Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of Proposed Rule Change Consisting of Amendments to Streamline New Issue Information Submission Requirements Under MSRB Rules G-32 and G-34, 67047-67052 [2012-27266]
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Federal Register / Vol. 77, No. 217 / Thursday, November 8, 2012 / Notices
environment (which offers the added
benefits of transparency, price
discovery, liquidity, and financial
stability as compared to the over-thecounter market) and subject to
exchange-based rules, and investors
would benefit as a result.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposal.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the 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 prior to 30 days from the date
on which it was filed, or such shorter
time as the Commission may designate,
the proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 18 and Rule 19b–4(f)(6)
thereunder.19
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 20 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6) 21
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange requested
that the Commission waive the 30-day
operative delay so that the proposed
rule change may become operative upon
filing. The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest. The
Commission notes that waiving the 30day operative delay would prevent the
expiration of the pilot programs on
November 2, 2012, prior to the
18 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
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 Exchange
has satisfied this requirement.
20 17 CFR 240.19b–4(f)(6).
21 17 CFR 240.19b–4(f)(6).
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19 17
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extension of the pilot program becoming
operative. Therefore, the Commission
hereby waives the 30-day operative
delay and designates the proposal
operative upon filing.22
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend 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.
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
2012–102 and should be submitted on
or before November 29, 2012.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
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 email to rulecomments@sec.gov. Please include File
Number SR–CBOE–2012–102 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–CBOE–2012–102. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
22 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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[FR Doc. 2012–27290 Filed 11–7–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68134; File No. SR–MSRB–
2012–08]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing of Proposed
Rule Change Consisting of
Amendments to Streamline New Issue
Information Submission Requirements
Under MSRB Rules G–32 and G–34
November 1, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on October 23, 2012, the Municipal
Securities Rulemaking Board (‘‘MSRB’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the MSRB. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The MSRB is filing with the
Commission a proposed rule change
consisting of amendments to Rules G–8,
on books and records, G–14 RTRS
Procedures, G–32, on disclosures in
connection with primary offerings, G–
34, on CUSIP numbers, new issue, and
market information requirements, and
the Electronic Municipal Market Access
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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(EMMA®) 3 system facility (the
‘‘proposed rule change’’). The MSRB
requested an effective date for the
proposed amendments no later than
May 6, 2013, or such earlier date to be
announced by the MSRB in a notice
published on the MSRB Web site with
at least a thirty day advance notification
prior to the effective date.
The text of the proposed rule change
is available on the MSRB’s Web site at
www.msrb.org/Rules-andInterpretations/SEC-Filings/2012Filings.aspx, at the MSRB’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
MSRB included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The MSRB has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The proposed rule change amends
Rules G–32 and G–34 to allow
underwriters to satisfy certain of their
submission requirements under Rule G–
32 in connection with new issues of
municipal securities by their
submission of data, pursuant to Rule G–
34, to the New Issue Information
Dissemination Service (‘‘NIIDS’’)
operated by the Depository Trust and
Clearing Corporation (‘‘DTCC’’). In
addition, the proposed rule change
revises deadlines for the submission of
data to NIIDS, removes certain
exceptions from the NIIDS submission
requirements under Rule G–34 for
certain short term instruments, modifies
the EMMA system to include certain
elements of the NIIDS data on the
EMMA Web site, and eliminates
language describing auction rate
securities as having a short ‘‘effective
maturity,’’ as further described below
under ‘‘Summary of Proposed Rule
Change’’ and under ‘‘Discussion of
Comments.’’
3 EMMA
is a registered trademark of the MSRB.
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Background
Rule G–32 requires underwriters to
submit selected information about most
new issues of municipal securities to
the MSRB by completing electronic
Form G–32 through EMMA’s Primary
Market Disclosure Service. This
information includes, among other
items, the issuer name and issue
description for the new issue and, for
each maturity of the new issue, the
CUSIP numbers, principal amounts and
initial offering prices or yields.
Separately, Rule G–34 requires
underwriters for most new issues to
submit comprehensive information to
NIIDS. Information required to be
submitted to NIIDS generally includes
all of the information required for
dealers to produce a ‘‘when, as and if
issued’’ 4 customer trade confirmation
and also includes many of the same
items of information included in Form
G–32.
New Issue EMMA Submission
Requirements Under Rule G–32. EMMA
is an information facility of the MSRB
for receiving electronic submissions of
official statements, initial offering prices
and other information about new issues
as well as on-going municipal securities
disclosure and other key documents and
related information. EMMA makes such
documents and information, together
with trade price and interest rate
information, available to the public at
no charge on an Internet Web site or by
paid subscription. The submission of
data under Rule G–32 to EMMA’s
Primary Market Disclosure Service in
connection with new issues is required
to be commenced by no later than the
end of the day of first execution of
transactions in the offered municipal
securities.5 The submission of
4 The term, ‘‘when, as and if issued’’ is used to
describe the time period in the life of a new issue
of municipal securities from the original date of the
sale by the issuer to the delivery of the securities
to, and payment by, the underwriter. Sales made
during the ‘‘when, as and if issued’’ period (also
called the ‘‘when-issued’ period’’) are subject to
issuance of the securities.
5 Under Rule G–32(b)(vi)(C)(1) and Section 2.6.2
of the EMMA Dataport Manual (Information by the
Date of First Execution of Transactions),
underwriters are required to initiate the Form G–
32 submission process by no later than the date of
first execution of transactions in securities sold in
the offering by submitting certain issue-specific
information about the new issue. ‘‘Date of first
execution’’ is defined in Rule G–32(d)(xi) as: ‘‘the
date on which the underwriter executives its first
transactions with a customer or another broker,
dealer or municipal securities dealer in any security
offered in a primary offering; provided that, for
offerings subject to Rule G–34(a)(ii)(C), ‘date of first
execution’ shall mean the date corresponding to the
Time of First Execution as defined in Rule G–
34(a)(ii)(C)(1)(b); further provided that, solely for
purposes of this rule, the date of first execution
shall be deemed to occur by no later than the
closing date.’’
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documents relating to issues of
municipal securities, including official
statements or preliminary official
statements (if applicable), and of certain
additional items of information, is
subject to other submission deadlines as
outlined in Rule G–32.6
New Issue NIIDS Submission
Requirements Under Rule G–34. NIIDS
is a centralized system for collecting
from underwriters and disseminating to
market participants standardized
electronic information describing new
issue securities. It was developed to
ensure that all market participants have
access to information necessary for
processing transactions once the
underwriter executes its first
transactions in the new issue. The
information submitted by underwriters
to NIIDS, required to be completed by
no later than two hours after Time of
Formal Award 7 for most new issues of
municipal securities,8 is disseminated
in real time to DTCC participants and
other subscribers, such as information
vendors. Submissions to NIIDS also
provide a mechanism for underwriters
to communicate the Time of Formal
Award and Time of First Execution 9 to
market participants that may trade in
the new issue to promote orderly trade
execution and processing on the first
day of trading in a new issue. Consistent
communication of these events ensures
that all market participants have
sufficient data to process and time to
prepare pending trades in new issues for
execution, real-time trade reporting 10
6 Securities 2.6.4 and 2.6.5 of the EMMA Dataport
Manual set out the basic timeframes for submitting
documents and information to EMMA in
connection with a new issue.
7 ‘‘Time of Formal Award’’ is defined in Rule G–
34(a)(ii)(C)(1)(a) as: ‘‘for competitive issues, the
later of the time the issuer announces the award or
the time the issuer notifies the underwriter of the
award, and, for negotiated issues, the later of the
time the contract to purchase the securities from the
issuer is executed or the time the issuer notifies the
underwriter of its execution. If the underwriter and
issuer have agreed in advance on a Time of Formal
Award, that time may be submitted to the new issue
information dissemination system in advance of the
actual Time of Formal Award.’’
8 Rule G–34(a)(ii)(C) currently provides
exceptions to the submission requirements for
certain short-term instruments, including variable
rate instruments, auction rate products and
commercial paper. In addition, this requirement
does not apply to new issues that do not meet the
eligibility criteria for CUSIP number assignments or
that consist of municipal fund securities (such as
interests in 529 college savings plans) under the
general exemption provided in Rule G–34(d).
9 ‘‘Time of First Execution’’ is defined in Rule G–
34(a)(ii)(C)(1)(b) as: ‘‘the time the underwriter plans
to execute its first transaction [sic] in the new issue.
The underwriter shall designate a Time of First
Execution that is no less than two hours after all
information required by paragraph (a)(ii)(C) has
been transmitted to the new issue information
dissemination system.’’
10 ‘‘Real-time trade reporting’’ refers to the
reporting of certain information about each
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and sending of when-issued customer
confirmations.
Planned Integration of EMMA and
NIIDS New Issue Submission
Requirements. The MSRB launched
EMMA as a pilot on March 31, 2008.11
On September 30, 2008, amendments to
Rule G–34 became effective that
instituted the requirement for
underwriters to provide new issue
information to NIIDS.12 During the early
stages of planning for EMMA, the MSRB
had planned on integrating into
EMMA’s Primary Market Disclosure
Service the NIIDS data submitted by
underwriters under Rule G–34 for the
purpose of also fulfilling the data
submission requirements under Rule G–
32 and making such information
available to the public through the
EMMA Web site. Due to divergent
development schedules and limited
opportunities to ensure effective
interoperability between the two
systems, the Primary Market Disclosure
Service was launched on June 1, 2009
requiring a separate submission of new
issue data to EMMA through Form G–
32, although at that time the MSRB
continued to plan for future integration
of the submission processes under Rules
G–32 and G–34.13
The MSRB believes there would be
significant benefits in integrating the
NIIDS data into the EMMA submission
process. While the information required
to be submitted under Rule G–32 is less
extensive than the information required
for a NIIDS submission pursuant to Rule
G–34, re-keying information under both
Rules G–32 and G–34 is time consuming
and this duplication of effort may
increase the possibility of error. In
addition to reducing the submission
burden on underwriters, elimination of
this duplicative data entry would result
in improved data quality on EMMA and
throughout the marketplace. It would
allow both underwriters and
enforcement agencies to concentrate
their compliance activities on ensuring
exacting data submissions through this
single pipeline through which data
would flow uniformly to EMMA as well
purchase and sale transaction effected in municipal
securities to the MSRB’s Real-Time Transaction
Reporting System (‘‘RTRS’’), as prescribed by Rule
G–14, Rule G–14 RTRS Procedures and the RTRS
Users Manual.
11 See Release No. 34–57577 (March 28, 2008), 73
FR 18022 (April 2, 2008) (File No. SR–MSRB–2007–
06) (November 15, 2007).
12 See Release No. 34–57750 (May 7 [sic], 2008),
73 FR 25815 (May 7, 2008) (File No. SR–MSRB–
2007–08) (November 27, 2007).
13 See MSRB Notice 2009–07 (March 23, 2009), in
which the MSRB noted that it would advise market
participants of any future development of a
functionality providing for the use of NIIDS data to
fulfill Rule G–32 information submission
requirements.
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as to other market data vendors
receiving the NIIDS subscription feed.
The integration of the NIIDS data into
the EMMA submission process also
would accelerate the availability of
Form G–32 data on EMMA by
displaying such information in real time
upon receipt from NIIDS by no later
than two hours after the Time of Formal
Award as provided under Rule G–34,
rather than by the close of business on
the date of first execution as currently
provided under Rule G–32. In
particular, use of the NIIDS data to
populate EMMA will allow for more
rapid intra-day, rather than end of day,
dissemination of the maturity schedule,
interest rates and initial offering
prices 14 for new issues within two
hours after the Time of Formal Award.
Furthermore, additional NIIDS data
elements not currently available through
EMMA, such as the Time of Formal
Award and Time of First Execution as
announced by the underwriter, would
be displayed on EMMA. To enhance
transparency for a broader scope of new
issues of municipal securities, the
MSRB is also proposing to eliminate
exceptions under Rule G–34 for
submitting data for certain new issues to
NIIDS.
Summary of Proposed Rule Change
The proposed rule change revises
Rule G–32 to provide that an
underwriter’s obligations to submit data
about a new issue under that rule would
be fulfilled through submission of such
data through NIIDS as required pursuant
to Rule G–34. Data for certain types of
offerings not required to use NIIDS (as
described below) would continue to be
subject to existing Rule G–32 data
submission requirements. In addition,
certain data elements that are not
included in NIIDS, such as underwriting
spread (if not included in the official
statement), the existence of a continuing
disclosure undertaking and the timing
for issuer submission of annual
financial information, would be
required to be submitted to EMMA
pursuant to existing timeframes set forth
in Rule G–32 and the EMMA Dataport
Manual.
Rule G–34 currently requires that
information about most new issues of
municipal securities be submitted to
NIIDS by no later than two hours
following the Time of Formal Award of
a new issue. Rule G–34 currently
14 Initial offering prices or yields currently must
be, and would continue to be, disclosed for all
maturities, including those otherwise designated as
‘‘not reoffered,’’ through both EMMA and NIIDS.
See Release No. 34–67908 (September 21, 2012), 77
FR 59427 (September 27, 2012) (File No. SR–
MSRB–2012–06) (June 28, 2012).
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exempts certain types of short-term
instruments (including variable rate
instruments, auction rate products, and
commercial paper), as well as municipal
fund securities (such as interests in 529
college savings plans) and issues
ineligible for CUSIP number
assignment. The proposed rule change
revises Rule G–34 to remove the
exception for underwriters to submit to
NIIDS information about short-term
instruments such as variable rate
instruments, auction rate products and
notes maturing in less than nine
months, but would retain this exception
for commercial paper issues, municipal
fund securities and issues ineligible for
CUSIP number assignment. The
proposed rule change adds a narrow
exception from the requirement to
provide a minimum of two hours
advance notice of the planned Time of
First Execution for offerings of variable
rate instruments with a planned
settlement cycle of one day or less.
The proposed rule change revises the
EMMA facility by adding to the EMMA
display and to the EMMA primary
market subscription the Time of First
Execution and Time of Formal Award.
In addition, the proposed rule change
includes amendments to Rule G–8 to
conform recordkeeping requirements to
amended Rules G–32 and G–34, and
amendments to the Rule G–14 RTRS
Procedures and Rules G–32 and G–34 to
make certain non-substantive technical
changes. The technical amendments to
Rule G–32 correct a cross-reference to
Exchange Act Rule 15c2–12, correct a
mis-numbered paragraph defining the
term ‘‘obligated person’’ and eliminate
section (e), which operated as a
transitional provision in June 2009 from
the former pre-EMMA official statement
submission process under former Rule
G–36 to the EMMA-based submission
process under current Rule G–32. The
technical amendments to Rule G–34
improve the organization of certain
provisions of the rule.
Finally, the technical amendments to
section (a)(ii)(B) of the Rule G–14 RTRS
Procedures under Rule G–14 revise
language in such RTRS Procedures that
is parallel to the language regarding
short-term instruments that is being
removed from Rule G–34 by the
amendments described above. Such
amendments would more clearly
describe the types of securities to which
the end-of-day RTRS reporting
exception for short-term instruments
applies and also eliminate language
describing auction rate securities as
having a short ‘‘effective maturity.’’ The
MSRB believes that auction rate
securities should not be characterized as
having an effective short-term maturity
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and has previously noted that, unlike
other short-term municipal securities
with long-term maturity dates and shortterm interest rate reset periods (such as
variable rate demand obligations),
auction rate securities generally do not
have ‘‘put’’ features or liquidity
facilities that allow holders to tender
their securities back to an issuerappointed representative on a periodic
basis.15 Thus, the MSRB is eliminating
the use of the term ‘‘effective maturity’’
in the context of auction rate securities
in order to avoid any potential
implication that holders of auction rate
securities have assurances of liquidity
on a short-term basis.
Effective Date of Proposed Rule Change
The MSRB requested an effective date
for the proposed amendments no later
than May 6, 2013, or such earlier date
to be announced by the MSRB in a
notice published on the MSRB Web site
with at least a thirty day advance
notification prior to the effective date.
2. Statutory Basis
The MSRB believes that the proposed
rule change is consistent with Section
15B(b)(2)(C) of the Exchange Act, which
provides that the MSRB’s rules shall:
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Be designed to prevent fraudulent and
manipulative acts and practices, to promote
just and equitable principles of trade, to
foster cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with respect
to, and facilitating transactions in municipal
securities and municipal financial products,
to remove impediments to and perfect the
mechanism of a free and open market in
municipal securities and municipal financial
15 See MSRB Notice 2008–09 (February 19, 2008),
in which the MSRB published an alert regarding
investor protection concerns arising in the market
for auction rate securities after widespread auction
failures began to occur at the beginning of 2008.
The MSRB also published educational information
regarding this key difference in the EMMA
Education Center upon launch of the EMMA pilot
on March 31, 2008, which states: ‘‘An important
distinction between auction rate securities and
variable rate demand obligations is that investors in
auction rate securities do not have a ‘put’ right.
Thus, there is no assurance that the investor will
be able to sell its holdings during an auction.
Instead, investors are dependent on the success of
the auction process. Among many other factors, the
pool of purchase bids that may be entered can vary
widely from auction to auction, and bids entered by
broker-dealers, banks and other market
professionals that have the effect of supporting
market liquidity, if permitted, generally are not
required under the legal documents and therefore
investors cannot be assured that such bids will be
entered in any particular auction. See https://
emma.msrb.org/EducationCenter/
WhatAreBonds.aspx. The MSRB thereafter
launched its Short-term Obligation Rate
Transparency (‘‘SHORT’’) system on January 30,
2009 pursuant to which certain key information
regarding periodic auctions for auction rate
securities is made available to the public through
EMMA.
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products, and, in general, to protect
investors, municipal entities, obligated
persons, and the public interest.
The proposed rule change is
consistent with Section 15B(b)(2)(C) of
the Exchange Act. There will be
significant benefits in integrating the
NIIDS data into the EMMA submission
process that will assist in removing
impediments to and perfecting the
mechanism of a free and open market,
and that will also improve protections
to all market participants. The current
requirement to re-key significant
amounts of information under both
Rules G–32 and G–34 is time consuming
and this duplication of effort may
increase the possibility of error. In
addition to reducing the submission
burden on underwriters, elimination of
this duplicative data entry will result in
improved data quality on EMMA and
throughout the marketplace. It will
allow both underwriters and
enforcement agencies to concentrate
their compliance activities on ensuring
exacting data submissions through this
single pipeline through which data
would flow uniformly to EMMA as well
as to other market data vendors
receiving the NIIDS subscription feed.
The integration of the NIIDS data into
the EMMA submission process will also
accelerate the availability of Form G–32
data on EMMA by displaying such
information in real time upon receipt
from NIIDS, which will occur by no
later than two hours after the Time of
Formal Award as provided under Rule
G–34, rather than by the close of
business on the date of first execution
as currently provided under Rule G–32.
Furthermore, additional NIIDS data
elements not currently available through
EMMA, such as the Time of Formal
Award and Time of First Execution as
announced by the underwriter, will be
displayed on EMMA.
Finally, the proposed rule change
eliminates exceptions under Rule G–34
for submitting data for certain new
issues to NIIDS. Thus, enhanced realtime access to primary market data
would become available to the
marketplace, both through NIIDS data
disseminated by DTCC to information
vendors and EMMA data disseminated
by the MSRB to market participants and
the general public, for a broader scope
of new issues of municipal securities.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The MSRB does not believe that the
proposed rule change would impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Exchange Act, since it
would apply equally to all dealers that
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serve as underwriters of new issues of
municipal securities. The enhanced and
more timely information flow resulting
from the proposed rule change would
make such information available to all
persons on an equal and nondiscriminatory basis.
The marketplace and the general
public would realize the substantial
benefits of more prompt, more complete
and more accurate information about
new issue municipal securities,
resulting in greater marketplace
efficiency that enhances liquidity and
the quality of pricing. In addition, the
proposed rule change would reduce the
burden on dealers that serve as
underwriters for new issues of
municipal securities. Such dealers
would benefit from the reduced burden
of significantly diminished levels of
duplicative data entry into two separate
information systems—including the
burden of entering such data and of
undertaking appropriate quality
control—with only a minimal, one-time
burden of reviewing and, if necessary,
making minor modifications to their
internal policies and procedures with
respect to data submissions under
MSRB rules. In addition to the reduced
burden to dealers resulting from the
more efficient use of dealer resources to
ensure the accuracy of data submissions
through this single pipeline, the
resultant improvement in data quality
upon initial submission would reduce
the burden of making corrections at a
later time when errors are detected by
market participants and would reduce
the incidence of potential problems
with secondary market activity that can
arise from inaccuracies in the indicative
data used by market participants to
price and process transactions.
Some underwriters of new issues
bearing short-term interest rates
previously exempted from the NIIDS
submission requirements under Rule G–
34 would be required to modify their
new issue information dissemination
processes to use NIIDS for such
dissemination, rather than the currently
permissible use of other means of
announcing relevant new issue
information promptly in a manner
reasonably designed to reach market
participants that may trade the new
issue. Such underwriters, however, have
not previously been exempted from the
EMMA submission requirements under
Rule G–32, and the proposed rule
change would provide for much of the
data currently required to be provided
through EMMA under Rule G–32 to
instead be provided through NIIDS
under Rule G–34. Thus, such
underwriters would realize a reduced
burden of compliance with Rule G–32
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while facing a potential incremental
change in the burden under Rule G–34.
Whether such incremental change in
burden under Rule G–34 is an increase
or decrease would depend on whether,
and to what extent, using NIIDS to
disseminate new issue information is
more or less burdensome than the
alternative means currently used by
such underwriters to comply with Rule
G–34 and the procedures and processes
they currently maintained for using two
or more separate data submission
processes for new issues rather than a
single process through NIIDS. If and to
the extent that such balance results in
a net burden rather than a net benefit,
the bulk of such net burden likely
would occur as up-front costs of
modifying procedures and likely would
be minimal on an ongoing basis.
On balance, the MSRB believes that
the benefits of the proposed rule change
greatly exceed any potential increased
burden resulting therefrom.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
On April 10, 2012, the MSRB
requested comment on a proposal to
streamline new issue information
submission requirements under Rules
G–32 and G–34 by allowing
underwriters to satisfy certain of their
submission requirements under Rule G–
32 by their submission of data to NIIDS
pursuant to Rule G–34.16 Specifically,
the MSRB sought comment on whether:
(i) The timeframe under Rule G–32 for
submission of data for issues not subject
to the NIIDS requirement or of data
elements not included in NIIDS should
be accelerated to coincide with the Time
of First Execution, which typically
would be within two-to-four hours after
the Time of Formal Award; 17 (ii)
removing the exception in NIIDS for
certain short-term instruments would
present compliance challenges; (iii)
additional items of information
available through NIIDS that are not
currently available through EMMA
should be added to the EMMA display;
(iv) to extend the business day for
purposes of determining timeframes for
compliance with Rule G–34
deadlines; 18 or (v) to shorten the time
16 See
MSRB Notice 2012–19 (April 10, 2012).
G–34 generally requires that underwriters
submit required data to NIIDS within two hours of
the Time of Formal Award, and that such NIIDS
data be disseminated to the marketplace for at least
two hours prior to the Time of First Execution.
18 Rule G–34 currently provides that only the
hours between 9:00 a.m. and 5:00 p.m. Eastern
Time on a Business Day for the MSRB’s Real-time
Transaction Reporting System (RTRS) are used for
purposes of the timeframes set out in the rule.
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after the formal award occurs for first
executions of transactions and other
related timeframes under Rule G–34.
The MSRB received comment letters
from the Securities Industry and
Financial Markets Association
(‘‘SIFMA’’) and TD Securities (USA)
LLC (‘‘TD’’).
Discussion of Comments
SIFMA stated that it ‘‘believe[s] this
move towards straight-through
processing will be beneficial for market
participants by reducing transaction
costs and increasing data integrity.’’ TD
stated that it ‘‘welcome[d] the effort to
have one centralized system and one
pass in establishing the information
necessary to satisfy the regulations.’’
The MSRB discusses additional
comments from these commenters
below.
Accelerating the deadline for
completing submission of Form G–32
data not eligible to be submitted to
NIIDS. While no written comments were
received on this question, the MSRB
understands from conversations with
various industry participants that
accelerating the submission
requirements for Form G–32 data not
eligible to be submitted to NIIDS may
present compliance challenges for some
industry participants, particularly those
that make manual submissions of
information to NIIDS and Form G–32.
Thus, the MSRB determined not to
accelerate such timeframes but instead
retain the existing timeframe for
submission of those Form G–32 data
elements not able to be populated using
NIIDS data. Similarly, for those
securities that are not eligible for
submission to NIIDS and therefore
would continue to be submitted through
Form G–32, the MSRB is retaining all
existing timeframes for submission.
Removing the exception for certain
short term instruments from the data
submission requirements under Rule G–
34. SIFMA noted that while eliminating
the exception under Rule G–34 for short
term notes with maturities of nine
months or less would not be a
challenge, eliminating the exception for
variable rate demand obligations
(‘‘VRDOs’’) would present operational
challenges. SIFMA noted that daily and
weekly VRDOs are usually priced,
allocated, ticketed and settled on the
same or next day. Removing the
exception for VRDOs under Rule G–34
would subject VRDOs to deadlines for
both data submission and Time of First
Execution under Rule G–34. As SIFMA
noted, issuers and underwriters already
typically agree in advance to a Time of
Formal Award to avoid DTCC
disincentive fees for short settlements,
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
67051
which means that underwriters
generally are able to comply with the
data submission requirements for trade
eligibility under Rule G–34. Based on
additional feedback from SIFMA, the
larger concern results from the fact that
purchasers of VRDOs require same day
cash settlement within a short period of
time following time of pricing and
formal award and, as a result, the
mandatory minimum two hour time
period between Time of Formal Award
and Time of First Execution required by
Rule G–34 would present operational
challenges to ensure same day cash
settlement.
The purpose of the required two hour
advanced notification timeframe
between disseminating NIIDS data and
the announced Time of First Execution
is to ensure that dealers with pending
trades in new issues are able to receive
and enter into trade processing systems
NIIDS data before the first transactions
in the new issue are executed. For
VRDOs, there typically are not multiple
dealers with pending transactions in
new issues, so the two hour advanced
notification timeframe is not as
important as for other types of new
issues with a broad distribution.
However, the MSRB believes that it is
important that as many types of
securities as possible benefit from the
centralized data collection and
dissemination of information provided
by NIIDS. Accordingly, the proposed
rule change removes the exception for
short-term instruments (including
VRDOs and auction rate securities but
not including commercial paper) from
Rule G–34 with respect to the
requirement to submit information to
NIIDS and announce the Time of Formal
Award and Time of First Execution,
which can be done within the existing
timeframes of typical VRDO offerings.
However, the proposed rule change also
adds a narrow exception from the
requirement to provide a minimum two
hours of advance notice of the planned
Time of First Execution for offerings of
variable rate instruments with a planned
settlement cycle of one day or less.
Dissemination of Additional NIIDS
information on EMMA. SIFMA
supported the dissemination of the
Time of First Execution and Time of
Formal Award on EMMA but suggested
that the addition of more NIIDS data to
EMMA be carefully considered to avoid
obscuring important data. SIFMA
suggested that those that require
additional NIIDS data consider a
subscription feed for such data. The
MSRB agrees that careful selection of
NIIDs data is necessary and will
consider this issue as it reviews the full
range of NIIDS data for potential
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inclusion on EMMA at a future date.
The MSRB determined that the only
new data elements from NIIDS to be
added to the EMMA display and to the
EMMA primary market subscription
product at this time are Time of First
Execution and Time of Formal Award.
Extending Rule G–34 Business Day
hours. SIFMA said that, while
expanding the 9:00 a.m. to 5:00 p.m.
Eastern timeframe for the deadlines in
Rule G–34 may not be problematic for
dealers operating in the Eastern Time
zone, expanding these hours could
cause significant staffing challenges to
those dealers operating in other time
zones. SIFMA suggested the MSRB not
alter the existing 9:00 a.m. to 5:00 p.m.
Eastern timeframe in Rule G–34. The
MSRB decided against changing the
Rule G–34 Business Day hours.
Shortening advanced notification
timeframe between the submission of all
data to NIIDS and the Time of First
Execution. TD said that the two hour
window between the time of
disseminating NIIDS data and first
executions was ‘‘tough enough’’
especially for smaller shops that were
limited in staff, and that shortening the
time period would create undue
pressure and add little to transparency.
SIFMA stated that, because most dealers
receive the NIIDS data from one or more
information providers, the two hour
dissemination period is frequently
needed to integrate the data into their
own systems, irrespective of the type of
underwriting. However, SIFMA
suggested that, where a dealer has
submitted data to NIIDS to make an
issue ‘‘trade eligible’’ between 3:00 p.m.
and 5:00 p.m. on a trading day, Rule G–
34’s current carry-forward of the two
hour dissemination period through to
the first hours of the following day may
not be necessary because the dealer has
been able to disseminate and integrate
the data through information providers
overnight. SIFMA therefore suggested
that underwriters of any issue that is
made ‘‘trade eligible’’ between 3:00 p.m.
and 5:00 p.m. Eastern Time should be
permitted to elect to waive the two
business hour dissemination period and
set the Time of First Execution to be
9:00 a.m. Eastern Time the following
morning.19 SIFMA noted that this
option would enable dealers to reduce
the risk of carrying these securities.
Recognizing these operational
challenges, the MSRB decided against
19 Currently, an underwriter disseminating NIIDS
data at, for example, 4:00 p.m. Eastern Time would
not be able to set a Time of First Execution for
earlier than 10:00 a.m. Eastern Time the following
business day since the two hour advanced
notification timeframe must occur between the
hours of 9:00 a.m. to 5:00 p.m. Eastern Time.
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18:34 Nov 07, 2012
Jkt 229001
shortening the required two hour
minimum period between the time an
underwriter disseminates NIIDS
information and the Time of First
Execution that can be set by an
underwriter. However, the MSRB
decided that underwriters setting a
Time of First Execution for the business
day following the day NIIDS data is
disseminated should be able to set a
Time of First Execution for the
following day as early as 9:00 a.m.
Eastern Time without having to wait
until the full two-hour period has
elapsed. Acknowledging that dealers
would have sixteen hours between 5:00
p.m. Eastern Time and the earliest
possible Time of First Execution at 9:00
a.m. Eastern Time to integrate
disseminated NIIDS data and prepare
for the underwriter’s announced Time
of First Execution, the MSRB believes
that it would be appropriate that
underwriters wanting to set a Time of
First Execution as early as 9:00 a.m.
Eastern Time should be able to do so.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (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 or disapprove
such proposed rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Exchange
Act. Comments may be submitted by
any of the following methods:
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–MSRB–2012–08. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room on official business
days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of such filing also
will be available for inspection and
copying at the principal offices 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–2012–08, and
should be submitted on or before
November 29, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–27266 Filed 11–7–12; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–MSRB–2012–08 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
PO 00000
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20 17
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]]>Agencies
[Federal Register Volume 77, Number 217 (Thursday, November 8, 2012)]
[Notices]
[Pages 67047-67052]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-27266]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68134; File No. SR-MSRB-2012-08]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of Proposed Rule Change Consisting of
Amendments to Streamline New Issue Information Submission Requirements
Under MSRB Rules G-32 and G-34
November 1, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is
hereby given that on October 23, 2012, the Municipal Securities
Rulemaking Board (``MSRB'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the MSRB.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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
consisting of amendments to Rules G-8, on books and records, G-14 RTRS
Procedures, G-32, on disclosures in connection with primary offerings,
G-34, on CUSIP numbers, new issue, and market information requirements,
and the Electronic Municipal Market Access
[[Page 67048]]
(EMMA[supreg]) \3\ system facility (the ``proposed rule change''). The
MSRB requested an effective date for the proposed amendments no later
than May 6, 2013, or such earlier date to be announced by the MSRB in a
notice published on the MSRB Web site with at least a thirty day
advance notification prior to the effective date.
---------------------------------------------------------------------------
\3\ EMMA is a registered trademark of the MSRB.
---------------------------------------------------------------------------
The text of the proposed rule change is available on the MSRB's Web
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2012-Filings.aspx, at the MSRB's principal office, and at the Commission's
Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the MSRB included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The MSRB has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The proposed rule change amends Rules G-32 and G-34 to allow
underwriters to satisfy certain of their submission requirements under
Rule G-32 in connection with new issues of municipal securities by
their submission of data, pursuant to Rule G-34, to the New Issue
Information Dissemination Service (``NIIDS'') operated by the
Depository Trust and Clearing Corporation (``DTCC''). In addition, the
proposed rule change revises deadlines for the submission of data to
NIIDS, removes certain exceptions from the NIIDS submission
requirements under Rule G-34 for certain short term instruments,
modifies the EMMA system to include certain elements of the NIIDS data
on the EMMA Web site, and eliminates language describing auction rate
securities as having a short ``effective maturity,'' as further
described below under ``Summary of Proposed Rule Change'' and under
``Discussion of Comments.''
Background
Rule G-32 requires underwriters to submit selected information
about most new issues of municipal securities to the MSRB by completing
electronic Form G-32 through EMMA's Primary Market Disclosure Service.
This information includes, among other items, the issuer name and issue
description for the new issue and, for each maturity of the new issue,
the CUSIP numbers, principal amounts and initial offering prices or
yields. Separately, Rule G-34 requires underwriters for most new issues
to submit comprehensive information to NIIDS. Information required to
be submitted to NIIDS generally includes all of the information
required for dealers to produce a ``when, as and if issued'' \4\
customer trade confirmation and also includes many of the same items of
information included in Form G-32.
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\4\ The term, ``when, as and if issued'' is used to describe the
time period in the life of a new issue of municipal securities from
the original date of the sale by the issuer to the delivery of the
securities to, and payment by, the underwriter. Sales made during
the ``when, as and if issued'' period (also called the ``when-
issued' period'') are subject to issuance of the securities.
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New Issue EMMA Submission Requirements Under Rule G-32. EMMA is an
information facility of the MSRB for receiving electronic submissions
of official statements, initial offering prices and other information
about new issues as well as on-going municipal securities disclosure
and other key documents and related information. EMMA makes such
documents and information, together with trade price and interest rate
information, available to the public at no charge on an Internet Web
site or by paid subscription. The submission of data under Rule G-32 to
EMMA's Primary Market Disclosure Service in connection with new issues
is required to be commenced by no later than the end of the day of
first execution of transactions in the offered municipal securities.\5\
The submission of documents relating to issues of municipal securities,
including official statements or preliminary official statements (if
applicable), and of certain additional items of information, is subject
to other submission deadlines as outlined in Rule G-32.\6\
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\5\ Under Rule G-32(b)(vi)(C)(1) and Section 2.6.2 of the EMMA
Dataport Manual (Information by the Date of First Execution of
Transactions), underwriters are required to initiate the Form G-32
submission process by no later than the date of first execution of
transactions in securities sold in the offering by submitting
certain issue-specific information about the new issue. ``Date of
first execution'' is defined in Rule G-32(d)(xi) as: ``the date on
which the underwriter executives its first transactions with a
customer or another broker, dealer or municipal securities dealer in
any security offered in a primary offering; provided that, for
offerings subject to Rule G-34(a)(ii)(C), `date of first execution'
shall mean the date corresponding to the Time of First Execution as
defined in Rule G-34(a)(ii)(C)(1)(b); further provided that, solely
for purposes of this rule, the date of first execution shall be
deemed to occur by no later than the closing date.''
\6\ Securities 2.6.4 and 2.6.5 of the EMMA Dataport Manual set
out the basic timeframes for submitting documents and information to
EMMA in connection with a new issue.
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New Issue NIIDS Submission Requirements Under Rule G-34. NIIDS is a
centralized system for collecting from underwriters and disseminating
to market participants standardized electronic information describing
new issue securities. It was developed to ensure that all market
participants have access to information necessary for processing
transactions once the underwriter executes its first transactions in
the new issue. The information submitted by underwriters to NIIDS,
required to be completed by no later than two hours after Time of
Formal Award \7\ for most new issues of municipal securities,\8\ is
disseminated in real time to DTCC participants and other subscribers,
such as information vendors. Submissions to NIIDS also provide a
mechanism for underwriters to communicate the Time of Formal Award and
Time of First Execution \9\ to market participants that may trade in
the new issue to promote orderly trade execution and processing on the
first day of trading in a new issue. Consistent communication of these
events ensures that all market participants have sufficient data to
process and time to prepare pending trades in new issues for execution,
real-time trade reporting \10\
[[Page 67049]]
and sending of when-issued customer confirmations.
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\7\ ``Time of Formal Award'' is defined in Rule G-
34(a)(ii)(C)(1)(a) as: ``for competitive issues, the later of the
time the issuer announces the award or the time the issuer notifies
the underwriter of the award, and, for negotiated issues, the later
of the time the contract to purchase the securities from the issuer
is executed or the time the issuer notifies the underwriter of its
execution. If the underwriter and issuer have agreed in advance on a
Time of Formal Award, that time may be submitted to the new issue
information dissemination system in advance of the actual Time of
Formal Award.''
\8\ Rule G-34(a)(ii)(C) currently provides exceptions to the
submission requirements for certain short-term instruments,
including variable rate instruments, auction rate products and
commercial paper. In addition, this requirement does not apply to
new issues that do not meet the eligibility criteria for CUSIP
number assignments or that consist of municipal fund securities
(such as interests in 529 college savings plans) under the general
exemption provided in Rule G-34(d).
\9\ ``Time of First Execution'' is defined in Rule G-
34(a)(ii)(C)(1)(b) as: ``the time the underwriter plans to execute
its first transaction [sic] in the new issue. The underwriter shall
designate a Time of First Execution that is no less than two hours
after all information required by paragraph (a)(ii)(C) has been
transmitted to the new issue information dissemination system.''
\10\ ``Real-time trade reporting'' refers to the reporting of
certain information about each purchase and sale transaction
effected in municipal securities to the MSRB's Real-Time Transaction
Reporting System (``RTRS''), as prescribed by Rule G-14, Rule G-14
RTRS Procedures and the RTRS Users Manual.'
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Planned Integration of EMMA and NIIDS New Issue Submission
Requirements. The MSRB launched EMMA as a pilot on March 31, 2008.\11\
On September 30, 2008, amendments to Rule G-34 became effective that
instituted the requirement for underwriters to provide new issue
information to NIIDS.\12\ During the early stages of planning for EMMA,
the MSRB had planned on integrating into EMMA's Primary Market
Disclosure Service the NIIDS data submitted by underwriters under Rule
G-34 for the purpose of also fulfilling the data submission
requirements under Rule G-32 and making such information available to
the public through the EMMA Web site. Due to divergent development
schedules and limited opportunities to ensure effective
interoperability between the two systems, the Primary Market Disclosure
Service was launched on June 1, 2009 requiring a separate submission of
new issue data to EMMA through Form G-32, although at that time the
MSRB continued to plan for future integration of the submission
processes under Rules G-32 and G-34.\13\
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\11\ See Release No. 34-57577 (March 28, 2008), 73 FR 18022
(April 2, 2008) (File No. SR-MSRB-2007-06) (November 15, 2007).
\12\ See Release No. 34-57750 (May 7 [sic], 2008), 73 FR 25815
(May 7, 2008) (File No. SR-MSRB-2007-08) (November 27, 2007).
\13\ See MSRB Notice 2009-07 (March 23, 2009), in which the MSRB
noted that it would advise market participants of any future
development of a functionality providing for the use of NIIDS data
to fulfill Rule G-32 information submission requirements.
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The MSRB believes there would be significant benefits in
integrating the NIIDS data into the EMMA submission process. While the
information required to be submitted under Rule G-32 is less extensive
than the information required for a NIIDS submission pursuant to Rule
G-34, re-keying information under both Rules G-32 and G-34 is time
consuming and this duplication of effort may increase the possibility
of error. In addition to reducing the submission burden on
underwriters, elimination of this duplicative data entry would result
in improved data quality on EMMA and throughout the marketplace. It
would allow both underwriters and enforcement agencies to concentrate
their compliance activities on ensuring exacting data submissions
through this single pipeline through which data would flow uniformly to
EMMA as well as to other market data vendors receiving the NIIDS
subscription feed.
The integration of the NIIDS data into the EMMA submission process
also would accelerate the availability of Form G-32 data on EMMA by
displaying such information in real time upon receipt from NIIDS by no
later than two hours after the Time of Formal Award as provided under
Rule G-34, rather than by the close of business on the date of first
execution as currently provided under Rule G-32. In particular, use of
the NIIDS data to populate EMMA will allow for more rapid intra-day,
rather than end of day, dissemination of the maturity schedule,
interest rates and initial offering prices \14\ for new issues within
two hours after the Time of Formal Award. Furthermore, additional NIIDS
data elements not currently available through EMMA, such as the Time of
Formal Award and Time of First Execution as announced by the
underwriter, would be displayed on EMMA. To enhance transparency for a
broader scope of new issues of municipal securities, the MSRB is also
proposing to eliminate exceptions under Rule G-34 for submitting data
for certain new issues to NIIDS.
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\14\ Initial offering prices or yields currently must be, and
would continue to be, disclosed for all maturities, including those
otherwise designated as ``not reoffered,'' through both EMMA and
NIIDS. See Release No. 34-67908 (September 21, 2012), 77 FR 59427
(September 27, 2012) (File No. SR-MSRB-2012-06) (June 28, 2012).
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Summary of Proposed Rule Change
The proposed rule change revises Rule G-32 to provide that an
underwriter's obligations to submit data about a new issue under that
rule would be fulfilled through submission of such data through NIIDS
as required pursuant to Rule G-34. Data for certain types of offerings
not required to use NIIDS (as described below) would continue to be
subject to existing Rule G-32 data submission requirements. In
addition, certain data elements that are not included in NIIDS, such as
underwriting spread (if not included in the official statement), the
existence of a continuing disclosure undertaking and the timing for
issuer submission of annual financial information, would be required to
be submitted to EMMA pursuant to existing timeframes set forth in Rule
G-32 and the EMMA Dataport Manual.
Rule G-34 currently requires that information about most new issues
of municipal securities be submitted to NIIDS by no later than two
hours following the Time of Formal Award of a new issue. Rule G-34
currently exempts certain types of short-term instruments (including
variable rate instruments, auction rate products, and commercial
paper), as well as municipal fund securities (such as interests in 529
college savings plans) and issues ineligible for CUSIP number
assignment. The proposed rule change revises Rule G-34 to remove the
exception for underwriters to submit to NIIDS information about short-
term instruments such as variable rate instruments, auction rate
products and notes maturing in less than nine months, but would retain
this exception for commercial paper issues, municipal fund securities
and issues ineligible for CUSIP number assignment. The proposed rule
change adds a narrow exception from the requirement to provide a
minimum of two hours advance notice of the planned Time of First
Execution for offerings of variable rate instruments with a planned
settlement cycle of one day or less.
The proposed rule change revises the EMMA facility by adding to the
EMMA display and to the EMMA primary market subscription the Time of
First Execution and Time of Formal Award.
In addition, the proposed rule change includes amendments to Rule
G-8 to conform recordkeeping requirements to amended Rules G-32 and G-
34, and amendments to the Rule G-14 RTRS Procedures and Rules G-32 and
G-34 to make certain non-substantive technical changes. The technical
amendments to Rule G-32 correct a cross-reference to Exchange Act Rule
15c2-12, correct a mis-numbered paragraph defining the term ``obligated
person'' and eliminate section (e), which operated as a transitional
provision in June 2009 from the former pre-EMMA official statement
submission process under former Rule G-36 to the EMMA-based submission
process under current Rule G-32. The technical amendments to Rule G-34
improve the organization of certain provisions of the rule.
Finally, the technical amendments to section (a)(ii)(B) of the Rule
G-14 RTRS Procedures under Rule G-14 revise language in such RTRS
Procedures that is parallel to the language regarding short-term
instruments that is being removed from Rule G-34 by the amendments
described above. Such amendments would more clearly describe the types
of securities to which the end-of-day RTRS reporting exception for
short-term instruments applies and also eliminate language describing
auction rate securities as having a short ``effective maturity.'' The
MSRB believes that auction rate securities should not be characterized
as having an effective short-term maturity
[[Page 67050]]
and has previously noted that, unlike other short-term municipal
securities with long-term maturity dates and short-term interest rate
reset periods (such as variable rate demand obligations), auction rate
securities generally do not have ``put'' features or liquidity
facilities that allow holders to tender their securities back to an
issuer-appointed representative on a periodic basis.\15\ Thus, the MSRB
is eliminating the use of the term ``effective maturity'' in the
context of auction rate securities in order to avoid any potential
implication that holders of auction rate securities have assurances of
liquidity on a short-term basis.
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\15\ See MSRB Notice 2008-09 (February 19, 2008), in which the
MSRB published an alert regarding investor protection concerns
arising in the market for auction rate securities after widespread
auction failures began to occur at the beginning of 2008. The MSRB
also published educational information regarding this key difference
in the EMMA Education Center upon launch of the EMMA pilot on March
31, 2008, which states: ``An important distinction between auction
rate securities and variable rate demand obligations is that
investors in auction rate securities do not have a `put' right.
Thus, there is no assurance that the investor will be able to sell
its holdings during an auction. Instead, investors are dependent on
the success of the auction process. Among many other factors, the
pool of purchase bids that may be entered can vary widely from
auction to auction, and bids entered by broker-dealers, banks and
other market professionals that have the effect of supporting market
liquidity, if permitted, generally are not required under the legal
documents and therefore investors cannot be assured that such bids
will be entered in any particular auction. See https://emma.msrb.org/EducationCenter/WhatAreBonds.aspx. The MSRB thereafter launched its
Short-term Obligation Rate Transparency (``SHORT'') system on
January 30, 2009 pursuant to which certain key information regarding
periodic auctions for auction rate securities is made available to
the public through EMMA.
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Effective Date of Proposed Rule Change
The MSRB requested an effective date for the proposed amendments no
later than May 6, 2013, or such earlier date to be announced by the
MSRB in a notice published on the MSRB Web site with at least a thirty
day advance notification prior to the effective date.
2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Exchange Act, 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 and
municipal financial products, to remove impediments to and perfect
the mechanism of a free and open market in municipal securities and
municipal financial products, and, in general, to protect investors,
municipal entities, obligated persons, and the public interest.
The proposed rule change is consistent with Section 15B(b)(2)(C) of
the Exchange Act. There will be significant benefits in integrating the
NIIDS data into the EMMA submission process that will assist in
removing impediments to and perfecting the mechanism of a free and open
market, and that will also improve protections to all market
participants. The current requirement to re-key significant amounts of
information under both Rules G-32 and G-34 is time consuming and this
duplication of effort may increase the possibility of error. In
addition to reducing the submission burden on underwriters, elimination
of this duplicative data entry will result in improved data quality on
EMMA and throughout the marketplace. It will allow both underwriters
and enforcement agencies to concentrate their compliance activities on
ensuring exacting data submissions through this single pipeline through
which data would flow uniformly to EMMA as well as to other market data
vendors receiving the NIIDS subscription feed.
The integration of the NIIDS data into the EMMA submission process
will also accelerate the availability of Form G-32 data on EMMA by
displaying such information in real time upon receipt from NIIDS, which
will occur by no later than two hours after the Time of Formal Award as
provided under Rule G-34, rather than by the close of business on the
date of first execution as currently provided under Rule G-32.
Furthermore, additional NIIDS data elements not currently available
through EMMA, such as the Time of Formal Award and Time of First
Execution as announced by the underwriter, will be displayed on EMMA.
Finally, the proposed rule change eliminates exceptions under Rule
G-34 for submitting data for certain new issues to NIIDS. Thus,
enhanced real-time access to primary market data would become available
to the marketplace, both through NIIDS data disseminated by DTCC to
information vendors and EMMA data disseminated by the MSRB to market
participants and the general public, for a broader scope of new issues
of municipal securities.
B. Self-Regulatory Organization's Statement on Burden on Competition
The MSRB does not believe that the proposed rule change would
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Exchange Act, since it would apply
equally to all dealers that serve as underwriters of new issues of
municipal securities. The enhanced and more timely information flow
resulting from the proposed rule change would make such information
available to all persons on an equal and non-discriminatory basis.
The marketplace and the general public would realize the
substantial benefits of more prompt, more complete and more accurate
information about new issue municipal securities, resulting in greater
marketplace efficiency that enhances liquidity and the quality of
pricing. In addition, the proposed rule change would reduce the burden
on dealers that serve as underwriters for new issues of municipal
securities. Such dealers would benefit from the reduced burden of
significantly diminished levels of duplicative data entry into two
separate information systems--including the burden of entering such
data and of undertaking appropriate quality control--with only a
minimal, one-time burden of reviewing and, if necessary, making minor
modifications to their internal policies and procedures with respect to
data submissions under MSRB rules. In addition to the reduced burden to
dealers resulting from the more efficient use of dealer resources to
ensure the accuracy of data submissions through this single pipeline,
the resultant improvement in data quality upon initial submission would
reduce the burden of making corrections at a later time when errors are
detected by market participants and would reduce the incidence of
potential problems with secondary market activity that can arise from
inaccuracies in the indicative data used by market participants to
price and process transactions.
Some underwriters of new issues bearing short-term interest rates
previously exempted from the NIIDS submission requirements under Rule
G-34 would be required to modify their new issue information
dissemination processes to use NIIDS for such dissemination, rather
than the currently permissible use of other means of announcing
relevant new issue information promptly in a manner reasonably designed
to reach market participants that may trade the new issue. Such
underwriters, however, have not previously been exempted from the EMMA
submission requirements under Rule G-32, and the proposed rule change
would provide for much of the data currently required to be provided
through EMMA under Rule G-32 to instead be provided through NIIDS under
Rule G-34. Thus, such underwriters would realize a reduced burden of
compliance with Rule G-32
[[Page 67051]]
while facing a potential incremental change in the burden under Rule G-
34. Whether such incremental change in burden under Rule G-34 is an
increase or decrease would depend on whether, and to what extent, using
NIIDS to disseminate new issue information is more or less burdensome
than the alternative means currently used by such underwriters to
comply with Rule G-34 and the procedures and processes they currently
maintained for using two or more separate data submission processes for
new issues rather than a single process through NIIDS. If and to the
extent that such balance results in a net burden rather than a net
benefit, the bulk of such net burden likely would occur as up-front
costs of modifying procedures and likely would be minimal on an ongoing
basis.
On balance, the MSRB believes that the benefits of the proposed
rule change greatly exceed any potential increased burden resulting
therefrom.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
On April 10, 2012, the MSRB requested comment on a proposal to
streamline new issue information submission requirements under Rules G-
32 and G-34 by allowing underwriters to satisfy certain of their
submission requirements under Rule G-32 by their submission of data to
NIIDS pursuant to Rule G-34.\16\ Specifically, the MSRB sought comment
on whether: (i) The timeframe under Rule G-32 for submission of data
for issues not subject to the NIIDS requirement or of data elements not
included in NIIDS should be accelerated to coincide with the Time of
First Execution, which typically would be within two-to-four hours
after the Time of Formal Award; \17\ (ii) removing the exception in
NIIDS for certain short-term instruments would present compliance
challenges; (iii) additional items of information available through
NIIDS that are not currently available through EMMA should be added to
the EMMA display; (iv) to extend the business day for purposes of
determining timeframes for compliance with Rule G-34 deadlines; \18\ or
(v) to shorten the time after the formal award occurs for first
executions of transactions and other related timeframes under Rule G-
34. The MSRB received comment letters from the Securities Industry and
Financial Markets Association (``SIFMA'') and TD Securities (USA) LLC
(``TD'').
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\16\ See MSRB Notice 2012-19 (April 10, 2012).
\17\ Rule G-34 generally requires that underwriters submit
required data to NIIDS within two hours of the Time of Formal Award,
and that such NIIDS data be disseminated to the marketplace for at
least two hours prior to the Time of First Execution.
\18\ Rule G-34 currently provides that only the hours between
9:00 a.m. and 5:00 p.m. Eastern Time on a Business Day for the
MSRB's Real-time Transaction Reporting System (RTRS) are used for
purposes of the timeframes set out in the rule.
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Discussion of Comments
SIFMA stated that it ``believe[s] this move towards straight-
through processing will be beneficial for market participants by
reducing transaction costs and increasing data integrity.'' TD stated
that it ``welcome[d] the effort to have one centralized system and one
pass in establishing the information necessary to satisfy the
regulations.'' The MSRB discusses additional comments from these
commenters below.
Accelerating the deadline for completing submission of Form G-32
data not eligible to be submitted to NIIDS. While no written comments
were received on this question, the MSRB understands from conversations
with various industry participants that accelerating the submission
requirements for Form G-32 data not eligible to be submitted to NIIDS
may present compliance challenges for some industry participants,
particularly those that make manual submissions of information to NIIDS
and Form G-32. Thus, the MSRB determined not to accelerate such
timeframes but instead retain the existing timeframe for submission of
those Form G-32 data elements not able to be populated using NIIDS
data. Similarly, for those securities that are not eligible for
submission to NIIDS and therefore would continue to be submitted
through Form G-32, the MSRB is retaining all existing timeframes for
submission.
Removing the exception for certain short term instruments from the
data submission requirements under Rule G-34. SIFMA noted that while
eliminating the exception under Rule G-34 for short term notes with
maturities of nine months or less would not be a challenge, eliminating
the exception for variable rate demand obligations (``VRDOs'') would
present operational challenges. SIFMA noted that daily and weekly VRDOs
are usually priced, allocated, ticketed and settled on the same or next
day. Removing the exception for VRDOs under Rule G-34 would subject
VRDOs to deadlines for both data submission and Time of First Execution
under Rule G-34. As SIFMA noted, issuers and underwriters already
typically agree in advance to a Time of Formal Award to avoid DTCC
disincentive fees for short settlements, which means that underwriters
generally are able to comply with the data submission requirements for
trade eligibility under Rule G-34. Based on additional feedback from
SIFMA, the larger concern results from the fact that purchasers of
VRDOs require same day cash settlement within a short period of time
following time of pricing and formal award and, as a result, the
mandatory minimum two hour time period between Time of Formal Award and
Time of First Execution required by Rule G-34 would present operational
challenges to ensure same day cash settlement.
The purpose of the required two hour advanced notification
timeframe between disseminating NIIDS data and the announced Time of
First Execution is to ensure that dealers with pending trades in new
issues are able to receive and enter into trade processing systems
NIIDS data before the first transactions in the new issue are executed.
For VRDOs, there typically are not multiple dealers with pending
transactions in new issues, so the two hour advanced notification
timeframe is not as important as for other types of new issues with a
broad distribution. However, the MSRB believes that it is important
that as many types of securities as possible benefit from the
centralized data collection and dissemination of information provided
by NIIDS. Accordingly, the proposed rule change removes the exception
for short-term instruments (including VRDOs and auction rate securities
but not including commercial paper) from Rule G-34 with respect to the
requirement to submit information to NIIDS and announce the Time of
Formal Award and Time of First Execution, which can be done within the
existing timeframes of typical VRDO offerings. However, the proposed
rule change also adds a narrow exception from the requirement to
provide a minimum two hours of advance notice of the planned Time of
First Execution for offerings of variable rate instruments with a
planned settlement cycle of one day or less.
Dissemination of Additional NIIDS information on EMMA. SIFMA
supported the dissemination of the Time of First Execution and Time of
Formal Award on EMMA but suggested that the addition of more NIIDS data
to EMMA be carefully considered to avoid obscuring important data.
SIFMA suggested that those that require additional NIIDS data consider
a subscription feed for such data. The MSRB agrees that careful
selection of NIIDs data is necessary and will consider this issue as it
reviews the full range of NIIDS data for potential
[[Page 67052]]
inclusion on EMMA at a future date. The MSRB determined that the only
new data elements from NIIDS to be added to the EMMA display and to the
EMMA primary market subscription product at this time are Time of First
Execution and Time of Formal Award.
Extending Rule G-34 Business Day hours. SIFMA said that, while
expanding the 9:00 a.m. to 5:00 p.m. Eastern timeframe for the
deadlines in Rule G-34 may not be problematic for dealers operating in
the Eastern Time zone, expanding these hours could cause significant
staffing challenges to those dealers operating in other time zones.
SIFMA suggested the MSRB not alter the existing 9:00 a.m. to 5:00 p.m.
Eastern timeframe in Rule G-34. The MSRB decided against changing the
Rule G-34 Business Day hours.
Shortening advanced notification timeframe between the submission
of all data to NIIDS and the Time of First Execution. TD said that the
two hour window between the time of disseminating NIIDS data and first
executions was ``tough enough'' especially for smaller shops that were
limited in staff, and that shortening the time period would create
undue pressure and add little to transparency. SIFMA stated that,
because most dealers receive the NIIDS data from one or more
information providers, the two hour dissemination period is frequently
needed to integrate the data into their own systems, irrespective of
the type of underwriting. However, SIFMA suggested that, where a dealer
has submitted data to NIIDS to make an issue ``trade eligible'' between
3:00 p.m. and 5:00 p.m. on a trading day, Rule G-34's current carry-
forward of the two hour dissemination period through to the first hours
of the following day may not be necessary because the dealer has been
able to disseminate and integrate the data through information
providers overnight. SIFMA therefore suggested that underwriters of any
issue that is made ``trade eligible'' between 3:00 p.m. and 5:00 p.m.
Eastern Time should be permitted to elect to waive the two business
hour dissemination period and set the Time of First Execution to be
9:00 a.m. Eastern Time the following morning.\19\ SIFMA noted that this
option would enable dealers to reduce the risk of carrying these
securities.
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\19\ Currently, an underwriter disseminating NIIDS data at, for
example, 4:00 p.m. Eastern Time would not be able to set a Time of
First Execution for earlier than 10:00 a.m. Eastern Time the
following business day since the two hour advanced notification
timeframe must occur between the hours of 9:00 a.m. to 5:00 p.m.
Eastern Time.
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Recognizing these operational challenges, the MSRB decided against
shortening the required two hour minimum period between the time an
underwriter disseminates NIIDS information and the Time of First
Execution that can be set by an underwriter. However, the MSRB decided
that underwriters setting a Time of First Execution for the business
day following the day NIIDS data is disseminated should be able to set
a Time of First Execution for the following day as early as 9:00 a.m.
Eastern Time without having to wait until the full two-hour period has
elapsed. Acknowledging that dealers would have sixteen hours between
5:00 p.m. Eastern Time and the earliest possible Time of First
Execution at 9:00 a.m. Eastern Time to integrate disseminated NIIDS
data and prepare for the underwriter's announced Time of First
Execution, the MSRB believes that it would be appropriate that
underwriters wanting to set a Time of First Execution as early as 9:00
a.m. Eastern Time should be able to do so.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (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 or disapprove such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Exchange 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 email to rule-comments@sec.gov. Please include
File Number SR-MSRB-2012-08 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-2012-08. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room on official business
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for inspection and copying at the
principal offices 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-2012-08, and should be submitted on or before
November 29, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27266 Filed 11-7-12; 8:45 am]
BILLING CODE 8011-01-P
