Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Establish the 2024 Rate Card Fees for Dealers and Municipal Advisors Pursuant to MSRB Rules A-11 and A-13, 7424-7429 [2024-02069]
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share of executed volume of multiplylisted equity and ETF options trades.18
The Exchange believes that the
proposed changes reflect this
competitive environment because they
modify the Exchange’s fees and rebates
in a manner designed to continue to
incent OTP Holders to direct trading
interest (particularly manual
transactions) to the Exchange, to
provide liquidity and to attract order
flow. To the extent that Floor Brokers
are encouraged to participate in the FB
Prepay Program and/or incented to
utilize the Exchange as a primary
trading venue for all transactions, all of
the Exchange’s market participants
should benefit from the improved
market quality and increased
opportunities for price improvement.
The Exchange further believes that the
proposed change could promote
competition between the Exchange and
other execution venues, including those
that currently offer rebates on manual
transactions by encouraging additional
orders to be sent to the Exchange for
execution.
Finally, the proposed changes to
remove superfluous or obsolete text
from the FB Prepay Program are not
designed to address any competitive
issue but are instead designed to add
clarity, transparency, and internal
consistency to the Fee Schedule.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
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The foregoing rule change is effective
upon filing pursuant to section
19(b)(3)(A) 19 of the Act and
subparagraph (f)(2) of Rule 19b–4 20
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
At any time within 60 days of the
filing of such 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
18 Based on a compilation of OCC data for
monthly volume of equity-based options and
monthly volume of equity-based ETF options, see
id., the Exchange’s market share in equity-based
options decreased from 12.31% for the month of
November 2022 to 11.67% for the month of
November 2023.
19 15 U.S.C. 78s(b)(3)(A).
20 17 CFR 240.19b–4(f)(2).
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public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under section 19(b)(2)(B) 21 of the Act to
determine whether the proposed rule
change should be approved or
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 email to rule-comments@
sec.gov. Please include file number SR–
NYSEARCA–2024–10 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–NYSEARCA–2024–10. 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 website (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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
21 15
PO 00000
U.S.C. 78s(b)(2)(B).
Frm 00072
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withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSEARCA–2024–10 and should be
submitted on or before February 23,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–02062 Filed 2–1–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99444; File No. SR–MSRB–
2023–06]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Suspension of and Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To Establish
the 2024 Rate Card Fees for Dealers
and Municipal Advisors Pursuant to
MSRB Rules A–11 and A–13
January 29, 2024.
I. Introduction
On November 30, 2023, the Municipal
Securities Rulemaking Board (‘‘MSRB’’
or ‘‘Board’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and
Rule 19b–4 thereunder,2 a proposed rule
change (File No. SR–MSRB–2023–06) to
establish the 2024 Rate Card Fees for
Dealers and Municipal Advisors.3 The
proposed rule change was immediately
effective upon filing with the
Commission pursuant to Section
19(b)(3)(A) of the Act.4 The proposed
rule change was published for comment
in the Federal Register on December 12,
2023.5 Pursuant to Section 19(b)(3)(C) of
the Act,6 the Commission is hereby
temporarily suspending File No. SR–
MSRB–2023–06 and instituting
22 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 34–99096
(December 6, 2023), 88 FR 86188 (December 12,
2023) (‘‘Notice’’).
4 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the SRO as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
5 See Notice 88 FR at 86188.
6 15 U.S.C. 78s(b)(3)(C).
1 15
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proceedings to determine whether to
approve or disapprove File No. SR–
MSRB–2023–06.
II. Description of the Proposed Rule
Change
The MSRB filed with the Commission
the proposed rule change to amend,
consistent with the MSRB’s annual ratesetting process (‘‘Annual Rate Card
Process’’): 7 (i) Supplementary Material
.01 to Rule A–11 to modify the rate of
assessment for the annual rate card fees
on municipal advisors for covered
professionals under Rule A–11(b) (the
‘‘Municipal Advisor Professional Fee’’);
and (ii) Supplementary Material .01 to
Rule A–13 to modify the rate of
assessments for the annual rate card fees
on brokers, dealers, and municipal
securities dealers (collectively,
‘‘dealers’’) for certain underwriting fees
under Rule A–13(b), transaction fees
under Rule A–13(d)(i) and (ii), and trade
count fees under Rule A–13(d)(iv)(a)
and (b) (collectively, the ‘‘Market
Activity Fees’’ and, together with the
Municipal Advisor Professional Fee, the
‘‘Rate Card Fees’’).8
In July 2023, the board of directors of
the MSRB approved an annual expense
budget of approximately $47.4 million
for Fiscal Year 2024, which represents
a 4.8% increase over the prior fiscal
year, and established the baseline
revenue that the MSRB will need to
operate (i.e., the ‘‘Operational Funding
Level’’).9 To achieve this Operational
Funding Level, the MSRB proposed Rate
Card Fees in its proposed rule change
allocated based on the following
contribution targets: underwriting fee at
30%; transaction fee at 41%; trade count
fee at 21%; and Municipal Advisor
Professional Fee at 8%.10 This resulted
in Proportional Contribution Amounts
as follows for Fiscal Year 2024:
underwriting fee of $12.15 million;
transaction fee of $16.61 million; trade
count fee of $8.51 million; and
Municipal Advisor Professional Fee of
$3.24 million.11 The proposed rule
change would establish the Municipal
Advisor Professional Fee specified in
Rule A–11 and the Market Activity Fees
specified in Rule A–13 in accordance
with the chart below.12
Current rate
for 2023
Basis
Underwriting Fee ..........................................................
Transaction Fee ............................................................
Trade Count Fee ..........................................................
Municipal Advisor Professional Fee .............................
$1,000 Par Underwritten ........................................
$1,000 Par Transacted ..........................................
Trade ......................................................................
Covered Professional ............................................
$0.0297
0.0107
1.10
1,060
$0.0371
0.0091
0.57
1,160
The Commission received four
comment letters 15 on the proposed rule
change during the comment period. The
Commission’s Office of Municipal
Securities also held a meeting with
representatives of the American
Securities Association (‘‘ASA’’), Bond
Dealers of America (‘‘BDA’’), National
Association of Municipal Advisors
(‘‘NAMA’’), and the Securities Industry
and Financial Markets Association
(‘‘SIFMA’’ and, collectively with ASA,
BDA, and NAMA, the ‘‘Joint
Commenters’’).16 The Commission
received an additional, supplemental
comment letter from SIFMA and BDA
after the comment period had ended.17
On January 26, 2024, the MSRB
responded to the comment letters.18
The Joint Commenters expressed
concern with the proposed rule
change.19 Among other things, the Joint
Commenters expressed concern ‘‘about
the lack of transparency in the
Municipal Securities Rulemaking
Board’s budget and its budgeting
process, and the need for MSRB’s
resources to be directed toward areas
within its statutory authority.’’ 20 The
Joint Commenters described the MSRB’s
budgeting and rate-setting strategy as
‘‘alarmingly opaque and troubling’’ and
lacking detail, particularly in instances
where expenses are not directly tied to
projects aligned with its congressional
mandate.21 For example, the Joint
Commenters cited a portion of the
7 See Notice 88 FR at 86188. See also Exchange
Act Release No. 95417 (Aug. 3, 2022), 87 FR 48530
(Aug. 9, 2022), File No. SR–MSRB–2022–06
(establishing the MSRB’s Annual Rate Card Process
with respect to the setting of certain fee rates each
calendar year (an ‘‘Annual Rate Card’’) and setting
the initial Rate Card Fees through December 31,
2023) (the ‘‘Annual Rate Card Process Notice’’).
8 See Notice 88 FR at 86188. The proposed
amendments to Supplementary Material .01 to Rule
A–11 and Supplementary Material .01 to Rule A–
13 collectively make up the ‘‘proposed rule
change.’’
9 See Notice 88 FR at 86188; MSRB Fiscal Year
2024 Budget, available at https://www.msrb.org/
sites/default/files/2023-09/MSRB-FY-2024-BudgetSummary.pdf.
10 See Notice 88 FR at 86189.
11 Id. According to the MSRB, these contribution
targets were determined by averaging the
distribution of revenue assessed for Rate Card Fees
over the past two fiscal years (Fiscal Year 2022 and
Fiscal Year 2023) and the distribution of revenue
assessed for Rate Card Fees over the past five fiscal
years (Fiscal Year 2019 through Fiscal Year 2023).
These two periods of time were used to reflect a
balance of current market conditions and a longerterm historical precedent. To make the data
comparable across fiscal years, the calculations
were completed using the Market Activity Fee rates
that were in place prior to the 2023 Rate Card,
excluding the impact of the temporary fee
reductions, and calculated as if the Municipal
Advisor Professional Fee rate of $1,000 per covered
professional that was in place for Fiscal Years 2021
and 2022 had been in place for all Fiscal Years used
in the calculations. Resulting contribution targets
were rounded to the nearest whole percent. See also
MSRB Fiscal Year 2024 Budget, available at https://
www.msrb.org/sites/default/files/2023-09/MSRBFY-2024-Budget-Summary.pdf.
12 See Notice 88 FR at 86190.
13 Id. at 86188.
14 Id.
15 See Letter from Leslie M. Norwood, Managing
Director, Associate General Counsel, Securities
Industry and Financial Markets Association, dated
January 2, 2024 (‘‘SIFMA Letter’’); Letter from
Susan Gaffney, Executive Director, National
Association of Municipal Advisors, dated January 2,
2024 (‘‘NAMA Letter’’); Letter from Michael Decker,
Senior Vice President, Research and Public Policy,
Bond Dealers of America, dated January 2, 2024
(‘‘BDA Letter’’); Letter from Jessica Giroux, General
Counsel and Head of Fixed Income Policy,
American Securities Association; Michael Decker,
Senior Vice President for Research and Public
Policy, Bond Dealers of America; Susan Gaffney,
Executive Director, National Association of
Municipal Advisors; and Leslie Norwood,
Managing Director, Associate General Counsel, and
Head of Municipal Securities, Securities and
Financial Markets Association, dated January 2,
2024 (‘‘Joint Letter’’).
16 See Memorandum from the Office of Municipal
Securities regarding a December 11, 2023 meeting
with representatives of the American Securities
Association (ASA), Bond Dealers of America (BDA),
National Association of Municipal Advisors
(NAMA), and Securities Industry and Financial
Markets Association (SIFMA), dated December 11,
2023 (‘‘OMS Memo’’).
17 See Letter from Michael Decker, Senior Vice
President, Bond Dealers of America and Leslie
Norwood, Managing Director and Associate General
Counsel, Securities and Financial Markets
Association, dated January 24, 2024
(‘‘Supplemental Letter’’).
18 See Letter from Ernesto A. Lanza, Chief
Regulatory and Policy Officer, Municipal Securities
Rulemaking Board, dated January 26, 2024 (‘‘MSRB
Letter’’).
19 Joint Letter at 1–2.
20 Id. at 1.
21 Id.
The MSRB designated the proposed
rule change for immediate
effectiveness.13 The new Rate Card Fees
reflected in the proposed rule change
became effective as of January 1, 2024.14
III. Summary of Comments Received to
the Proposed Rule Change
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Per
Per
Per
Per
Proposed rate
for 2024
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MSRB’s budget that highlights
technology initiatives, but that lacks
specificity regarding those initiatives,
including their costs and their
alignment with the MSRB’s role as a
repository for disclosure documents.22
Without such information, it is difficult,
the Joint Commenters believe, for
regulated entities to assess whether the
fees assessed in the proposed rule
change are ‘‘reasonable’’ as required
under the Exchange Act.23
BDA expressed concern over the
MSRB’s approach to fee setting, and
believes that the Board’s budget process
is opaque with little to no outside
oversight over the MSRB’s spending.24
BDA stated that it would like to see the
MSRB provide more transparency into
its budgeting process and setting budget
priorities, particularly regarding the
MSRB’s focus on IT development and
maintenance, which comprises 56
percent of the MSRB budget.25 BDA is
also concerned that the MSRB has
provided no justification in its proposed
rule change for imposing fee increases
that BDA believes impose a ‘‘heavy’’
burden on dealers.26
NAMA expressed concern with the
MSRB’s approach to budgeting and rate
setting to accommodate its budget.27 In
particular, NAMA noted that ‘‘it is
difficult to know if MSRB fees are set at
a reasonable rate (a MSRB responsibility
within SEC Rule 15B) when the MSRB’s
budget is so opaque.’’ 28 As one
example, NAMA cited the lack of cost
information and sufficient detail in the
MSRB’s budget to demonstrate whether
its emphasis on technology systems
supports its congressional mandate.29
NAMA believes there is ‘‘insufficient
detail within the budget to allow
regulated parties (who pay for these
activities) the opportunity to
appropriately evaluate, address or
question the fees assessed to meet the
MSRB’s budget needs.’’ 30
SIFMA expressed concern that the
proposed rule change does not provide
adequate transparency on the MSRB’s
rate setting process, reflects significant
fee volatility, and fails to address flaws
in the rate setting process that could
create market harms.31 Regarding fee
volatility, SIFMA noted that the
underwriting fee has been increased
25% and the trade count fee reduced by
48%, yet the MSRB failed to explain
why it believes this volatility in fee rates
will not be repeated in subsequent
years.32 Regarding transparency, SIFMA
expressed concern that the MSRB’s
proposed rule change includes
‘‘significant and material changes’’ to its
fee structure, yet the MSRB gave
regulated entities its first official
description of the amount of those
changes a mere three weeks before they
became effective.33 Regarding market
harms, SIFMA noted that the MSRB is
proposing to increase underwriting fees
even as new issuance has decreased this
past year, which could hurt the viability
of the municipal marketplace.34
In their Supplemental Letter, SIFMA
and BDA argued that although they have
raised concerns about the MSRB’s
budgeting and fee setting processes, the
Commission should allow the proposed
rule change to take effect without any
changes.35 SIFMA and BDA expressed
concern that suspending the proposed
rule change could be ‘‘operationally
disruptive’’ for dealers and would leave
transactional fees ‘‘in limbo’’ until a
2024 Rate Card is approved.36 SIFMA
and BDA noted that they have had
preliminary conversations with the
MSRB about its budget and fee setting
processes and will continue to press the
MSRB as it works on its 2025 Budget.37
The MSRB argued that its 2024
Budget ‘‘provides sufficient basis to
evaluate the reasonableness of the 2024
Rate Card Fees’’ and urged the
Commission not to suspend the
proposed rule change.38 The MSRB also
outlined its plan for an ongoing process
of ‘‘engagement’’ which would include:
(i) a retrospective review of the Rate
Card Process; (ii) instituting certain
financial transparency enhancements,
including more granular details
regarding key technology services and
initiatives; and (iii) developing avenues
to provide municipal market
participants an opportunity to offer
input to the MSRB in advance of
finalization of annual budgets.39
The MSRB stated that its retrospective
review of the Rate Card Process will
consider the appropriateness of
instituting caps on fee changes more
broadly or other means to limit the
magnitude of year-to-year fee changes.40
The retrospective review also ‘‘could
reconsider’’ a revenue-based or
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22 Id.
23 Id.
32 Id.
24 BDA
33 Id.
at 2.
at 3.
34 Id. at 4.
35 Supplemental Letter at 1.
36 Id.
37 Id.
38 MSRB Letter at 10.
39 Id. at 1–2.
40 Id. at 3–4.
Letter at 1.
25 Id. at 2–3.
26 Id. at 1–2.
27 NAMA Letter at 1–2.
28 Id. at 1.
29 Id. at 1–2.
30 Id. at 2.
31 SIFMA Letter at 1.
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transaction volume-based fee
assessment model.41
Regarding financial transparency, the
MSRB cited Section IV of its 2024
Budget Summary as an example of its
‘‘granular breakdown’’ of program
expenditures and stated that it will seek
feedback on whether this ‘‘additional
information’’ is responsive to
commenters’ requests for greater detail
about the MSRB’s budget areas and
initiatives.42 The MSRB stated that it
would develop ‘‘reasonable allocation
assumptions’’ to aid in the
understanding of its technology systemrelated expenses.43 The MSRB also
stated that it will ‘‘explore other
possible avenues’’ for improving the
transparency of its technology
initiatives and priorities and believes
that all such expenditures are within the
MSRB’s legal authority.44
Regarding input from market
participants, the MSRB stated that it
‘‘looks to provide’’ opportunities for
market participants to provide input
and ‘‘could consider’’ a more formalized
survey of market participants during the
rate setting process.45
IV. Suspension of the Proposed Rule
Change
Pursuant to Section 19(b)(3)(C) of the
Act,46 at any time within 60 days of the
date of filing of an immediately effective
proposed rule change pursuant to
Section 19(b)(1) of the Act,47 the
Commission summarily may
temporarily suspend the change in the
rules of a self-regulatory organization
(‘‘SRO’’) 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. As described below, the
Commission believes a temporary
suspension of the proposed rule change
is necessary or appropriate to allow for
additional analysis of the proposed rule
change’s consistency with the Act and
the rules thereunder.
When SROs file their proposed rule
changes with the Commission,
including fee filings like the MSRB’s
present proposed rule change, they are
required to provide a statement
supporting the proposed rule change’s
basis under the Act and the rules and
regulations thereunder applicable to the
41 Id.
at 4–5.
at 5–6.
43 Id. at 6–7.
44 Id. at 7–8.
45 Id. at 8–9.
46 15 U.S.C. 78s(b)(3)(C).
47 15 U.S.C. 78s(b)(1).
42 Id.
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SRO.48 The instructions to Form 19b–4,
on which SROs file their proposed rule
changes, specify that such statement
‘‘should be sufficiently detailed and
specific to support a finding that the
proposed rule change is consistent with
[those] requirements.’’ 49
Among other things, the MSRB’s
proposed rule change is subject to
Section 15B(b)(2)(J) of the Exchange
Act,50 which states that the MSRB’s
rules shall provide that each municipal
securities broker, municipal securities
dealer, and municipal advisor shall pay
to the MSRB such reasonable fees and
charges as may be necessary or
appropriate to defray the costs and
expenses of operating and administering
the MSRB.51 Such rules must specify
the amount of such fees and charges,
which may include charges for failure to
submit to the MSRB, or to any
information system operated by the
MSRB, within the prescribed
timeframes, any items of information or
documents required to be submitted
under any rule issued by the MSRB.52
The MSRB’s proposed rule change also
is subject to Section 15B(b)(2)(C) of the
Exchange Act,53 which states, among
other things, that the MSRB’s rules shall
be designed, in general, to protect
investors, municipal entities, obligated
persons, and the public interest.
In support of its proposed rule
change, the MSRB stated that the
proposed rule change satisfies the
requirements of Section 15B(b)(2)(J)
‘‘through a reasonable fee structure that
ensures (i) an equitable balance of
necessary and appropriate fees among
regulated entities and (ii) a fair
allocation of the burden of defraying the
costs and expenses of the MSRB.’’ 54
Specifically, the MSRB believes that the
2024 Rate Card ‘‘will achieve reasonable
fees to be paid by regulated entities that
(i) are necessary and appropriate to
sustain the operation and
administration of the MSRB by
defraying the MSRB’s anticipated Fiscal
Year 2024 operating and administrative
expenses; (ii) reasonably and
appropriately allocate fees among firms
by equitably distributing fees in
accordance with each individual firm’s
overall market activities; and (iii)
reasonably and appropriately adjust for
the annual fluctuations in the volume of
48 See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose
of, and Statutory Basis for, the Proposed Rule
Change’’).
49 See id.
50 15 U.S.C. 78o–4(b)(2)(J).
51 Id.
52 Id.
53 15 U.S.C. 78o–4(b)(2)(C).
54 Notice 88 FR at 86191.
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market activity as compared to budget
expectation by incorporating the actual
amounts of Market Activity Fees and
Municipal Advisor Professional Fees
collected as compared to budget into
this and future rate-setting
processes.’’ 55 The MSRB provided
additional support for the
reasonableness of the proposed rule
change in the MSRB Letter.56 However,
due to the date of receipt of the MSRB
Letter (i.e., late afternoon one business
day before the suspension deadline), the
Commission has not had sufficient time
to evaluate the material included
therein. Temporary suspension will
allow for additional analysis of whether
the MSRB Fiscal Year 2024 Budget is
reasonable and whether the proposed
rule change provides for reasonable fees
and charges that satisfy the standards
under the Act and the rules thereunder.
In temporarily suspending the
MSRB’s proposed rule change, the
Commission intends to further consider
whether the proposed fees and charges
are consistent with the statutory
requirements applicable to the MSRB
under the Act. Among other things, the
Commission will consider whether the
proposed rule change provides for
reasonable fees and charges that satisfy
the standards under the Act and the
rules thereunder.57 The Commission
will also consider whether the fees and
charges in the proposed rule change are
necessary or appropriate to defray the
costs and expenses of operating and
administering the MSRB,58 including
whether such costs and expenses, as set
forth in the MSRB’s Fiscal Year 2024
Budget, are themselves reasonable.
Additionally, the Commission will
consider whether the fees and charges
in the proposed rule change are in the
public interest.59
Therefore, the Commission finds that
it is necessary or appropriate in the
public interest, for the protection of
investors, and otherwise in furtherance
of the purposes of the Act, to
temporarily suspend the proposed rule
change.60
V. Proceedings To Determine Whether
To Approve or Disapprove the
Proposed Rule Change
In addition to temporarily suspending
the proposal, the Commission also
55 Id.
56 MSRB
57 15
Letter.
U.S.C. 78o–4(b)(2)(J).
58 Id.
59 15
U.S.C. 78o–4(b)(2)(C).
purposes of temporarily suspending the
proposed rule change, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
60 For
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hereby institutes proceedings pursuant
to Sections 19(b)(3)(C) 61 and
19(b)(2)(B) 62 of the Act to determine
whether the proposed rule change
should be approved or disapproved.
Institution of such proceedings is
appropriate at this time in view of the
legal and policy issues raised by the
proposed rule change. Institution of
proceedings does not indicate that the
Commission has reached any
conclusions with respect to any of the
issues involved. Rather, as described
below, the Commission seeks and
encourages interested persons to
provide comments on the proposed rule
change to inform the Commission’s
analysis of whether to approve or
disapprove the proposed rule change.
Pursuant to Section 19(b)(2)(B) of the
Act,63 the Commission is providing
notice of the grounds for possible
disapproval under consideration. The
Commission is instituting proceedings
to allow for additional analysis of
whether the MSRB has sufficiently
demonstrated how the proposed rule
change is consistent with Sections
15B(b)(2)(J) and 15B(b)(2)(C) of the
Act.64 Section 15B(b)(2)(J) of the Act
states that the MSRB’s rules shall
provide that each municipal securities
broker, municipal securities dealer, and
municipal advisor shall pay to the
MSRB such reasonable fees and charges
as may be necessary or appropriate to
defray the costs and expenses of
operating and administering the
MSRB.65 Such rules must specify the
amount of such fees and charges, which
may include charges for failure to
submit to the MSRB, or to any
information system operated by the
MSRB, within the prescribed
timeframes, any items of information or
documents required to be submitted
under any rule issued by the MSRB.66
Section 15B(b)(2)(C) of the Exchange
Act 67 states, among other things, that
61 15 U.S.C. 78s(b)(3)(C). Once the Commission
temporarily suspends a proposed rule change,
Section 19(b)(3)(C) of the Act requires that the
Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule
change should be approved or disapproved.
62 15 U.S.C. 78s(b)(2)(B).
63 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the
Act also provides that proceedings to determine
whether to disapprove a proposed rule change must
be concluded within 180 days of the date of
publication of notice of the filing of the proposed
rule change. See id. The time for conclusion of the
proceedings may be extended for up to 60 days if
the Commission finds good cause for such
extension and publishes its reasons for so finding,
or if the SRO consents to the longer period. See id.
64 15 U.S.C. 78o–4(b)(2)(J).
65 Id.
66 Id.
67 15 U.S.C. 78o–4(b)(2)(C).
E:\FR\FM\02FEN1.SGM
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7428
Federal Register / Vol. 89, No. 23 / Friday, February 2, 2024 / Notices
the MSRB’s rules shall be designed, in
general, to protect investors, municipal
entities, obligated persons, and the
public interest.
As discussed in Section IV above, the
Notice, and the MSRB Letter, the MSRB
has made various arguments in support
of the proposals, and the Commission
received comment letters disputing the
MSRB’s arguments and expressing
concerns regarding the proposals.68 In
particular, commenters argued that the
MSRB did not provide sufficient
information to establish that the
proposed fees and charges are consistent
with the Act and the rules thereunder.69
Under the Commission’s Rules of
Practice, the ‘‘burden to demonstrate
that a proposed rule change is
consistent with the [Act] and the rules
and regulations issued thereunder . . .
is on the [SRO] that proposed the rule
change.’’ 70 The description of a
proposed rule change, its purpose and
operation, its effect, and a legal analysis
of its consistency with applicable
requirements must all be sufficiently
detailed and specific to support an
affirmative Commission finding,71 and
any failure of an SRO to provide this
information may result in the
Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Act and the applicable rules
and regulations.72 Moreover,
‘‘unquestioning reliance’’ on an SRO’s
representations in a proposed rule
change would not be sufficient to justify
Commission approval of a proposed rule
change.73
The Commission believes it is
appropriate to institute proceedings to
allow for additional consideration and
comment on the issues raised herein,
including as to whether the proposed
fees and charges are consistent with the
Act, any potential comments or
supplemental information provided by
the MSRB, and any additional
independent analysis by the
Commission.
V. Commission’s Solicitation of
Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
khammond on DSKJM1Z7X2PROD with NOTICES
68 See
supra note 15.
69 See discussion supra Section III.
70 Rule 700(b)(3), Commission Rules of Practice,
17 CFR 201.700(b)(3).
71 See id.
72 See id.
73 See Susquehanna Int’l Group, LLP v. Securities
and Exchange Commission, 866 F.3d 442, 446–47
(D.C. Cir. 2017) (rejecting the Commission’s reliance
on an SRO’s own determinations without sufficient
evidence of the basis for such determinations).
VerDate Sep<11>2014
17:08 Feb 01, 2024
Jkt 262001
arguments with respect to the concerns
and issues identified above, as well as
any other relevant concerns. In
particular, the Commission invites the
written views of interested persons
concerning whether the proposal is
consistent with Section 15B(b)(2)(J),
Section 15B(b)(2)(C), or any other
provision of the Act, or the rules and
regulations thereunder. The
Commission asks that commenters
address the sufficiency and merit of the
MSRB’s statements in support of the
proposal, in addition to any other
comments they may wish to submit
about the proposed rule change. The
Commission also invites the written
views of interested persons on: (i) what
process the MSRB should undertake to
ensure that the fees assessed in its Rate
Card filing and underlying Budget are
both reasonable and capable of
meaningful evaluation by the public,
market participants, and the
Commission; (ii) what specific data and
information the MSRB should publicly
disclose (that it does not currently
publicly disclose); (iii) when the MSRB
should file its Rate Card each year; (iv)
whether the MSRB’s representations
about the cost, functionality, and
evolution of the EMMA system have
been consistent with actual practice in
the years since EMMA was adopted; and
(v) what general steps could be taken in
the future to minimize the potential
operational disruption caused by either
the Commission suspending a Rate Card
filing or a Rate Card otherwise not being
effective on January 1 of the calendar
year. Although there do not appear to be
any issues relevant to approval or
disapproval that would be facilitated by
an oral presentation of views, data, and
arguments, the Commission will
consider, pursuant to Rule 19b–4, any
request for an opportunity to make an
oral presentation.74
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposal should be approved or
disapproved by February 23, 2024. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by March 8, 2024.
Comments may be submitted by any
of the following methods:
74 Section
19(b)(2) of the Exchange Act, as
amended by the Securities Act Amendments of
1975, Public Law 94–29 (June 4, 1975), grants the
Commission flexibility to determine what type of
proceeding—either oral or notice and opportunity
for written comments—is appropriate for
consideration of a particular proposal by a selfregulatory organization. See Securities Act
Amendments of 1975, Senate Comm. on Banking,
Housing & Urban Affairs, S. Rep. No. 75, 94th
Cong., 1st Sess. 30 (1975).
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
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–2023–06 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MSRB–2023–06. 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 website (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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the MSRB. Do not include
personal identifiable information in
submissions; you should submit only
information that you wish to make
available publicly. We may redact in
part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–MSRB–2023–06 and
should be submitted on or before
February 23, 2024. Rebuttal comments
should be submitted by March 8, 2024.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(3)(C) of the Act,75 that File
No. SR–MSRB–2023–06 be, and hereby
is, temporarily suspended. In addition,
the Commission is instituting
proceedings to determine whether the
proposed rule change should be
approved or disapproved.
75 15
E:\FR\FM\02FEN1.SGM
U.S.C. 78s(b)(3)(C).
02FEN1
Federal Register / Vol. 89, No. 23 / Friday, February 2, 2024 / Notices
For the Commission, pursuant to delegated
authority.76
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–02069 Filed 2–1–24; 8:45 am]
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99440; File No. SR–
NYSEARCA–2024–10]
1. Purpose
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Modify the NYSE Arca
Options Fee Schedule
January 29, 2024.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on January
25, 2024, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. 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 Exchange proposes to modify the
NYSE Arca Options Fee Schedule (‘‘Fee
Schedule’’) regarding the Floor Broker
Fixed Cost Prepayment Incentive
Program (the ‘‘FB Prepay Program’’).
The Exchange proposes to implement
the fee change effective January 25,
2024.4 The proposed rule change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
khammond on DSKJM1Z7X2PROD with NOTICES
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
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
76 17
CFR 200.30–3(a)(11) and (12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 The Exchange originally filed to amend the Fee
Schedule on January 2, 2024 (NYSEArca–2023–90)
[sic] and withdrew such filing on January 12, 2024
(SR–NYSEArca–2024–07) [sic], which latter filing
the Exchange withdrew on January 25, 2024.
1 15
VerDate Sep<11>2014
17:08 Feb 01, 2024
Jkt 262001
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
The purpose of this filing is to amend
the Fee Schedule to modify the FB
Prepay Program. The Exchange proposes
to implement the rule change on
January 25, 2024.
The FB Prepay Program is a
prepayment incentive program that
allows Floor Brokers to prepay certain
of their annual Eligible Fixed Costs in
exchange for volume rebates.
Participating Floor Brokers receive their
monthly rebate amount on a monthly
basis.5 All Floor Brokers that participate
in the FB Prepay Program are eligible for
a rebate on manual billable volume of
($0.08) per billable side, payable on a
monthly basis. In addition, FB Prepay
Program participants that achieve more
than 500,000 billable sides in a month
are eligible for an additional rebate of
($0.02) per billable side. The additional
($0.02) is retroactive to the first billable
side. Manual billable volume includes
transactions for which at least one side
is subject to manual transaction fees and
excludes QCCs. Any volume calculated
to achieve the Limit of Fees on Options
Strategy Executions (‘‘Strategy Cap’’),
regardless of whether this cap is
achieved, is likewise excluded from the
Manual Billable Rebate Program because
fees on such volume are already capped
and therefore such volume does not
increase billable manual volume. The
Exchange notes that it places a
$2,000,000 per firm, monthly maximum
limit on the rebates earned through the
Manual Billable Rebate Program when
combined with ‘‘Submitting Broker QCC
Credits.’’ 6
5 See Fee Schedule, Floor Broker Fixed Cost
Prepayment Incentive Program (the ‘‘FB Prepay
Program’’). The Exchange notes that the FB Prepay
Program is currently structured similarly to the
Floor Broker prepayment program offered by its
affiliated exchange, NYSE American LLC (‘‘NYSE
American’’).
6 See Fee Schedule, FB Prepay Program, endnote
17 (providing in relevant part that ‘‘Submitting
Broker QCC credits and Floor Broker rebates earned
through the Manual Billable Rebate Program shall
not combine to exceed $2,500,000 per month per
firm’’). A ‘‘Submitting Broker QCC credit’’ is
available to any broker submitting a QCC
transaction to the Exchange (a ‘‘Submitting
Broker’’), whether the broker is a Floor Broker on
the Trading Floor or a broker that enters orders
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
7429
Floor Brokers that wish to participate
in the FB Prepay Program for the
following calendar year must notify the
Exchange no later than the last business
day of December in the current year.7
The Exchange does not issue any
refunds in the event that a Floor Broker
organization’s prepaid Eligible Fixed
Costs exceeds actual costs.
The Exchange proposes to modify the
FB Prepay Program as follows. First, the
Exchange proposes to increase the
maximum allowable combined
Submitting Broker QCC credits and
Floor Broker rebates earned through the
Manual Billable Rebate Program (the
‘‘Maximum Combined Rebate/Credit’’)
to $2,500,000 per month per firm, an
increase from the current maximum of
$2,000,000. The proposed increase is
designed to encourage Floor Broker
firms to continue to direct transactions
to the Exchange, despite increasing
industry volumes making it less difficult
to attain the maximum rebate.
Next, the Exchange proposes to
modify the FB Prepay Program to
remove reference to a specific year (i.e.,
November 2022) and to instead
reference ‘‘November of the current
year’’ as the date that the Exchange will
use for the calculation of a Floor
Broker’s Eligible Fixed Costs for the
following calendar year. The FB Prepay
Program currently specifies that a Floor
Broker that commits to the program will
be invoiced in January for Eligible Fixed
Costs, based on annualizing their
Eligible Fixed Costs incurred in
November 2022. The Exchange believes
that this proposed change would
prevent the Exchange from relying on a
stale date and would add flexibility to
the program (insofar as it would not
need to be revised each year).
Finally, the Exchange proposes to
allow a Floor Broker to join the Program
after the first of the year To do so,
electronically through an interface with the
Exchange. The Exchange provides a ($0.22) per
contract credits to Submitting Brokers for NonCustomer vs.Non-Customer QCC transactions and a
($0.16) per contract credit to Submitting Brokers for
Customer vs. Non-Customer QCC transactions. See
Fee Schedule, NYSE Arca OPTIONS: TRADERELATED CHARGES FOR STANDARD OPTIONS,
QUALIFIED CONTINGENT CROSS (‘‘QCC’’)
TRANSACTION FEES AND CREDITS.
7 See Fee Schedule, FB Prepay Program
(providing, in relevant part, that the notification
‘‘email to enroll in the Program must originate from
an officer of the Floor Broker organization and,
except as provided for below, represents a binding
commitment through the end of the following
calendar year.’’). The Exchange proposes to modify
Section III.E. [sic] of the Fee Schedule to remove the
now obsolete phrase ‘‘except as provided for
below,’’ as there is no exception to the notification
requirement, which modification will add clarity,
transparency, and internal consistency to the Fee
Schedule. See proposed Fee Schedule, FB Prepay
Program.
E:\FR\FM\02FEN1.SGM
02FEN1
]]>Agencies
[Federal Register Volume 89, Number 23 (Friday, February 2, 2024)]
[Notices]
[Pages 7424-7429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-02069]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99444; File No. SR-MSRB-2023-06]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Suspension of and Order Instituting Proceedings To Determine
Whether To Approve or Disapprove a Proposed Rule Change To Establish
the 2024 Rate Card Fees for Dealers and Municipal Advisors Pursuant to
MSRB Rules A-11 and A-13
January 29, 2024.
I. Introduction
On November 30, 2023, the Municipal Securities Rulemaking Board
(``MSRB'' or ``Board'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and
Rule 19b-4 thereunder,\2\ a proposed rule change (File No. SR-MSRB-
2023-06) to establish the 2024 Rate Card Fees for Dealers and Municipal
Advisors.\3\ The proposed rule change was immediately effective upon
filing with the Commission pursuant to Section 19(b)(3)(A) of the
Act.\4\ The proposed rule change was published for comment in the
Federal Register on December 12, 2023.\5\ Pursuant to Section
19(b)(3)(C) of the Act,\6\ the Commission is hereby temporarily
suspending File No. SR-MSRB-2023-06 and instituting
[[Page 7425]]
proceedings to determine whether to approve or disapprove File No. SR-
MSRB-2023-06.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 34-99096 (December 6,
2023), 88 FR 86188 (December 12, 2023) (``Notice'').
\4\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take
effect upon filing with the Commission if it is designated by the
SRO as ``establishing or changing a due, fee, or other charge
imposed by the self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory organization.''
15 U.S.C. 78s(b)(3)(A)(ii).
\5\ See Notice 88 FR at 86188.
\6\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The MSRB filed with the Commission the proposed rule change to
amend, consistent with the MSRB's annual rate-setting process (``Annual
Rate Card Process''): \7\ (i) Supplementary Material .01 to Rule A-11
to modify the rate of assessment for the annual rate card fees on
municipal advisors for covered professionals under Rule A-11(b) (the
``Municipal Advisor Professional Fee''); and (ii) Supplementary
Material .01 to Rule A-13 to modify the rate of assessments for the
annual rate card fees on brokers, dealers, and municipal securities
dealers (collectively, ``dealers'') for certain underwriting fees under
Rule A-13(b), transaction fees under Rule A-13(d)(i) and (ii), and
trade count fees under Rule A-13(d)(iv)(a) and (b) (collectively, the
``Market Activity Fees'' and, together with the Municipal Advisor
Professional Fee, the ``Rate Card Fees'').\8\
---------------------------------------------------------------------------
\7\ See Notice 88 FR at 86188. See also Exchange Act Release No.
95417 (Aug. 3, 2022), 87 FR 48530 (Aug. 9, 2022), File No. SR-MSRB-
2022-06 (establishing the MSRB's Annual Rate Card Process with
respect to the setting of certain fee rates each calendar year (an
``Annual Rate Card'') and setting the initial Rate Card Fees through
December 31, 2023) (the ``Annual Rate Card Process Notice'').
\8\ See Notice 88 FR at 86188. The proposed amendments to
Supplementary Material .01 to Rule A-11 and Supplementary Material
.01 to Rule A-13 collectively make up the ``proposed rule change.''
---------------------------------------------------------------------------
In July 2023, the board of directors of the MSRB approved an annual
expense budget of approximately $47.4 million for Fiscal Year 2024,
which represents a 4.8% increase over the prior fiscal year, and
established the baseline revenue that the MSRB will need to operate
(i.e., the ``Operational Funding Level'').\9\ To achieve this
Operational Funding Level, the MSRB proposed Rate Card Fees in its
proposed rule change allocated based on the following contribution
targets: underwriting fee at 30%; transaction fee at 41%; trade count
fee at 21%; and Municipal Advisor Professional Fee at 8%.\10\ This
resulted in Proportional Contribution Amounts as follows for Fiscal
Year 2024: underwriting fee of $12.15 million; transaction fee of
$16.61 million; trade count fee of $8.51 million; and Municipal Advisor
Professional Fee of $3.24 million.\11\ The proposed rule change would
establish the Municipal Advisor Professional Fee specified in Rule A-11
and the Market Activity Fees specified in Rule A-13 in accordance with
the chart below.\12\
---------------------------------------------------------------------------
\9\ See Notice 88 FR at 86188; MSRB Fiscal Year 2024 Budget,
available at https://www.msrb.org/sites/default/files/2023-09/MSRB-FY-2024-Budget-Summary.pdf.
\10\ See Notice 88 FR at 86189.
\11\ Id. According to the MSRB, these contribution targets were
determined by averaging the distribution of revenue assessed for
Rate Card Fees over the past two fiscal years (Fiscal Year 2022 and
Fiscal Year 2023) and the distribution of revenue assessed for Rate
Card Fees over the past five fiscal years (Fiscal Year 2019 through
Fiscal Year 2023). These two periods of time were used to reflect a
balance of current market conditions and a longer-term historical
precedent. To make the data comparable across fiscal years, the
calculations were completed using the Market Activity Fee rates that
were in place prior to the 2023 Rate Card, excluding the impact of
the temporary fee reductions, and calculated as if the Municipal
Advisor Professional Fee rate of $1,000 per covered professional
that was in place for Fiscal Years 2021 and 2022 had been in place
for all Fiscal Years used in the calculations. Resulting
contribution targets were rounded to the nearest whole percent. See
also MSRB Fiscal Year 2024 Budget, available at https://www.msrb.org/sites/default/files/2023-09/MSRB-FY-2024-Budget-Summary.pdf.
\12\ See Notice 88 FR at 86190.
----------------------------------------------------------------------------------------------------------------
Current rate Proposed rate
Basis for 2023 for 2024
----------------------------------------------------------------------------------------------------------------
Underwriting Fee.............................. Per $1,000 Par Underwritten..... $0.0297 $0.0371
Transaction Fee............................... Per $1,000 Par Transacted....... 0.0107 0.0091
Trade Count Fee............................... Per Trade....................... 1.10 0.57
Municipal Advisor Professional Fee............ Per Covered Professional........ 1,060 1,160
----------------------------------------------------------------------------------------------------------------
The MSRB designated the proposed rule change for immediate
effectiveness.\13\ The new Rate Card Fees reflected in the proposed
rule change became effective as of January 1, 2024.\14\
---------------------------------------------------------------------------
\13\ Id. at 86188.
\14\ Id.
---------------------------------------------------------------------------
III. Summary of Comments Received to the Proposed Rule Change
The Commission received four comment letters \15\ on the proposed
rule change during the comment period. The Commission's Office of
Municipal Securities also held a meeting with representatives of the
American Securities Association (``ASA''), Bond Dealers of America
(``BDA''), National Association of Municipal Advisors (``NAMA''), and
the Securities Industry and Financial Markets Association (``SIFMA''
and, collectively with ASA, BDA, and NAMA, the ``Joint
Commenters'').\16\ The Commission received an additional, supplemental
comment letter from SIFMA and BDA after the comment period had
ended.\17\ On January 26, 2024, the MSRB responded to the comment
letters.\18\
---------------------------------------------------------------------------
\15\ See Letter from Leslie M. Norwood, Managing Director,
Associate General Counsel, Securities Industry and Financial Markets
Association, dated January 2, 2024 (``SIFMA Letter''); Letter from
Susan Gaffney, Executive Director, National Association of Municipal
Advisors, dated January 2, 2024 (``NAMA Letter''); Letter from
Michael Decker, Senior Vice President, Research and Public Policy,
Bond Dealers of America, dated January 2, 2024 (``BDA Letter'');
Letter from Jessica Giroux, General Counsel and Head of Fixed Income
Policy, American Securities Association; Michael Decker, Senior Vice
President for Research and Public Policy, Bond Dealers of America;
Susan Gaffney, Executive Director, National Association of Municipal
Advisors; and Leslie Norwood, Managing Director, Associate General
Counsel, and Head of Municipal Securities, Securities and Financial
Markets Association, dated January 2, 2024 (``Joint Letter'').
\16\ See Memorandum from the Office of Municipal Securities
regarding a December 11, 2023 meeting with representatives of the
American Securities Association (ASA), Bond Dealers of America
(BDA), National Association of Municipal Advisors (NAMA), and
Securities Industry and Financial Markets Association (SIFMA), dated
December 11, 2023 (``OMS Memo'').
\17\ See Letter from Michael Decker, Senior Vice President, Bond
Dealers of America and Leslie Norwood, Managing Director and
Associate General Counsel, Securities and Financial Markets
Association, dated January 24, 2024 (``Supplemental Letter'').
\18\ See Letter from Ernesto A. Lanza, Chief Regulatory and
Policy Officer, Municipal Securities Rulemaking Board, dated January
26, 2024 (``MSRB Letter'').
---------------------------------------------------------------------------
The Joint Commenters expressed concern with the proposed rule
change.\19\ Among other things, the Joint Commenters expressed concern
``about the lack of transparency in the Municipal Securities Rulemaking
Board's budget and its budgeting process, and the need for MSRB's
resources to be directed toward areas within its statutory authority.''
\20\ The Joint Commenters described the MSRB's budgeting and rate-
setting strategy as ``alarmingly opaque and troubling'' and lacking
detail, particularly in instances where expenses are not directly tied
to projects aligned with its congressional mandate.\21\ For example,
the Joint Commenters cited a portion of the
[[Page 7426]]
MSRB's budget that highlights technology initiatives, but that lacks
specificity regarding those initiatives, including their costs and
their alignment with the MSRB's role as a repository for disclosure
documents.\22\ Without such information, it is difficult, the Joint
Commenters believe, for regulated entities to assess whether the fees
assessed in the proposed rule change are ``reasonable'' as required
under the Exchange Act.\23\
---------------------------------------------------------------------------
\19\ Joint Letter at 1-2.
\20\ Id. at 1.
\21\ Id.
\22\ Id.
\23\ Id.
---------------------------------------------------------------------------
BDA expressed concern over the MSRB's approach to fee setting, and
believes that the Board's budget process is opaque with little to no
outside oversight over the MSRB's spending.\24\ BDA stated that it
would like to see the MSRB provide more transparency into its budgeting
process and setting budget priorities, particularly regarding the
MSRB's focus on IT development and maintenance, which comprises 56
percent of the MSRB budget.\25\ BDA is also concerned that the MSRB has
provided no justification in its proposed rule change for imposing fee
increases that BDA believes impose a ``heavy'' burden on dealers.\26\
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\24\ BDA Letter at 1.
\25\ Id. at 2-3.
\26\ Id. at 1-2.
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NAMA expressed concern with the MSRB's approach to budgeting and
rate setting to accommodate its budget.\27\ In particular, NAMA noted
that ``it is difficult to know if MSRB fees are set at a reasonable
rate (a MSRB responsibility within SEC Rule 15B) when the MSRB's budget
is so opaque.'' \28\ As one example, NAMA cited the lack of cost
information and sufficient detail in the MSRB's budget to demonstrate
whether its emphasis on technology systems supports its congressional
mandate.\29\ NAMA believes there is ``insufficient detail within the
budget to allow regulated parties (who pay for these activities) the
opportunity to appropriately evaluate, address or question the fees
assessed to meet the MSRB's budget needs.'' \30\
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\27\ NAMA Letter at 1-2.
\28\ Id. at 1.
\29\ Id. at 1-2.
\30\ Id. at 2.
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SIFMA expressed concern that the proposed rule change does not
provide adequate transparency on the MSRB's rate setting process,
reflects significant fee volatility, and fails to address flaws in the
rate setting process that could create market harms.\31\ Regarding fee
volatility, SIFMA noted that the underwriting fee has been increased
25% and the trade count fee reduced by 48%, yet the MSRB failed to
explain why it believes this volatility in fee rates will not be
repeated in subsequent years.\32\ Regarding transparency, SIFMA
expressed concern that the MSRB's proposed rule change includes
``significant and material changes'' to its fee structure, yet the MSRB
gave regulated entities its first official description of the amount of
those changes a mere three weeks before they became effective.\33\
Regarding market harms, SIFMA noted that the MSRB is proposing to
increase underwriting fees even as new issuance has decreased this past
year, which could hurt the viability of the municipal marketplace.\34\
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\31\ SIFMA Letter at 1.
\32\ Id. at 2.
\33\ Id. at 3.
\34\ Id. at 4.
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In their Supplemental Letter, SIFMA and BDA argued that although
they have raised concerns about the MSRB's budgeting and fee setting
processes, the Commission should allow the proposed rule change to take
effect without any changes.\35\ SIFMA and BDA expressed concern that
suspending the proposed rule change could be ``operationally
disruptive'' for dealers and would leave transactional fees ``in
limbo'' until a 2024 Rate Card is approved.\36\ SIFMA and BDA noted
that they have had preliminary conversations with the MSRB about its
budget and fee setting processes and will continue to press the MSRB as
it works on its 2025 Budget.\37\
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\35\ Supplemental Letter at 1.
\36\ Id.
\37\ Id.
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The MSRB argued that its 2024 Budget ``provides sufficient basis to
evaluate the reasonableness of the 2024 Rate Card Fees'' and urged the
Commission not to suspend the proposed rule change.\38\ The MSRB also
outlined its plan for an ongoing process of ``engagement'' which would
include: (i) a retrospective review of the Rate Card Process; (ii)
instituting certain financial transparency enhancements, including more
granular details regarding key technology services and initiatives; and
(iii) developing avenues to provide municipal market participants an
opportunity to offer input to the MSRB in advance of finalization of
annual budgets.\39\
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\38\ MSRB Letter at 10.
\39\ Id. at 1-2.
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The MSRB stated that its retrospective review of the Rate Card
Process will consider the appropriateness of instituting caps on fee
changes more broadly or other means to limit the magnitude of year-to-
year fee changes.\40\ The retrospective review also ``could
reconsider'' a revenue-based or transaction volume-based fee assessment
model.\41\
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\40\ Id. at 3-4.
\41\ Id. at 4-5.
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Regarding financial transparency, the MSRB cited Section IV of its
2024 Budget Summary as an example of its ``granular breakdown'' of
program expenditures and stated that it will seek feedback on whether
this ``additional information'' is responsive to commenters' requests
for greater detail about the MSRB's budget areas and initiatives.\42\
The MSRB stated that it would develop ``reasonable allocation
assumptions'' to aid in the understanding of its technology system-
related expenses.\43\ The MSRB also stated that it will ``explore other
possible avenues'' for improving the transparency of its technology
initiatives and priorities and believes that all such expenditures are
within the MSRB's legal authority.\44\
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\42\ Id. at 5-6.
\43\ Id. at 6-7.
\44\ Id. at 7-8.
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Regarding input from market participants, the MSRB stated that it
``looks to provide'' opportunities for market participants to provide
input and ``could consider'' a more formalized survey of market
participants during the rate setting process.\45\
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\45\ Id. at 8-9.
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IV. Suspension of the Proposed Rule Change
Pursuant to Section 19(b)(3)(C) of the Act,\46\ at any time within
60 days of the date of filing of an immediately effective proposed rule
change pursuant to Section 19(b)(1) of the Act,\47\ the Commission
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') 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. As described below, the Commission believes a temporary
suspension of the proposed rule change is necessary or appropriate to
allow for additional analysis of the proposed rule change's consistency
with the Act and the rules thereunder.
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\46\ 15 U.S.C. 78s(b)(3)(C).
\47\ 15 U.S.C. 78s(b)(1).
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When SROs file their proposed rule changes with the Commission,
including fee filings like the MSRB's present proposed rule change,
they are required to provide a statement supporting the proposed rule
change's basis under the Act and the rules and regulations thereunder
applicable to the
[[Page 7427]]
SRO.\48\ The instructions to Form 19b-4, on which SROs file their
proposed rule changes, specify that such statement ``should be
sufficiently detailed and specific to support a finding that the
proposed rule change is consistent with [those] requirements.'' \49\
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\48\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change'').
\49\ See id.
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Among other things, the MSRB's proposed rule change is subject to
Section 15B(b)(2)(J) of the Exchange Act,\50\ which states that the
MSRB's rules shall provide that each municipal securities broker,
municipal securities dealer, and municipal advisor shall pay to the
MSRB such reasonable fees and charges as may be necessary or
appropriate to defray the costs and expenses of operating and
administering the MSRB.\51\ Such rules must specify the amount of such
fees and charges, which may include charges for failure to submit to
the MSRB, or to any information system operated by the MSRB, within the
prescribed timeframes, any items of information or documents required
to be submitted under any rule issued by the MSRB.\52\ The MSRB's
proposed rule change also is subject to Section 15B(b)(2)(C) of the
Exchange Act,\53\ which states, among other things, that the MSRB's
rules shall be designed, in general, to protect investors, municipal
entities, obligated persons, and the public interest.
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\50\ 15 U.S.C. 78o-4(b)(2)(J).
\51\ Id.
\52\ Id.
\53\ 15 U.S.C. 78o-4(b)(2)(C).
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In support of its proposed rule change, the MSRB stated that the
proposed rule change satisfies the requirements of Section 15B(b)(2)(J)
``through a reasonable fee structure that ensures (i) an equitable
balance of necessary and appropriate fees among regulated entities and
(ii) a fair allocation of the burden of defraying the costs and
expenses of the MSRB.'' \54\ Specifically, the MSRB believes that the
2024 Rate Card ``will achieve reasonable fees to be paid by regulated
entities that (i) are necessary and appropriate to sustain the
operation and administration of the MSRB by defraying the MSRB's
anticipated Fiscal Year 2024 operating and administrative expenses;
(ii) reasonably and appropriately allocate fees among firms by
equitably distributing fees in accordance with each individual firm's
overall market activities; and (iii) reasonably and appropriately
adjust for the annual fluctuations in the volume of market activity as
compared to budget expectation by incorporating the actual amounts of
Market Activity Fees and Municipal Advisor Professional Fees collected
as compared to budget into this and future rate-setting processes.''
\55\ The MSRB provided additional support for the reasonableness of the
proposed rule change in the MSRB Letter.\56\ However, due to the date
of receipt of the MSRB Letter (i.e., late afternoon one business day
before the suspension deadline), the Commission has not had sufficient
time to evaluate the material included therein. Temporary suspension
will allow for additional analysis of whether the MSRB Fiscal Year 2024
Budget is reasonable and whether the proposed rule change provides for
reasonable fees and charges that satisfy the standards under the Act
and the rules thereunder.
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\54\ Notice 88 FR at 86191.
\55\ Id.
\56\ MSRB Letter.
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In temporarily suspending the MSRB's proposed rule change, the
Commission intends to further consider whether the proposed fees and
charges are consistent with the statutory requirements applicable to
the MSRB under the Act. Among other things, the Commission will
consider whether the proposed rule change provides for reasonable fees
and charges that satisfy the standards under the Act and the rules
thereunder.\57\ The Commission will also consider whether the fees and
charges in the proposed rule change are necessary or appropriate to
defray the costs and expenses of operating and administering the
MSRB,\58\ including whether such costs and expenses, as set forth in
the MSRB's Fiscal Year 2024 Budget, are themselves reasonable.
Additionally, the Commission will consider whether the fees and charges
in the proposed rule change are in the public interest.\59\
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\57\ 15 U.S.C. 78o-4(b)(2)(J).
\58\ Id.
\59\ 15 U.S.C. 78o-4(b)(2)(C).
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Therefore, the Commission finds that it is necessary or appropriate
in the public interest, for the protection of investors, and otherwise
in furtherance of the purposes of the Act, to temporarily suspend the
proposed rule change.\60\
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\60\ For purposes of temporarily suspending the proposed rule
change, 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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V. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change
In addition to temporarily suspending the proposal, the Commission
also hereby institutes proceedings pursuant to Sections 19(b)(3)(C)
\61\ and 19(b)(2)(B) \62\ of the Act to determine whether the proposed
rule change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as described below, the
Commission seeks and encourages interested persons to provide comments
on the proposed rule change to inform the Commission's analysis of
whether to approve or disapprove the proposed rule change.
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\61\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
\62\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\63\ the Commission is
providing notice of the grounds for possible disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis of whether the MSRB has sufficiently demonstrated
how the proposed rule change is consistent with Sections 15B(b)(2)(J)
and 15B(b)(2)(C) of the Act.\64\ Section 15B(b)(2)(J) of the Act states
that the MSRB's rules shall provide that each municipal securities
broker, municipal securities dealer, and municipal advisor shall pay to
the MSRB such reasonable fees and charges as may be necessary or
appropriate to defray the costs and expenses of operating and
administering the MSRB.\65\ Such rules must specify the amount of such
fees and charges, which may include charges for failure to submit to
the MSRB, or to any information system operated by the MSRB, within the
prescribed timeframes, any items of information or documents required
to be submitted under any rule issued by the MSRB.\66\ Section
15B(b)(2)(C) of the Exchange Act \67\ states, among other things, that
[[Page 7428]]
the MSRB's rules shall be designed, in general, to protect investors,
municipal entities, obligated persons, and the public interest.
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\63\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also
provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
See id. The time for conclusion of the proceedings may be extended
for up to 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding, or if the SRO
consents to the longer period. See id.
\64\ 15 U.S.C. 78o-4(b)(2)(J).
\65\ Id.
\66\ Id.
\67\ 15 U.S.C. 78o-4(b)(2)(C).
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As discussed in Section IV above, the Notice, and the MSRB Letter,
the MSRB has made various arguments in support of the proposals, and
the Commission received comment letters disputing the MSRB's arguments
and expressing concerns regarding the proposals.\68\ In particular,
commenters argued that the MSRB did not provide sufficient information
to establish that the proposed fees and charges are consistent with the
Act and the rules thereunder.\69\
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\68\ See supra note 15.
\69\ See discussion supra Section III.
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Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the [SRO]
that proposed the rule change.'' \70\ The description of a proposed
rule change, its purpose and operation, its effect, and a legal
analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an affirmative Commission
finding,\71\ and any failure of an SRO to provide this information may
result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the
Act and the applicable rules and regulations.\72\ Moreover,
``unquestioning reliance'' on an SRO's representations in a proposed
rule change would not be sufficient to justify Commission approval of a
proposed rule change.\73\
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\70\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
\71\ See id.
\72\ See id.
\73\ See Susquehanna Int'l Group, LLP v. Securities and Exchange
Commission, 866 F.3d 442, 446-47 (D.C. Cir. 2017) (rejecting the
Commission's reliance on an SRO's own determinations without
sufficient evidence of the basis for such determinations).
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The Commission believes it is appropriate to institute proceedings
to allow for additional consideration and comment on the issues raised
herein, including as to whether the proposed fees and charges are
consistent with the Act, any potential comments or supplemental
information provided by the MSRB, and any additional independent
analysis by the Commission.
V. Commission's Solicitation of Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
concerns and issues identified above, as well as any other relevant
concerns. In particular, the Commission invites the written views of
interested persons concerning whether the proposal is consistent with
Section 15B(b)(2)(J), Section 15B(b)(2)(C), or any other provision of
the Act, or the rules and regulations thereunder. The Commission asks
that commenters address the sufficiency and merit of the MSRB's
statements in support of the proposal, in addition to any other
comments they may wish to submit about the proposed rule change. The
Commission also invites the written views of interested persons on: (i)
what process the MSRB should undertake to ensure that the fees assessed
in its Rate Card filing and underlying Budget are both reasonable and
capable of meaningful evaluation by the public, market participants,
and the Commission; (ii) what specific data and information the MSRB
should publicly disclose (that it does not currently publicly
disclose); (iii) when the MSRB should file its Rate Card each year;
(iv) whether the MSRB's representations about the cost, functionality,
and evolution of the EMMA system have been consistent with actual
practice in the years since EMMA was adopted; and (v) what general
steps could be taken in the future to minimize the potential
operational disruption caused by either the Commission suspending a
Rate Card filing or a Rate Card otherwise not being effective on
January 1 of the calendar year. Although there do not appear to be any
issues relevant to approval or disapproval that would be facilitated by
an oral presentation of views, data, and arguments, the Commission will
consider, pursuant to Rule 19b-4, any request for an opportunity to
make an oral presentation.\74\
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\74\ Section 19(b)(2) of the Exchange Act, as amended by the
Securities Act Amendments of 1975, Public Law 94-29 (June 4, 1975),
grants the Commission flexibility to determine what type of
proceeding--either oral or notice and opportunity for written
comments--is appropriate for consideration of a particular proposal
by a self-regulatory organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by February 23, 2024. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
March 8, 2024.
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 [email protected]. Please include
File Number SR-MSRB-2023-06 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-MSRB-2023-06. 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 website (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the MSRB. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to File Number SR-MSRB-2023-06 and should be submitted on
or before February 23, 2024. Rebuttal comments should be submitted by
March 8, 2024.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\75\ that File No. SR-MSRB-2023-06 be, and hereby is, temporarily
suspended. In addition, the Commission is instituting proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\75\ 15 U.S.C. 78s(b)(3)(C).
[[Page 7429]]
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For the Commission, pursuant to delegated authority.\76\
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\76\ 17 CFR 200.30-3(a)(11) and (12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-02069 Filed 2-1-24; 8:45 am]
BILLING CODE 8011-01-P
