Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of Proposed Rule Change to MSRB Rule G-34, CUSIP Numbers and New Issue Requirements, To Enhance the Interest Rate and Descriptive Information Currently Collected and Made Transparent by the MSRB on Municipal Auction Rate Securities and Variable Rate Demand Obligations, 16878-16886 [2010-7463]
Download as PDF
<![CDATA[
16878
Federal Register / Vol. 75, No. 63 / Friday, April 2, 2010 / Notices
to build on ISB Standard 1, and
superseded that standard and two
related interpretations.
Nasdaq proposes to remove the
reference in its rules to the superseded
ISB Standard. This proposed change
will not change the substantive
requirements that must be contained in
the audit committee charter.
2. Statutory Basis
Nasdaq believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,8 in
general, and Section 6(b)(5) of the Act,9
in particular, because it is 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 facilitating
transactions in securities, and to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system. The
proposed rule change is designed to
update Nasdaq’s requirements
concerning auditor independence by
eliminating an outdated, redundant
reference.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
mstockstill on DSKH9S0YB1PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, if
consistent with the protection of
investors and the public interest, it has
become effective pursuant to Section
PCAOB–2008–003). This rule requires auditor’s
[sic] to deliver certain information concerning their
independence to the audit committee and to discuss
that information with the committee.
8 15 U.S.C. 78f.
9 15 U.S.C. 78f(b)(5).
VerDate Nov<24>2008
16:40 Apr 01, 2010
Jkt 220001
19(b)(3)(A) of the Act 10 and Rule 19b–
4(f)(6)(iii) thereunder.11
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
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
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2010–037 on the
subject line.
Paper Comments:
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2010–037. This
file number should be included on the
subject line if e-mail 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
10 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6)(iii). In addition, Rule
19b–4(f)(6)(iii) requires that a self-regulatory
organization submit to the Commission written
notice of its intent to file the proposed rule change,
along with a brief description and text of the
proposed rule change, at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Commission notes that Nasdaq
satisfied the five-day pre-filing notice requirement.
11 17
PO 00000
Frm 00160
Fmt 4703
Sfmt 4703
Reference Room on official business
days between the hours of 10 a.m. and
3 p.m. Copies of such filing also will be
available for inspection and copying at
the principal office of Nasdaq. 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–NASDAQ–2010–037 and
should be submitted on or before April
23, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–7430 Filed 4–1–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61793; File No. SR–MSRB–
2010–02]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing of Proposed
Rule Change to MSRB Rule G–34,
CUSIP Numbers and New Issue
Requirements, To Enhance the Interest
Rate and Descriptive Information
Currently Collected and Made
Transparent by the MSRB on Municipal
Auction Rate Securities and Variable
Rate Demand Obligations
March 26, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 10,
2010, the Municipal Securities
Rulemaking Board (‘‘MSRB’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
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 is filing with the
Commission a proposed rule change to
enhance the interest rate and descriptive
information currently collected and
made transparent by the MSRB on
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\02APN1.SGM
02APN1
mstockstill on DSKH9S0YB1PROD with NOTICES
Federal Register / Vol. 75, No. 63 / Friday, April 2, 2010 / Notices
municipal Auction Rate Securities
(‘‘ARS’’) and Variable Rate Demand
Obligations (‘‘VRDOs’’). The proposed
rule change would: (i) Amend Rules G–
8, books and records, and G–34(c),
variable rate security market
information, to require brokers, dealers
and municipal securities dealers
(collectively ‘‘dealers’’) to submit to the
MSRB (a) documents that define auction
procedures and interest rate setting
mechanisms for ARS and liquidity
facilities for VRDOs (‘‘short-term
obligation document disclosure rule
change’’); (b) ARS bidding information
(‘‘ARS bidding information rule
change’’); and (c) additional VRDO
information (‘‘VRDO information rule
change’’) (collectively, the ‘‘rule change
proposal’’); (ii) amend the MSRB Shortterm Obligation Rate Transparency
(‘‘SHORT’’) System Facility to collect
and disseminate information identified
in the ARS bidding information rule
change and the VRDO information rule
change and documents identified in the
short-term obligation document
disclosure rule change (the ‘‘SHORT
System Facility amendment proposal’’);
and (iii) amend the MSRB EMMA Shortterm Obligation Rate Transparency
Service to make the documents
collected in the SHORT System Facility
amendment proposal available on the
MSRB’s Electronic Municipal Market
Access (EMMA) Web site (the ‘‘EMMA
Short-term Obligation Rate
Transparency Service amendment’’).
The MSRB has requested that the
proposed rule change, which may be
implemented in phases, be made
effective on such date or dates as would
be announced by the MSRB in notices
published on the MSRB Web site, which
dates would be no later than nine
months after Commission approval of
the proposed rule change and would be
announced no later than sixty (60) days
prior to the effective dates.
The text of the proposed rule change
is available on the MSRB’s Web site
(https://www.msrb.org), at the MSRB’s
principal office, and at the
Commission’s Public Reference Room. If
approved, the rule text for the Shortterm Obligation Rate Transparency
System, as well as for the EMMA ShortTerm Obligation Rate Transparency
Service, would be available on the
MSRB Web site at https://www.msrb.org/
msrb1/rulesandforms under the heading
Information Facilities.
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
VerDate Nov<24>2008
16:40 Apr 01, 2010
Jkt 220001
the purpose of and basis for 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 proposed rule change would
enhance the interest rate and descriptive
information currently collected and
made transparent by the MSRB on
municipal Auction Rate Securities
(‘‘ARS’’) and Variable Rate Demand
Obligations (‘‘VRDOs’’). The proposed
rule change would: (i) Amend MSRB
Rules G–8, books and records, and G–
34(c), variable rate security market
information, to require brokers, dealers
and municipal securities dealers
(collectively ‘‘dealers’’) to submit to the
MSRB (a) documents that define auction
procedures and interest rate setting
mechanisms for ARS and liquidity
facilities for VRDOs; (b) ARS bidding
information; and (c) additional VRDO
information (collectively ‘‘rule change
proposal’’); (ii) amend the MSRB Shortterm Obligation Rate Transparency
(‘‘SHORT’’) System Facility to collect
and disseminate the documents
identified in the rule change proposal
(‘‘SHORT System Facility amendment
proposal’’); and (iii) amend the MSRB
EMMA Short-term Obligation Rate
Transparency Service to make the
documents collected in the SHORT
System Facility amendment proposal
available on the MSRB’s Electronic
Municipal Market Access (EMMA) Web
site (the ‘‘EMMA Short-term Obligation
Rate Transparency Service
amendment’’).
SHORT and EMMA are components
of an integrated suite of programs,
services and systems (‘‘MSRB market
information programs’’) for the
collection of municipal securities
market data and documents from
dealers and other market participants
and the dissemination of such data and
documents to the public. The MSRB
market information programs leverage
the components of the various
individual programs, services and
systems to enhance the overall
efficiency and effectiveness of the
MSRB market information programs. In
particular, processes, software,
hardware or other components initially
placed into service for a particular
program, service or system may be
PO 00000
Frm 00161
Fmt 4703
Sfmt 4703
16879
utilized by other programs, services and
systems within the MSRB market
information programs to optimize the
effectiveness of the MSRB market
information programs and the
individual components thereof.3
Background
Since January 30, 2009 for ARS and
April 1, 2009 for VRDOs, MSRB Rule G–
34(c), on variable rate security market
information, has required dealers that
act as Program Dealers 4 for ARS or
Remarketing Agents for VRDOs to report
(either directly or through an agent)
certain information following an ARS
auction or VRDO interest rate reset to
the SHORT System.5 Information
generally is required to be reported to
the SHORT System by no later than 6:30
p.m. Eastern Time on the day that an
ARS auction or VRDO interest rate reset
occurs and all collected information is
made available to market participants
for free in real-time on the MSRB’s
Electronic Municipal Market Access
(‘‘EMMA’’) Web site.6 The specific items
of interest rate and descriptive
information about ARS and VRDOs
currently required to be reported to the
SHORT System are listed below.
The following is a list of the
information currently required to be
reported to the SHORT System by an
ARS Program Dealer following an ARS
auction:
• CUSIP number;
• Interest rate for the next reset
period;
• Identity of Program Dealer(s);
• Number of days of the reset period;
• Minimum denomination;
• Date and time of the auction;
• Date and time of posting of auction
results by an Auction Agent;
• Indication of whether the interest
rate represents a ‘‘maximum rate,’’ an
‘‘all hold rate,’’ or a rate that was ‘‘set by
auction;’’
3 For example, certain elements of the SHORT
System Facility amendment proposal would rely on
components previously placed into service
pursuant to the EMMA primary market or
continuing disclosure services for purposes of
processing submissions made to the MSRB.
4 An ARS Program Dealer is defined in Rule G–
34(c) as a dealer that submits an order directly to
an Auction Agent for its own account or on behalf
of another account to buy, hold or sell ARS through
the auction process.
5 See Securities Exchange Act Release No. 34–
59212, January 7, 2009 (File No. SR–MSRB–2008–
07).
6 The 6:30 p.m. Eastern Time deadline only
applies to those ARS auctions and VRDO interest
rate resets that occur during an ‘‘RTRS Business
Day,’’ as defined in Rule G–14(d)(ii). Information
about ARS auctions and VRDO interest rate resets
that occur outside of the hours of an ‘‘RTRS
Business Day’’ is required to be submitted to the
SHORT System by no later than 6:30 p.m. Eastern
Time on the next ‘‘RTRS Business Day.’’
E:\FR\FM\02APN1.SGM
02APN1
16880
Federal Register / Vol. 75, No. 63 / Friday, April 2, 2010 / Notices
• Minimum and maximum rates, if
any, applicable at the time of the
auction or, if not calculable as of the
time of auction, indication that such
rate or rates are not calculable; 7 and
• Par amount auctioned, not
including hold orders effective at any
rate.
The following is a list of the
information currently required to be
reported to the SHORT System by a
VRDO Remarketing Agent following a
VRDO interest rate reset:
• CUSIP number;
• Interest rate for the next reset
period;
• Identity of Remarketing Agent;
• Date of interest rate reset;
• Length of the interest rate reset
period;
• Length of Notification Period;
• Indication of whether interest rate
is ‘‘set by formula,’’ ‘‘set by Remarketing
Agent’’ or a ‘‘maximum rate;’’
• Minimum and maximum rates, if
any, applicable at the time of the
interest rate reset or, if not calculable as
of the time of the interest rate reset,
indication that such rate or rates are not
calculable; 8
• Minimum denomination;
• Type of liquidity facility(ies); 9 and
• Expiration date of each liquidity
facility.
mstockstill on DSKH9S0YB1PROD with NOTICES
Description of the Rule Change Proposal
The proposed rule change would
enhance the interest rate and descriptive
information currently made available to
market participants about ARS and
VRDOs. The proposed rule change
would require dealers to report to the
MSRB documents that set forth auction
procedures and interest rate setting
mechanisms for ARS and liquidity
facilities for VRDOs, as well as ARS
bidding information and additional
VRDO information. All collected
documents and information would be
made available in real-time on EMMA.10
The documents and information about
7 Some ARS and VRDOs have minimum and
maximum rates that are set pursuant to formulas
that are unable to be calculated at the time a
submission to the SHORT System is required. In
these cases, a value of ‘‘NC’’ is required to be
included in a submission to the SHORT System to
show that the minimum and maximum rates are
‘‘not calculable.’’ This exception does not apply to
minimum and maximum rates that are linked to an
index or bank lending rate, such as LIBOR. Such
rates are required to be computed and the resulting
values included on a submission to the SHORT
System.
8 Id.
9 Dealers are required to submit to the SHORT
System whether each applicable liquidity facility is
a letter of credit or standby bond purchase
agreement.
10 In the future, the MSRB also plans to make all
information collected under the rule change
proposal available on a subscription basis.
VerDate Nov<24>2008
16:40 Apr 01, 2010
Jkt 220001
ARS and VRDOs that would be required
to be provided to the MSRB under the
proposed rule change are described
below.
ARS Bidding Information
The proposed rule change would
require each ARS Program Dealer to
report to the SHORT System an
electronic document containing ‘‘ARS
bidding information,’’ which would
include information about all orders
placed by an ARS Program Dealer with
an ARS Auction Agent for inclusion in
an auction. This information would
augment the interest rate and
descriptive information currently
provided to market participants by also
providing information that would show,
for example, how the interest rate was
determined for a successful auction. The
specific items of ARS bidding
information an ARS Program Dealer
would be required to report to the
SHORT System are listed below. All
items would be required to be reported
within the same timeframe as the ARS
interest rate and descriptive information
currently required to be reported under
Rule G–34(c). The ARS bidding
information document would be
required to be submitted to the SHORT
System as a word-searchable portable
document format (‘‘PDF’’) file.
• Interest rate(s) and aggregate par
amount(s) of orders to sell at a specific
interest rate and aggregate par amount of
such orders that were executed;
• Aggregate par amount of orders to
sell at any interest rate and aggregate par
amount of such orders that were
executed;
• Interest rate(s) and aggregate par
amount(s) of orders to hold at a specific
interest rate and aggregate par amount of
such orders that were successfully held;
• Interest rate(s) and aggregate par
amount(s) of orders to buy and aggregate
par amount of such orders that were
executed;
• Interest rate(s), aggregate par
amount(s), and type of order—either
buy, sell or hold—by a Program Dealer
for its own account and aggregate par
amounts of such orders, by type, that
were executed; and
• Interest rate(s), aggregate par
amount(s), and type of order—either
buy, sell or hold—by an issuer or
conduit borrower for such Auction Rate
Security and aggregate par amounts of
such orders, by type, that were
executed.
Additional VRDO Information
The proposed rule change would
require VRDO Remarketing Agents to
submit additional items of VRDO
information to the SHORT System in
PO 00000
Frm 00162
Fmt 4703
Sfmt 4703
conjunction with the VRDO interest rate
and descriptive information currently
required to be reported under Rule
G–34(c). This information would
provide additional details concerning
the interest rate set for a VRDO, such as
the effective date of the interest rate,
and would facilitate the tendering of a
position in a VRDO by investors by
requiring VRDO Remarketing Agents to
report the identity of the agent of the
issuer of the VRDOs to which a holder
may tender their security (‘‘Tender
Agent’’).
The additional VRDO information
would also provide transparency related
to the current holders of the VRDO.
Information about current holders of a
VRDO would indicate, for example, that
interest rate set represents an interest
rate paid to holders of the VRDO instead
of instances when the VRDO is held
entirely by a liquidity provider (as a
‘‘Bank Bond’’) and that the interest rate
set is therefore not set by market
demand. A complete list of the specific
items of additional VRDO information a
VRDO Remarketing Agent would be
required to report to the SHORT System
under the proposed rule change are
listed below.
• Effective date that the interest rate
reset is applicable;
• Identity of the Tender Agent;
• Identity of the liquidity provider(s)
including a indication of those VRDOs
for which an issuer provides ‘‘self
liquidity’’ and the identity of the party
providing such self-liquidity; 11
• Information available to the VRDO
Remarketing Agent as of the time of the
interest rate reset of the par amount of
the VRDO, if any, held as a Bank Bond;
and
• Information available to the VRDO
Remarketing Agent as of the time of the
interest rate reset of the aggregate par
amount of the VRDO, if any, held by
parties other than a liquidity provider,
which includes the par amounts held by
a VRDO Remarketing Agent and by
investors.
ARS and VRDO Documents
The proposed rule change would
require ARS Program Dealers and VRDO
Remarketing Agents to submit certain
documents to the SHORT System to
11 Some VRDOs have liquidity provisions under
which the liquidity is provided by the issuer,
conduit borrower or affiliate instead of by a thirdparty. Rule G–34(c) currently requires Remarketing
Agents to report the type of liquidity facility
applicable to a VRDO. Currently, SHORT System
specifications only provide two options for this data
element—letter of credit and standby bond
purchase agreement—and in conjunction with
proposed rule change the MSRB would revise the
specifications to also capture VRDOs that have ‘‘self
liquidity.’’
E:\FR\FM\02APN1.SGM
02APN1
mstockstill on DSKH9S0YB1PROD with NOTICES
Federal Register / Vol. 75, No. 63 / Friday, April 2, 2010 / Notices
ensure that market participants have
centralized access to critical documents
about ARS programs and VRDO issues.
For existing ARS programs, dealers
would be required to submit the current
versions of ARS documents defining
current auction procedures and interest
rate setting mechanisms to the SHORT
System within ninety days after the
effective date of the proposed rule
change. For existing VRDO issues,
dealers would be required to undertake
and document 12 best efforts to obtain
current versions of VRDO liquidity
facility documents, including Letters of
Credit, Stand-by Bond Purchase
Agreements and any other document
that establishes an obligation to provide
liquidity, and submit such documents to
the SHORT System within ninety days
after the effective date of the proposed
rule change. On an ongoing basis,
dealers would be required to submit any
new or amended versions of these
documents within one business day of
receipt.
The MSRB recognizes that for some
ARS programs, documents defining
current auction procedures and interest
rate setting mechanisms may already be
available in the SHORT System. This
may occur in the case of an ARS with
multiple Program Dealers in which one
Program Dealer has already submitted to
the SHORT System the required
document. In these cases, in lieu of
submitting duplicate documents,
dealers would be provided the
capability to signify that a document
required to be submitted has already
been submitted to the SHORT System
by identifying the relevant document.
Since January 1, 2010, all documents
submitted to EMMA have been required
to be word-searchable PDF files. While
this same requirement would apply to
the submission of ARS and VRDO
documents to the SHORT System,
MSRB acknowledges that some of these
documents for outstanding ARS and
VRDOs are likely to be older documents
that may not be available in electronic
format or a format that would easily
permit a dealer to produce a wordsearchable PDF file of the document.
Accordingly, the proposed rule change
would only require ARS and VRDO
documents submitted to EMMA to be
word-searchable for new or amended
versions of documents produced after
the effective date of the proposed rule
change.
12 The proposed rule change would require
dealers to keep records for a period of three years
of all best efforts undertaken to obtain documents
for existing VRDO issues. Such records of best
efforts would include, for example, all written
requests for documents to and any responses from
an issuer or liquidity provider.
VerDate Nov<24>2008
16:40 Apr 01, 2010
Jkt 220001
Description of the Short System Facility
Amendment Proposal
The SHORT System is an MSRB
Facility for the collection and public
dissemination of information about ARS
and VRDO. The amendment to this
facility would provide for the collection
and public dissemination of documents
identified in the rule change proposal.
Submissions to the SHORT System
The SHORT System receives
submissions of information and
documents about securities bearing
interest at short-term rates under MSRB
Rule G–34, on CUSIP numbers, new
issue and market information
requirements.
Information and Documents to be
Submitted. The basic items of
information and documents that would
be required to be submitted to the
SHORT System are the same as those
required to be submitted to the MSRB
under MSRB Rule G–34(c). Submitters
of documents would be required to
provide to the SHORT System related
indexing information with respect to
each document submitted, including an
indication of the document type, date
such document became available to the
dealer, and CUSIP number(s) of the
municipal securities to which such
document relates. A submitter required
to submit a document that is already
available in its entirety in the SHORT
System would be permitted to, in lieu
of submitting a duplicate document,
identify the document already
submitted and provide such items of
related indexing information as are
required by MSRB rules or the SHORT
System input specifications and system
procedures. A submitter required to
submit a document that is not able to be
obtained through best efforts as
provided in the proposed rule change
would be required to provide an
affirmative indication that a document
required to be submitted is not available
for submission notwithstanding the
submitter’s best efforts to obtain such
document. The complete list of data
elements that would be required on a
submission to the SHORT System
would be available in input
specifications and system procedures
made available on https://www.msrb.org.
Submitters would be responsible for the
accuracy and completeness of all
information submitted to the SHORT
System.
Submitters. Submissions to the
SHORT System may be made solely by
authorized submitters using passwordprotected accounts in the MSRB’s user
authentication system, MSRB Gateway.
MSRB Gateway is designed to be a
PO 00000
Frm 00163
Fmt 4703
Sfmt 4703
16881
single, secure access point for all MSRB
applications. Submitters of information
to the SHORT System are required to
obtain an account in MSRB Gateway in
order to submit information to the
SHORT System. Through MSRB
Gateway, submitters also have the
ability to designate third-party agents to
submit information to the SHORT
System on the submitter’s behalf.
Submissions may be made by the
following classes of submitters:
• ARS Program Dealer;
• VRDO Remarketing Agent;
• ARS Auction Agent; and
• Designated Agent, which may
submit any information otherwise
permitted to be submitted by another
class of submitter which has designated
such agent, as provided below.
All ARS Auction Agents are allowed
to submit information about an auction
to the SHORT System without prior
designation by an ARS Program Dealer.
Dealers optionally may designate agents
to submit information on their behalf,
and may revoke the designation of any
such agents, through MSRB Gateway.
All actions taken by a Designated Agent
on behalf of a dealer that has designated
such agent shall be the responsibility of
the dealer.
Timing of Submissions. Submitters
are required to make submissions to the
SHORT System within the timeframes
set forth in MSRB Rule G–34(c) and
related MSRB procedures. Submissions
of information to the SHORT System
may be made throughout any RTRS
Business Day, as defined in Rule G–14
RTRS Procedures, from at least the
hours of 6 a.m. to 9 p.m. Eastern Time,
subject to the right of the MSRB to make
such processes unavailable at times as
needed to ensure the integrity of the
SHORT System and any related systems.
Submissions of documents would be
able to be made throughout any day,
subject to the right of the MSRB to make
such processes unavailable between the
hours of 3 a.m. and 6 a.m. each day,
Eastern Time, for required maintenance,
upgrades or other purposes, or at other
times as needed to ensure the integrity
of MSRB systems. The MSRB provides
advance notice of any planned periods
of unavailability and shall endeavor to
provide information to submitters as to
the status of the submission interface
during unanticipated periods of
unavailability, to the extent technically
feasible.
Method of Submission. Information
and documents may be submitted to the
SHORT System through a secure,
password-protected, Web-based
electronic submitter interface or through
a secure, authenticated computer-tocomputer data connection, at the
E:\FR\FM\02APN1.SGM
02APN1
16882
Federal Register / Vol. 75, No. 63 / Friday, April 2, 2010 / Notices
election of the submitter. When making
submissions using the Web-based
interface, related information is entered
manually into an on-line form and
documents would be required to be
uploaded as portable document format
(PDF) files. Computer-to-computer
submissions utilize XML files for data
and PDF files for documents.
Appropriate schemas and procedures
for Web-based and computer-tocomputer submissions would be
available in input specifications and
system procedures made available on
https://www.msrb.org.
Designated Electronic Format for
Documents. All documents submitted to
the SHORT System would be required
to be in portable document format
(PDF), configured to permit documents
to be saved, viewed, printed and
retransmitted by electronic means. If the
submitted file is a reproduction of the
original document, the submitted file
must maintain the graphical and textual
integrity of the original document.
Documents submitted to the SHORT
System created on or after the effective
date of the proposed rule change would
be required to be word-searchable
(without regard to diagrams, images and
other non-textual elements).
mstockstill on DSKH9S0YB1PROD with NOTICES
SHORT System Processing
The SHORT System provides a single
portal for the submission of information
and documents. The SHORT System, as
well as other MSRB systems and
services, performs various data checks
to ensure that information and
documents are submitted in the correct
format. In addition, data checks are
performed to monitor dealer compliance
with MSRB Rule G–34(c) as well as to
identify information submitted in
correct formats that may contain errors
due to information not falling within
reasonable ranges of expected values for
a given item of information. All
submissions generate an
acknowledgement or error message, and
all dealers that have information or
documents submitted on their behalf by
either an ARS Auction Agent or a
Designated Agent are able to monitor
such submissions.
SHORT System Information and
Document Dissemination
Information and documents submitted
to the SHORT System that pass the
format and data checks described above
are processed and disseminated on a
real-time basis. Any changes to
submissions also are processed upon
receipt and updated information and
documents are disseminated in realtime. Information submitted to the
SHORT System is, in general,
VerDate Nov<24>2008
16:40 Apr 01, 2010
Jkt 220001
disseminated to the EMMA short-term
obligation rate transparency service
within 15 minutes of acceptance,
although during peak traffic periods
dissemination may occur within one
hour of acceptance. Submissions of
documents to the SHORT System
accepted during the hours of 8:30 a.m.
to 6 p.m. Eastern Time on an MSRB
business day would generally be
disseminated to the EMMA short-term
obligation transparency service within
15 minutes of acceptance, although
during peak traffic periods posting may
occur within one hour of acceptance.
Submissions outside of such hours often
would be posted within 15 minutes
although some submissions outside of
the MSRB’s normal business hours may
not be processed until the next business
day. SHORT System information and
documents, along with related indexing
information, would be made available to
the public through the EMMA portal for
the life of the related securities.
The MSRB plans to offer
subscriptions to the information and
documents submitted to the SHORT
System in the future.
Description of the EMMA Short-Term
Obligation Rate Transparency Service
Amendment Proposal
The EMMA short-term obligation rate
transparency service currently makes
the information collected by the SHORT
System available to the public, at no
charge, on the EMMA portal. The
amendment to this service would add
the documents identified in the rule
change proposal to this service so that
such documents would also be available
to the public, at no charge, on the
EMMA portal.
2. Statutory Basis
The MSRB has adopted the proposed
rule change pursuant to Section
15B(b)(2)(C) of the Act,13 which
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, to remove impediments to and
perfect the mechanism of a free and open
market in municipal securities, and, in
general, to protect investors and the public
interest.
The MSRB believes that the proposed
rule change is consistent with the Act.
The proposed rule change would serve
as an additional mechanism by which
the MSRB works toward removing
impediments to and helping to perfect
the mechanisms of a free and open
market in municipal securities by
providing a centralized venue for free
public access to information about and
documents relating to ARS and VRDO.
The proposed rule change would
provide greater access to information
about and documents relating to ARS
and VRDO to all participants in the
municipal securities market on an equal
basis thereby removing potential
barriers to obtaining such information.
These factors serve to promote the
statutory mandate of the MSRB to
protect investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The MSRB does not believe the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act, since it would
apply equally to dealers in municipal
securities.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
On March 17, 2008, the MSRB
requested comment on a proposed plan
for increasing the information available
for ARS (‘‘March 2008 ARS Notice’’),14
on May 23, 2008, the MSRB requested
comment on a proposed plan for
increasing the information available for
VRDOs (‘‘May 2008 VRDO Notice’’),15
and on July 14, 2009 the MSRB
requested comment on the draft
amendments to Rule G–34(c) (‘‘July 2009
Notice’’).16 These notices, the comments
received, and the MSRB’s responses are
discussed below.
March 2008 ARS Notice
The March 2008 ARS Notice proposed
a plan to create a centralized system for
the collection and dissemination of
critical market information about ARS.
The March 2008 ARS Notice proposed
the collection and dissemination of the
current interest rate and certain
descriptive information for ARS
programs, bidding information detailing
the orders placed by an ARS Program
Dealer with an ARS Auction Agent for
inclusion in an auction (‘‘ARS bidding
information’’) and documents
concerning ARS that were not required
to be filed with the MSRB under former
Rule G–36, on delivery of official
statements, advance refunding
14 See
MSRB Notice 2008–15 (March 17, 2008).
MSRB Notice 2008–24 (May 23, 2008).
16 See MSRB Notice 2009–43 (July 14, 2009).
15 See
13 15
PO 00000
U.S.C. 78o–4(b)(2)(C).
Frm 00164
Fmt 4703
Sfmt 4703
E:\FR\FM\02APN1.SGM
02APN1
Federal Register / Vol. 75, No. 63 / Friday, April 2, 2010 / Notices
documents and Forms G–36(OS) and G–
36(ARD).
May 2008 VRDO Notice
The May 2008 VRDO Notice proposed
a plan to collect and disseminate critical
market information about VRDOs using
the same system proposed in the March
2008 ARS Notice for ARS. The May
2008 VRDO Notice proposed collecting
and disseminating the current interest
rate and certain descriptive information
for VRDOs and documents concerning
VRDOs that were not required to be
filed with the MSRB under former Rule
G–36, such as the letter of credit or
standby bond purchase agreement.
July 2009 Notice
The July 2009 Notice requested
comment on draft amendments to Rule
G–34(c). The draft amendments would
require ARS Program Dealers to report
ARS bidding information and VRDO
Remarketing Agents to report additional
descriptive information about VRDOs to
the MSRB Short-term Obligation Rate
Transparency (‘‘SHORT’’) System. The
draft amendments also would require
ARS Program Dealers and VRDO
Remarketing Agents to submit ARS
documents defining current auction
procedures and interest rate setting
mechanisms and VRDO liquidity facility
documents, including current Letters of
Credit and Stand-by Bond Purchase
Agreements (collectively ‘‘short-term
obligation documents’’). For existing
ARS and VRDOs, the draft amendments
would require dealers to provide the
current versions of documents to the
MSRB within thirty days after the
effective date of the draft amendments
and on an ongoing basis dealers would
be required to provide any new or
amended versions of these documents
within one business day of receipt.
mstockstill on DSKH9S0YB1PROD with NOTICES
Discussion of Comments
The MSRB received comments on the
March 2008 ARS Notice from seven
commentators,17 on the May 2008
VRDO Notice from nine
commentators,18 and on the July 2009
17 See letters from Paula Stuart, Chief Executive
Officer, Digital Assurance Certification, LLC
(‘‘DAC’’) to Justin Pica, dated April 21, 2008; Jack
B. McPherson to Mr. Pica, dated March 27, 2008;
Mikag@cox.net to Mr. Pica, e-mail dated April 23,
2008; Michael Decker, Co-Chief Executive Officer,
and Mike Nicholas, Co-Chief Executive Officer,
Regional Bond Dealers Association (‘‘RBDA’’) to Mr.
Pica, dated April 21, 2008; Joseph S. Fichera, Senior
Managing Director and CEO, Saber Partners, LLC
(‘‘Saber Partners’’) to Mr. Pica, dated July 9, 2008;
Leslie M. Norwood, Managing Director and
Associate General Counsel, Securities Industry and
Financial Markets Association (‘‘SIFMA’’) to Mr.
Pica, dated April 21, 2008; and, Jeff Yankauer to Mr.
Pica, e-mail dated April 17, 2008.
18 See letters from Paula Stuart, Chief Executive
Officer, Digital Assurance Certification LLC (‘‘DAC’’)
VerDate Nov<24>2008
16:40 Apr 01, 2010
Jkt 220001
Notice from five commentators.19 After
reviewing the comments on the March
2008 ARS Notice and May 2008 VRDO
Notice, the MSRB approved a phased-in
approach to the collection and
dissemination of ARS and VRDO
information and documents. The first
phase of this approach included
changes to MSRB Rule G–34 to require
dealers to report ARS and VRDO
interest rate and descriptive information
to the MSRB and implementation of the
SHORT System, which became effective
on January 30, 2009 for ARS and April
1, 2009 for VRDOs.20 The principal
comments of the March 2008 ARS
Notice, May 2008 VRDO Notice and July
2009 Notice concerning the collection of
ARS bidding information, additional
VRDO descriptive information and
short-term obligation disclosure
documents are discussed below.
Additional VRDO Data
The draft amendments in the July
2009 Notice identified items of
information that a VRDO Remarketing
Agent would be required to report to the
SHORT System in conjunction with the
VRDO interest rate and descriptive
information currently required to be
reported on the day that an interest rate
reset occurs. The specific items of
information proposed included:
to Mr. Pica, dated July 1, 2008; Daniel Thieke, Vice
President, Depository Trust and Clearing
Corporation (‘‘DTCC’’) to Mr. Pica, dated June 26,
2008; Christine Walsh, Managing Director, Merrill
Lynch to Mr. Pica, dated June 26, 2008; S. Lauren
Heyne, Chief Compliance Officer, RW Smith and
Associates, Inc. (‘‘RW Smith’’) to Mr. Pica, dated
June 30, 2008; Joseph S. Fichera, Senior Managing
Director and CEO, Saber Partners to Mr. Pica, dated
July 9, 2008; Leslie M. Norwood, Managing Director
and Associate General Counsel, SIFMA to Mr. Pica,
dated June 30, 2008; Dara L. Smith, Managing
Director, SunTrust Robinson Humphrey
(‘‘SunTrust’’) to Mr. Pica, dated June 27, 2008;
Joseph A. Whitehead, Thornton Farish Inc.
(‘‘Thornton Farish’’) to Mr. Pica, dated June 30,
2008; and, Belle Walker, Senior Vice President,
W.R. Taylor and Company, LLC (‘‘W.R. Taylor’’) to
Mr. Pica, dated August 7, 2008.
19 See letters from Patricia W. Wilson, Senior
Managing Director Global Alternatives, Allstate
Investments, LLC (‘‘Allstate’’) to Mr. Pica, dated
September 1, 2009; Robert J. Stracks, Counsel, BMO
Capital Markets GKST Inc. to Mr. Pica, dated
September 1, 2009; Carl Giles, Managing Director
Capital Markets, First Southwest Company (‘‘First
Southwest’’) to Mr. Pica, dated August 31, 2009;
Michael Decker, Co-Chief Executive Officer, and
Mike Nicholas, Co-Chief Executive Officer, RBDA to
Mr. Pica, dated September 1, 2009; and Leslie M.
Norwood, Managing Director and Associate General
Counsel, SIFMA to Mr. Pica, dated September 1,
2009.
20 See Securities Exchange Act Release No. 59212,
January 7, 2009 (File No. SR–MSRB–2008–07). The
principal comments of the March ARS Notice and
May VRDO Notice concerning the collection of ARS
and VRDO interest rate and descriptive information
as well as the implementation of the SHORT
System were discussed in File No. SR–MSRB–
2008–07.
PO 00000
Frm 00165
Fmt 4703
Sfmt 4703
16883
• Effective date that the interest rate
reset is applicable;
• Identity of the Tender Agent;
• Identity of the liquidity provider;
• Par amount, if any, held by VRDO
Remarketing Agent, at time of interest
rate reset;
• Par amount, if any, held by a
liquidity facility (‘‘Bank Bond’’) at time
of interest rate reset and interest rate
paid to the liquidity provider; and
• Par amount, if any, held by a party
other than the Remarketing Agent or as
a Bank Bond.
In response to July 2009 Notice, First
Southwest and SIFMA stated concerns
relating to the draft amendment’s
requirement to report the additional
VRDO information to the SHORT
System, which are primarily focused on
whether a VRDO Remarketing Agent
would be able to obtain and report
accurate information for several of the
additional items of VRDO information.
For example, with respect to reporting
the identity of the Tender Agent and
liquidity provider, First Southwest
stated that it would be ‘‘difficult and
burdensome to be required to be
continually updating [this] information,
which can and does change frequently,
between two parties where [the VRDO
Remarketing Agent] has no legal
standing and should be the
responsibility of the bank or tender
agent that is party to those transactions.’’
However, RBDA generally supported the
additional items of VRDO information
and stated that ‘‘the information
proposed to be disclosed for VRDOs is
material to evaluating VRDO
investments’’ but acknowledged that
‘‘Remarketing Agents may not have
ready access to all of the information
* * * proposed to be submitted * * *
[and] would support other reasonable
initiatives to achieve the ends outlined
in the [July 2009 Notice] * * *.’’
The MSRB believes that information
concerning the identity of the Tender
Agent and liquidity provider is material
to market participants and, in particular,
investors of VRDOs. With respect to
Tender Agents, the July 2009 Notice
also solicited comment on whether a
VRDO Remarketing Agent could also
provide the contact information for the
Tender Agent and the MSRB believes
some of the concerns stated by SIFMA
about providing the identity of the
Tender Agent were focused on
challenges in obtaining and keeping
current contact information for the
Tender Agent. MSRB acknowledges that
it may be difficult to obtain and keep
current contact information for a Tender
Agent, particularly for smaller Tender
Agents that use the name and contact
information for an individual instead of
E:\FR\FM\02APN1.SGM
02APN1
16884
Federal Register / Vol. 75, No. 63 / Friday, April 2, 2010 / Notices
mstockstill on DSKH9S0YB1PROD with NOTICES
a division within a company for
submitting tender requests, but the
MSRB believes that a basic requirement
to provide the identity of the Tender
Agent is reasonable and that it is
important that investors be able to have
access to the identity of the Tender
Agent to facilitate an investor tendering
its position in VRDOs.
In response to the July 2009 Notice
proposal to require reporting of the par
amounts of a VRDO held as a Bank
Bond, by the VRDO Remarketing Agent
and by investors at the time of the
interest rate reset, SIFMA stated that
making such information transparent
‘‘would be detrimental to the municipal
securities market by giving competitors
a trading advantage against one
another.’’ MSRB is sensitive to SIFMA’s
concerns related to reporting and
making transparent the individual par
amounts of the VRDO held as a Bank
Bond,21 by the VRDO Remarketing
Agent and by investors. One of the
purposes of requiring this information
to be reported is to provide market
participants with an indication that the
interest rate set by the VRDO
Remarketing Agent represents an
interest rate paid to holders of the
VRDO instead of instances when the
VRDO is held entirely as a Bank Bond
and that the interest rate set is therefore
not set by market demand.22 As an
alternative to the requirement in the
July 2009 Notice, the proposed rule
change includes a requirement for a
VRDO Remarketing Agent to report the
‘‘par amount remarketed,’’ which would
be the aggregate of VRDOs held by the
VRDO Remarketing Agent and investors,
but not Bank Bonds, and separately
report the par amount held as Bank
Bonds. This should provide a sufficient
indication that the interest rate set
reflects a market interest rate paid to
holders of the VRDO while preventing
individual par amounts held by VRDO
Remarketing Agents from being
disclosed to the public.
21 The July 2009 Notice also proposed collecting
the interest rate paid to a liquidity provider for
VRDOs held as a Bank Bond. SIFMA noted that
many VRDO Remarketing Agents are not made
aware of the interest rate paid on Bank Bonds. The
MSRB acknowledges that this requirement may
present significant compliance challenges for
dealers and has accordingly decided not to proceed
with it at this time.
22 This information also is intended to provide a
centralized source of information about holdings of
VRDOs. SIFMA notes that information collected by
the SEC in its Financial and Operational Combined
Uniform Single (‘‘FOCUS’’) Reports, while not an
identical requirement, provides such a centralized
source of information about the holdings of VRDOs
by Remarketing Agents.
VerDate Nov<24>2008
16:40 Apr 01, 2010
Jkt 220001
ARS Bidding Information
The July 2009 Notice identified ARS
Bidding Information that an ARS
Program Dealer would be required to
submit to the SHORT System as
individual data elements in connection
with a report of the ARS interest rate
and descriptive information currently
required to be reported following an
auction. In response to the July 2009
Notice, First Southwest and SIFMA both
noted that reporting ARS Bidding
Information to the SHORT System as
individual data elements would be
costly and time consuming, particularly,
as SIFMA noted, ‘‘for a product that is
winding down.’’ SIFMA further noted
that ‘‘there have not been any new ARS
issues in over a year and a half, and
none are expected.’’ Instead of
submitting information as individual
data elements, SIFMA suggested that
‘‘the disclosure of this information to
[the MSRB] by way of document,
instead of breaking out each data
element, would help minimize the
burden.’’
The MSRB acknowledges that
reporting ARS Bidding Information to
the SHORT System as individual data
elements would result in ARS Program
Dealers incurring programming
expenses as well as increasing the
ongoing cost of compliance with
reporting information to the SHORT
System. Further, current interest rate
information from the SHORT System
indicates that approximately 80% of all
ARS continue to experience failed
auctions,23 so one of the purposes of
having ARS Bidding Information as
individual data elements, to compute a
‘‘bid-to-cover ratio’’ 24 that would show
the demand for the ARS, may not at this
time justify the expense incurred by
ARS Program Dealers to report such
information as individual data elements
to the SHORT System. Nonetheless, the
MSRB believes that having a centralized
source of ARS Bidding Information,
even if such information is only
available as a document, would be of
benefit to market participants as it
would further the MSRB’s investor
protection mission. This documentbased approach would provide for
23 In light of the high number of failed auctions,
Allstate suggests requiring ARS Program Dealers to
provide the formula used to compute the maximum
rate, including the ‘‘net loan rate.’’ MSRB does not
believe that this information is readily available to
ARS Program Dealers but notes that a separate
requirement for certain ARS documents to be
submitted to the MSRB and made available publicly
should aide in determining how maximum rates are
set.
24 In response to the April 2008 ARS Notice,
Saber Partners identified this statistic as one that
‘‘can give great insight into the liquidity of an
auction.’’
PO 00000
Frm 00166
Fmt 4703
Sfmt 4703
indexing of each such submission to the
appropriate security so that the
information would be easy to find, even
if the information contained within
such documents could not easily be
exported to a data file or otherwise
manipulated.
In response to specific items of ARS
Bidding information identified in the
July 2009 Notice, SIFMA noted that
when an ARS Program Dealer receives
orders to buy from other dealers for
submission to an ARS auction, such
orders may be aggregated by the other
dealer making it impossible for the ARS
Program Dealer to provide accurate
information on the number of unique
bidders other than the Program Dealer
bidding for its own account. MSRB
acknowledges that orders submitted to
an ARS Program Dealer may be
aggregated by the submitting party and
believes that disclosing such aggregated
orders may be misleading to market
participants. Thus, the MSRB has not
included this requirement in the
proposed rule change. SIFMA also
noted that separately requiring an ARS
Program Dealer to report bidding
information for orders submitted by an
issuer or conduit borrower would be
unnecessary since issuers and ARS
Program Dealers have made such
information available on public Web
sites. The MSRB notes that while the
EMMA Continuing Disclosure Service
provides a document category for
issuers to voluntarily disclose an intent
to bid on its ARS, this does not provide
for a centralized source of all orders
submitted by an issuer or conduit
borrower, which would be provided by
the proposed rule change.25
Short-term Obligation Documents
The draft amendments in the July
2009 Notice proposed requiring ARS
Program Dealers and VRDO
Remarketing Agents to submit to the
MSRB current and any new or amended
versions of the following documents:
• ARS documents defining auction
procedures and interest rate setting
mechanisms;
• VRDO documents consisting of
liquidity facilities, including Letter of
Credit Agreements and Stand-by Bond
Purchase Agreements.
In response to the July 2009 Notice
First Southwest and SIFMA both stated
25 MSRB notes that issuers or conduit borrowers
may instruct a third party, such as an investment
adviser, to submit orders to an ARS Program Dealer
on their behalf. In these cases, MSRB acknowledges
that the ARS Program Dealer would not know that
such orders are on behalf of issuers or conduit
borrowers and would not be able to include this fact
when making submissions of ARS Bidding
Information to the SHORT System.
E:\FR\FM\02APN1.SGM
02APN1
Federal Register / Vol. 75, No. 63 / Friday, April 2, 2010 / Notices
mstockstill on DSKH9S0YB1PROD with NOTICES
concerns with the requirement to
submit ARS and VRDO documents for
outstanding issues to the MSRB. First
Southwest noted that to obtain some of
these documents, dealers ‘‘would need
to go back to the creators of those
documents to comply with the rule’’ but
nevertheless noted that ‘‘in general, the
requested documents are available.’’ 26
SIFMA also stated a concern that some
documents for outstanding VRDOs may
contain information that was not
intended to be made public. In response
to the May 2008 VRDO Notice DAC also
noted that dealers ‘‘may not always be
a party to or have control over all of the
documents.’’ MSRB recognizes that
dealers’ ability to comply with the
requirement proposed in the July 2009
Notice for VRDOs would, in some cases,
be subject to the ability of the dealer to
obtain a document from a third party.
Therefore, MSRB has incorporated into
the proposed rule change a ‘‘best efforts’’
provision coupled with a recordkeeping
requirement that would require dealers
to make and document all efforts to
obtain a VRDO document for which the
dealer does not already have access.
First Southwest and SIFMA also
stated concerns with the timeframes
proposed for submitting ARS and VRDO
documents to the MSRB due to the high
number of ARS and VRDO issues,
which SIFMA states is approximately
16,500 VRDOs and 1,750 ARS, and the
fact that dealers may not have such
documents in a format that would allow
for easy electronic submission of the
document to the MSRB. Given the high
numbers of these securities, First
Southwest and SIFMA both stated that
180 days, instead of the 30 days
proposed in the July 2009 Notice, would
be a more appropriate amount of time to
submit the documents to the MSRB.
MSRB recognizes that there are a large
number of documents that would need
to be obtained, converted into an
electronic format and submitted to the
MSRB. However, MSRB believes that it
is important for investors and other
market participants to have centralized
access to these documents.
Acknowledging the large number of
documents and the fact that, for
26 Both First Southwest and SIFMA also noted
that Official Statements typically contain
summaries of the information contained in the
documents identified in the draft amendments and
note that if an investor wanted to obtain the actual
document, they could request the documents
identified in the draft amendments from either the
issuer or a dealer. In particular, SIFMA noted in
response to the April 2008 ARS Notice that ARS
Official Statements generally already contain much
of the information. MSRB notes that the proposed
rule change would permit dealers to reference
documents already submitted in lieu of submitting
duplicate documents.
VerDate Nov<24>2008
16:40 Apr 01, 2010
Jkt 220001
outstanding issues, dealers may need
time to request documents from third
parties, MSRB has provided 90 days
from the date of effectiveness of a rule
in the proposed rule change for dealers
to submit outstanding ARS and VRDO
documents to the MSRB. However,
MSRB notes that dealers should not
wait until a rule is in effect to begin the
process of requesting documents and
converting them into the appropriate
electronic format.27
In response to the July 2009 Notice
proposal that any new or amended
versions of documents be submitted to
the MSRB within one day of receipt,
SIFMA suggested that dealers be
required to submit a document within 5days of receipt so that the deadline
would be consistent with the deadline
for submitting advance refunding
documents to the MSRB. MSRB believes
that it is important that market
participants have access to documents
that are current and therefore has
retained in the proposed rule change the
timeframe for an ARS Program Dealer or
VRDO Remarketing Agent to provide
such new or amended versions of
documents to the MSRB no later than
one business day after receipt by the
dealer.28
Public Availability of Collected
Information and Documents
In response to the April 2008 ARS
Notice, Mr. Yankauer recommended
that the MSRB make information
collected about ARS available ‘‘to the
general public without any fee to view
the information.’’ MSRB agrees with Mr.
Yankauer’s recommendation and notes
that the interest rate and descriptive
information currently collected by the
SHORT System is available at no charge
on the EMMA Web site. MSRB also
notes that it plans to make all
information and documents collected
under the proposed rule change
available at no charge on the EMMA
Web site.
27 As previously described, the MSRB has
requested flexibility with respect to the setting of
effective dates for the proposed rule change. The
MSRB notes that it would be prudent for dealers to
use the time between the approval date of the
proposed rule change and the effective date to begin
collecting such required documents and converting
them into electronic format.
28 RBDA also suggested that MSRB look into
utilizing optical character recognition technology to
facilitate performing word searches on EMMA of
documents that are scanned and not ‘‘native’’ PDFs.
MSRB notes that all documents submitted to
EMMA since January 1, 2010 are required to be
word-searchable and that the proposed rule change
would require documents created after the effective
date of the proposed rule change to also be wordsearchable.
PO 00000
Frm 00167
Fmt 4703
Sfmt 4703
16885
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date 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 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
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–MSRB–2010–02 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–MSRB–2010–02. This file
number should be included on the
subject line if e-mail 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
E:\FR\FM\02APN1.SGM
02APN1
16886
Federal Register / Vol. 75, No. 63 / Friday, April 2, 2010 / Notices
business days between the hours of 10
a.m. and 3 p.m. Copies of such 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–2010–02 and should
be submitted on or before April 23,
2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–7463 Filed 4–1–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61798; File No. SR–NSCC–
2010–04]
Self-Regulatory Organizations; The
National Securities Clearing
Corporation; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Set the Effective Date
for the Elimination of the Guaranty of
Payment With Respect to Its Envelope
Settlement Service
March 29, 2010.
mstockstill on DSKH9S0YB1PROD with NOTICES
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
March 8, 2010, the National Securities
Clearing Corporation (‘‘NSCC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change described in Items
I, II, and III below, which items have
been prepared primarily by NSCC.
NSCC filed the proposal pursuant to
section 19(b)(3)(A)(i) of the Act 2 and
Rule 19b–4(f)(1) 3 thereunder so that the
proposal was effective upon filing with
the Commission. The Commission is
publishing this notice to solicit
comments on the rule change from
interested parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The proposed rule change will set the
effective date for the elimination of a
guarantee of payment (and associated
rule changes) with respect to NSCC’s
29 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78s(b)(3)(A)(i).
3 17 CFR 240.19b–4(f)(1).
1 15
VerDate Nov<24>2008
16:40 Apr 01, 2010
Jkt 220001
Envelope Settlement Service (‘‘ESS’’) as
of April 1, 2010.
adjust their processes and systems as
necessary to accommodate the changes.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
NSCC does not believe that the
proposed rule change will have any
impact or impose any burden on
competition.
In its filing with the Commission,
NSCC 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. NSCC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.4
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
On March 1, 2010, the Commission
approved rule filing SR–NSCC–2010–01
(‘‘Approved Filing’’) relating to NSCC’s
elimination of the guarantee of payment
in connection with ESS.5 Specifically,
the approval will give effect to specified
changes to Rule 9, Addendum D,
Addendum K, and Procedure XV of
NSCC’s rules and procedures as set forth
in Exhibit 5 of the Approved Filing, to:
(1) Eliminate NSCC’s guaranty of the
payment to the receiving NSCC member
in an ESS delivery, (2) provide that the
credits and debits of the payment
amount of an envelope may be reversed,
and (3) eliminate clearing fund deposits
allocated to ESS. In order to afford
members a transitional period to
prepare for these changes, NSCC is
proposing to implement the changes on
April 1, 2010.
The proposed rule change is
consistent with Section 17A of the Act,6
as amended, and the rules and
regulations thereunder applicable to
NSCC. The proposed rule change will
protect NSCC’s net settlement process
while continuing to provide a central
delivery point for physical deliveries of
envelopes with constrained payment
processing. The changes will reduce
NSCC’s exposure to potential losses
from member defaults, insolvencies,
mistakes, and fraud and will
appropriately shift the risk outside
NSCC to the contracting members in an
ESS transaction. The interim period for
implementation will permit members to
4 The Commission has modified the text of the
summaries prepared by NSCC.
5 See Securities Exchange Act Release No. 61618
(March 1, 2010), 75 FR 10542 (March 8, 2010) (SR–
NSCC–2010–01).
6 15 U.S.C. 78q–1.
PO 00000
Frm 00168
Fmt 4703
Sfmt 4703
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments relating to the
proposed rule change were not and are
not intended to be solicited or received.
NSCC will notify the Commission of any
written comments received by NSCC.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change
has become effective upon filing
pursuant to Section 19(b)(3)(A)(i) of the
Act 7 and Rule 19b–4(f)(1) 8 thereunder
because the proposed rule change
constitutes a stated policy, practice, or
interpretation with respect to the
meaning, administration or enforcement
of an existing rule. At any time within
sixty days of the filing of the proposed
rule change, the Commission may
summarily abrogate such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NSCC–2010–04 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NSCC–2010–04. This file
7 15
8 17
E:\FR\FM\02APN1.SGM
U.S.C. 78s(b)(3)(A)(i).
CFR 240.19b–4(f)(1).
02APN1
]]>Agencies
[Federal Register Volume 75, Number 63 (Friday, April 2, 2010)]
[Notices]
[Pages 16878-16886]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-7463]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61793; File No. SR-MSRB-2010-02]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of Proposed Rule Change to MSRB Rule G-34,
CUSIP Numbers and New Issue Requirements, To Enhance the Interest Rate
and Descriptive Information Currently Collected and Made Transparent by
the MSRB on Municipal Auction Rate Securities and Variable Rate Demand
Obligations
March 26, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 10, 2010, the Municipal Securities Rulemaking Board (``MSRB'')
filed with the Securities and Exchange Commission (``Commission'' or
``SEC'') 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)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The MSRB is filing with the Commission a proposed rule change to
enhance the interest rate and descriptive information currently
collected and made transparent by the MSRB on
[[Page 16879]]
municipal Auction Rate Securities (``ARS'') and Variable Rate Demand
Obligations (``VRDOs''). The proposed rule change would: (i) Amend
Rules G-8, books and records, and G-34(c), variable rate security
market information, to require brokers, dealers and municipal
securities dealers (collectively ``dealers'') to submit to the MSRB (a)
documents that define auction procedures and interest rate setting
mechanisms for ARS and liquidity facilities for VRDOs (``short-term
obligation document disclosure rule change''); (b) ARS bidding
information (``ARS bidding information rule change''); and (c)
additional VRDO information (``VRDO information rule change'')
(collectively, the ``rule change proposal''); (ii) amend the MSRB
Short-term Obligation Rate Transparency (``SHORT'') System Facility to
collect and disseminate information identified in the ARS bidding
information rule change and the VRDO information rule change and
documents identified in the short-term obligation document disclosure
rule change (the ``SHORT System Facility amendment proposal''); and
(iii) amend the MSRB EMMA Short-term Obligation Rate Transparency
Service to make the documents collected in the SHORT System Facility
amendment proposal available on the MSRB's Electronic Municipal Market
Access (EMMA) Web site (the ``EMMA Short-term Obligation Rate
Transparency Service amendment'').
The MSRB has requested that the proposed rule change, which may be
implemented in phases, be made effective on such date or dates as would
be announced by the MSRB in notices published on the MSRB Web site,
which dates would be no later than nine months after Commission
approval of the proposed rule change and would be announced no later
than sixty (60) days prior to the effective dates.
The text of the proposed rule change is available on the MSRB's Web
site (https://www.msrb.org), at the MSRB's principal office, and at the
Commission's Public Reference Room. If approved, the rule text for the
Short-term Obligation Rate Transparency System, as well as for the EMMA
Short-Term Obligation Rate Transparency Service, would be available on
the MSRB Web site at https://www.msrb.org/msrb1/rulesandforms under the
heading Information Facilities.
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. 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 proposed rule change would enhance the interest rate and
descriptive information currently collected and made transparent by the
MSRB on municipal Auction Rate Securities (``ARS'') and Variable Rate
Demand Obligations (``VRDOs''). The proposed rule change would: (i)
Amend MSRB Rules G-8, books and records, and G-34(c), variable rate
security market information, to require brokers, dealers and municipal
securities dealers (collectively ``dealers'') to submit to the MSRB (a)
documents that define auction procedures and interest rate setting
mechanisms for ARS and liquidity facilities for VRDOs; (b) ARS bidding
information; and (c) additional VRDO information (collectively ``rule
change proposal''); (ii) amend the MSRB Short-term Obligation Rate
Transparency (``SHORT'') System Facility to collect and disseminate the
documents identified in the rule change proposal (``SHORT System
Facility amendment proposal''); and (iii) amend the MSRB EMMA Short-
term Obligation Rate Transparency Service to make the documents
collected in the SHORT System Facility amendment proposal available on
the MSRB's Electronic Municipal Market Access (EMMA) Web site (the
``EMMA Short-term Obligation Rate Transparency Service amendment'').
SHORT and EMMA are components of an integrated suite of programs,
services and systems (``MSRB market information programs'') for the
collection of municipal securities market data and documents from
dealers and other market participants and the dissemination of such
data and documents to the public. The MSRB market information programs
leverage the components of the various individual programs, services
and systems to enhance the overall efficiency and effectiveness of the
MSRB market information programs. In particular, processes, software,
hardware or other components initially placed into service for a
particular program, service or system may be utilized by other
programs, services and systems within the MSRB market information
programs to optimize the effectiveness of the MSRB market information
programs and the individual components thereof.\3\
---------------------------------------------------------------------------
\3\ For example, certain elements of the SHORT System Facility
amendment proposal would rely on components previously placed into
service pursuant to the EMMA primary market or continuing disclosure
services for purposes of processing submissions made to the MSRB.
---------------------------------------------------------------------------
Background
Since January 30, 2009 for ARS and April 1, 2009 for VRDOs, MSRB
Rule G-34(c), on variable rate security market information, has
required dealers that act as Program Dealers \4\ for ARS or Remarketing
Agents for VRDOs to report (either directly or through an agent)
certain information following an ARS auction or VRDO interest rate
reset to the SHORT System.\5\ Information generally is required to be
reported to the SHORT System by no later than 6:30 p.m. Eastern Time on
the day that an ARS auction or VRDO interest rate reset occurs and all
collected information is made available to market participants for free
in real-time on the MSRB's Electronic Municipal Market Access
(``EMMA'') Web site.\6\ The specific items of interest rate and
descriptive information about ARS and VRDOs currently required to be
reported to the SHORT System are listed below.
---------------------------------------------------------------------------
\4\ An ARS Program Dealer is defined in Rule G-34(c) as a dealer
that submits an order directly to an Auction Agent for its own
account or on behalf of another account to buy, hold or sell ARS
through the auction process.
\5\ See Securities Exchange Act Release No. 34-59212, January 7,
2009 (File No. SR-MSRB-2008-07).
\6\ The 6:30 p.m. Eastern Time deadline only applies to those
ARS auctions and VRDO interest rate resets that occur during an
``RTRS Business Day,'' as defined in Rule G-14(d)(ii). Information
about ARS auctions and VRDO interest rate resets that occur outside
of the hours of an ``RTRS Business Day'' is required to be submitted
to the SHORT System by no later than 6:30 p.m. Eastern Time on the
next ``RTRS Business Day.''
---------------------------------------------------------------------------
The following is a list of the information currently required to be
reported to the SHORT System by an ARS Program Dealer following an ARS
auction:
CUSIP number;
Interest rate for the next reset period;
Identity of Program Dealer(s);
Number of days of the reset period;
Minimum denomination;
Date and time of the auction;
Date and time of posting of auction results by an Auction
Agent;
Indication of whether the interest rate represents a
``maximum rate,'' an ``all hold rate,'' or a rate that was ``set by
auction;''
[[Page 16880]]
Minimum and maximum rates, if any, applicable at the time
of the auction or, if not calculable as of the time of auction,
indication that such rate or rates are not calculable; \7\ and
---------------------------------------------------------------------------
\7\ Some ARS and VRDOs have minimum and maximum rates that are
set pursuant to formulas that are unable to be calculated at the
time a submission to the SHORT System is required. In these cases, a
value of ``NC'' is required to be included in a submission to the
SHORT System to show that the minimum and maximum rates are ``not
calculable.'' This exception does not apply to minimum and maximum
rates that are linked to an index or bank lending rate, such as
LIBOR. Such rates are required to be computed and the resulting
values included on a submission to the SHORT System.
---------------------------------------------------------------------------
Par amount auctioned, not including hold orders effective
at any rate.
The following is a list of the information currently required to be
reported to the SHORT System by a VRDO Remarketing Agent following a
VRDO interest rate reset:
CUSIP number;
Interest rate for the next reset period;
Identity of Remarketing Agent;
Date of interest rate reset;
Length of the interest rate reset period;
Length of Notification Period;
Indication of whether interest rate is ``set by formula,''
``set by Remarketing Agent'' or a ``maximum rate;''
Minimum and maximum rates, if any, applicable at the time
of the interest rate reset or, if not calculable as of the time of the
interest rate reset, indication that such rate or rates are not
calculable; \8\
---------------------------------------------------------------------------
\8\ Id.
---------------------------------------------------------------------------
Minimum denomination;
Type of liquidity facility(ies); \9\ and
---------------------------------------------------------------------------
\9\ Dealers are required to submit to the SHORT System whether
each applicable liquidity facility is a letter of credit or standby
bond purchase agreement.
---------------------------------------------------------------------------
Expiration date of each liquidity facility.
Description of the Rule Change Proposal
The proposed rule change would enhance the interest rate and
descriptive information currently made available to market participants
about ARS and VRDOs. The proposed rule change would require dealers to
report to the MSRB documents that set forth auction procedures and
interest rate setting mechanisms for ARS and liquidity facilities for
VRDOs, as well as ARS bidding information and additional VRDO
information. All collected documents and information would be made
available in real-time on EMMA.\10\ The documents and information about
ARS and VRDOs that would be required to be provided to the MSRB under
the proposed rule change are described below.
---------------------------------------------------------------------------
\10\ In the future, the MSRB also plans to make all information
collected under the rule change proposal available on a subscription
basis.
---------------------------------------------------------------------------
ARS Bidding Information
The proposed rule change would require each ARS Program Dealer to
report to the SHORT System an electronic document containing ``ARS
bidding information,'' which would include information about all orders
placed by an ARS Program Dealer with an ARS Auction Agent for inclusion
in an auction. This information would augment the interest rate and
descriptive information currently provided to market participants by
also providing information that would show, for example, how the
interest rate was determined for a successful auction. The specific
items of ARS bidding information an ARS Program Dealer would be
required to report to the SHORT System are listed below. All items
would be required to be reported within the same timeframe as the ARS
interest rate and descriptive information currently required to be
reported under Rule G-34(c). The ARS bidding information document would
be required to be submitted to the SHORT System as a word-searchable
portable document format (``PDF'') file.
Interest rate(s) and aggregate par amount(s) of orders to
sell at a specific interest rate and aggregate par amount of such
orders that were executed;
Aggregate par amount of orders to sell at any interest
rate and aggregate par amount of such orders that were executed;
Interest rate(s) and aggregate par amount(s) of orders to
hold at a specific interest rate and aggregate par amount of such
orders that were successfully held;
Interest rate(s) and aggregate par amount(s) of orders to
buy and aggregate par amount of such orders that were executed;
Interest rate(s), aggregate par amount(s), and type of
order--either buy, sell or hold--by a Program Dealer for its own
account and aggregate par amounts of such orders, by type, that were
executed; and
Interest rate(s), aggregate par amount(s), and type of
order--either buy, sell or hold--by an issuer or conduit borrower for
such Auction Rate Security and aggregate par amounts of such orders, by
type, that were executed.
Additional VRDO Information
The proposed rule change would require VRDO Remarketing Agents to
submit additional items of VRDO information to the SHORT System in
conjunction with the VRDO interest rate and descriptive information
currently required to be reported under Rule G-34(c). This information
would provide additional details concerning the interest rate set for a
VRDO, such as the effective date of the interest rate, and would
facilitate the tendering of a position in a VRDO by investors by
requiring VRDO Remarketing Agents to report the identity of the agent
of the issuer of the VRDOs to which a holder may tender their security
(``Tender Agent'').
The additional VRDO information would also provide transparency
related to the current holders of the VRDO. Information about current
holders of a VRDO would indicate, for example, that interest rate set
represents an interest rate paid to holders of the VRDO instead of
instances when the VRDO is held entirely by a liquidity provider (as a
``Bank Bond'') and that the interest rate set is therefore not set by
market demand. A complete list of the specific items of additional VRDO
information a VRDO Remarketing Agent would be required to report to the
SHORT System under the proposed rule change are listed below.
Effective date that the interest rate reset is applicable;
Identity of the Tender Agent;
Identity of the liquidity provider(s) including a
indication of those VRDOs for which an issuer provides ``self
liquidity'' and the identity of the party providing such self-
liquidity; \11\
---------------------------------------------------------------------------
\11\ Some VRDOs have liquidity provisions under which the
liquidity is provided by the issuer, conduit borrower or affiliate
instead of by a third-party. Rule G-34(c) currently requires
Remarketing Agents to report the type of liquidity facility
applicable to a VRDO. Currently, SHORT System specifications only
provide two options for this data element--letter of credit and
standby bond purchase agreement--and in conjunction with proposed
rule change the MSRB would revise the specifications to also capture
VRDOs that have ``self liquidity.''
---------------------------------------------------------------------------
Information available to the VRDO Remarketing Agent as of
the time of the interest rate reset of the par amount of the VRDO, if
any, held as a Bank Bond; and
Information available to the VRDO Remarketing Agent as of
the time of the interest rate reset of the aggregate par amount of the
VRDO, if any, held by parties other than a liquidity provider, which
includes the par amounts held by a VRDO Remarketing Agent and by
investors.
ARS and VRDO Documents
The proposed rule change would require ARS Program Dealers and VRDO
Remarketing Agents to submit certain documents to the SHORT System to
[[Page 16881]]
ensure that market participants have centralized access to critical
documents about ARS programs and VRDO issues. For existing ARS
programs, dealers would be required to submit the current versions of
ARS documents defining current auction procedures and interest rate
setting mechanisms to the SHORT System within ninety days after the
effective date of the proposed rule change. For existing VRDO issues,
dealers would be required to undertake and document \12\ best efforts
to obtain current versions of VRDO liquidity facility documents,
including Letters of Credit, Stand-by Bond Purchase Agreements and any
other document that establishes an obligation to provide liquidity, and
submit such documents to the SHORT System within ninety days after the
effective date of the proposed rule change. On an ongoing basis,
dealers would be required to submit any new or amended versions of
these documents within one business day of receipt.
---------------------------------------------------------------------------
\12\ The proposed rule change would require dealers to keep
records for a period of three years of all best efforts undertaken
to obtain documents for existing VRDO issues. Such records of best
efforts would include, for example, all written requests for
documents to and any responses from an issuer or liquidity provider.
---------------------------------------------------------------------------
The MSRB recognizes that for some ARS programs, documents defining
current auction procedures and interest rate setting mechanisms may
already be available in the SHORT System. This may occur in the case of
an ARS with multiple Program Dealers in which one Program Dealer has
already submitted to the SHORT System the required document. In these
cases, in lieu of submitting duplicate documents, dealers would be
provided the capability to signify that a document required to be
submitted has already been submitted to the SHORT System by identifying
the relevant document.
Since January 1, 2010, all documents submitted to EMMA have been
required to be word-searchable PDF files. While this same requirement
would apply to the submission of ARS and VRDO documents to the SHORT
System, MSRB acknowledges that some of these documents for outstanding
ARS and VRDOs are likely to be older documents that may not be
available in electronic format or a format that would easily permit a
dealer to produce a word-searchable PDF file of the document.
Accordingly, the proposed rule change would only require ARS and VRDO
documents submitted to EMMA to be word-searchable for new or amended
versions of documents produced after the effective date of the proposed
rule change.
Description of the Short System Facility Amendment Proposal
The SHORT System is an MSRB Facility for the collection and public
dissemination of information about ARS and VRDO. The amendment to this
facility would provide for the collection and public dissemination of
documents identified in the rule change proposal.
Submissions to the SHORT System
The SHORT System receives submissions of information and documents
about securities bearing interest at short-term rates under MSRB Rule
G-34, on CUSIP numbers, new issue and market information requirements.
Information and Documents to be Submitted. The basic items of
information and documents that would be required to be submitted to the
SHORT System are the same as those required to be submitted to the MSRB
under MSRB Rule G-34(c). Submitters of documents would be required to
provide to the SHORT System related indexing information with respect
to each document submitted, including an indication of the document
type, date such document became available to the dealer, and CUSIP
number(s) of the municipal securities to which such document relates. A
submitter required to submit a document that is already available in
its entirety in the SHORT System would be permitted to, in lieu of
submitting a duplicate document, identify the document already
submitted and provide such items of related indexing information as are
required by MSRB rules or the SHORT System input specifications and
system procedures. A submitter required to submit a document that is
not able to be obtained through best efforts as provided in the
proposed rule change would be required to provide an affirmative
indication that a document required to be submitted is not available
for submission notwithstanding the submitter's best efforts to obtain
such document. The complete list of data elements that would be
required on a submission to the SHORT System would be available in
input specifications and system procedures made available on https://www.msrb.org. Submitters would be responsible for the accuracy and
completeness of all information submitted to the SHORT System.
Submitters. Submissions to the SHORT System may be made solely by
authorized submitters using password-protected accounts in the MSRB's
user authentication system, MSRB Gateway. MSRB Gateway is designed to
be a single, secure access point for all MSRB applications. Submitters
of information to the SHORT System are required to obtain an account in
MSRB Gateway in order to submit information to the SHORT System.
Through MSRB Gateway, submitters also have the ability to designate
third-party agents to submit information to the SHORT System on the
submitter's behalf.
Submissions may be made by the following classes of submitters:
ARS Program Dealer;
VRDO Remarketing Agent;
ARS Auction Agent; and
Designated Agent, which may submit any information
otherwise permitted to be submitted by another class of submitter which
has designated such agent, as provided below.
All ARS Auction Agents are allowed to submit information about an
auction to the SHORT System without prior designation by an ARS Program
Dealer. Dealers optionally may designate agents to submit information
on their behalf, and may revoke the designation of any such agents,
through MSRB Gateway. All actions taken by a Designated Agent on behalf
of a dealer that has designated such agent shall be the responsibility
of the dealer.
Timing of Submissions. Submitters are required to make submissions
to the SHORT System within the timeframes set forth in MSRB Rule G-
34(c) and related MSRB procedures. Submissions of information to the
SHORT System may be made throughout any RTRS Business Day, as defined
in Rule G-14 RTRS Procedures, from at least the hours of 6 a.m. to 9
p.m. Eastern Time, subject to the right of the MSRB to make such
processes unavailable at times as needed to ensure the integrity of the
SHORT System and any related systems. Submissions of documents would be
able to be made throughout any day, subject to the right of the MSRB to
make such processes unavailable between the hours of 3 a.m. and 6 a.m.
each day, Eastern Time, for required maintenance, upgrades or other
purposes, or at other times as needed to ensure the integrity of MSRB
systems. The MSRB provides advance notice of any planned periods of
unavailability and shall endeavor to provide information to submitters
as to the status of the submission interface during unanticipated
periods of unavailability, to the extent technically feasible.
Method of Submission. Information and documents may be submitted to
the SHORT System through a secure, password-protected, Web-based
electronic submitter interface or through a secure, authenticated
computer-to-computer data connection, at the
[[Page 16882]]
election of the submitter. When making submissions using the Web-based
interface, related information is entered manually into an on-line form
and documents would be required to be uploaded as portable document
format (PDF) files. Computer-to-computer submissions utilize XML files
for data and PDF files for documents. Appropriate schemas and
procedures for Web-based and computer-to-computer submissions would be
available in input specifications and system procedures made available
on https://www.msrb.org.
Designated Electronic Format for Documents. All documents submitted
to the SHORT System would be required to be in portable document format
(PDF), configured to permit documents to be saved, viewed, printed and
retransmitted by electronic means. If the submitted file is a
reproduction of the original document, the submitted file must maintain
the graphical and textual integrity of the original document. Documents
submitted to the SHORT System created on or after the effective date of
the proposed rule change would be required to be word-searchable
(without regard to diagrams, images and other non-textual elements).
SHORT System Processing
The SHORT System provides a single portal for the submission of
information and documents. The SHORT System, as well as other MSRB
systems and services, performs various data checks to ensure that
information and documents are submitted in the correct format. In
addition, data checks are performed to monitor dealer compliance with
MSRB Rule G-34(c) as well as to identify information submitted in
correct formats that may contain errors due to information not falling
within reasonable ranges of expected values for a given item of
information. All submissions generate an acknowledgement or error
message, and all dealers that have information or documents submitted
on their behalf by either an ARS Auction Agent or a Designated Agent
are able to monitor such submissions.
SHORT System Information and Document Dissemination
Information and documents submitted to the SHORT System that pass
the format and data checks described above are processed and
disseminated on a real-time basis. Any changes to submissions also are
processed upon receipt and updated information and documents are
disseminated in real-time. Information submitted to the SHORT System
is, in general, disseminated to the EMMA short-term obligation rate
transparency service within 15 minutes of acceptance, although during
peak traffic periods dissemination may occur within one hour of
acceptance. Submissions of documents to the SHORT System accepted
during the hours of 8:30 a.m. to 6 p.m. Eastern Time on an MSRB
business day would generally be disseminated to the EMMA short-term
obligation transparency service within 15 minutes of acceptance,
although during peak traffic periods posting may occur within one hour
of acceptance. Submissions outside of such hours often would be posted
within 15 minutes although some submissions outside of the MSRB's
normal business hours may not be processed until the next business day.
SHORT System information and documents, along with related indexing
information, would be made available to the public through the EMMA
portal for the life of the related securities.
The MSRB plans to offer subscriptions to the information and
documents submitted to the SHORT System in the future.
Description of the EMMA Short-Term Obligation Rate Transparency Service
Amendment Proposal
The EMMA short-term obligation rate transparency service currently
makes the information collected by the SHORT System available to the
public, at no charge, on the EMMA portal. The amendment to this service
would add the documents identified in the rule change proposal to this
service so that such documents would also be available to the public,
at no charge, on the EMMA portal.
2. Statutory Basis
The MSRB has adopted the proposed rule change pursuant to Section
15B(b)(2)(C) of the Act,\13\ which provides that the MSRB's rules
shall:
---------------------------------------------------------------------------
\13\ 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, to remove
impediments to and perfect the mechanism of a free and open market
in municipal securities, and, in general, to protect investors and
---------------------------------------------------------------------------
the public interest.
The MSRB believes that the proposed rule change is consistent with
the Act. The proposed rule change would serve as an additional
mechanism by which the MSRB works toward removing impediments to and
helping to perfect the mechanisms of a free and open market in
municipal securities by providing a centralized venue for free public
access to information about and documents relating to ARS and VRDO. The
proposed rule change would provide greater access to information about
and documents relating to ARS and VRDO to all participants in the
municipal securities market on an equal basis thereby removing
potential barriers to obtaining such information. These factors serve
to promote the statutory mandate of the MSRB to protect investors and
the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The MSRB does not believe the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act, since it would apply equally to dealers in
municipal securities.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
On March 17, 2008, the MSRB requested comment on a proposed plan
for increasing the information available for ARS (``March 2008 ARS
Notice''),\14\ on May 23, 2008, the MSRB requested comment on a
proposed plan for increasing the information available for VRDOs (``May
2008 VRDO Notice''),\15\ and on July 14, 2009 the MSRB requested
comment on the draft amendments to Rule G-34(c) (``July 2009
Notice'').\16\ These notices, the comments received, and the MSRB's
responses are discussed below.
---------------------------------------------------------------------------
\14\ See MSRB Notice 2008-15 (March 17, 2008).
\15\ See MSRB Notice 2008-24 (May 23, 2008).
\16\ See MSRB Notice 2009-43 (July 14, 2009).
---------------------------------------------------------------------------
March 2008 ARS Notice
The March 2008 ARS Notice proposed a plan to create a centralized
system for the collection and dissemination of critical market
information about ARS. The March 2008 ARS Notice proposed the
collection and dissemination of the current interest rate and certain
descriptive information for ARS programs, bidding information detailing
the orders placed by an ARS Program Dealer with an ARS Auction Agent
for inclusion in an auction (``ARS bidding information'') and documents
concerning ARS that were not required to be filed with the MSRB under
former Rule G-36, on delivery of official statements, advance refunding
[[Page 16883]]
documents and Forms G-36(OS) and G-36(ARD).
May 2008 VRDO Notice
The May 2008 VRDO Notice proposed a plan to collect and disseminate
critical market information about VRDOs using the same system proposed
in the March 2008 ARS Notice for ARS. The May 2008 VRDO Notice proposed
collecting and disseminating the current interest rate and certain
descriptive information for VRDOs and documents concerning VRDOs that
were not required to be filed with the MSRB under former Rule G-36,
such as the letter of credit or standby bond purchase agreement.
July 2009 Notice
The July 2009 Notice requested comment on draft amendments to Rule
G-34(c). The draft amendments would require ARS Program Dealers to
report ARS bidding information and VRDO Remarketing Agents to report
additional descriptive information about VRDOs to the MSRB Short-term
Obligation Rate Transparency (``SHORT'') System. The draft amendments
also would require ARS Program Dealers and VRDO Remarketing Agents to
submit ARS documents defining current auction procedures and interest
rate setting mechanisms and VRDO liquidity facility documents,
including current Letters of Credit and Stand-by Bond Purchase
Agreements (collectively ``short-term obligation documents''). For
existing ARS and VRDOs, the draft amendments would require dealers to
provide the current versions of documents to the MSRB within thirty
days after the effective date of the draft amendments and on an ongoing
basis dealers would be required to provide any new or amended versions
of these documents within one business day of receipt.
Discussion of Comments
The MSRB received comments on the March 2008 ARS Notice from seven
commentators,\17\ on the May 2008 VRDO Notice from nine
commentators,\18\ and on the July 2009 Notice from five
commentators.\19\ After reviewing the comments on the March 2008 ARS
Notice and May 2008 VRDO Notice, the MSRB approved a phased-in approach
to the collection and dissemination of ARS and VRDO information and
documents. The first phase of this approach included changes to MSRB
Rule G-34 to require dealers to report ARS and VRDO interest rate and
descriptive information to the MSRB and implementation of the SHORT
System, which became effective on January 30, 2009 for ARS and April 1,
2009 for VRDOs.\20\ The principal comments of the March 2008 ARS
Notice, May 2008 VRDO Notice and July 2009 Notice concerning the
collection of ARS bidding information, additional VRDO descriptive
information and short-term obligation disclosure documents are
discussed below.
---------------------------------------------------------------------------
\17\ See letters from Paula Stuart, Chief Executive Officer,
Digital Assurance Certification, LLC (``DAC'') to Justin Pica, dated
April 21, 2008; Jack B. McPherson to Mr. Pica, dated March 27, 2008;
Mikag@cox.net to Mr. Pica, e-mail dated April 23, 2008; Michael
Decker, Co-Chief Executive Officer, and Mike Nicholas, Co-Chief
Executive Officer, Regional Bond Dealers Association (``RBDA'') to
Mr. Pica, dated April 21, 2008; Joseph S. Fichera, Senior Managing
Director and CEO, Saber Partners, LLC (``Saber Partners'') to Mr.
Pica, dated July 9, 2008; Leslie M. Norwood, Managing Director and
Associate General Counsel, Securities Industry and Financial Markets
Association (``SIFMA'') to Mr. Pica, dated April 21, 2008; and, Jeff
Yankauer to Mr. Pica, e-mail dated April 17, 2008.
\18\ See letters from Paula Stuart, Chief Executive Officer,
Digital Assurance Certification LLC (``DAC'') to Mr. Pica, dated
July 1, 2008; Daniel Thieke, Vice President, Depository Trust and
Clearing Corporation (``DTCC'') to Mr. Pica, dated June 26, 2008;
Christine Walsh, Managing Director, Merrill Lynch to Mr. Pica, dated
June 26, 2008; S. Lauren Heyne, Chief Compliance Officer, RW Smith
and Associates, Inc. (``RW Smith'') to Mr. Pica, dated June 30,
2008; Joseph S. Fichera, Senior Managing Director and CEO, Saber
Partners to Mr. Pica, dated July 9, 2008; Leslie M. Norwood,
Managing Director and Associate General Counsel, SIFMA to Mr. Pica,
dated June 30, 2008; Dara L. Smith, Managing Director, SunTrust
Robinson Humphrey (``SunTrust'') to Mr. Pica, dated June 27, 2008;
Joseph A. Whitehead, Thornton Farish Inc. (``Thornton Farish'') to
Mr. Pica, dated June 30, 2008; and, Belle Walker, Senior Vice
President, W.R. Taylor and Company, LLC (``W.R. Taylor'') to Mr.
Pica, dated August 7, 2008.
\19\ See letters from Patricia W. Wilson, Senior Managing
Director Global Alternatives, Allstate Investments, LLC
(``Allstate'') to Mr. Pica, dated September 1, 2009; Robert J.
Stracks, Counsel, BMO Capital Markets GKST Inc. to Mr. Pica, dated
September 1, 2009; Carl Giles, Managing Director Capital Markets,
First Southwest Company (``First Southwest'') to Mr. Pica, dated
August 31, 2009; Michael Decker, Co-Chief Executive Officer, and
Mike Nicholas, Co-Chief Executive Officer, RBDA to Mr. Pica, dated
September 1, 2009; and Leslie M. Norwood, Managing Director and
Associate General Counsel, SIFMA to Mr. Pica, dated September 1,
2009.
\20\ See Securities Exchange Act Release No. 59212, January 7,
2009 (File No. SR-MSRB-2008-07). The principal comments of the March
ARS Notice and May VRDO Notice concerning the collection of ARS and
VRDO interest rate and descriptive information as well as the
implementation of the SHORT System were discussed in File No. SR-
MSRB-2008-07.
---------------------------------------------------------------------------
Additional VRDO Data
The draft amendments in the July 2009 Notice identified items of
information that a VRDO Remarketing Agent would be required to report
to the SHORT System in conjunction with the VRDO interest rate and
descriptive information currently required to be reported on the day
that an interest rate reset occurs. The specific items of information
proposed included:
Effective date that the interest rate reset is applicable;
Identity of the Tender Agent;
Identity of the liquidity provider;
Par amount, if any, held by VRDO Remarketing Agent, at
time of interest rate reset;
Par amount, if any, held by a liquidity facility (``Bank
Bond'') at time of interest rate reset and interest rate paid to the
liquidity provider; and
Par amount, if any, held by a party other than the
Remarketing Agent or as a Bank Bond.
In response to July 2009 Notice, First Southwest and SIFMA stated
concerns relating to the draft amendment's requirement to report the
additional VRDO information to the SHORT System, which are primarily
focused on whether a VRDO Remarketing Agent would be able to obtain and
report accurate information for several of the additional items of VRDO
information. For example, with respect to reporting the identity of the
Tender Agent and liquidity provider, First Southwest stated that it
would be ``difficult and burdensome to be required to be continually
updating [this] information, which can and does change frequently,
between two parties where [the VRDO Remarketing Agent] has no legal
standing and should be the responsibility of the bank or tender agent
that is party to those transactions.'' However, RBDA generally
supported the additional items of VRDO information and stated that
``the information proposed to be disclosed for VRDOs is material to
evaluating VRDO investments'' but acknowledged that ``Remarketing
Agents may not have ready access to all of the information * * *
proposed to be submitted * * * [and] would support other reasonable
initiatives to achieve the ends outlined in the [July 2009 Notice] * *
*.''
The MSRB believes that information concerning the identity of the
Tender Agent and liquidity provider is material to market participants
and, in particular, investors of VRDOs. With respect to Tender Agents,
the July 2009 Notice also solicited comment on whether a VRDO
Remarketing Agent could also provide the contact information for the
Tender Agent and the MSRB believes some of the concerns stated by SIFMA
about providing the identity of the Tender Agent were focused on
challenges in obtaining and keeping current contact information for the
Tender Agent. MSRB acknowledges that it may be difficult to obtain and
keep current contact information for a Tender Agent, particularly for
smaller Tender Agents that use the name and contact information for an
individual instead of
[[Page 16884]]
a division within a company for submitting tender requests, but the
MSRB believes that a basic requirement to provide the identity of the
Tender Agent is reasonable and that it is important that investors be
able to have access to the identity of the Tender Agent to facilitate
an investor tendering its position in VRDOs.
In response to the July 2009 Notice proposal to require reporting
of the par amounts of a VRDO held as a Bank Bond, by the VRDO
Remarketing Agent and by investors at the time of the interest rate
reset, SIFMA stated that making such information transparent ``would be
detrimental to the municipal securities market by giving competitors a
trading advantage against one another.'' MSRB is sensitive to SIFMA's
concerns related to reporting and making transparent the individual par
amounts of the VRDO held as a Bank Bond,\21\ by the VRDO Remarketing
Agent and by investors. One of the purposes of requiring this
information to be reported is to provide market participants with an
indication that the interest rate set by the VRDO Remarketing Agent
represents an interest rate paid to holders of the VRDO instead of
instances when the VRDO is held entirely as a Bank Bond and that the
interest rate set is therefore not set by market demand.\22\ As an
alternative to the requirement in the July 2009 Notice, the proposed
rule change includes a requirement for a VRDO Remarketing Agent to
report the ``par amount remarketed,'' which would be the aggregate of
VRDOs held by the VRDO Remarketing Agent and investors, but not Bank
Bonds, and separately report the par amount held as Bank Bonds. This
should provide a sufficient indication that the interest rate set
reflects a market interest rate paid to holders of the VRDO while
preventing individual par amounts held by VRDO Remarketing Agents from
being disclosed to the public.
---------------------------------------------------------------------------
\21\ The July 2009 Notice also proposed collecting the interest
rate paid to a liquidity provider for VRDOs held as a Bank Bond.
SIFMA noted that many VRDO Remarketing Agents are not made aware of
the interest rate paid on Bank Bonds. The MSRB acknowledges that
this requirement may present significant compliance challenges for
dealers and has accordingly decided not to proceed with it at this
time.
\22\ This information also is intended to provide a centralized
source of information about holdings of VRDOs. SIFMA notes that
information collected by the SEC in its Financial and Operational
Combined Uniform Single (``FOCUS'') Reports, while not an identical
requirement, provides such a centralized source of information about
the holdings of VRDOs by Remarketing Agents.
---------------------------------------------------------------------------
ARS Bidding Information
The July 2009 Notice identified ARS Bidding Information that an ARS
Program Dealer would be required to submit to the SHORT System as
individual data elements in connection with a report of the ARS
interest rate and descriptive information currently required to be
reported following an auction. In response to the July 2009 Notice,
First Southwest and SIFMA both noted that reporting ARS Bidding
Information to the SHORT System as individual data elements would be
costly and time consuming, particularly, as SIFMA noted, ``for a
product that is winding down.'' SIFMA further noted that ``there have
not been any new ARS issues in over a year and a half, and none are
expected.'' Instead of submitting information as individual data
elements, SIFMA suggested that ``the disclosure of this information to
[the MSRB] by way of document, instead of breaking out each data
element, would help minimize the burden.''
The MSRB acknowledges that reporting ARS Bidding Information to the
SHORT System as individual data elements would result in ARS Program
Dealers incurring programming expenses as well as increasing the
ongoing cost of compliance with reporting information to the SHORT
System. Further, current interest rate information from the SHORT
System indicates that approximately 80% of all ARS continue to
experience failed auctions,\23\ so one of the purposes of having ARS
Bidding Information as individual data elements, to compute a ``bid-to-
cover ratio'' \24\ that would show the demand for the ARS, may not at
this time justify the expense incurred by ARS Program Dealers to report
such information as individual data elements to the SHORT System.
Nonetheless, the MSRB believes that having a centralized source of ARS
Bidding Information, even if such information is only available as a
document, would be of benefit to market participants as it would
further the MSRB's investor protection mission. This document-based
approach would provide for indexing of each such submission to the
appropriate security so that the information would be easy to find,
even if the information contained within such documents could not
easily be exported to a data file or otherwise manipulated.
---------------------------------------------------------------------------
\23\ In light of the high number of failed auctions, Allstate
suggests requiring ARS Program Dealers to provide the formula used
to compute the maximum rate, including the ``net loan rate.'' MSRB
does not believe that this information is readily available to ARS
Program Dealers but notes that a separate requirement for certain
ARS documents to be submitted to the MSRB and made available
publicly should aide in determining how maximum rates are set.
\24\ In response to the April 2008 ARS Notice, Saber Partners
identified this statistic as one that ``can give great insight into
the liquidity of an auction.''
---------------------------------------------------------------------------
In response to specific items of ARS Bidding information identified
in the July 2009 Notice, SIFMA noted that when an ARS Program Dealer
receives orders to buy from other dealers for submission to an ARS
auction, such orders may be aggregated by the other dealer making it
impossible for the ARS Program Dealer to provide accurate information
on the number of unique bidders other than the Program Dealer bidding
for its own account. MSRB acknowledges that orders submitted to an ARS
Program Dealer may be aggregated by the submitting party and believes
that disclosing such aggregated orders may be misleading to market
participants. Thus, the MSRB has not included this requirement in the
proposed rule change. SIFMA also noted that separately requiring an ARS
Program Dealer to report bidding information for orders submitted by an
issuer or conduit borrower would be unnecessary since issuers and ARS
Program Dealers have made such information available on public Web
sites. The MSRB notes that while the EMMA Continuing Disclosure Service
provides a document category for issuers to voluntarily disclose an
intent to bid on its ARS, this does not provide for a centralized
source of all orders submitted by an issuer or conduit borrower, which
would be provided by the proposed rule change.\25\
---------------------------------------------------------------------------
\25\ MSRB notes that issuers or conduit borrowers may instruct a
third party, such as an investment adviser, to submit orders to an
ARS Program Dealer on their behalf. In these cases, MSRB
acknowledges that the ARS Program Dealer would not know that such
orders are on behalf of issuers or conduit borrowers and would not
be able to include this fact when making submissions of ARS Bidding
Information to the SHORT System.
---------------------------------------------------------------------------
Short-term Obligation Documents
The draft amendments in the July 2009 Notice proposed requiring ARS
Program Dealers and VRDO Remarketing Agents to submit to the MSRB
current and any new or amended versions of the following documents:
ARS documents defining auction procedures and interest
rate setting mechanisms;
VRDO documents consisting of liquidity facilities,
including Letter of Credit Agreements and Stand-by Bond Purchase
Agreements.
In response to the July 2009 Notice First Southwest and SIFMA both
stated
[[Page 16885]]
concerns with the requirement to submit ARS and VRDO documents for
outstanding issues to the MSRB. First Southwest noted that to obtain
some of these documents, dealers ``would need to go back to the
creators of those documents to comply with the rule'' but nevertheless
noted that ``in general, the requested documents are available.'' \26\
SIFMA also stated a concern that some documents for outstanding VRDOs
may contain information that was not intended to be made public. In
response to the May 2008 VRDO Notice DAC also noted that dealers ``may
not always be a party to or have control over all of the documents.''
MSRB recognizes that dealers' ability to comply with the requirement
proposed in the July 2009 Notice for VRDOs would, in some cases, be
subject to the ability of the dealer to obtain a document from a third
party. Therefore, MSRB has incorporated into the proposed rule change a
``best efforts'' provision coupled with a recordkeeping requirement
that would require dealers to make and document all efforts to obtain a
VRDO document for which the dealer does not already have access.
---------------------------------------------------------------------------
\26\ Both First Southwest and SIFMA also noted that Official
Statements typically contain summaries of the information contained
in the documents identified in the draft amendments and note that if
an investor wanted to obtain the actual document, they could request
the documents identified in the draft amendments from either the
issuer or a dealer. In particular, SIFMA noted in response to the
April 2008 ARS Notice that ARS Official Statements generally already
contain much of the information. MSRB notes that the proposed rule
change would permit dealers to reference documents already submitted
in lieu of submitting duplicate documents.
---------------------------------------------------------------------------
First Southwest and SIFMA also stated concerns with the timeframes
proposed for submitting ARS and VRDO documents to the MSRB due to the
high number of ARS and VRDO issues, which SIFMA states is approximately
16,500 VRDOs and 1,750 ARS, and the fact that dealers may not have such
documents in a format that would allow for easy electronic submission
of the document to the MSRB. Given the high numbers of these
securities, First Southwest and SIFMA both stated that 180 days,
instead of the 30 days proposed in the July 2009 Notice, would be a
more appropriate amount of time to submit the documents to the MSRB.
MSRB recognizes that there are a large number of documents that would
need to be obtained, converted into an electronic format and submitted
to the MSRB. However, MSRB believes that it is important for investors
and other market participants to have centralized access to these
documents. Acknowledging the large number of documents and the fact
that, for outstanding issues, dealers may need time to request
documents from third parties, MSRB has provided 90 days from the date
of effectiveness of a rule in the proposed rule change for dealers to
submit outstanding ARS and VRDO documents to the MSRB. However, MSRB
notes that dealers should not wait until a rule is in effect to begin
the process of requesting documents and converting them into the
appropriate electronic format.\27\
---------------------------------------------------------------------------
\27\ As previously described, the MSRB has requested flexibility
with respect to the setting of effective dates for the proposed rule
change. The MSRB notes that it would be prudent for dealers to use
the time between the approval date of the proposed rule change and
the effective date to begin collecting such required documents and
converting them into electronic format.
---------------------------------------------------------------------------
In response to the July 2009 Notice proposal that any new or
amended versions of documents be submitted to the MSRB within one day
of receipt, SIFMA suggested that dealers be required to submit a
document within 5-days of receipt so that the deadline would be
consistent with the deadline for submitting advance refunding documents
to the MSRB. MSRB believes that it is important that market
participants have access to documents that are current and therefore
has retained in the proposed rule change the timeframe for an ARS
Program Dealer or VRDO Remarketing Agent to provide such new or amended
versions of documents to the MSRB no later than one business day after
receipt by the dealer.\28\
---------------------------------------------------------------------------
\28\ RBDA also suggested that MSRB look into utilizing optical
character recognition technology to facilitate performing word
searches on EMMA of documents that are scanned and not ``native''
PDFs. MSRB notes that all documents submitted to EMMA since January
1, 2010 are required to be word-searchable and that the proposed
rule change would require documents created after the effective date
of the proposed rule change to also be word-searchable.
---------------------------------------------------------------------------
Public Availability of Collected Information and Documents
In response to the April 2008 ARS Notice, Mr. Yankauer recommended
that the MSRB make information collected about ARS available ``to the
general public without any fee to view the information.'' MSRB agrees
with Mr. Yankauer's recommendation and notes that the interest rate and
descriptive information currently collected by the SHORT System is
available at no charge on the EMMA Web site. MSRB also notes that it
plans to make all information and documents collected under the
proposed rule change available at no charge on the EMMA Web site.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date 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 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
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-MSRB-2010-02 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-MSRB-2010-02. This file
number should be included on the subject line if e-mail 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
[[Page 16886]]
business days between the hours of 10 a.m. and 3 p.m. Copies of such
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-2010-02 and should be submitted on or before April
23, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
---------------------------------------------------------------------------
\29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7463 Filed 4-1-10; 8:45 am]
BILLING CODE 8011-01-P
