS
Academic Data Product
Harris commented that the RTRS
Academic Data Product should provide
full trade sizes and that the utility of the
RTRS Academic Data Product would be
reduced if the trade data did not reveal
the sizes of the largest trades.
The MSRB understands the potential
issues academic researchers could
encounter if the full size of trades is not
included in the trade data, and,
therefore, the proposed rule change
would provide the full size of each trade
that is included in the RTRS Academic
Data Product.
Limiting RTRS Academic Data Product
to Academic Institutions
As proposed in the Request for
Comment, the RTRS Academic Data
Product would only be made available
to academics in connection with their
research activities. Commenters had
differing views as to whether or not the
subscriber base should be larger. First,
Bergstresser suggested that the MSRB
broaden the set of individuals who
could have access to the RTRS
Academic Data Product to include, for
example, researchers associated with
the Federal Reserve Board, individual
Federal Reserve Banks, and other
institutions such as the Brookings
Institution, the American Enterprise
Institute, and the Urban Institute.
Bergstresser stated further that
excluding researchers from such
institutions would be ‘‘inappropriate
and would hamper the progress of
research on the municipal bond
market.’’ Second, Harris stated that ‘‘[i]t
would not be fair or in the public
interest if interested industry groups
could not replicate academic studies or
produce their own’’ and that the RTRS
Academic Data Product should be
available to anyone. Harris added that
the trade data needs to be made widely
available so that academics can have a
reasonable expectation that others will
replicate, and potentially challenge, the
research they conduct on the trade data.
In contrast, Coastal argued that the
availability of the RTRS Academic Data
Product should be limited to academics
to provide additional protection against
reverse engineering of the trade data.
ABFM affirmatively stated that it took
no position on whether the data product
should be limited to, or expanded
beyond, academics, but stated that the
MSRB should not base access to the
RTRS Academic Data Product on the
content, or results, of the requesting
researcher’s previously published
works. Similarly, Harris also stated that
access to the RTRS Academic Data
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Fmt 4703
Sfmt 4703
47215
Product should not be made contingent
on the resulting research produced.
Finally, SIFMA stated that the RTRS
Academic Data Product should be
available to ‘‘[a]ny not-for-profit that has
a separately identifiable Research
Department and regularly publishes
research reports’’ on the same terms that
it would be available to academics, but
only if other modifications suggested by
SIFMA were made, such as
anonymizing dealer identities by group
and aging the data for 48 months.
The establishment of the RTRS
Academic Data Product was conceived
as a means of advancing a goal of the
MSRB’s Long-Range Plan for Market
Transparency Products 12 by facilitating
access to municipal market data for
academics to conduct research on the
municipal securities market. The MSRB
believes that limiting the availability of
the RTRS Academic Data Product to
academic institutions will facilitate
transparency, while not exposing the
trade data to institutions or
organizations that could have a more
direct incentive to use the trade data for
commercial purposes. The MSRB is
committed to increasing market
transparency and, in the future, after the
use of the RTRS Academic Data Product
has been observed, the MSRB may
reconsider providing access to the data
to a larger group of researchers.
However, at this time, the MSRB
believes that limiting the RTRS
Academic Data Product to academic
institutions helps address the concerns
of dealers about the use of the data,
while advancing the purpose of the
product to foster academic research on
the municipal securities market.
Pricing of the RTRS Academic Data
Product
As proposed in the Request for
Comment, the RTRS Academic Data
Product would be made available for a
fee of $500 per calendar-year data set
(with a one-time initial set-up fee of
$500).13 Harris commented that
academics should either pay a reduced
rate, when compared to the fee charged
to industry participants and their
various organizations and consultants,
or be given access for free because, in
his opinion, academics are often not
paid to conduct their research while the
12 MSRB Long-Range Plan for Market
Transparency Products (January 27, 2012), available
at: https://www.msrb.org/msrb1/pdfs/Long-RangePlan.pdf.
13 The MSRB notes that the Request for Comment
proposed the availability of the RTRS Academic
Data Product in calendar-year data sets, but, as it
does with other data products and as described
above, the MSRB would make the RTRS Academic
Data Product available on a rolling basis in one-year
data sets.
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Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices
public obtains a benefit from the
research being conducted. ABFM
believes the fee is reasonable.
As noted above, the MSRB intends to
establish a fee for the RTRS Academic
Data Product prior to the effective date
of the proposed rule change. The fee
will be established pursuant to a
separate rule filing in which Harris’
comment will be addressed.14
mstockstill on DSK3G9T082PROD with NOTICES
Subscription Agreement
As part of the Request for Comment,
the MSRB included a draft description
of the subscription agreement into
which recipients of the RTRS Academic
Data Product (‘‘Recipients’’) would be
required to enter with the MSRB before
access to the data would be granted
(‘‘Draft Agreement’’). Some commenters
requested clarification of, and others
raised concerns about potential issues
that could arise from, the terms of the
Draft Agreement.
Liability for Breach of Draft Agreement
The MSRB included a liability
provision in the Draft Agreement to, in
part, deter and prevent reverse
engineering and/or other misuse of the
trade data provided by the RTRS
Academic Data Product. Several
commenters expressed concern
regarding this provision that would hold
Recipients ‘‘liable to the MSRB for any
breach of the [Draft Agreement]
resulting from the action/inaction of
Recipient’s internal users or any other
individual or entity that accesses the
[RTRS Academic Data Product] via
Recipient or to whom Recipient
provides any derivative works.’’ In
particular, ABFM commented that the
inclusion of the provision would be
overly burdensome for academic
institutions and may preclude some
from subscribing. ABFM further
suggested, as an alternative, that
liability be limited to two times the
price paid by the Recipient for the data
and that holding a Recipient liable to
the extent described by the Draft
Agreement would be unreasonable.
Bergstresser, Cusatis and Ramsey
expressed similar views, and each stated
that the liability exposure could prevent
an academic institution from signing the
Draft Agreement and using the RTRS
Academic Data Product. In contrast,
Harris stated that the terms of the Draft
Agreement generally were sufficient and
not unduly restrictive.
Publication of Works Based on Data
In the Request for Comment, the
MSRB asked whether academics would
be opposed to including, as a term of the
14 See
supra note 7.
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18:24 Jul 19, 2016
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agreement, a requirement that a copy of
all derivative works that rely on the
RTRS Academic Data Product be
provided to the MSRB upon
publication. In response, Harris
requested that the MSRB provide more
specifics regarding what is meant by the
term ‘‘publication’’ because, in his view,
academics may have differing
understandings of when works of
research are considered ‘‘published.’’
Harris further stated that, if academics
are required to send published works to
the MSRB, they should only be required
to do so after the work is no longer
described by its author as a ‘‘Working
Draft—Not for Quotation—Subject to
Change’’ and can be found via an
internet search. ABFM stated that it
believes that academics would not be
opposed to providing the MSRB with all
published works relying on the data
from the RTRS Academic Data Product,
so long as the MSRB did not require the
academic to share authorship of the
work or the copyright of such works.
Permissible Use and Security of the
Trade Data
SIFMA commented that the draft
proposal did not state who at academic
institutions would be able to access the
trade data and requested that the MSRB
modify the draft proposal to include
‘‘parameters around who may be
considered an ‘Internal User’ or
‘Recipient/Licensee.’ ’’ In addition,
SIFMA also suggested that the MSRB
further limit ‘‘Authorized Use’’ to serve
the purpose of research and to exclude
any commercial use of the trade data.
Overall, SIFMA expressed a concern
that the creation of the RTRS Academic
Data Product would lead to an
inevitable data breach, revealing dealer
trading and distribution strategies,
which could have a negative impact on
market liquidity. Similarly, BDA noted
that nothing in the Draft Agreement
would require academic institutions to
have a minimum level of data security
protections in place, making the data
susceptible to theft.
The MSRB understands and
appreciates the comments provided in
response to the terms of the Draft
Agreement presented in the Request for
Comment. The MSRB included those
terms and solicited comment on them
primarily to determine whether to
establish the RTRS Academic Data
Product, and the subscription agreement
into which academics and/or academic
institutions would be required to enter
(‘‘Final Agreement’’), and the terms
thereof, have yet to be finalized. If the
RTRS Academic Data Product is
approved, the MSRB will, as it does for
all of its subscription service
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Fmt 4703
Sfmt 4703
agreements, conduct a thorough legal
and risk analysis to ensure that it is
adequately protected from possible
breaches of the agreement, as well as
consider the potential burdens placed
on all parties to the agreement in light
of the intended benefits. In performing
this analysis, the MSRB will take all of
the above comments into consideration.
As noted above, given the potential
risk of the trade data included in the
RTRS Academic Data Product being
reverse engineered, the MSRB believes
the subscription agreement will be an
important complement to the measures
included in the proposal to mitigate that
risk. As such, the MSRB expects that the
Final Agreement will include a liability
provision substantially similar to the
one included in the Draft Agreement to
deter and prevent reverse engineering
and other potential breaches of the
agreement. The MSRB also expects that
the Final Agreement will include a
definition of ‘‘publication’’ to provide
clarity to academics on what work
product to provide to the MSRB and
when, and will not require any form of
joint authorship with the MSRB.
Finally, the MSRB expects that the Final
Agreement will define ‘‘Internal User’’
to clarify to whom access to the data
may be provided and require reasonable
security measures to protect the data
from unauthorized access by controlling
how they are used, accessed, processed,
stored and/or transmitted.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period of
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
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Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MSRB–2016–09 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549.
All submissions should refer to File
Number SR–MSRB–2016–09. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the MSRB. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–MSRB–
2016–09 and should be submitted on or
before August 10, 2016.
For the Commission, pursuant to delegated
authority.15
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2016–17094 Filed 7–19–16; 8:45 am]
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BILLING CODE 8011–01–P
15 17
CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78329; File No. SR–
BatsBZX–2016–01]
Self-Regulatory Organizations; Bats
BZX Exchange, Inc.; Order Granting
Approval of Proposed Rule Change, as
Modified by Amendment No. 8 Thereto,
to List and Trade Under BZX Rule
14.11(c)(4) Shares of the Following
Series of VanEck Vectors ETF Trust:
VanEck Vectors AMT-Free 6–8 Year
Municipal Index ETF; VanEck Vectors
AMT-Free 8–12 Year Municipal Index
ETF; and VanEck Vectors AMT-Free
12–17 Year Municipal Index ETF
July 14, 2016.
I. Introduction
On March 29, 2016, Bats BZX
Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade under BZX Rule
14.11(c)(4) the shares (‘‘Shares’’) of the
following series of VanEck Vectors ETF
Trust (‘‘Trust’’): VanEck Vectors AMTFree 6–8 Year Municipal Index ETF;
VanEck Vectors AMT-Free 8–12 Year
Municipal Index ETF; and VanEck
Vectors AMT-Free 12–17 Year
Municipal Index ETF (individually,
‘‘Fund’’ and, collectively, ‘‘Funds’’). The
proposed rule change was published for
comment in the Federal Register on
April 18, 2016.3 On June 1, the
Exchange filed Amendment No. 1 to the
proposed rule change.4 On June 14,
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 77596
(April 18, 2016), 81 FR 22681 (‘‘Notice’’).
4 In Amendment No. 1, the Exchange: (a) Clarified
the names of the exchange-traded funds (‘‘ETFs’’)
by replacing references to ‘‘Market Vectors’’ with
‘‘VanEck Vectors’’; (b) added representations
relating to continued listing compliance and
Exchange delisting procedures in the event of noncompliance with respect to the proposal; (c)
clarified certain holdings of the Funds by (i)
replacing references to ‘‘to-be-announced’’ or
‘‘TBA’’ transactions with ‘‘when-issued’’ or ‘‘WI’’
transactions, (ii) deleting references to over-thecounter options on futures contracts, (iii) deleting
statements relating to certain swaps, and (iv)
deleting information relating to municipal bonds
that are not included in the applicable underlying
indices; (d) made conforming and clarifying
changes in describing the calculation of net asset
value of the Funds; (e) changed the creation unit
size of the Funds from 100,000 Shares to 50,000
Shares; and (f) clarified that information with
respect to the mid-point of the bid/ask spread
would not be publicly available; and (g) added
availability of information relating to the
underlying indices. Because the changes in
Amendment No. 1 to the proposed rule change
clarify certain statements in the proposal and do not
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2 17
Frm 00063
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47217
2016, the Exchange filed Amendment
No. 2 to the proposed rule change.5 On
June 23, 2016, the Exchange filed
Amendment No. 3 to the proposed rule
change.6 On July 8, 2016, the Exchange
filed: (1) Amendment No. 4 to the
proposed rule change; 7 (2) Amendment
No. 5 to the proposed rule change; 8 and
(3) Amendment No. 6 to the proposed
rule change.9 On July 12, 2016, the
materially alter the substance of the proposed rule
change or raise any novel regulatory issues, it is not
subject to notice and comment. Amendment No. 1,
which amended and replaced the Notice in its
entirety, is available on the Commission’s Web site
at: https://www.sec.gov/comments/sr-batsbzx-201601/batsbzx201601-2.pdf.
5 In Amendment No. 2, the Exchange: (a) Clarified
the other portfolio holdings of the Funds with
respect to other municipal bonds; (b) added
statements with respect to certain swaps; (c)
corrected a typographical error; and (d) clarified
that each Fund will disclose on its Web site the
identities and quantities of the portfolio of
securities and other assets in the daily disclosed
portfolio held by the Funds that formed the basis
for each Fund’s calculation of net asset value at the
end of the previous business day. Because the
changes in Amendment No. 2 to the proposed rule
change are technical in nature and do not materially
alter the substance of the proposed rule change or
raise any novel regulatory issues, it is not subject
to notice and comment. Amendment No. 2, which
amended and replaced the proposed rule change, as
modified by Amendment No. 1 thereto, in its
entirety, is available on the Commission’s Web site
at: https://www.sec.gov/comments/sr-batsbzx-201601/batsbzx201601-3.pdf.
6 In Amendment No. 3, the Exchange: (a) Deleted
extraneous language previously corrected by
Amendment No. 2 to the proposed rule change
relating to certain swaps; and (b) corrected a
technical redundancy with respect to a defined
term. Because the changes in Amendment No. 3 to
the proposed rule change are technical in nature
and do not materially alter the substance of the
proposed rule change or raise any novel regulatory
issues, it is not subject to notice and comment.
Amendment No. 3, which amended and replaced
the proposed rule change, as modified by
Amendment No. 2 thereto, in its entirety, is
available on the Commission’s Web site at: https://
www.sec.gov/comments/sr-batsbzx-2016-01/
batsbzx201601-4.pdf.
7 In Amendment No. 4, the Exchange corrected
errors made with respect to the names of the Funds
by adding ‘‘AMT-Free’’ to certain references made
in the proposal. Because the changes in
Amendment No. 4 to the proposed rule change are
technical in nature and do not materially alter the
substance of the proposed rule change or raise any
novel regulatory issues, it is not subject to notice
and comment. Amendment No. 4, which amended
and replaced the proposed rule change, as modified
by Amendment No. 3 thereto, in its entirety, is
available on the Commission’s Web site at: https://
www.sec.gov/comments/sr-batsbzx-2016-01/
batsbzx201601-5.pdf.
8 On July 8, 2016, the Exchange withdrew
Amendment No. 5 to the proposed rule change.
9 In Amendment No. 6, the Exchange further
corrected the names of the Funds by removing
references to ‘‘AMT-Free.’’ Because the changes in
Amendment No. 6 to the proposed rule change are
technical in nature and do not materially alter the
substance of the proposed rule change or raise any
novel regulatory issues, it is not subject to notice
and comment. Amendment No. 6, which amended
and replaced the proposed rule change, as modified
by Amendment No. 4 thereto, in its entirety, is
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]]>Agencies
[Federal Register Volume 81, Number 139 (Wednesday, July 20, 2016)]
[Notices]
[Pages 47211-47217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17094]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78323; File No. SR-MSRB-2016-09]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of a Proposed Rule Change To Establish the MSRB
Academic Historical Transaction Data Product
July 14, 2016.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on June 30, 2016, the Municipal Securities
Rulemaking Board (the ``MSRB'' or ``Board'') filed with the Securities
and Exchange Commission (the ``SEC'' or ``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by the MSRB. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(i).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The MSRB filed with the Commission a proposed rule change to the
MSRB's facility for the Real-Time Transaction Reporting System
(``RTRS'') to establish an historical data product to provide
institutions of higher education (``academic institutions'') with post-
trade municipal securities transaction data collected through RTRS
(``MSRB Academic Historical Transaction Data Product,'' hereafter
referred to as ``RTRS Academic Data Product'') for purchase (``proposed
rule change''). If approved by the Commission, the MSRB will announce
the effective date of the proposed rule change in a regulatory notice
to be published no later than 90 days following Commission approval.
The effective date will be no later than 270 days following publication
of the regulatory notice announcing Commission approval.
The text of the proposed rule change is available on the MSRB's Web
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2016-Filings.aspx, at the MSRB's principal office, and at the Commission's
Public Reference Room.
[[Page 47212]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the MSRB included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The MSRB has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The MSRB is the federal regulatory entity with primary
responsibility under the Exchange Act for rulemaking for the municipal
securities market. Under the Exchange Act, the MSRB is charged with
adopting rules with respect to transactions in municipal securities
effected by brokers, dealers and municipal securities dealers
(``dealers'') and the municipal advisory activities of municipal
advisors.
In addition to developing its comprehensive body of rules governing
the activities of dealers and municipal advisors, the MSRB has
undertaken to create various market transparency products in
furtherance of its statutory duties and its mission, which is, in part,
to promote a fair and efficient municipal securities market through the
collection and dissemination of market information. Historically, the
MSRB has operated information systems to collect key disclosure
documents and transaction data to create a central warehouse of
information that made most of these documents and data available to the
market--the Electronic Municipal Market Access (``EMMA[supreg]'') \3\
Web site. The MSRB makes post-trade transaction data available to the
general public through the EMMA Web site at no cost, and to data
vendors, industry utilities and others on a subscription basis through
a real-time data feed and on a delayed basis.
---------------------------------------------------------------------------
\3\ EMMA[supreg] is a registered trademark of the MSRB.
---------------------------------------------------------------------------
MSRB Rule G-14, on transaction reporting, requires dealers to
report all executed transactions in municipal securities to RTRS within
15 minutes of the time of trade, with limited exceptions.\4\ RTRS
serves the dual objectives of price transparency and market
surveillance. While a comprehensive database of transactions is needed
for the surveillance function of RTRS, the MSRB does not believe that
all information or transactions reported to RTRS are necessary to serve
the transparency objective of the system and, therefore, such
information does not qualify for public dissemination. Among other
information, the executing broker symbol, which provides the identity
of each dealer that executed a transaction reported to RTRS, is not
publicly disseminated. The information facility for RTRS serves to
outline the high-level parameters by which the MSRB operates the
system.
---------------------------------------------------------------------------
\4\ Transactions in securities without CUSIP numbers,
transactions in municipal fund securities and certain inter-dealer
securities movements not eligible for comparison through a clearing
agency are the only transactions exempt from the reporting
requirements of Rule G-14.
---------------------------------------------------------------------------
While currently used by researchers from academic institutions
(``academics''), through subscription services or in historical data
sets, the RTRS data available on the EMMA Web site do not include any
identifying information regarding the dealer reporting each
transaction. Thus, the information disseminated from RTRS would not
allow such an academic to attribute transactions to the dealers that
facilitated them--even anonymously. As a result, some academics have
asked whether the MSRB could make an enhanced version of RTRS trade
data available that includes dealer identifiers. Further, on July 15,
2014, the MSRB published a Report on Secondary Market Trading in the
Municipal Securities Market that utilized dealer identifiers to gain a
better understanding of secondary market trading practices in the
municipal securities market, including basic patterns of trading,
pricing differentials associated with trading patterns and the impact
of price transparency on pricing differentials. However, academics
wishing to replicate the methodology employed in this report are unable
to do so, as it relies, in part, on dealer identifiers.
In July 2015, in response to these requests from academics, the
MSRB published a request for comment, proposing to create a new RTRS
Academic Data Product that would include anonymized dealer identifiers
(``draft proposal'').\5\ In response to the Request for Comment, the
MSRB received 13 comment letters, mostly supporting the draft
proposal.\6\ After carefully considering all of the comments received,
the MSRB determined to file this proposed rule change to the RTRS
facility to create the RTRS Academic Data Product, which would be made
available only to academic institutions and would include the same
transactions included in the current RTRS historical transaction data
sets, with the exclusion of list offering price and takedown
transactions, which can be used to identify primary market
transactions.\7\
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\5\ MSRB Notice 2015-10 (July 16, 2015) (``Request for
Comment'').
\6\ See infra note 11.
\7\ In addition, the MSRB intends to establish a fee for the
RTRS Academic Data Product prior to the effective date of the
proposed rule change. The fee will be established pursuant to a
separate rule filing.
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While the MSRB understands that anonymized dealer identifiers may
be highly useful to academic institutions in connection with their
research activities, the MSRB also recognizes that dealers may be
concerned with the potential for reverse engineering of anonymized
dealer identifiers to determine dealer identities. To address this
issue, in addition to anonymizing dealer identifiers, the MSRB would
take additional measures, including:
Providing unique data sets with different anonymized
dealer identifiers to each academic;
excluding list offering price and takedown transactions;
explicitly requiring subscribers to agree that they will
not attempt to reverse engineer the identity of any dealer;
prohibiting the redistribution of the data in the RTRS
Academic Data Product;
requiring users to disclose each intended use of the data
(including a description of each study being performed and the names of
each individual who will have access to the data for the study);
requiring users to ensure that any data presented in work
product be sufficiently aggregated so as to prevent reverse engineering
of any dealer or transaction;
requiring that the data be returned or destroyed if the
agreement is terminated; and
aging all the transactions included in the RTRS Academic
Data Product for no less than 36 months.
The establishment of the RTRS Academic Data Product would add to
the MSRB's current offering of data products and further the MSRB's
mission to improve the transparency of the municipal securities market
by facilitating access to municipal market data for academic
institutions. While academic institutions currently have access to the
post-trade municipal securities transaction data disseminated from
RTRS, the RTRS Academic Data Product would improve the usefulness
[[Page 47213]]
of this data by enabling academics to distinguish transactions executed
by different dealers.
2. Statutory Basis
Section 15B(b)(2) of the Exchange Act \8\ provides that:
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78o-4(b)(2).
[T]he Board shall propose and adopt rules to effect the purposes
of this title with respect to transactions in municipal securities
effected by [dealers] and advice provided to or on behalf of
municipal entities or obligated persons by [dealers] and municipal
advisors with respect to municipal financial products, the issuance
of municipal securities, and solicitations of municipal entities or
---------------------------------------------------------------------------
obligated persons undertaken by [dealers] and municipal advisors.
Section 15B(b)(2)(C) of the Exchange Act,\9\ provides that the
MSRB's rules shall:
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78o-4(b)(2)(C).
be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect
to, and facilitating transactions in municipal securities and
municipal financial products, to remove impediments to and perfect
the mechanism of a free and open market in municipal securities and
municipal financial products, and, in general, to protect investors,
---------------------------------------------------------------------------
municipal entities, obligated persons, and the public interest.
The MSRB believes that the proposed rule change is consistent with
Sections 15B(b)(2) and 15B(b)(2)(C) of the Exchange Act because it
would prevent fraudulent and manipulative acts and practices, promote
just and equitable principles of trade, and remove impediments to and
perfect the mechanism of a free and open market in municipal
securities. Specifically, the RTRS Academic Data Product would enable
subscribers of the product to better understand the pricing of certain
transactions, as well as how such transactions were executed, which
should, in turn, facilitate higher quality research and analysis.
Overall, the proposed rule change would contribute to the MSRB's
continuing efforts to improve market transparency and to protect
investors, municipal entities, obligated persons and the public
interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
Section 15B(b)(2)(C) of the Exchange Act \10\ requires that MSRB
rules not be designed to impose any burden on competition not necessary
or appropriate in furtherance of the purposes of the Act. In
determining whether these standards have been met, the MSRB was guided
by the Board's Policy on the Use of Economic Analysis in MSRB
Rulemaking. In accordance with this policy, the Board has evaluated the
potential impacts on competition of the proposed rule change, including
in comparison to reasonable alternative regulatory approaches, relative
to the baseline. The MSRB also considered other economic impacts of the
proposed rule change and has addressed comments relevant to these
impacts in other sections of this document.
---------------------------------------------------------------------------
\10\ Id.
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The MSRB believes that the availability of this data may further
research, which could help the MSRB and other regulators: Prevent
fraudulent and manipulative acts and practices; facilitate transactions
in municipal securities and municipal financial products; remove
impediments to and perfect the mechanism of a free and open market in
municipal securities and municipal financial products; and protect
investors, municipal entities, obligated persons and the public
interest.
The MSRB acknowledges the potential for reverse engineering of
anonymized dealer identifiers to determine dealer identities and has
taken a number of measures to reduce this risk and mitigate any
potential impact. Given these measures and the aforementioned benefits,
the MSRB does not believe that the proposed rule change will impose any
additional burdens on competition, relative to the baseline, that are
not necessary or appropriate in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The MSRB received 13 comment letters in response to the Request for
Comment.\11\ The comment letters are summarized below by topic, and the
MSRB's responses are provided.
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\11\ See letters from: Robert Doty, American Governmental
Financial Services (``AGFS''), dated August 24, 2015; Robert
Kravchuck, et al., Association for Budgeting and Financial
Management (``ABFM''), dated September 13, 2015; Michael Nicholas,
Chief Executive Officer, Bond Dealers of America (``BDA''), dated
August 24, 2015; Daniel Bergstresser (``Bergstresser''), Associate
Professor of Finance, Brandeis University, International Business
School, dated September 14, 2015; Chris Melton, Executive Vice
President, Coastal Securities (``Coastal'') dated August 5, 2015;
Patrick J. Cusatis (``Cusatis''), Associate Professor of Finance,
Penn State Harrisburg, School of Business Administration, dated
September 10, 2015; Jonathan L. Gifford (``Gifford''), Professor and
Director of Center for Transportation P3 Policy, George Mason
University, dated September 1, 2015; Andrew Glassberg
(``Glassberg''), dated August 17, 2015; Lawrence Harris
(``Harris''), Professor of Finance and Business Economics,
University of Southern California, Marshall School of Business,
dated September 6, 2015; John Mousseau (``Mousseau''), dated July
29, 2015; Norman White et al., New York University, Leonard N. Stern
School of Business (``NYU Stern''), dated September 16, 2015; James
R. Ramsey (``Ramsey''), President, University of Louisville, dated
September 4, 2015; Sean Davy, Managing Director, Capital Markets
Division, and David L. Cohen, Managing Director and Associate
General Counsel, Municipal Securities Division, Securities Industry
and Financial Markets Association (``SIFMA''), dated September 11,
2015.
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Support for the Proposed Rule Change
In response to the Request for Comment, several commenters
expressed strong general support for the creation of the RTRS Academic
Data Product. ABFM, AGFS, Bergstresser, Cusatis, Glassberg, NYU Stern
and Ramsey believe it would improve the quality of academic research
on, and contribute to enhanced transparency in, the municipal
securities market. Further, Gifford opined that the draft proposal
would allow for better cost-benefit analysis of public-private
partnership projects that access the municipal securities market, and
Coastal stated that trade data that would be made available by the
draft proposal would contribute to academic research of the municipal
securities market and that it should be supported. Finally, Harris
strongly supports the RTRS Academic Data Product and commented that the
draft proposal would ``allow the MSRB to better regulate markets for
the public good.''
Risk of Reverse Engineering Trade Data
In the Request for Comment, the MSRB recognized that dealers may be
concerned with the potential for reverse engineering of anonymized
dealer identifiers to determine dealer identities from the data
provided by the RTRS Academic Data Product, and it proposed several
measures to prevent and deter those that would try to reverse engineer
the trade data. Several commenters addressed this issue and proposed
modifications to the draft proposal for purposes of preventing reverse
engineering.
General Comments
BDA expressed concern that the draft proposal would allow reverse
engineering of a dealer's trading/investment strategy and the
requirements of the subscription agreement would not sufficiently
protect dealers, thus, exposing them to an ``unnecessary business
risk.'' BDA further stated that data on municipal
[[Page 47214]]
securities transactions that are currently available to the public for
academic research ``include a sufficient level of detail to support
rigorous study.'' SIFMA also expressed concern that the proposed
anonymization of dealer identifiers would not effectively protect
dealer identities. Harris commented that use of the RTRS Academic Data
Product may result in some reverse engineering, which may cause some
level of harm to dealers, but he also stated that, while he believes
engaging in reverse engineering would be inappropriate, it may ``serve
the public interest'' by revealing ``price differentials (known as
markups by many) . . . to [dealers'] customers.'' ABFM commented that
the planned terms of the subscription agreement intended to prevent
reverse engineering would be a sufficient deterrent.
Since the inception of this rulemaking initiative, the MSRB has
been acutely aware of the potential for reverse engineering the trade
data that would be included in the RTRS Academic Data Product. Indeed,
the MSRB acknowledges that the data provided in the RTRS Academic Data
Product could be reverse engineered. However, the MSRB believes that
the measures it would take--e.g., anonymizing dealer identifiers,
imposing liability on subscribers of the data for breaching the terms
of the subscription agreement (which would, among other things, include
a provision prohibiting reverse engineering), and limiting subscribers
to academic institutions--, on balance, sufficiently reduce the risk of
reverse engineering, and of harm resulting therefrom. Further, in
response to the concerns raised by commenters, the MSRB is now
proposing to: Increase the aging requirement for the trade data from 24
to 36 months prior to its release; provide unique data sets with
different anonymized dealer identifiers to each academic, which may
both help guard against coordinated efforts at attempting reverse
engineering dealer identities, as well as assist in identifying the
source of conduct that violates the subscription agreement; exclude
list offering price and take down transactions, which can be used to
identify primary market transactions; require users to ensure the
sufficient aggregation of any data presented in work product, which
would protect against reverse engineering by readers of published
works; and not include primary offering trades in the trade data.
Overall, the MSRB has proposed numerous measures that should mitigate
the risk of reverse engineering, and the residual risk is warranted by
the benefits to the municipal securities market that would result from
creation of the RTRS Academic Data Product and greater transparency of
dealer behavior. The MSRB may consider amending or discontinuing the
RTRS Academic Data Product, as currently proposed, if future experience
shows that anonymized dealer identifiers are reverse engineered by
researchers.
Aging Trade Data
As noted above, as part of the MSRB's effort to prevent and deter
reverse engineering of dealer identities, the draft proposal required
that the trade data made available to subscribers of the RTRS Academic
Data Product would be for trades that were executed at least 24 months
prior to the date that they were provided to the subscriber. SIFMA
stated, in combination with other concerns about the draft proposal,
that 24 months is too short of a time period to adequately protect
against reverse engineering, and, instead, suggested that the MSRB age
the trade data for 48 months. In contrast, ABFM believed 12 months,
rather than 24, would be a sufficient time period to ensure that trades
could not be reverse engineered, and Ramsey also suggested 12 months
would be preferable to 24 months to ensure the data is timely. Harris
argued that 24 months would be more than sufficient for aging the data
to remove the usefulness of that data for the purpose of reverse
engineering, in part, because he believes dealer positions change in no
more than two months, and he also noted that as few as six or up to 12
months would be a better length of time because it would allay the
concerns of dealers and allow for the ``identifying [of] parasitic
trading strategies as quickly as possible.'' Coastal believes 12 months
would be too short a time period to sufficiently mitigate the reverse
engineering risk but that 24 months would be appropriate and would not
encumber research because, in its opinion, municipal securities market
practices and conditions are ``slow to evolve,'' making the data still
relevant to academics studying market behavior.
Based on careful consideration of all of the diverse comments on
this issue, the MSRB believes, at this time, that a 36-month period is
appropriate to protect against, and mitigate the risk and potential
harm from, any reverse engineering, while still providing useful trade
data for academics to study.
Grouped Versus Individual Dealer Identifiers
In the draft proposal, the MSRB proposed anonymizing identifiers
for each individual dealer for the trade data made available through
the RTRS Academic Data Product to protect against the potential of
subscribers reverse engineering the data to determine dealer
identities. A few commenters suggested alternative methods to anonymize
dealer identities. Specifically, BDA stated that grouping dealers by
size, as opposed to issuing individual anonymized identifiers, would
better protect the trade data from reverse engineering if the MSRB does
not plan on changing the dealer identifiers on a regular basis because,
without periodic changes, it would become easier to identify dealers
based on trading data over a long period of time. SIFMA similarly
supported making the trade data available through ``groupings of
comparable dealers,'' arguing that the MSRB and FINRA should ``adopt
the peer group criteria used in MSRB and FINRA report cards to
aggregate dealers into reportable groups.'' Further, Coastal stated
that, if dealers were not grouped by size, then reverse engineering
would likely occur, while grouping by size would not substantially
encumber research uses of the trade data. Coastal also argued that
contracting with subscribers to prevent reverse engineering would not
be effective, and BDA noted that any subscription agreement would not
extend to readers of studies produced by subscribers.
In support of individual identifiers, Harris stated that the
``empirical work [of academics] requires high quality data that can
inform their analyses as to what dealers do. Dealer identities thus
need to be revealed, at a minimum in anonymized form, so that academics
can understand how dealer trading decisions relate to their previous
trading decisions.'' To this point, Harris stated that grouping dealers
would likely provide better trade data than is currently available to
academics, but that such grouped data would not provide academics with
the information needed to understand specific dealer behavior. He
stated, ``[D]ealer decisions to offer, not offer, and take liquidity
are made by individual dealers in response to their individual needs
and inventory conditions. Groups of dealers acting in concert do not
make these decisions. To better understand these decisions, you must
see who is making them.'' Additionally, Bergstresser argued that
grouping dealers by size would substantially hinder the purpose of the
RTRS Academic Data Product because it would reduce ``the information
content of the data [and] would negate the entire purpose of having
(anonymized) dealer identities, which is to be able to identify
[[Page 47215]]
round-trip transactions.'' Similarly, Ramsey stated that anonymizing
dealer identifiers would be reasonable if it allowed tracking unique
trades, which groupings by size or volume would not, and ABFM commented
that the potential beneficial research that could result from the RTRS
Academic Data Product with individual dealer identifiers would likely
be much greater than if ``the dealer identifier is less precise (e.g.,
a categorical identifier based on dealer size or average daily trading
volume).''
The MSRB believes, at this time, that it would better further the
principal purpose of creating the RTRS Academic Data Product--namely,
to foster detailed research and analysis of municipal securities
trading--if the trade data identifies dealers individually rather than
by group. The MSRB believes that grouping dealers would result in too
great a reduction in the usefulness of the RTRS Academic Data Product,
and, as previously mentioned, that the protections incorporated in the
proposed rule change, including, but not limited to, the 36-month aging
of the data, and terms planned to be included in the subscription
agreement will, on balance, adequately mitigate the risk of reverse
engineering without the grouping of dealers.
Primary Offering Data
As proposed in the Request for Comment, the RTRS Academic Data
Product would make trade data available from transactions in both the
primary and secondary markets. SIFMA believes that the potential for
reverse engineering primary market trade data is particularly acute
because, in its view, the currently available public data that does not
have dealer identifiers is already subject to reverse engineering.
SIFMA recommended that, if made available on a dealer-by-dealer basis,
the data provided by the RTRS Academic Data Product exclude primary
trades from the data set and periodically scramble dealer identifiers.
The MSRB agrees with SIFMA regarding primary market trades, in
light of trade data products currently offered by the MSRB to provide
academics and other interested parties with information about the
primary market for municipal securities. Therefore, the RTRS Academic
Data Product would not include list offering price and takedown
transactions, which can be used to identify primary market
transactions.
Release of Full Trade Sizes in RTRS Academic Data Product
Harris commented that the RTRS Academic Data Product should provide
full trade sizes and that the utility of the RTRS Academic Data Product
would be reduced if the trade data did not reveal the sizes of the
largest trades.
The MSRB understands the potential issues academic researchers
could encounter if the full size of trades is not included in the trade
data, and, therefore, the proposed rule change would provide the full
size of each trade that is included in the RTRS Academic Data Product.
Limiting RTRS Academic Data Product to Academic Institutions
As proposed in the Request for Comment, the RTRS Academic Data
Product would only be made available to academics in connection with
their research activities. Commenters had differing views as to whether
or not the subscriber base should be larger. First, Bergstresser
suggested that the MSRB broaden the set of individuals who could have
access to the RTRS Academic Data Product to include, for example,
researchers associated with the Federal Reserve Board, individual
Federal Reserve Banks, and other institutions such as the Brookings
Institution, the American Enterprise Institute, and the Urban
Institute. Bergstresser stated further that excluding researchers from
such institutions would be ``inappropriate and would hamper the
progress of research on the municipal bond market.'' Second, Harris
stated that ``[i]t would not be fair or in the public interest if
interested industry groups could not replicate academic studies or
produce their own'' and that the RTRS Academic Data Product should be
available to anyone. Harris added that the trade data needs to be made
widely available so that academics can have a reasonable expectation
that others will replicate, and potentially challenge, the research
they conduct on the trade data. In contrast, Coastal argued that the
availability of the RTRS Academic Data Product should be limited to
academics to provide additional protection against reverse engineering
of the trade data. ABFM affirmatively stated that it took no position
on whether the data product should be limited to, or expanded beyond,
academics, but stated that the MSRB should not base access to the RTRS
Academic Data Product on the content, or results, of the requesting
researcher's previously published works. Similarly, Harris also stated
that access to the RTRS Academic Data Product should not be made
contingent on the resulting research produced. Finally, SIFMA stated
that the RTRS Academic Data Product should be available to ``[a]ny not-
for-profit that has a separately identifiable Research Department and
regularly publishes research reports'' on the same terms that it would
be available to academics, but only if other modifications suggested by
SIFMA were made, such as anonymizing dealer identities by group and
aging the data for 48 months.
The establishment of the RTRS Academic Data Product was conceived
as a means of advancing a goal of the MSRB's Long-Range Plan for Market
Transparency Products \12\ by facilitating access to municipal market
data for academics to conduct research on the municipal securities
market. The MSRB believes that limiting the availability of the RTRS
Academic Data Product to academic institutions will facilitate
transparency, while not exposing the trade data to institutions or
organizations that could have a more direct incentive to use the trade
data for commercial purposes. The MSRB is committed to increasing
market transparency and, in the future, after the use of the RTRS
Academic Data Product has been observed, the MSRB may reconsider
providing access to the data to a larger group of researchers. However,
at this time, the MSRB believes that limiting the RTRS Academic Data
Product to academic institutions helps address the concerns of dealers
about the use of the data, while advancing the purpose of the product
to foster academic research on the municipal securities market.
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\12\ MSRB Long-Range Plan for Market Transparency Products
(January 27, 2012), available at: https://www.msrb.org/msrb1/pdfs/Long-Range-Plan.pdf.
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Pricing of the RTRS Academic Data Product
As proposed in the Request for Comment, the RTRS Academic Data
Product would be made available for a fee of $500 per calendar-year
data set (with a one-time initial set-up fee of $500).\13\ Harris
commented that academics should either pay a reduced rate, when
compared to the fee charged to industry participants and their various
organizations and consultants, or be given access for free because, in
his opinion, academics are often not paid to conduct their research
while the
[[Page 47216]]
public obtains a benefit from the research being conducted. ABFM
believes the fee is reasonable.
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\13\ The MSRB notes that the Request for Comment proposed the
availability of the RTRS Academic Data Product in calendar-year data
sets, but, as it does with other data products and as described
above, the MSRB would make the RTRS Academic Data Product available
on a rolling basis in one-year data sets.
---------------------------------------------------------------------------
As noted above, the MSRB intends to establish a fee for the RTRS
Academic Data Product prior to the effective date of the proposed rule
change. The fee will be established pursuant to a separate rule filing
in which Harris' comment will be addressed.\14\
---------------------------------------------------------------------------
\14\ See supra note 7.
---------------------------------------------------------------------------
Subscription Agreement
As part of the Request for Comment, the MSRB included a draft
description of the subscription agreement into which recipients of the
RTRS Academic Data Product (``Recipients'') would be required to enter
with the MSRB before access to the data would be granted (``Draft
Agreement''). Some commenters requested clarification of, and others
raised concerns about potential issues that could arise from, the terms
of the Draft Agreement.
Liability for Breach of Draft Agreement
The MSRB included a liability provision in the Draft Agreement to,
in part, deter and prevent reverse engineering and/or other misuse of
the trade data provided by the RTRS Academic Data Product. Several
commenters expressed concern regarding this provision that would hold
Recipients ``liable to the MSRB for any breach of the [Draft Agreement]
resulting from the action/inaction of Recipient's internal users or any
other individual or entity that accesses the [RTRS Academic Data
Product] via Recipient or to whom Recipient provides any derivative
works.'' In particular, ABFM commented that the inclusion of the
provision would be overly burdensome for academic institutions and may
preclude some from subscribing. ABFM further suggested, as an
alternative, that liability be limited to two times the price paid by
the Recipient for the data and that holding a Recipient liable to the
extent described by the Draft Agreement would be unreasonable.
Bergstresser, Cusatis and Ramsey expressed similar views, and each
stated that the liability exposure could prevent an academic
institution from signing the Draft Agreement and using the RTRS
Academic Data Product. In contrast, Harris stated that the terms of the
Draft Agreement generally were sufficient and not unduly restrictive.
Publication of Works Based on Data
In the Request for Comment, the MSRB asked whether academics would
be opposed to including, as a term of the agreement, a requirement that
a copy of all derivative works that rely on the RTRS Academic Data
Product be provided to the MSRB upon publication. In response, Harris
requested that the MSRB provide more specifics regarding what is meant
by the term ``publication'' because, in his view, academics may have
differing understandings of when works of research are considered
``published.'' Harris further stated that, if academics are required to
send published works to the MSRB, they should only be required to do so
after the work is no longer described by its author as a ``Working
Draft--Not for Quotation--Subject to Change'' and can be found via an
internet search. ABFM stated that it believes that academics would not
be opposed to providing the MSRB with all published works relying on
the data from the RTRS Academic Data Product, so long as the MSRB did
not require the academic to share authorship of the work or the
copyright of such works.
Permissible Use and Security of the Trade Data
SIFMA commented that the draft proposal did not state who at
academic institutions would be able to access the trade data and
requested that the MSRB modify the draft proposal to include
``parameters around who may be considered an `Internal User' or
`Recipient/Licensee.' '' In addition, SIFMA also suggested that the
MSRB further limit ``Authorized Use'' to serve the purpose of research
and to exclude any commercial use of the trade data. Overall, SIFMA
expressed a concern that the creation of the RTRS Academic Data Product
would lead to an inevitable data breach, revealing dealer trading and
distribution strategies, which could have a negative impact on market
liquidity. Similarly, BDA noted that nothing in the Draft Agreement
would require academic institutions to have a minimum level of data
security protections in place, making the data susceptible to theft.
The MSRB understands and appreciates the comments provided in
response to the terms of the Draft Agreement presented in the Request
for Comment. The MSRB included those terms and solicited comment on
them primarily to determine whether to establish the RTRS Academic Data
Product, and the subscription agreement into which academics and/or
academic institutions would be required to enter (``Final Agreement''),
and the terms thereof, have yet to be finalized. If the RTRS Academic
Data Product is approved, the MSRB will, as it does for all of its
subscription service agreements, conduct a thorough legal and risk
analysis to ensure that it is adequately protected from possible
breaches of the agreement, as well as consider the potential burdens
placed on all parties to the agreement in light of the intended
benefits. In performing this analysis, the MSRB will take all of the
above comments into consideration.
As noted above, given the potential risk of the trade data included
in the RTRS Academic Data Product being reverse engineered, the MSRB
believes the subscription agreement will be an important complement to
the measures included in the proposal to mitigate that risk. As such,
the MSRB expects that the Final Agreement will include a liability
provision substantially similar to the one included in the Draft
Agreement to deter and prevent reverse engineering and other potential
breaches of the agreement. The MSRB also expects that the Final
Agreement will include a definition of ``publication'' to provide
clarity to academics on what work product to provide to the MSRB and
when, and will not require any form of joint authorship with the MSRB.
Finally, the MSRB expects that the Final Agreement will define
``Internal User'' to clarify to whom access to the data may be provided
and require reasonable security measures to protect the data from
unauthorized access by controlling how they are used, accessed,
processed, stored and/or transmitted.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period of up to 90 days (i) as
the Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
[[Page 47217]]
Send an email to rule-comments@sec.gov. Please include
File Number SR-MSRB-2016-09 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549.
All submissions should refer to File Number SR-MSRB-2016-09. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the MSRB. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-MSRB-2016-09 and should be
submitted on or before August 10, 2016.
For the Commission, pursuant to delegated authority.\15\
Jill M. Peterson,
Assistant Secretary.
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\15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-17094 Filed 7-19-16; 8:45 am]
BILLING CODE 8011-01-P
