Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend MSRB Rule G-14 To Shorten the Timeframe for Reporting Trades in Municipal Securities to the MSRB, 78955-78967 [2024-22028]

Download as PDF Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices All submissions should refer to file number SR–CBOE–2024–043. 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 withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–CBOE–2024–043 and should be submitted on or before October 17, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.46 Vanessa A. Countryman, Secretary. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–101118; File No. SR– MSRB–2024–01] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend MSRB Rule G–14 To Shorten the Timeframe for Reporting Trades in Municipal Securities to the MSRB September 20, 2024. I. Introduction On January 12, 2024, the Municipal Securities Rulemaking Board (‘‘MSRB’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘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 to (1) amend MSRB Rule G–14 (‘‘Rule G– 14’’), on reports of sales or purchases, to (i) shorten the amount of time within which brokers, dealers, and municipal securities dealers (collectively, ‘‘dealers,’’ and each individually, a ‘‘dealer’’) must report most transactions to the MSRB; and (ii) require dealers to report certain transactions with a new trade indicator, and make certain clarifying amendments, and (2) make conforming amendments to MSRB Rule G–12, on uniform practice (‘‘Rule G– 12’’), and the MSRB’s Real-Time Transaction Reporting System (‘‘RTRS’’) Information Facility (‘‘IF–1’’) to reflect the shortened reporting timeframe (the ‘‘original proposed rule change’’). The original proposed rule change was published for comment in the Federal Register on January 26, 2024.3 The Commission received comments in response to the original proposed rule change.4 On April 22, 2024, the [FR Doc. 2024–22026 Filed 9–25–24; 8:45 am] 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Exchange Act Release No. 99402 (Jan. 19, 2024), 89 FR 5384 (Jan. 26, 2024) (‘‘Notice’’). 4 See Letters to Secretary, Commission, from Michael Noto, FINRA Registered Representative dated Jan. 31, 2024 (‘‘Noto Letter’’); J. Ben Watkins, Director, Division of Bond Finance, State of Florida dated Feb. 13, 2024 (‘‘State of Florida Letter’’); Matthew Kamler, President, Sanderlin Securities LLC dated Feb. 14, 2024 (‘‘Sanderlin Securities Letter’’); J.D. Colwell dated Feb. 15, 2024 (‘‘Colwell Letter’’); Gerard O’Reilly, Co-Chief Executive Officer and Co-Chief Investment Officer and David A. Plecha, Global Head of Fixed Income, Dimensional Fund Advisors LP dated Feb. 15, 2024 (‘‘Dimensional Fund Advisors Letter’’); Michael Decker, Senior Vice President, Bond Dealers of America (‘‘BDA’’) dated Feb. 15, 2024 (‘‘BDA Letter’’); Sarah A. Bessin, Deputy General Counsel and Kevin Ercoline, Assistant General Counsel, Investment Company Institute dated Feb. 15, 2024 (‘‘ICI Letter’’); Kenneth E. Bentsen, Jr., President khammond on DSKJM1Z7X2PROD with NOTICES BILLING CODE 8011–01–P 46 17 2 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:11 Sep 25, 2024 Jkt 262001 PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 78955 Commission issued an order instituting proceedings (‘‘OIP’’) under Section 19(b)(2)(B) of the Act 5 to determine whether to approve or disapprove the proposed rule change.6 The Commission received comments in response to the OIP.7 On July 18, 2024, the Commission, pursuant to Section 19(b)(2) of the Act,8 designated September 20, 2024, as the date by which the Commission shall either approve or disapprove the original proposed rule change.9 Also on July 18, 2024, the MSRB filed a comment letter 10 and an amendment to the original proposal in response to certain comments on the original proposed rule change (‘‘Amendment No. 1’’; the original proposed rule change, as modified by Amendment No. 1, the ‘‘proposed rule change’’). On July 25, 2024, the Commission published notice and CEO, Securities Industry and Financial Markets Association (‘‘SIFMA’’) dated Feb. 15, 2024 (‘‘SIFMA Letter’’); Howard Meyerson, Managing Director, Financial Information Forum (‘‘FIF’’) dated Feb. 15, 2024 (‘‘FIF I Letter’’); Gregory Babyak, Global Head of Regulatory Affairs, Bloomberg L.P. dated Feb. 16, 2024 (‘‘Bloomberg Letter’’); Melissa P. Hoots, CEO/COO, Falcon Square Capital, LLC (‘‘Falcon Square Capital’’) dated Feb. 16, 2024 (‘‘Falcon Square Capital Letter’’); Matt Dalton, Chief Executive Officer, Belle Haven Investments, LP (‘‘Belle Haven’’) dated Feb. 16, 2024 (‘‘Belle Haven Letter’’); and Christopher A. Iacovella, President & Chief Executive Officer, American Securities Association (‘‘ASA’’) dated Feb. 16, 2024 (‘‘ASA Letter’’). After the close of the comment period, one commenter submitted a supplemental letter. See letter to Secretary, Commission, from Howard Meyerson, FIF dated Feb. 26, 2024 (‘‘FIF II Letter’’). These comment letters are available at https://www.sec.gov/ comments/sr-msrb-2024-01/srmsrb202401.htm. 5 15 U.S.C. 78s(b)(2)(B). 6 See Exchange Act Release No. 100003 (Apr. 22, 2024), 89 FR 32486 (Apr. 26, 2024). 7 See Letters to Secretary, Commission, from David C. Jaderlund dated Apr. 23, 2024 (‘‘Jaderlund OIP Letter’’); Ronald P. Bernardi, President and CEO, Bernardi Securities, Inc. dated May 14, 2024 (‘‘Bernardi Securities OIP Letter’’); Frank Fairman, Managing Director, Piper Sandler & Co. dated May 17, 2024 (‘‘Piper Sandler OIP Letter’’); Christopher A. Iacovella, ASA dated May 17, 2024 (‘‘ASA OIP Letter’’); Michael Decker, BDA dated May 17, 2024 (‘‘BDA OIP Letter’’); Mark D. Griffin, Senior Vice President and Risk Control Manager, FHN Financial dated May 17, 2024 (‘‘FHN Financial OIP Letter’’); Howard Meyerson, FIF dated May 17, 2024 (‘‘FIF OIP Letter’’); Richard G. Wallace, Senior Vice President and Associate General Counsel, LPL Financial LLC (‘‘LPL’’) dated May 17, 2024 (‘‘LPL OIP Letter’’); Lisa Gayle Melnyk dated May 17, 2024 (‘‘Melnyk OIP Letter’’); Kenneth E. Bentsen, Jr., SIFMA dated May 17, 2024 (‘‘SIFMA OIP Letter’’). These comment letters are available at https:// www.sec.gov/comments/sr-msrb-2024-01/ srmsrb202401.htm. 8 15 U.S.C. 78s(b)(2). 9 See Exchange Act Release No. 100557 (July 18, 2024), 89 FR 59951 (July 24, 2024). 10 See Letter to Secretary, Commission, from Ernesto A. Lanza, Chief Regulatory and Policy Officer, MSRB, dated July 18, 2024, available at https://www.sec.gov/comments/sr-msrb-2024-01/ srmsrb202401.htm (‘‘MSRB Letter’’). E:\FR\FM\26SEN1.SGM 26SEN1 78956 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices of Amendment No. 1,11 and the Commission received comment letters in response.12 This order approves the proposed rule change. II. Description of the Proposed Rule Change As described more fully in the Notice and Amendment No. 1, the MSRB is proposing amendments to Rule G–14, Reports of Sales or Purchases, and conforming technical changes to Rule G–12(f)(i) and IF–1. The MSRB believes that the proposed rule change would remove impediments to a free and open market in municipal securities by making publicly available more timely information about the market and the prices at which municipal securities transactions are executed, which is central to fairly priced municipal securities and a dealer’s ability to make informed quotations.13 Additionally, the MSRB is of the view that the new intra-day exceptions balance potential burdens for dealers with limited trading activity and address potential burdens faced by dealers engaged in complex transactions, including voice/ electronically negotiated transactions involving a manual post-transaction component.14 As the proposed rule change was developed in close coordination with the Financial Industry Regulatory Authority (‘‘FINRA’’),15 the MSRB is of the view that the proposed rule change reduces the risk of potential confusion and may reduce compliance burdens resulting from inconsistent obligations and standards for different classes of securities.16 According to the MSRB, a shortened trade reporting time would promote regulatory consistency, khammond on DSKJM1Z7X2PROD with NOTICES 11 See Exchange Act Release No. 100589 (July 24, 2024), 89 FR 61516 (July 31, 2024) (‘‘Amendment No. 1’’). 12 See Letters to Secretary, Commission, from Guerras Global International, University of Providence dated July 29, 2024 (‘‘Guerras Global Amendment No. 1 Letter’’); Kenneth E. Bentsen, Jr., SIFMA dated Aug. 21, 2024 (‘‘SIMFA Amendment No. 1 Letter’’); Christopher A. Iacovella, ASA dated Aug. 21, 2024 (‘‘ASA Amendment No. 1 Letter’’); Matt Dalton, Belle Haven dated Aug. 21, 2024 (‘‘Belle Haven Amendment No. 1 Letter’’); Melissa P. Hoots, Falcon Square dated Aug. 21, 2024 (‘‘Falcon Square Capital Amendment No. 1 Letter’’); Michael Decker, BDA dated Aug. 21, 2024 (‘‘BDA Amendment No. 1 Letter’’). These comment letters are available at https://www.sec.gov/comments/srmsrb-2024-01/srmsrb202401.htm. 13 See MSRB Letter at 5. 14 Id. 15 See Securities Exchange Act Release No. 99404 (Jan. 19, 2024), 89 FR 5034 (Jan. 24, 2024) (‘‘FINRA Notice’’), as partially amended by Securities Exchange Act Release No. 100594 (July 25, 2024), 89 FR 61514 (July 31, 2024) (‘‘Partial Amendment No. 1,’’ and together with the FINRA Notice, the ‘‘FINRA proposed rule change’’). 16 See MSRB Letter at 4. VerDate Sep<11>2014 17:11 Sep 25, 2024 Jkt 262001 reducing potential compliance violations caused by market participants’ imperfect application of differing standards when executing and reporting various types of transactions in fixed income securities.17 A. New Baseline Reporting Requirement: One Minute After the Time of Trade The proposed amendments to Rule G– 14 RTRS Procedures Section (a)(ii) generally would provide that transactions effected with a Time of Trade during the hours of an RTRS Business Day 18 must be reported to an RTRS Portal 19 ‘‘as soon as practicable, but no later than one minute’’ after the Time of Trade, subject to several existing reporting exceptions, which would be retained in the amended rule,20 and two new intra-day reporting exceptions relating to dealers with limited trading activity and trades with a manual component that would be added by the proposed rule change.21 Except for those trades that would qualify for a reporting exception, all trades currently required to be reported within 15 minutes after the Time of Trade would, under the proposed rule change, be required to be reported no later than one minute after the Time of Trade. i. New Requirement To Report Trades ‘‘as Soon as Practicable’’ Section (a)(ii) of the proposed amendment to Rule G–14 RTRS Procedures adds a new requirement that, absent an exception, trades must be reported as soon as practicable (but no later than one minute after the Time of Trade).22 This ‘‘as soon as practicable’’ requirement would also apply to trades subject to longer trade reporting deadlines under the two new exceptions for dealers with limited trading activity pursuant to Rule G–14 RTRS Procedures Section (a)(ii)(C)(1) and Supplementary Material .01, or trades with a manual component pursuant to Rule G–14 RTRS Procedures Section (a)(ii)(C)(2) and 17 Id. 18 Rule G–14 RTRS Procedures Section (d)(ii) defines ‘‘RTRS Business Day’’ as 7:30 a.m. to 6:30 p.m., Eastern Time, Monday through Friday, unless otherwise announced by the MSRB. 19 See Notice, 89 at 5385 n.13 (discussing the various portals). 20 Id. at 5385 n.14 (describing the existing exceptions). 21 The two new intra-day reporting exceptions, consisting of trades by dealers with limited trading activity and trades with a manual component, would be designated as Rule G–14 RTRS Procedures Sections (a)(ii)(C)(1) and (2), respectively. See Notice, 89 FR at 5385 n.15; Amendment No. 1. 22 See Notice, 89 FR at 5386. PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 Supplementary Material .02.23 Although Rule G–14 RTRS Procedures do not currently explicitly prohibit a dealer from waiting until the existing 15minute deadline to report a trade notwithstanding the fact that the dealer could reasonably have reported such trade more rapidly, the MSRB notes that under the proposed rule change a dealer could not simply await the deadline to report a trade if it were practicable to report such trade more rapidly.24 As provided in more detail in the Notice, proposed Supplementary Material .03 would provide guidance relating to policies and procedures for complying with the ‘‘as soon as practicable’’ reporting requirement.25 The MSRB noted that dealers must not purposely withhold trade reports, for example, by programming their systems to delay reporting until the last permissible minute or by otherwise delaying reports to a time just before the deadline if it would have been practicable to report such trades more rapidly.26 For trades with a manual component, and consistent with Supplementary Material .03(b) of FINRA Rule 6730, the MSRB recognized that the trade reporting process may not be completed as quickly as, for example, where an automated trade reporting system is used.27 The MSRB explained that it expected that the regulatory authorities that examine dealers and enforce compliance with this requirement would take into consideration the manual nature of the dealer’s trade reporting process in determining whether the dealer’s policies and procedures are reasonably designed to report the trade ‘‘as soon as practicable’’ after execution.28 ii. Time of Trade Discussion The ‘‘Time of Trade’’ is defined as the time at which a contract is formed for a sale or purchase of municipal securities at a set quantity and set price.29 For transaction reporting purposes, the MSRB stated that the Time of Trade is the same as the time that a trade is ‘‘executed’’ and, generally, is consistent with the ‘‘time of 23 Id. 24 Id. 25 Id. Where a dealer has reasonably designed policies, procedures and systems in place, the dealer generally would not be viewed as violating the ‘‘as soon as practicable’’ requirement because of delays in trade reporting due to extrinsic factors that are not reasonably predictable and where the dealer does not intend to delay the reporting of the trade (for example, due to a systems outage). 26 Id. 27 Id. 28 Id. 29 See current Rule G–14 RTRS Procedures Section (d)(iii). E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices execution’’ for recordkeeping purposes.30 iii. Valid Contract Discussion In general, to form a valid contract, there must be at least an offer and acceptance of that offer. As a result, the MSRB noted that dealers should consider the point in time at which an offer to buy or sell municipal securities was met with an acceptance of that offer. This ‘‘meeting of the minds,’’ 31 cannot occur before the final material terms, such as the exact security, price and quantity, have been agreed to and such terms are known by the parties to the transaction.32 The MSRB further explained that dealers should be clear in their communications regarding the final material terms of the trade and how such terms would be conveyed between the parties 33 to ensure that such a valid trade contract has been formed.34 iv. Exceptions to the Baseline Reporting Requirement Proposed amendments to Rule G–14 RTRS Procedures Section (a)(ii) add two new exceptions to the proposed oneminute reporting requirement: (a) New Section (C)(1) provides an exception for a dealer with ‘‘limited trading activity,’’ and (b) New Section (C)(2) provides an exception for a dealer reporting a ‘‘trade with a manual component.’’ 35 khammond on DSKJM1Z7X2PROD with NOTICES a. Exception for Dealers With Limited Trading Activity Proposed new Section (a)(ii)(C)(1) would except a dealer with ‘‘limited trading activity’’ from the one-minute reporting requirement and would 30 See Notice, 89 FR at 5386–87 (discussing time of execution and note 22 for additional guidance on the time of execution); MSRB Letter at 13 (MSRB further explaining that the Time of Trade is the time at which a meeting of the minds has occurred, for example, where parties have already reached agreement regarding the terms and elements of execution and at what point a contract is formed for the transaction). 31 See generally FINRA Regulatory Notice 16–30 (Trade Reporting and Compliance Engine (TRACE): FINRA Reminds Firms of their Obligation to Report Accurately the Time of Execution for Transactions in TRACE-eligible Securities) (Aug. 2016); MSRB Notice 2016–19 (MSRB Provides Guidance on MSRB Rule G–14, on Reports of Sales or Purchases of Municipal Securities (Aug. 9, 2016) (the ‘‘2016 RTRS FAQs’’) at questions 1 and 2. 32 See generally MSRB Notice 2004–18 (Notice Requesting Comment on Draft Amendments to Rule G–34 to Facilitate Real-Time Transaction Reporting and Explaining Time of Trade for Reporting New Issue Trades) (June 18, 2004); 2016 RTRS FAQs at question 1. 33 See Notice, 89 FR at 5386 n.26. 34 Id. at 5387 (discussing the particulars for when transactions have been executed, confirmed, and reported). 35 Id. (explaining how these exceptions have a narrowly tailored purpose). VerDate Sep<11>2014 17:11 Sep 25, 2024 Jkt 262001 instead be required to report its trades as soon as practicable, but no later than 15 minutes after the Time of Trade for so long as the dealer remains qualified for the limited trading activity exception, as further specified in new Supplementary Material .01.36 Proposed Section (d)(xi) of Rule G–14 RTRS Procedures would define a dealer with limited trading activity as a dealer that, during at least one of the prior two consecutive calendar years, reported to an RTRS Portal fewer than 2,500 purchase or sale transactions with customers or other dealers,37 excluding transactions exempted under Rule G– 14(b)(v) and transactions specified in Rule G–14 RTRS Procedures Sections (a)(ii)(A) and (B). A dealer relying on this exception to report trades within the 15-minute timeframe, rather than the new standard one-minute timeframe, would have to confirm that it meets the criteria for a dealer with limited trading activity for each year during which it continues to rely on the exception (e.g., the dealer could confirm its eligibility based on its internal trade records and by checking MSRB compliance tools which would indicate a dealer’s transaction volume for a given year).38 b. Exception for Trades With a Manual Component Rule G–14 RTRS Procedures Section (a)(ii)(C)(2) would except a ‘‘trade with a manual component’’ as defined in new Section (d)(xii) of Rule G–14 RTRS Procedures from the one-minute reporting requirement. The MSRB noted that dealers with such trades would be required to report such trades as soon as practicable and within the time periods 36 The MSRB noted that transactions effected by such a dealer with a Time of Trade outside the hours of an RTRS Business Day would be permitted to be reported no later than 15 minutes after the beginning of the next RTRS Business Day pursuant to Rule G–14 RTRS Procedures Section (a)(iii). The MSRB also noted that, as is the case today, transactions for which an end-of-trade-day or posttrade-day reporting exception is available under redesignated Sections (A) and (B) would continue to have that exception available. See Notice, 89 FR at 5387 n.29. 37 The original proposed rule change established a threshold of 1,800 trades. See Notice, 89 FR at 5387. The MSRB recalculated the appropriate threshold for the definition of ‘‘dealer with limited trading activity’’ to take into account both sell-side and buy-side inter-dealer trade reports together with reports of dealer trades with customers, regardless of whether the dealer bought or sold in the customer transaction. See Amendment No. 1; MSRB Letter at 22 n.81. The MSRB stated that there is no material impact to the economic analysis contained in the original proposed rule change as a result of the increased threshold. See MSRB Letter at 23. 38 See Notice, 89 FR at 5387–88 (MSRB using a hypothetical to illustrate variations in dealer eligibility for the limited trading exception). PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 78957 specified in new Supplementary Material .02, unless another exception from the one-minute reporting requirement applies under proposed Rule G–14 RTRS Procedures Sections (a)(ii)(A) and (B) (i.e., transactions having an end-of-trade-day or posttrade-day reporting exception) or (a)(ii)(C)(1) (i.e., transactions by dealers with limited trading activity).39 Section (d)(xii) of Rule G–14 RTRS Procedures would define a ‘‘trade with a manual component’’ as a transaction that is manually executed or where the dealer must manually enter any of the trade details or information necessary for reporting the trade directly into an RTRS Portal (for example, by manually entering trade data into the RTRS Web Portal) or into a system that facilitates trade reporting (for example, by transmitting the information manually entered into a dealer’s in-house or thirdparty system) to an RTRS Portal. As described below and more fully in the Notice, a dealer reporting to the MSRB a trade meeting the definition for a ‘‘trade with a manual component’’ would be required to append a new trade indicator so that the MSRB can identify manual trades.40 As explained by the MSRB, this ‘‘manual’’ exception would apply narrowly, and would normally encompass any human participation, approval or other intervention necessary to complete the initial execution and reporting of trade information after execution, regardless of whether undertaken by electronic means (e.g., keyboard entry), physical signature or other physical action. To qualify as a trade with a manual component, the manual aspect(s) of the trade generally would have to occur after the relevant Time of Trade (i.e., the time at which a contract is formed for the transaction).41 As further explained by the MSRB, any manual aspects that precede the time of trade (e.g., phone calls to locate bonds to be sold to a customer before the dealer agrees to sell such bonds to a purchasing customer) would normally not be relevant for purposes of the exception unless they have a direct impact on the activities that must be 39 As explained by the MSRB, transactions effected with a Time of Trade outside the hours of an RTRS Business Day would be permitted to be reported no later than 15 minutes after the beginning of the next RTRS Business Day pursuant to Rule G–14 RTRS Procedures Section (a)(iii). See Notice, 89 FR at 5388 n.38. 40 Such new indicator would be required for any trade with a manual component, whether the dealer reports such trade within the new one-minute timeframe or the dealer seeks to take advantage of the longer timeframes permitted for trades with a manual component. See Notice, 89 FR at 5388 n.39. 41 Id. at 5388. E:\FR\FM\26SEN1.SGM 26SEN1 78958 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices khammond on DSKJM1Z7X2PROD with NOTICES undertaken post-execution to enter information necessary to report the trade.42 The MSRB provided the following non-exhaustive list of situations in which trades would be considered to have a manual component: • where a dealer executes a trade by manual or hybrid means, such as voice or negotiated trading by telephone, email, or through a chat/messaging function, and subsequently must manually enter into a system that facilitates trade reporting all or some of the information required to book the trade and report it to RTRS; 43 • where a dealer executes a trade (typically a larger-sized trade) that requires additional steps to negotiate and confirm details of the trade with a client and manually enters the trade into risk and reporting systems; 44 • where a dually-registered brokerdealer/investment adviser executes a block transaction that requires allocations of portions of the block trade to the individual accounts of the firm’s advisory clients that must be manually inputted in connection with a trade; 45 • where an electronically or manually executed trade is subject to manual review by a second reviewer for risk management (e.g., transactions above a certain dollar or par amount or other transactions meriting heightened risk review) and, as part of or following the review, the trade must be manually approved, amended or released before the trade is reported to RTRS; 46 • where a dealer’s trade execution processes may entail further diligence following the Time of Trade involving a manual step (e.g., manually checking another market to confirm that a better price is not available to the customer); 47 • where a dealer trades a municipal security, whether for the first time or under other circumstances where the security master information may not already be populated (e.g., information has been removed or archived due to a long lapse in trading the security), and 42 The MSRB provided various scenarios to illustrate application of the manual exception would apply. See generally id. at 5389 n.40. The MSRB further clarified that the exception is intended to apply only to the trade execution and reporting portions of the workflow. See MSRB Letter at 13. 43 See Notice, 89 FR at 5389. 44 See Notice, 89 FR at 5389. 45 Id. 46 Id. 47 The MSRB noted that dealers experiencing significant levels of post-Time of Trade price adjustments due to such post-trade best execution processes should consider whether these processes are well suited to the dealer’s obligations under MSRB Rule G–18 and whether the dealer is appropriately evaluating when a contract has in fact been formed with its customer. Id. at 5389 n.41. VerDate Sep<11>2014 17:11 Sep 25, 2024 Jkt 262001 additional manual steps are necessary to set up the security and populate the associated indicative data in the dealer’s systems prior to executing and reporting the trade; 48 • where a dealer receives a large order or a trade list resulting in a portfolio of trades with potentially numerous unique securities involving rapid execution and frequent communications on multiple transactions with multiple counterparties, and the dealer must then book and report those transactions manually, one by one; 49 • where a broker’s broker engages in mediated transactions that involve multiple transactions with multiple counterparties; 50 and • where a dealer reports a trade manually through the RTRS Web Portal.51 The MSRB noted that appropriateness of treating any step in the trade execution and reporting process as being manual must be assessed in light of the anti-circumvention provision included in the proposed rule change with regard to the delay in execution or insertion of manual tasks for the purpose of meeting this new exception.52 New Supplementary Material .02(a) would require all trades with a manual component to be reported as soon as practicable and would specify that in no event may a dealer purposely delay the execution of an order, introduce any manual steps following the Time of Trade, or otherwise modify any steps prior to executing or reporting a trade for the purpose of utilizing the exception for manual trades.53 New Supplementary Material .03 would require that dealers adopt policies and procedures for complying with the as soon as practicable reporting requirement, including by implementing systems that commence the trade reporting process without delay upon execution and provides for additional guidance for regulatory authorities that enforce and examine 48 Id. at 5389. MSRB explained that in instances where a dealer trades a basket of securities at a single price for the full basket, rather than individual prices for each security based on its then-current market price, such price likely would be away from the market, requiring inclusion of the ‘‘away from market’’ special condition indicator and qualifying for an end-of-trade-day reporting exception under proposed Rule G–14 RTRS Procedures Section (a)(ii)(A)(3). See Notice, 89 FR at 5389 n.42. 50 Id. at 5389. 51 Id. 52 Id. at 5390 (discussing the prohibition on purposeful insertion of manual steps in trade reporting process). 53 Id. 49 The PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 dealers for compliance with this requirement to take into consideration the manual nature of the dealer’s trade reporting process.54 The MSRB also noted that dealers should consider the types of transactions in which they regularly engage and whether they can reasonably reduce the time between a transaction’s Time of Trade and its reporting, and more generally should make a good faith effort to report their trades as soon as practicable.55 The MSRB currently collects and analyzes data regarding dealers’ historic reporting of transactions to RTRS under various scenarios and such data will continue to be available to the regulators for analysis under the proposed one-minute standard. Subject to Commission approval of the proposed rule change, the MSRB explained that it would be reviewing the use of the manual exception and would share with the examining authorities any analyses resulting from such reviews.56 1. Phase-In Period for Trades With a Manual Component New Supplementary Material .02(b) would subject trades with a manual component to a phase-in period for timely reporting over three years (‘‘phase-in period’’). During the first calendar year of effectiveness of the exception, trades meeting this definition would be required to be reported as soon as practicable, but no later than 15 minutes after the Time of Trade.57 For the second and third calendar years from effectiveness of the exception, such trades would be required to be reported as soon as practicable, but no later than 10 minutes after the Time of Trade.58 Following the conclusion of the third calendar year and thereafter, such trades 54 For trades with a manual component, the MSRB explained that it recognized that the trade reporting process may not be completed as quickly as, for example, where an automated trade reporting system is used. The MSRB further explained that in these cases, the MSRB expects that the regulatory authorities that examine dealers and enforce compliance with this requirement would take into consideration the manual nature of the dealer’s trade reporting process in determining whether the dealer’s policies and procedures are reasonably designed to report the trade ‘‘as soon as practicable’’ after execution. See id. at 5388. 55 Id. at 5389. 56 Id. at 5390. 57 Id. at 5389; Amendment No. 1, Supplementary Material .02(b)(i). 58 Under the original proposed rule change, trades with a manual component would have been required to be reported as soon as practicable, but no later than five minutes after the Time of Trades after the second calendar year from effectiveness and thereafter. See Notice, 89 FR at 5390; Amendment No. 1, Supplementary Material .02(b)(ii). E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices would be required to be reported as soon as practicable, but no later than five minutes after the Time of Trade.59 The MSRB stated that dealers should remember that the ‘‘as soon as practicable’’ reporting obligation may, depending on the facts and circumstances, require quicker reporting than the applicable outer reporting obligation during and after the phase-in period. 2. Prohibition on Purposeful Insertion of Manual Steps in Trade Reporting Process New Supplementary Material .02(a) would specifically prohibit dealers from purposely delaying the execution of an order, introducing any manual steps following the Time of Trade, or otherwise purposefully modifying any steps to execute or report a trade to utilize the exception for manual trades. The MSRB notes that this requirement would not prohibit reasonable manual steps that are taken for legitimate purposes and would not apply to any steps that are taken prior to the time of trade that do not have the effect of delaying the subsequent reporting of such trade.60 khammond on DSKJM1Z7X2PROD with NOTICES 3. Manual Trade Indicator Proposed amendments to Rule G–14 RTRS Procedures Section (b)(iv) would require the report of a trade meeting the MSRB’s definition for a ‘‘trade with a manual component,’’ as defined in proposed Section (d)(xii) of Rule G–14 RTRS Procedures,61 to append a new trade indicator 62 to such a trade report. The MSRB noted that this indicator would be mandatory for every trade that meets the standard to append the indicator,63 regardless of whether the trade is actually reported within one minute after the Time of Trade, is 59 See Notice, 89 FR at 5387. The MSRB explained that it would be monitoring the implementation of the proposed rule change and would analyze trade data to determine, among other things, whether the eventual five-minute trade reporting timeframe continues to be feasible and appropriate in light of the empirical data collected through the earlier phases of implementation. See Amendment No. 1. The MSRB further explained that any further reduction in reporting timeframe, or elimination of the manual trade exception, could not be possible without additional formal rulemaking by the MSRB that would be filed with the Commission. See Amendment No. 1. 60 See Notice, 89 FR at 5390. 61 See generally id. at 5388–90. 62 Id. at 5391 n.51 (discussing how the manual trade indicator would be used for regulatory purposes). 63 Current Rule G–14 RTRS Procedures Section (a)(iv) requires that transaction data that is not submitted in a timely and accurate manner must be submitted or corrected as soon as possible. The manual trade indicator is not intended to be used to reflect the manual nature of any correction to a prior trade report. Id. at 5390 n.50. VerDate Sep<11>2014 17:11 Sep 25, 2024 Jkt 262001 reported within the applicable timeframe under the manual trade exception or is otherwise subject to another reporting exception. v. Pattern or Practice of Late Trade Reporting Current Rule G–14 RTRS Procedures Section (a)(iv) requires that transaction data that is not submitted in a timely and accurate manner must be submitted or corrected as soon as possible—even when a dealer is late in reporting a trade, the dealer remains obligated to report such trade as soon as possible. The proposed rule change further provides that any transaction that is not reported within the applicable time period shall be designated as ‘‘late.’’ 64 The MSRB stated that a pattern or practice of late reporting without exceptional circumstances or reasonable justification may be considered a violation of Rule G–14.65 The MSRB further noted that the determination of whether exceptional circumstances or reasonable justifications exist for late trade reporting is dependent on the particular facts and circumstances and whether such circumstances are addressed in the dealer’s systems and procedures.66 The MSRB explained that it expected that the regulatory authorities that examine dealers and enforce compliance with the reporting timeframes established under Rule G–14 RTRS Procedures would focus their examination for and enforcement of the rule’s timing requirements on the consistency of timely reporting and the existence of effective controls to limit late reporting to exceptional circumstances or where reasonable justifications exist for a late trade report, rather than on individual late trade report outliers.67 Notwithstanding such expectation, where facts and circumstances indicate that an individual late report was intentional or otherwise egregious, or could reasonably be viewed as potentially giving rise to an associated fair practice, fair pricing, best execution or other material regulatory concern under MSRB or Commission rules with respect to that or a related transaction, the MSRB noted that the regulatory authorities could reasonably determine to take action with respect to such late 64 See generally id. at 5391 n.52 (MSRB explaining that late trade designations are currently, and would continue to be, available to regulators and, through the MSRB compliance tool described below in the Notice under ‘‘Purpose—Proposed Rule Change—Compliance Tools,’’ to the dealer submitting the late trade). 65 Id. at 5391. 66 Id. 67 Id. PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 78959 trade in the examination or enforcement context.68 vi. Compliance Tools The MSRB explained that it would continue to provide various compliance tools to assist dealers with compliance and for examining authorities to monitor for compliance.69 vii. Other Proposed Amendments a. Technical Amendments Technical amendments to Rule G–14 RTRS Procedures Section (a)(ii) regroup and renumber its current Sections (A) through (C) to new Sections (A)(1) through (A)(3), renumber current Sections (D) and (E) to new Sections (B)(1) and B(2), and correct a crossreference in Section (b)(iv) to certain of these Sections to be consistent with such renumbering.70 In addition, a technical amendment to Rule G–14 RTRS Procedures Section (a)(ii) changes the word ‘‘of’’ to ‘‘after’’ and omits the word ‘‘within’’ in the phrase ‘‘within 15 minutes of Time of Trade’’ for clarity and consistency of usage throughout the Rule G–14 RTRS Procedures as amended.71 b. Clarifying Amendments—Special Condition Indicators and Trades on an Invalid RTTM Trade Date Rule G–14 RTRS Procedures Section (b)(iv) currently sets forth information regarding certain existing special condition indicators while also referencing the existence of other special condition indicators in Section 4.3.2 of the Specifications for Real-Time Reporting of Municipal Securities Transactions. The MSRB stated that the proposed clarifying amendments to Section (b)(iv) of Rule G–14 RTRS Procedures would incorporate into the language thereof reference to all applicable special condition indicators, including the new trade with a manual component indicator and existing special condition indicators previously adopted by the MSRB but that are currently only documented explicitly in the Specifications for Real-Time Reporting of Municipal Securities Transactions.72 Other than the addition of the new trade with a manual component indicator, the MSRB noted that the proposed clarifying amendments to this provision would not make any changes to the types or usage of existing special condition 68 Id. 69 Id. 70 Id. at 5392. 71 Id. 72 See E:\FR\FM\26SEN1.SGM generally id. at 5392 n.55. 26SEN1 78960 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices indicators.73 Rule G–14 RTRS Procedures Section (a)(iii) would be amended to reflect that, in addition to trades effected outside the hours of the RTRS Business Day, inter-dealer trades may be executed on certain holidays (other than those recognized as nonRTRS Business Days) that are not valid RTTM trade dates (‘‘invalid RTTM trade date’’), and in either case such trades are to be reported no later than within 15 minutes after the beginning of the next RTRS Business Day. Such invalid RTTM trade date transactions are already subject to this same next RTRS Business Day reporting requirement.74 The MSRB believes that a proposed clarifying amendment to this provision would not make any changes to the circumstances or timing of reporting of such trades.75 c. Proposed Conforming Amendments to Rule G–12 and RTRS Information Facility Proposed amendments to Rule G–12, on uniform practice, would make conforming changes to Section (f)(i) thereof to require that each transaction effected during the RTRS Business Day shall be submitted for comparison as soon as practicable, but no later than one minute after the Time of Trade unless an exception applies. The proposed rule change would also modify the IF–1 to clarify lateness checking against the applicable reporting deadline(s) provided for in proposed amendments to Rule G–14 RTRS Procedures, as opposed to the current 15-minute requirement.76 III. Summary of Comments Received and the MSRB’s Response As noted previously, the Commission received fourteen (14) comments letters in response to the Notice, ten (10) letters in response to the OIP, and six (6) letters in response to Amendment No. 1.77 The 73 Id. at 5392. Section 4.3.2 of the Specifications for RealTime Reporting of Municipal Securities Transactions; Exchange Act Release No. 55957 (June 26, 2007), 72 FR 36532 (July 3, 2007), File No. SR–MSRB–2007–01. 75 See Notice, 89 FR at 5392. 76 Id. 77 See supra notes 4, 7, and 12. Separately, the MSRB published a request for information soliciting stakeholder input regarding the impact of MSRB rules on smaller regulated entities (‘‘Small Firm RFI’’) on December 4, 2023. Eight (8) of the comments received by the MSRB in response to the Small Firm RFI discussed the original proposed rule change or a draft version of the original proposed rule change previously published for comment. See letters to Ronald W. Smith, Corporate Secretary, MSRB, from: Mike Petagna, President, Amuni Financial, Inc. dated Jan. 8, 2024 (‘‘Amuni RFI Letter’’); Mr. Kamler, Sanderlin Securities LLC dated Jan. 26, 2024 (‘‘Sanderlin Securities RFI Letter’’); Robert S. Searle, President, Searle & Co., Inc. dated Feb. 16, 2024 (‘‘Searle RFI Letter’’); Brad khammond on DSKJM1Z7X2PROD with NOTICES 74 See VerDate Sep<11>2014 17:11 Sep 25, 2024 Jkt 262001 MSRB responded to the comment letters received on the Notice and OIP in the MSRB Letter.78 The MSRB reiterated that it continues to believe that the proposed rule change would promote just and equitable principles of trade because it would further reduce information asymmetry between market professionals (such as dealers and institutional investors) and retail investors by ensuring progressively increased access to more timely information about executed municipal securities transactions for all investors.79 Additionally, the MSRB explained that the proposed rule change would foster cooperation and coordination with persons engaged in regulating and processing information, facilitating a consistent standard for trade reporting across many fixed income products, including municipal securities.80 The MSRB further noted that the proposed rule change would remove impediments to a free and open market in municipal securities by making publicly available more timely information about the market and the prices at which municipal securities transactions are executed and promote investor protection and the public interest through increased market transparency.81 Commenters generally supported the MSRB’s goal of facilitating equal access to information and market transparency.82 A. One-Minute Reporting i. Benefit to Municipal Securities Market Some commenters expressed concern that the scope of the proposed rule was overly broad and could have unintended consequences on the municipal securities market as a whole.83 One commenter ‘‘generally agree[d] with the proposal to have those trades Harris, Director of Fixed Income—Municipal Bonds, Herold & Lantern Investments dated Feb. 22, 2024 (‘‘HLI RFI Letter’’); Jessica R. Giroux, General Counsel, ASA dated Feb. 26, 2024 (‘‘ASA RFI Letter’’); Mr. Decker, BDA dated Feb. 26, 2024 (‘‘BDA RFI Letter’’); Leslie M. Norwood, Managing Director and Associate General Counsel, Head of Municipal Securities, SIFMA dated Feb. 26, 2024 (‘‘SIFMA RFI Letter’’); and Stern Brothers & Co. dated Feb. 26, 2024 (‘‘Stern Bros. RFI Letter’’). The comment letters received in response to the Small Firm RFI are available at: https://www.msrb.org/ Regulatory-Documents?id=13895. 78 See supra note 10. 79 See MSRB Letter at 4. 80 Id. 81 Id. 82 See, e.g., letters from SIFMA; BDA; ICI; Dimensional Fund Advisors; Belle Haven; Bernardi Securities; Piper Sandler; LPL. 83 See, e.g., letters from BDA, Noto, State of Florida, Sanderlin Securities, SIFMA, ASA, Falcon Square Capital. PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 which can reasonably be reported within one minute be required by rulemaking to be reported within such time,’’ 84 but challenged the ‘‘benefit of an across-the-board shortening of reporting times and [had] concerns about the costs and risks associated with implementation.’’ 85 Another commenter questioned ‘‘what sort of benefit this almost-immediate reporting delivers or if the rule may very well adversely impact certain types of liquidity.’’ 86 One commenter stated that ‘‘[a]ccelerating the timeframe for trade reporting [would] not result in any additional protection for investors and may well further inhibit capital being deployed in the marketplace,’’ 87 further noting that ‘‘increasing the cost and compliance burden [would] impair liquidity and the willingness of firms to commit capital to their municipal business.’’ 88 A further commenter noted that the ‘‘transition to one-minute reporting has neither been adequately examined or justified’’ 89 and did not ‘‘believe that the proposed one-minute reporting rule [could] be adopted without exposing the broker-dealer community to significant liability and creating risk to the function of some fixed income markets’’ 90 and that ‘‘subjecting the fixed income market to trade reporting requirements that appear to be inspired by the equities market is misguided.’’ 91 Building on its 2022 letter, an additional commenter reiterated that the ‘‘[p]roposals lack evidence of a market failure to justify such a change’’ and ‘‘[would] not provide a tangible benefit to investors.’’ 92 This commenter also expressed the view that ‘‘regulatory changes based upon incomplete assumptions would be harmful to investors and threaten the participation of small and midsized brokerdealers.’’ 93 A commenter stated that the proposed rule change did ‘‘not provide evidence to support how the reporting change would result in a material 84 See BDA Letter at 1. BDA generally reiterated its position in the BDA OIP Letter and BDA Amendment No. 1 Letter. 85 See BDA Letter at 1. 86 See Noto Letter. 87 See State of Florida Letter at 1. 88 Id. at 2. 89 See SIFMA Letter at 2. 90 Id. 91 Id. 92 ASA Letter at 1. ASA generally reiterated its position in the ASA OIP Letter and ASA Amendment No. 1 Letter. 93 Id. at 2. ASA included its 2022 comment letter which already explained that the ‘‘Proposals are notable in that they offer scant evidence for why current reporting requirements are inadequate or how investors would benefit by a shift to a mandated one-minute time frame.’’ Id. at 5–6. E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices khammond on DSKJM1Z7X2PROD with NOTICES improvement of the fixed-income securities market’’ 94 and that the proposed rule change ‘‘appear[ed] to extrapolate the effects of the 2005 change in reporting time . . . to support the claim that a further reduction in reporting time would provide more market transparency and immediate access to data for the remaining 26.3% of trades that were not reported to the MSRB within one minute during 2022.’’ 95 One commenter stated that the MSRB failed to ‘‘provide carefully detailed analysis of the clear and substantial benefit to the municipal securities marketplace;’’ 96 ‘‘provide adequate evidence upon which the SEC can reach a determination as to whether to approve or disapprove the proposed rule change;’’ 97 and ‘‘advance quantifiable data to support its assertion that investors will save millions of dollars through such radically reduced reporting times.’’ 98 A further commenter expressed ‘‘concern that the [proposed rule change] will expose broker-dealers to significant regulatory risk and clients to diminished liquidity and service from their brokerdealers.’’ 99 Another commenter expressed a positive view by stating that ‘‘transparency fosters a fair and efficient market and that market quality is improved when public information is disseminated evenly to all market participants’’ 100 enhancing ‘‘investors’ power to negotiate with dealers, leading to reduced transaction costs.’’ 101 One commenter ‘‘question[ed] whether oneminute trade reporting is suitable across the board for all fixed income markets’’ and believed that the ‘‘current trade reporting framework already strikes an appropriate balance between transparency, the ability to reasonably comply, and market liquidity.’’ 102 Additionally, this commenter noted that the proposed rule change ‘‘lack[ed] sufficient evidence and reasoning as to why shortening the reporting timeframe is necessary, much less achievable.’’ 103 In response to comments, the MSRB explained that one way to assess the magnitude of the benefits of the proposed rule change is to compare the amount investors are paying (or might 94 See Falcon Square Capital Letter at 1. Falcon Square Capital generally reiterated its position in the Falcon Square Capital Amendment No. 1 Letter. 95 See Falcon Square Capital Letter at 1–2. 96 See Belle Haven Letter at 3. 97 Id. at 1. 98 Id. Belle Haven generally reiterated its position in the Belle Haven Amendment No. 1 Letter. 99 LPL OIP Letter at 1. 100 See Dimensional Fund Advisors Letter at 1. 101 Id. 102 See FHN Financial OIP Letter at 2. 103 Id. VerDate Sep<11>2014 17:11 Sep 25, 2024 Jkt 262001 pay in the future as a result of rulemaking) to the amount they would otherwise pay in a more efficient market.104 The MSRB further explained that when it previously shortened the trade reporting deadline from end-ofday to 15 minutes from the Time of Trade in 2005, the MSRB’s analysis of data collected showed a significant reduction in average customer trade effective spreads.105 The MSRB also noted that its analysis also showed that effective spreads for customer trades continued to decline in the last decade with progressively faster trade reporting due to technology improvements undertaken by the industry to execute trades more quickly and efficiently but that this downward trend had become less pronounced in recent years.106 The MSRB stated that it believes that it has appropriately demonstrated the estimated costs and benefits that the proposed rule change would likely provide to the municipal securities market 107 because the proposed rule change would result in reduced transaction costs for investors (i.e., reduced effective bid-ask spread on customer trades) and increased trading volume from the effective spread reduction because investors are more likely to trade when the cost to trade is lowered.108 Further, the MSRB explained that it expects that the universe of potentially benefited transactions and trading volume would be significantly larger than one commenter 109 described and that a shorter trade reporting window would likely result in yield curves that more accurately reflect the prevailing market conditions because of lower information lags in reported trade prices.110 ii. Impact on Competition and Liquidity Some commenters expressed views that shortening the reporting timeframe disproportionally impacted less active and smaller dealers, potentially leading to a decline in liquidity, capital resources, and concentration of municipal bond trading among the largest dealers in the industry. One commenter noted that the proposed rule change ‘‘grossly underestimated the costs of the proposed rule’’ 111 and forecasted that the proposed rule change would put many firms out of 104 See MSRB Letter at 6. at 6–7. 106 Id. at 7. 107 Id. at 6. 108 Id. at 7. 109 See Belle Haven Letter at 3. 110 See MSRB Letter at 8 (citing the Notice, 89 FR at 5395 n.74 and 5398). 111 See Belle Haven Letter at 6. 105 Id. PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 78961 business.112 Such commenter further explained that the ‘‘retail investor’s liquidity and negotiating power will be eliminated with the competitive landscape reduced to the largest of firms which do not negotiate with retail investors.’’ 113 A further commenter raised concerns ‘‘that significant regulatory changes—particularly when based upon incomplete assumptions— would be harmful to investors and threaten the participation of small and mid-sized broker-dealers in these markets.’’ 114 An additional commenter raised the concern that a ‘‘unilateral reduction to a one-minute reporting timeframe could create undue burdens on execution quality and liquidity with respect to large volume trades or trades in less liquid securities’’ 115 because ‘‘dealers may have insufficient time to hedge their positions or allocate risk with respect to large-sized trades or transactions in thinly trades securities and therefore lead to less willingness by dealers to provide liquidity’’ for these types of trades.116 Another commenter noted that the proposed rule change ‘‘[p]unished’’ 117 small broker-dealers and would ‘‘ultimately reduce liquidity for investors.’’ 118 In response to comments, the MSRB stated that it believes that the potential adverse impacts on competition and liquidity are appropriately mitigated by the two exceptions from the one-minute reporting requirement included in the proposed rule change, which would allow dealers of all sizes, levels of market activity, manners of executing transactions, and business models to continue to engage in municipal securities activities to promote a fair, efficient, robust and more modern municipal securities market consistent with investor protection.119 iii. Technology Costs Some commenters raised concerns that the proposed rule change would impose increased costs of new technology infrastructure. One commenter expressed the view that small firms that do not qualify for the limited trading exception would have to ‘‘implement more sophisticated and expensive automated reporting 112 Id. 113 Id. at 5. ASA Letter at 9. 115 See ICI Letter at 3. 116 Id. at 2 n.4. 117 See Sanderlin Securities Letter at 3. 118 Id. at 3. 119 See MSRB Letter at 10. 114 See E:\FR\FM\26SEN1.SGM 26SEN1 78962 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices khammond on DSKJM1Z7X2PROD with NOTICES systems’’ 120 that they estimated at half a million dollars each year 121 which would be ‘‘cost prohibitive to smaller firms’’ and would lead to ‘‘curtail[ing] customer access to the fixed income securities market.’’ 122 Another commenter noted that the ‘‘technology to report all transactions involving a manual component within five minutes does not currently exist and may never exist, given the structure of the market’’ and expressed the view that ‘‘members [would] need significant time to review systems to ensure that one-minute reporting can be accomplished; create systems, policies and procedures for manual trade indicators, and train staff’’ and also noted the ‘‘high costs of systems development’’ necessary to make operational changes to effect the original proposed rule change.123 A further commenter explained that ‘‘[b]uilding compliant systems for all aspects of the Proposals [would] require major investments by dealers and vendors in technology, training, and revisions to supervisory procedures’’ and that ‘‘[i]mplementation [would] be especially challenging for smaller . . . members who have fewer resources to commit to not only these changes, but the plethora of other new rules and amendments on the regulatory horizon.’’ 124 Additionally, this commenter explained that many firms ‘‘rely on third-party vendors to report all or most of their trades to TRACE and RTRS.’’ 125 This commenter stated that ‘‘vendors that need to update their infrastructure to accommodate changing reporting timelines will pass on this expense to dealers that rely on their service.’’ 126 In response to comments, the MSRB observed that most small and mid-sized firms that would otherwise need to shoulder higher technology or service costs would likely qualify as dealer with limited trading activity for which the proposed exception from the oneminute reporting timeframe would apply.127 The MSRB further explained that such firms would not need to obtain additional, and potentially more sophisticated, technology infrastructure or services beyond their current arrangements.128 The MSRB stated that it believes that the potential adverse 120 See Falcon Square Capital Letter at 2. Falcon Square Capital reiterated its position in the Falcon Square Capital Amendment No. 1 Letter. 121 See Falcon Square Capital Letter at 2 122 Id. at 6. 123 See SIFMA Letter at 10. 124 See BDA Letter at 4. 125 Id. at 3. 126 Id. at 4. 127 See MSRB Letter at 9. 128 Id. VerDate Sep<11>2014 17:11 Sep 25, 2024 Jkt 262001 impacts on competition and liquidity raised by some commenters are appropriately mitigated by the two exceptions from the one-minute reporting which would allow dealers of all sizes, levels of market activity, manners or executing transactions, and business models to continue to engage in municipal securities activities to promote a fair, efficient, robust and more modern municipal securities market consistent with investor protection.129 B. General Comments on Exceptions to One-Minute Reporting Commenters expressed several views relating to the exceptions. One commenter believes that the ‘‘current exceptions contained in the proposals represent essential elements to ensure industry compliance’’ and that ‘‘[w]ith the exceptions in place, the Proposals strike a reasonable balance between regulatory modernization and operational limitations which prevent may trades from meeting the one-minute reporting standard.’’ 130 This commenter further emphasized that ‘‘without the exceptions for dealers with limited trading activity and for trades with a manual component, the Proposals would be unworkable.’’ 131 Another commenter stated that the exceptions are critical to protect smaller dealer members and would be required if the proposed rule change moves forward.132 A further commenter supported the manual exception and noted that the scope of the manual trade exception should be consistent between SROs.133 One commenter, however, noted that the ‘‘exceptions do not appreciably alter market dynamics’’ 134 and expressed concern over the idea that either of the ‘‘exceptions could be reduced over time without being proposed for public comment’’ 135 which ‘‘would also set a troubling precedent that would allow SROs to implement changes without an evidentiary or legal justification for 129 Id. at 10. BDA Letter at 1. 131 See id.; BDA Amendment No. 1 Letter at 2 (expressing the view that the exceptions are made stronger by the changes made by Amendment No. 1). 132 See, e.g, SIFMA Letter at 2. SIFMA reiterated its position in the SIFMA OIP Letter and SIFMA Amendment No. 1 Letter at 2 (expressing the view that the proposed manual trade exception ‘‘is not a panacea since a mandatory one-minute requirement remains unworkable even for certain fully-electronic trades.’’). 133 See FIF I Letter at 2; FIF OIP Letter at 2 (expressing the view that the proposed manual trade exception ‘‘is important to avoid disruption to current trading practices for bonds.’’). 134 See ASA Letter at 1. 135 Id. at 2. 130 See PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 doing so.’’ 136 One commenter advocated for the complete phase out of the exceptions so that all trades subject to the 15-minute reporting timeframe will be reported within one minute.137 An additional commenter stated that its support for the original proposed rule change is conditioned on retaining the exceptions for firms with limited trading activity and for trades with a manual component.138 In response to comments, the MSRB agreed that the exceptions are important components of the proposed rule change and agreed with commenters that asserted that that the exceptions are critical to making the proposed rule change workable and provide for an orderly transition to a more rapid trade reporting paradigm 139 and noted that it ‘‘fully intends for the proposed new intra-day exceptions for trade reporting of municipal securities work in the same manner and at the same pace, and therefore consistent with, requirements for other fixed income securities.’’ 140 The MSRB further explained that ‘‘consideration of whether or when one or both of the proposed exceptions should be phased out is premature, because the MSRB currently lacks sufficient data so support such a decision.’’ 141 The MSRB stated that it ‘‘intends to monitor trade reporting activity and potential impacts on the marketplace to determine whether any changes to the proposed rule change should be considered in the future.’’ 142 i. Trades With a Manual Component Exception Commenters generally noted that the trades with a manual component exception balances shortening reporting requirements while avoiding undue disruptions to the municipal securities market. One commenter stated that it believed that the trades with a manual component exception is an ‘‘appropriate balance between shortening reporting timeframes and avoiding disruption to the marketplace or causing undue burdens.’’ 143 Another commenter requested that the MSRB should ‘‘implement a broad exception for manual trades.’’ 144 Several commenters raised questions about the application of the exception where manual steps may have been taken prior to trade execution but where the execution itself and the 136 Id. 137 See Dimensional Fund Advisors Letter at 2. Piper Sandler OIP Letter at 1. 139 See MSRB Letter at 11. 140 Id. at 12. 141 Id. at 11. 142 Id. 143 See ICI Letter at 3. 144 See LPL OIP Letter at 2. 138 See E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices subsequent trade reporting workflow may be fully automated.145 Commenters provided examples where systems processing limitations would prevent certain fully automated trades to be reported within one minute.146 Some commenters requested clarification in the context of dual registrants and situations where a dealer allocates a block trade to allocate trades.147 One such commenter noted that ‘‘maintaining the reporting time at 15 minutes is necessary, considering the complexities involved in the manual trade reporting process.’’ 148 With respect to qualifying as a trade with a manual component, the MSRB reiterated that ‘‘the manual aspect of the trade workflow generally would only occur after the relevant Time of Trade.’’ 149 The MSRB explained that ‘‘where trade execution and reporting processes are fully electronic, a minimal triggering action (e.g., click ‘‘accept’’) to prompt the electronic execution of a trade at the beginning of the process, by itself, typically would not be sufficient to constitute a manual step qualifying the trade for the manual trade exception.’’ 150 As it relates to system processing limitations, including trades involving large post-trade automated allocations, portfolio trades, trades involving batch processing, and trades where multiples systems are involved in a trade workflow, the MSRB stated that ‘‘analysis of such scenarios related to fully automated trades under the [proposed rule change] is likely to be highly fact specific.’’ 151 Because it is a facts and circumstances determination, the MSRB further explained that it is impossible to create an exhaustive list of examples and that ‘‘dealers should document the circumstances giving rise to [any reporting] delays and consider potential alternatives for reasonable ways to improve the timing of trade reporting such circumstances.’’ 152 The MSRB reminded dealers of the ‘‘overarching obligation to report trades as soon as practicable in light of the effects of such circumstances or justification’’ 153 even if not within the khammond on DSKJM1Z7X2PROD with NOTICES 145 See, generally, BDA Letter; FIF I Letter; ICI Letter; SIFMA Letter; ASA Letter. 146 See, e.g., BDA Letter at 4; Searle RFI Letter at 2; SIFMA Letter at 3, 7–9; FIF I Letter at 3. 147 See, e.g., BDA Letter at 4; SIFMA Letter at 7; Falcon Square Capital Letter at 3–4; FIF I Letter at 3; LPL OIP Letter at 2; SIFMA OIP Letter at 5; BDA OIP Letter at 1–2. 148 See ASA Letter at 2. 149 See MSRB Letter at 13 (citing Notice, 89 FR 5386–87). 150 Id. at 13. 151 Id. at 14. 152 Id. 153 Id. VerDate Sep<11>2014 17:11 Sep 25, 2024 Jkt 262001 applicable one-minute timeframe.154 The MSRB further explained that ‘‘failure to report such trades as soon practicable could be a factor weighing against the determination of whether the exceptional circumstances or reasonable justification provisions of the [proposed rule change] would be available to a dealer making such late reports.’’ 155 With respect to large or block transaction, the MSRB explained that depending on the specific facts and circumstances, ‘‘where a dealer executes a large or block transaction that requires allocations of portions of the trade to individual accounts, unless the initial large or block trade independently qualifies for the manual trade exception and absent another exception, the large or block transaction normally would not qualify for the manual trade exception and instead would be subject to the oneminute reporting requirement.’’ 156 The MSRB further noted that the ‘‘manual trade exception may, however, be available for any resulting allocations to individual accounts that may be required to be reported and such reporting involves manual input or other manual steps.’’ 157 a. Phase-In Period Several commenters addressed the phase-in of the shortening reporting timeframe for trades with a manual component.158 Some commenters requested that the MSRB propose for notice and comment each reduced outer limit timeframe for the trades with a manual component exception to allow market participants the opportunity to submit valuable data and comment prior to the MSRB shortening the reporting timeframe.159 One commenter expressed the view that this exception was not a true exception 160 and requested that the MSRB ‘‘collect data to support a reduction in reporting time for manual trades before it proposes a rule to do so’’ 161 as, according to this commenter, the MSRB did not ‘‘cite a scintilla of statistical or objective support for the need to ‘‘phase in’’ a 154 Id. 78963 reduction of reporting for manual reporters’’ 162 or ‘‘provide the SEC with evidence that manual reporters are not currently reporting as fast as practicable.’’ 163 This commenter also raised the concern that the phase-in period may eliminate small firms which are incapable of meeting the phased-in time periods.164 One commenter noted uncertainty regarding the technological capabilities to meet the proposed phasein timeframes, and requested the MSRB to undertake ongoing monitoring, analysis, and stakeholder engagement.165 A further commenter requested that the MSRB ‘‘[e]xamine impacts to liquidity, depth, concentration, and transparency prior to decreasing reporting times to shorter intervals to ensure markets are not harmed.’’ 166 One commenter also expressed being troubled by the language of the manual trade exception because it ‘‘suggests the possibility of reassessing the reporting timeframe, potentially leading to further reductions or even the elimination of the manual trade exception altogether.’’ 167 The MSRB noted that ‘‘it does not have specific evidence that dealers are currently, as a matter of practice, reporting trades less rapidly than as soon as practicable’’ 168 but ‘‘believes that the new requirement for reporting as soon as practicable would have the effect of increasing the proportion of trades being reported within shorter timeframes than they currently are, without regard to a one-minute, fiveminute or 15-minute deadline, potentially translating into significant improvement in market-wide average reporting times.’’ 169 The MSRB also stated that it ‘‘would monitor the implementation of the [proposed rule change] and, going forward, would analyze trade data related to the operation of the proposed two new exceptions to, among other things, determine whether the eventual fiveminute trade reporting timeframe that would become applicable after two years continues to be feasible and appropriate in light of the empirical data collected through the earlier phases 155 Id. 156 See MSRB Letter at 15 and accompanying notes 55 through 57 (citing the Notice, 89 FR at 5389). 157 Id. 158 See, e.g., BDA Letter at 3; ICI Letter at 3–4; Falcon Square Capital Letter at 4; Falcon Square Capital Amendment No. 1 Letter at 3–4; SIFMA Letter at 6; SIFMA OIP Letter at 6; SIFMA Amendment No. 1 Letter at 3; ASA OIP Letter at 2; ASA Amendment No. 1 Letter at 1; Belle Haven Letter at 5–9; Belle Haven Amendment No. 1 at 3– 4; BDA OIP Letter at 3, 5; LPL OIP Letter at 2. 159 Id. 160 See Belle Haven Letter at 6. 161 Id. at 9. PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 162 Id. at 7. at 7. 164 Id. at 5. 165 See SIFMA Letter at 6–7. See generally ICI Letter at 3–4 (noting potential impacts of implementing the proposed phase-in timeframes and requesting that the MSRB propose for notice and comment each reduced outer limit timeframe to allow market participants the opportunity to submit valuable data and comments prior to potentially shortening reporting timeframes). 166 See LPL OIP Letter at 2. 167 See ASA Letter at 2. 168 See MSRB Letter at 17. 169 Id. 163 Id. E:\FR\FM\26SEN1.SGM 26SEN1 78964 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices of implementation.’’ 170 To address concerns expressed by commenters regarding potential difficulties in meeting the shortened reporting timeframes and make the necessary changes to processes and technology to achieve such shortened timeframes, the MSRB has ‘‘determined to modify the pace of phasing-in the shortened reporting timeframe for trades with a manual component to extend the period during which such trades would be reportable by no later than 10 minutes after the Time of Trade from one year to two years.’’ 171 To alleviate commenters concerns related to the the elimination of the of the trades with a manual component exception, the MSRB explained that the proposed rule change ‘‘sets out a phased-in implementation of the exception for manual trades that would provide for an ultimate five-minute timeframe for the reporting of such trades. No further reductions in such timeframe, and no elimination of the manual trade exception could be possible without additional formal rulemaking by the MSRB that would be filed with the Commission, and any such change would be subject to the required notice and comment process under Section 19 of the Exchange Act.’’ 172 b. Manual Trade Indicator Several commenters addressed the manual trade indicator.173 Commenters requested that the trade indicator apply instead to fully automated trades subject to the one-minute reporting requirement.174 One commenter recommended that the MSRB default the manual trade indicator for any transaction that is reported initially through the RTRS web portal.175 Commenters requested that the MSRB institute an interim period where firms are permitted, but not required, to report the manual trade indicator.176 One commenter also requested clarification on the use of a portfolio trade modifier in specific scenarios.177 170 Id. at 20. 171 Id. 172 See MSRB Letter at 20 (citing 15 U.S.C. 78s). BDA Letter at 3; SIFMA Letter at 9; SIFMA OIP Letter at 7–8; FIF Letter I at 3–4; FIF Letter II generally. 174 See BDA Letter at 3; SIFMA Letter at 9; SIFMA OIP Letter at 7–8. 175 See FIF I Letter at 4. 176 Id. at 6; SIFMA OIP Letter at 8. 177 See generally FIF I Letter (scenarios where a firm corrects a technical issue and then submits automatically); FIF II Letter (consisting of examples of such scenarios and requesting corresponding clarification); FIF OIP Letter (FIF requested clarification on the use of a portfolio trade modifier to RTRS where a dealer receives a large order or a trade list resulting in a portfolio of trades with potentially numerous unique securities involving khammond on DSKJM1Z7X2PROD with NOTICES 173 See VerDate Sep<11>2014 17:11 Sep 25, 2024 Jkt 262001 After considering comments, the MSRB explained that ‘‘to the extent that these trades are fully automated—both the execution and the trade reporting— the manual trade indicator would not apply and should not be used, and the exception for trades with a manual component also would not apply.’’ 178 The MSRB further noted that since ‘‘dealers are already successfully processing other trade indicators that must be applied on an individualized basis in the context of manual and electronic trades[,] the MSRB believes that existing processes can be modified to include the manual trade indicator with only limited additional effort and expense.’’ 179 In response to the requested interim period for optional use, the MSRB ‘‘contemplates providing dealers with sufficient time to implement and test the use of the indicator and does not intend at this time to provide an optional reporting period.’’ 180 Additionally, the MSRB explained that since ‘‘one of the intended purposes of the manual trade indicator is to provide regulators with the information necessary to make thoughtful and pragmatic changes and identify roadblocks to achieving faster trade reporting for trades with a manual component’’ 181 the MSRB stated that it ‘‘will be using the manual trade indicator to assess whether taking further action in the course of such phase-in might be warranted.’’ 182 C. Limited Trading Activity Exception Several commenters addressed the limited trading activity exception.183 One commenter noted that the ‘‘[limited trading activity] exception is appropriately based on trade numbers that are correctly sized to protect minority, veteran and women owned business enterprises and small dealers from incurring the significant costs associated with the proposed rule’’ 184 rapid execution and frequent communications on multiple transactions with multiple counterparties, with the dealer having to book and report those transactions manually. In response, the MSRB clarified that the ‘‘Notice was not intended to create a requirement for portfolio trades to be reported with a trade indicator under MSRB Rule G–14, and no such portfolio indicator is proposed or would be required pursuant to the proposed rule change.’’ See MSRB Letter at 16. The MSRB further explained ‘‘that it has not made a determination as to whether an ‘‘away from market’ indicator would be required in connection with any particular portfolio transaction.’’). Id. at 17. 178 See MSRB Letter at 14. 179 Id. at 18–19. 180 Id. at 24. 181 Id. at 18 n.66. 182 Id. 183 See, e.g., SIFMA Letter; BDA Letter; Falcon Square Capital Letter; Belle Haven Letter; FIF I Letter. See also BDA OIP Letter; SIFMA OIP Letter. 184 See SIFMA Letter at 9. PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 while the proposed two-year look back period ‘‘[would] allow newly impacted members some time to attempt to implement systems to attempt to achieve compliance.’’ 185 Another commenter supported the limited trading activity exception, believing many firms in the market will benefit greatly from this exception.186 An additional commenter expressed the view that the proposed 1,800-trade threshold is ‘‘far too low’’ 187 and requested that the MSRB either significantly expand the threshold or conduct further analysis and provide data to support the 1,800 threshold.188 After considering comments received, the MSRB determined to increase the threshold to 2,500 trades.189 As explained by the MSRB, ‘‘the revised 2,500 threshold is expected to exempt a clear majority of dealers, i.e., 476 out of 651 dealers or approximately 73 percent of dealers based on 2021 and 2022 trade reporting data and these dealers would remain eligible to report their trades in 15 minutes or less.’’ 190 As stated by the MSRB, ‘‘these limited activity dealers account for 1.4 percent of total trades and 2.3 percent of the total par value traded, and therefore would have a 185 Id. 186 See BDA Letter at 2. Falcon Square Capital Letter at 3. 188 Id. at 3. 189 See MSRB Letter at 22 n.81 (explaining that ‘‘upon further review of the methodology used for proposing a 1,800-trade threshold for qualifying for the dealer with limited trading activity exception in the original proposed rule change, the MSRB has determined to increase the threshold to 2,500 trades based on a modification of its methodology described below. In establishing the original proposed threshold of 1,800 trades, the MSRB had used an approach consistent with other instances where MSRB rules and related transparency activities are based on inter-dealer trade report activity that rely solely on the sell-side inter-dealer trade reports so as to avoid, for those specific purposes, potential double counting if both the sellside and buy-side were to be used. For example, the manner in which the MSRB disseminates trade reports for compared inter-dealer trades and assesses its transaction and trade count fees for inter-dealer trades under MSRB Rule A–13(d) is based solely on sell-side trade reports for the reasons described in Amendment No. 1. As a result, the calculations discussed in the MSRB Filing Notice underlying the 1,800-trade threshold in the proposed definition of ‘‘dealer with limited trading activity’’ was lower and did not fully account for inter-dealer trade reports since only the sell-side inter-dealer trade reports were taken into account. In order to maintain compatibility with the plain meaning of the language of the MSRB’s proposed definition of ‘‘dealer with limited trading activity,’’ the MSRB has recalculated the applicable threshold for such definition to be 2,500 trades, taking into account both sell-side and buy-side inter-dealer trade reports together with reports of dealer trades with customers, regardless of whether the dealer bought or sold in the customer transaction.’’). See also Amendment No. 1. 190 See MSRB Letter at 23. 187 See E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices minimal impact on market transparency.’’ 191 D. Consistency in Implementation Commenters recommended an implementation path for municipal securities that is staggered with other fixed income securities.192 In response to comments, the MSRB ‘‘emphasize[d] that greater consistency in implementing changes across the various fixed income markets can be better achieved if the proposed requirements are applied to the entire fixed income industry at the same time. Consistency, not only in reporting requirements but also implementation of those requirements, helps avoid confusing and different reporting standards for the industry.’’ 193 khammond on DSKJM1Z7X2PROD with NOTICES E. Implementation Period Two commenters requested a twoyear implementation period and requested that the MSRB remain open to the creation of FAQs or the provision of implementation guidance to achieve greater compliance.194 One commenter requested an eighteen-month implementation period from the date the MSRB publishes technical specifications and guidance, requested a testing period with additional supports and enhancements ahead of final implementation, and a transitional period during which dealers would not be required to include the manual indicator on trades with a manual component.195 In response to comments, the MSRB stated that it ‘‘continues to intend to maintain an implementation schedule for the proposed rule change that is aligned with the implementation for other fixed income securities.’’ 196 The MSRB also explained that it will ‘‘endeavor to publish updated technical specifications as far as possible in advance of the effective date(s) and will work with dealers to provide interpretive guidance, where needed’’ 197 as is generally the protocol for RTRS and Information Facility changes and ‘‘will facilitate free testing that would include test CUSIP numbers and other appropriate support to ensure that all dealers have a significant opportunity to prepare their systems and processes to achieve full compliance with the requirements of the 191 Id. at 23 (referring to Table 2 in Amendment No. 1). 192 See, e.g., BDA Letter at 4; FIF I Letter at 5– 6; ICI Letter at 2; SIFMA Letter at 10. 193 See MSRB Letter at 12. 194 See BDA Letter at 4; SIFMA Letter at 10. 195 See FIF I Letter at 5–7; SIFMA OIP Letter at 8. 196 See MSRB Letter at 24. 197 Id. VerDate Sep<11>2014 17:11 Sep 25, 2024 Jkt 262001 proposed rule change, if approved.’’ 198 In response to the requested interim period for optional use of the manual trade indicator, the MSRB ‘‘contemplates providing dealers with sufficient time to implement and test the use of the indicator and does not intend at this time to provide an optional reporting period.’’ 199 F. Consistency With the Act Some commenters challenged the proposed rule change as circumventing regulatory obligations and requested that the MSRB conduct further analysis before implementation of the proposed rule change.200 One commenter expressed the view that the MSRB relied on ‘‘conclusory statements without background data in support’’ 201 and requested that the Commission deny and return the proposed rule change to the MSRB for further study and consideration.202 Another commenter asserted that the Commission ‘‘want[ed] to avoid conducting a robust economic cost/benefit analysis’’ 203 and ‘‘strongly recommend[ed] these Proposals be abandoned in their entirety.’’ 204 An additional commenter strongly encouraged the Commission to require the MSRB to revisit the proposed rule change in order to ‘‘consider the economic challenges of smaller firms before modifying the current rule.’’ 205 Another commenter raised issues regarding whether the proposed rule change conforms with the requirements of the Administrative Procedure Act (‘‘APA’’).206 Some commenters defended the process undertaken by the MSRB in connection with the proposed rule change.207 In response, the MSRB stated that it ‘‘is confident that the current rulemaking has been undertaken fully in compliance with applicable statutory and regulatory requirements and has had the benefit of fulsome input from market participants and is backed by extensive data analysis.’’ 208 The MSRB further stated that while not statutorily required, the MSRB ‘‘published a draft version of the proposal for comment in October 2022, including a preliminary economic analysis of such draft 198 Id. 199 Id. 200 See generally Belle Haven Letter; ASA Letter; ASA OIP Letter; Falcon Square Capital Letter. 201 See Belle Haven Letter at 2. 202 Id. 203 See ASA Letter at 3. 204 Id. 205 See Falcon Square Capital Letter at 6. 206 See ASA Letter at 3; ASA OIP Letter at 2. 207 See, e.g., Bernardi Securities OIP Letter at 2; Piper Sandler OIP Letter at 1–2. 208 See MSRB Letter at 24. PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 78965 proposal, and received over 50 comment letters in response.’’ 209 The MSRB explained how the MSRB ‘‘revised the draft version in response to comments received and, upon approval by the MSRB’s board of directors, filed it with the Commission as the original proposed rule change as required under Section 19(b) of the Exchange Act. Also as required by Section 19(b) of the Exchange Act, the Commission published the MSRB Filing Notice for comment.’’ 210 The MSRB further explained how, in response to comments received, the Commission instituted proceedings to obtain further input on the original proposed rule change and the MSRB has now addressed the comments received on the MSRB Filing Notice in this letter.’’ 211 The MSRB further stated that ‘‘[i]n part due to such extensive input, the MSRB has determined to file Amendment No. 1 to the original proposed rule change.’’ 212 The MSRB further stated that ‘‘while the MSRB has consulted with FINRA and the Commission throughout this rulemaking process, the MSRB board of directors and staff have exercised their independent judgment in formulating the proposed rule change, which represents the culmination of MSRB deliberation on this topic stretching back to 2013.’’ 213 IV. Discussion and Commission Findings The Commission has carefully considered the proposed rule change, as well as comment letters received, and the MSRB Letter. The Commission finds that the proposed rule change is consistent with the requirements of the Exchange Act and the rules and regulations thereunder applicable to the MSRB. In particular, the Commission believes that the proposed rule change is consistent with the provisions of Section 15B(b)(2)(C) of the Exchange Act and the rules and regulations thereunder.214 Section 15B(b)(2)(C) of the Exchange Act provides, in part, that the MSRB’s rules shall be designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing 209 Id. at 24–25. All comment letters received in response to the 2022 Request for Comment are available at https://www.msrb.org/sites/default/ files/2023-03/All-Comments-to-Notice-2022-07.pdf. 210 See MSRB Letter at 25. 211 Id. 212 Id. 213 Id. at 25 n.95 (listing MSRB Notice 2013–02 (Jan. 17, 2013); MSRB Notice 2013–14 (July 31, 2013); MSRB Notice 2014–14 (Aug. 13, 2014). 214 15 U.S.C. 78o–4(b)(2)(C). E:\FR\FM\26SEN1.SGM 26SEN1 78966 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices information with respect to, and facilitating transactions in municipal securities, to remove impediments to and perfect the mechanism of a free and open market in municipal securities, and, in general, to protect investors and the public interest.215 The Commission believes that the proposed rule change is consistent with the Exchange Act because the proposed rule change is reasonably designed to remove impediments to and perfect the mechanism of a free and open market in municipal securities by bringing about greater market transparency through more timely disclosures and dissemination of information provided through the RTRS. Accordingly, the Commission finds that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act, as further described below, because the proposed rule change will (i) promote just and equitable principles of trade; (ii) 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; (iii) remove impediments to and perfect the mechanism of a free and open market in municipal securities and municipal financial products; and (iv) protect investors and the public interest. khammond on DSKJM1Z7X2PROD with NOTICES A. Promote Just and Equitable Principles of Trade The Commission finds the proposed rule change will promote just and equitable principles of trade by providing the market with more timely pricing information. As noted by the MSRB, some market professionals may in some circumstances have better or more rapid access to information about trade prices which retail investors do not have access.216 The Commission believes that such reduced timeframe for trade reporting would improve market transparency by reducing information asymmetries between market participants and enhancing investor confidence in the market. The Commission also anticipates that the MSRB will monitor trade reporting activity and potential impacts on the marketplace to determine whether any changes to the proposed rule change should be considered in the future. The Commission will consider any future proposed rule changes filed with the Commission. 215 Id. 216 See Notice, 89 FR at 5393. VerDate Sep<11>2014 17:11 Sep 25, 2024 Jkt 262001 B. Foster Cooperation and Coordination The Commission finds that the proposed rule change would foster cooperation and coordination between the SEC, the MSRB, and FINRA by establishing consistent trade reporting requirements across various classes of fixed income securities. As noted by the MSRB, consistent trade reporting requirements reduce the risk of potential confusion and may reduce compliance burdens resulting from inconsistent obligations and standards for different classes of securities.217 A similar proposed rule change by FINRA, on which the MSRB closely coordinated with FINRA,218 would result in a consistent standard for trade reporting for municipal securities and the TRACEeligible securities covered by the FINRA proposed rule change.219 Accordingly, the Commission believes that the proposed rule change will provide regulatory clarity and would foster cooperation and coordination between the MSRB and FINRA by establishing consistent trade reporting requirements across various classes of fixed income securities. Consistent trade reporting requirements for municipal securities covered by the proposed rule change and the TRACE-eligible securities covered by the FINRA proposed rule change also may reduce compliance burdens resulting from inconsistent obligations and standards for different classes of fixed income securities. Additionally, the Commission finds that the proposed rule change will allow the municipal securities market to produce more timely transaction data which will enhance surveillance of the market by enforcement agencies. C. Remove Impediments to and Perfect the Mechanism of a Free and Open Market in Municipal Securities and Municipal Financial Products The Commission finds that the proposed rule change would remove impediments to, and perfect the mechanism of, a free and open market in municipal securities by making 217 Id. 218 The Commission did not direct the MSRB to file the proposed rule change and is not using the MSRB as a conduit to enact the proposed rule change. One commenter cites a speech by the Chair in stating to the contrary, but that speech does not specifically address the RTRS trade reporting timeframe at all. See ASA Amendment No. 1 Letter at 2 n.4 (citing Gary Gensler, Chair, Securities and Exchange Commission, Prepared Remarks before SEC Speaks: U.S. Capital Markets and the Public Good (Apr. 2, 2024) (transcript available at https:// www.sec.gov/newsroom/speeches-statements/ prepared-remarks-sec-speaks-us-capital-marketspublic-good). And, in any event, the speech reflects the views of the Chair alone, not the Commission. 219 See supra note 15. PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 publicly available more timely transaction data at which municipal securities transactions are executed. As noted by the MSRB, prices at which transactions are executed is central to fairly priced municipal securities and a dealer’s ability to make informed quotations.220 The Commission believes that the proposed rule change could mitigate certain information asymmetries that may exist, thereby enabling market participants to make more informed decisions. Further, the proposed exceptions reasonably balance the benefits to market participants of increased transparency while mitigating commenters’ concern of a shortened trade reporting deadline. In this regard, the proposed rule change is reasonably designed to not permit unfair discrimination between customers, issuers, brokers, or dealers. D. Protect Investors, Municipal Entities, Obligated Persons, and the Public Interest The Commission finds that the proposed rule change will protect investors and the public interest by increasing market transparency and providing the market with more efficient pricing information. In approving the proposed rule change, the Commission has considered the proposed rule change’s impact on efficiency, competition, and capital formation.221 Exchange Act Section 15B(b)(2)(C) 222 requires that MSRB rules not be designed to impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. The Commission does not believes that the proposed rule change would impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act because the proposed rule change takes into account competitive and liquidity concerns that could arise as a result of the costs associated with complying with a shortened reporting timeframe that could lead some dealers to exit the market, curtail their activities or consolidate with other firms. The MSRB has made efforts to minimize the impact of the proposed rule change on dealers in response to commenters including: (i) amending the definition of a dealer with limited trading activity in proposed subparagraph (d)(xi) of Rule G–14 RTRS Procedures by increasing the threshold for qualifying as a dealer with limited trading activity from 1,800 transactions to 2,500 transactions; and (ii) extending 220 See Notice, 78 FR at 5393. U.S.C. 78c(f). 222 15 U.S.C. 78o-4(b)(2)(C). 221 15 E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices the phase-in period for the manual trade exception in proposed new Supplementary Material .02(b) of Rule G–14 RTRS Procedures by one additional year. While the MSRB does not intend at this time to provide an interim period for optional use of the manual trade indicator, the MSRB intends to provide a sufficient implementation timeframe, publish updated technical specifications and will work with dealers to provide interpretive guidance, facilitate free testing and other appropriate support to ensure that all dealers have significant opportunity to prepare systems and processes to achieve full compliance with the proposed rule change.223 The Commission believes that the MSRB, through its responses and through proposed changes in Amendment No. 1 has addressed commenters’ concerns. The Commission has also reviewed the record for the proposed rule change and notes that the record does not contain any information to indicate that the proposed rule change would have a negative effect on capital formation. Further, the Commission finds that the possible increased investor protections offered by reducing the timeframe for trade reporting could foster greater faith in the integrity of the municipal securities market, increasing participation in this market, thereby increasing capital formation. The Commission also finds that the proposed rule change includes provisions that help promote efficiency. In particular, the Commission believes that the reduced timeframe for trade reporting could further reduce information asymmetries between market professionals and retail investors by increasing access to more timely information about executed transactions. For the reasons noted above, the Commission believes that the proposed rule change is consistent with the Act. V. Conclusion khammond on DSKJM1Z7X2PROD with NOTICES It is therefore ordered, pursuant to Section 19(b)(2) of the Act,224 that the proposed rule change (SR–MSRB–2024– 01), as modified by Amendment No. 1, be, and hereby is, approved. For the Commission, pursuant to delegated authority.225 Vanessa A. Countryman, Secretary. [FR Doc. 2024–22028 Filed 9–25–24; 8:45 am] BILLING CODE 8011–01–P MSRB Letter at 24. 224 15 U.S.C. 78s(b)(2). 225 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:11 Sep 25, 2024 DEPARTMENT OF STATE Adjournment [Public Notice: 12554] Stephan A. Lang, U.S. Coordinator and Deputy Assistant Secretary, International Information and Communications Policy, Bureau of Cyberspace and Digital Policy, Department of State. Notice of Public Meeting: International Information and Communications Policy Division Stakeholder Briefing ACTION: Notice of public meeting. The State Department will hold a public meeting at 1 p.m.–2:30 p.m. (ET) on WebEx with the Bureau of Cyberspace and Digital Policy’s International Information and Communications Policy (CDP/ICP) division. The purpose of the meeting is to brief stakeholders on CDP/ICP’s past and upcoming international engagements. These include engagement at the International Telecommunication Union (ITU), the Organization of American States Inter-American Telecommunication Commission (CITEL), the Organization for Economic Cooperation and Development (OECD), the Asia Pacific Economic Cooperation (APEC) Forum Telecommunications and Information Working Group, the Group of Seven (G7) Digital & Tech Working Group, the Group of Twenty (G20) Digital Economy Task Force, and other multilateral processes and bilateral digital and ICT dialogues. DATES: The meeting will be on October 9, 2024. FOR FURTHER INFORMATION CONTACT: Please contact Coreene White, Foreign Affairs Officer, CDP/ICP, at WhiteCE@ state.gov or 771–205–9909. SUPPLEMENTARY INFORMATION: Additional information about the Bureau of Cyberspace and Digital Policy is accessible at https://www.state.gov/ bureaus-offices/deputy-secretary-ofstate/bureau-of-cyberspace-and-digitalpolicy/. We encourage anyone wanting to attend this virtual meeting to register using the following link by 5 p.m. Monday, October 7: https:// statedept.webex.com/statedept/ j.php?MTID=m5a8fd865411e9795f1 b79405cceed2ed. Requests for reasonable accommodation made after Wednesday, October 2 will be considered but might not be able to be accommodated. The public may have an opportunity to provide comments at this meeting. SUMMARY: Agenda Wednesday, October 9, 2024, at 1:00 p.m. (ET) Opening Remarks Briefings on CDP/ICP’s past and upcoming activities Public Comment 223 See Jkt 262001 78967 PO 00000 Frm 00127 Fmt 4703 Sfmt 9990 [FR Doc. 2024–21987 Filed 9–25–24; 8:45 am] BILLING CODE 4710–10–P SURFACE TRANSPORTATION BOARD [Docket No. EP 290 (Sub-No. 5) (2024–4)] Quarterly Rail Cost Adjustment Factor AGENCY: ACTION: Surface Transportation Board. Approval of rail cost adjustment factor. The Surface Transportation Board has adopted the fourth quarter 2024 Rail Cost Adjustment Factor and cost index filed by the Association of American Railroads. SUMMARY: DATES: Applicability Date: October 1, 2024. FOR FURTHER INFORMATION CONTACT: Pedro Ramirez, (202) 245–0333. If you require an accommodation under the Americans with Disabilities Act, please call (202) 245–0245. The rail cost adjustment factor (RCAF) is an index formulated to represent changes in railroad costs incurred by the nation’s largest railroads over a specified period of time. The Surface Transportation Board (Board) is required by law to publish the RCAF on at least a quarterly basis. Each quarter, the Association of American Railroads computes three types of RCAF figures and submits those figures to the Board for approval. The Board has reviewed the submission and adopts the RCAF figures for the fourth quarter of 2024. The fourth quarter 2024 RCAF (Unadjusted) is 0.961. The fourth quarter 2024 RCAF (Adjusted) is 0.375. The fourth quarter 2024 RCAF–5 is 0.354. Additional information is contained in the Board’s decision, which is available at www.stb.gov. SUPPLEMENTARY INFORMATION: Decided: September 20, 2024. By the Board, Board Members Fuchs, Hedlund, Primus, and Schultz. Zantori Dickerson, Clearance Clerk. [FR Doc. 2024–21985 Filed 9–25–24; 8:45 am] BILLING CODE 4915–01–P E:\FR\FM\26SEN1.SGM 26SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 89, Number 187 (Thursday, September 26, 2024)]
[Notices]
[Pages 78955-78967]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-22028]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101118; File No. SR-MSRB-2024-01]

Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Order Granting Approval of a Proposed Rule Change, as Modified
by Amendment No. 1, To Amend MSRB Rule G-14 To Shorten the Timeframe
for Reporting Trades in Municipal Securities to the MSRB

September 20, 2024.

I. Introduction

On January 12, 2024, the Municipal Securities Rulemaking Board
(``MSRB'') filed with the Securities and Exchange Commission (``SEC''
or ``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 to (1) amend MSRB Rule G-14
(``Rule G-14''), on reports of sales or purchases, to (i) shorten the
amount of time within which brokers, dealers, and municipal securities
dealers (collectively, ``dealers,'' and each individually, a
``dealer'') must report most transactions to the MSRB; and (ii) require
dealers to report certain transactions with a new trade indicator, and
make certain clarifying amendments, and (2) make conforming amendments
to MSRB Rule G-12, on uniform practice (``Rule G-12''), and the MSRB's
Real-Time Transaction Reporting System (``RTRS'') Information Facility
(``IF-1'') to reflect the shortened reporting timeframe (the ``original
proposed rule change''). The original proposed rule change was
published for comment in the Federal Register on January 26, 2024.\3\
The Commission received comments in response to the original proposed
rule change.\4\ On April 22, 2024, the Commission issued an order
instituting proceedings (``OIP'') under Section 19(b)(2)(B) of the Act
\5\ to determine whether to approve or disapprove the proposed rule
change.\6\ The Commission received comments in response to the OIP.\7\
On July 18, 2024, the Commission, pursuant to Section 19(b)(2) of the
Act,\8\ designated September 20, 2024, as the date by which the
Commission shall either approve or disapprove the original proposed
rule change.\9\ Also on July 18, 2024, the MSRB filed a comment letter
\10\ and an amendment to the original proposal in response to certain
comments on the original proposed rule change (``Amendment No. 1''; the
original proposed rule change, as modified by Amendment No. 1, the
``proposed rule change''). On July 25, 2024, the Commission published
notice

[[Page 78956]]

of Amendment No. 1,\11\ and the Commission received comment letters in
response.\12\ This order approves the proposed rule change.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Exchange Act Release No. 99402 (Jan. 19, 2024), 89 FR
5384 (Jan. 26, 2024) (``Notice'').
\4\ See Letters to Secretary, Commission, from Michael Noto,
FINRA Registered Representative dated Jan. 31, 2024 (``Noto
Letter''); J. Ben Watkins, Director, Division of Bond Finance, State
of Florida dated Feb. 13, 2024 (``State of Florida Letter'');
Matthew Kamler, President, Sanderlin Securities LLC dated Feb. 14,
2024 (``Sanderlin Securities Letter''); J.D. Colwell dated Feb. 15,
2024 (``Colwell Letter''); Gerard O'Reilly, Co-Chief Executive
Officer and Co-Chief Investment Officer and David A. Plecha, Global
Head of Fixed Income, Dimensional Fund Advisors LP dated Feb. 15,
2024 (``Dimensional Fund Advisors Letter''); Michael Decker, Senior
Vice President, Bond Dealers of America (``BDA'') dated Feb. 15,
2024 (``BDA Letter''); Sarah A. Bessin, Deputy General Counsel and
Kevin Ercoline, Assistant General Counsel, Investment Company
Institute dated Feb. 15, 2024 (``ICI Letter''); Kenneth E. Bentsen,
Jr., President and CEO, Securities Industry and Financial Markets
Association (``SIFMA'') dated Feb. 15, 2024 (``SIFMA Letter'');
Howard Meyerson, Managing Director, Financial Information Forum
(``FIF'') dated Feb. 15, 2024 (``FIF I Letter''); Gregory Babyak,
Global Head of Regulatory Affairs, Bloomberg L.P. dated Feb. 16,
2024 (``Bloomberg Letter''); Melissa P. Hoots, CEO/COO, Falcon
Square Capital, LLC (``Falcon Square Capital'') dated Feb. 16, 2024
(``Falcon Square Capital Letter''); Matt Dalton, Chief Executive
Officer, Belle Haven Investments, LP (``Belle Haven'') dated Feb.
16, 2024 (``Belle Haven Letter''); and Christopher A. Iacovella,
President & Chief Executive Officer, American Securities Association
(``ASA'') dated Feb. 16, 2024 (``ASA Letter''). After the close of
the comment period, one commenter submitted a supplemental letter.
See letter to Secretary, Commission, from Howard Meyerson, FIF dated
Feb. 26, 2024 (``FIF II Letter''). These comment letters are
available at https://www.sec.gov/comments/sr-msrb-2024-01/srmsrb202401.htm.
\5\ 15 U.S.C. 78s(b)(2)(B).
\6\ See Exchange Act Release No. 100003 (Apr. 22, 2024), 89 FR
32486 (Apr. 26, 2024).
\7\ See Letters to Secretary, Commission, from David C.
Jaderlund dated Apr. 23, 2024 (``Jaderlund OIP Letter''); Ronald P.
Bernardi, President and CEO, Bernardi Securities, Inc. dated May 14,
2024 (``Bernardi Securities OIP Letter''); Frank Fairman, Managing
Director, Piper Sandler & Co. dated May 17, 2024 (``Piper Sandler
OIP Letter''); Christopher A. Iacovella, ASA dated May 17, 2024
(``ASA OIP Letter''); Michael Decker, BDA dated May 17, 2024 (``BDA
OIP Letter''); Mark D. Griffin, Senior Vice President and Risk
Control Manager, FHN Financial dated May 17, 2024 (``FHN Financial
OIP Letter''); Howard Meyerson, FIF dated May 17, 2024 (``FIF OIP
Letter''); Richard G. Wallace, Senior Vice President and Associate
General Counsel, LPL Financial LLC (``LPL'') dated May 17, 2024
(``LPL OIP Letter''); Lisa Gayle Melnyk dated May 17, 2024 (``Melnyk
OIP Letter''); Kenneth E. Bentsen, Jr., SIFMA dated May 17, 2024
(``SIFMA OIP Letter''). These comment letters are available at
https://www.sec.gov/comments/sr-msrb-2024-01/srmsrb202401.htm.
\8\ 15 U.S.C. 78s(b)(2).
\9\ See Exchange Act Release No. 100557 (July 18, 2024), 89 FR
59951 (July 24, 2024).
\10\ See Letter to Secretary, Commission, from Ernesto A. Lanza,
Chief Regulatory and Policy Officer, MSRB, dated July 18, 2024,
available at https://www.sec.gov/comments/sr-msrb-2024-01/srmsrb202401.htm (``MSRB Letter'').
\11\ See Exchange Act Release No. 100589 (July 24, 2024), 89 FR
61516 (July 31, 2024) (``Amendment No. 1'').
\12\ See Letters to Secretary, Commission, from Guerras Global
International, University of Providence dated July 29, 2024
(``Guerras Global Amendment No. 1 Letter''); Kenneth E. Bentsen,
Jr., SIFMA dated Aug. 21, 2024 (``SIMFA Amendment No. 1 Letter'');
Christopher A. Iacovella, ASA dated Aug. 21, 2024 (``ASA Amendment
No. 1 Letter''); Matt Dalton, Belle Haven dated Aug. 21, 2024
(``Belle Haven Amendment No. 1 Letter''); Melissa P. Hoots, Falcon
Square dated Aug. 21, 2024 (``Falcon Square Capital Amendment No. 1
Letter''); Michael Decker, BDA dated Aug. 21, 2024 (``BDA Amendment
No. 1 Letter''). These comment letters are available at https://www.sec.gov/comments/sr-msrb-2024-01/srmsrb202401.htm.
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

As described more fully in the Notice and Amendment No. 1, the MSRB
is proposing amendments to Rule G-14, Reports of Sales or Purchases,
and conforming technical changes to Rule G-12(f)(i) and IF-1.
The MSRB believes that the proposed rule change would remove
impediments to a free and open market in municipal securities by making
publicly available more timely information about the market and the
prices at which municipal securities transactions are executed, which
is central to fairly priced municipal securities and a dealer's ability
to make informed quotations.\13\ Additionally, the MSRB is of the view
that the new intra-day exceptions balance potential burdens for dealers
with limited trading activity and address potential burdens faced by
dealers engaged in complex transactions, including voice/electronically
negotiated transactions involving a manual post-transaction
component.\14\
---------------------------------------------------------------------------

\13\ See MSRB Letter at 5.
\14\ Id.
---------------------------------------------------------------------------

As the proposed rule change was developed in close coordination
with the Financial Industry Regulatory Authority (``FINRA''),\15\ the
MSRB is of the view that the proposed rule change reduces the risk of
potential confusion and may reduce compliance burdens resulting from
inconsistent obligations and standards for different classes of
securities.\16\ According to the MSRB, a shortened trade reporting time
would promote regulatory consistency, reducing potential compliance
violations caused by market participants' imperfect application of
differing standards when executing and reporting various types of
transactions in fixed income securities.\17\
---------------------------------------------------------------------------

\15\ See Securities Exchange Act Release No. 99404 (Jan. 19,
2024), 89 FR 5034 (Jan. 24, 2024) (``FINRA Notice''), as partially
amended by Securities Exchange Act Release No. 100594 (July 25,
2024), 89 FR 61514 (July 31, 2024) (``Partial Amendment No. 1,'' and
together with the FINRA Notice, the ``FINRA proposed rule change'').
\16\ See MSRB Letter at 4.
\17\ Id.
---------------------------------------------------------------------------

A. New Baseline Reporting Requirement: One Minute After the Time of
Trade

The proposed amendments to Rule G-14 RTRS Procedures Section
(a)(ii) generally would provide that transactions effected with a Time
of Trade during the hours of an RTRS Business Day \18\ must be reported
to an RTRS Portal \19\ ``as soon as practicable, but no later than one
minute'' after the Time of Trade, subject to several existing reporting
exceptions, which would be retained in the amended rule,\20\ and two
new intra-day reporting exceptions relating to dealers with limited
trading activity and trades with a manual component that would be added
by the proposed rule change.\21\ Except for those trades that would
qualify for a reporting exception, all trades currently required to be
reported within 15 minutes after the Time of Trade would, under the
proposed rule change, be required to be reported no later than one
minute after the Time of Trade.
---------------------------------------------------------------------------

\18\ Rule G-14 RTRS Procedures Section (d)(ii) defines ``RTRS
Business Day'' as 7:30 a.m. to 6:30 p.m., Eastern Time, Monday
through Friday, unless otherwise announced by the MSRB.
\19\ See Notice, 89 at 5385 n.13 (discussing the various
portals).
\20\ Id. at 5385 n.14 (describing the existing exceptions).
\21\ The two new intra-day reporting exceptions, consisting of
trades by dealers with limited trading activity and trades with a
manual component, would be designated as Rule G-14 RTRS Procedures
Sections (a)(ii)(C)(1) and (2), respectively. See Notice, 89 FR at
5385 n.15; Amendment No. 1.
---------------------------------------------------------------------------

i. New Requirement To Report Trades ``as Soon as Practicable''
Section (a)(ii) of the proposed amendment to Rule G-14 RTRS
Procedures adds a new requirement that, absent an exception, trades
must be reported as soon as practicable (but no later than one minute
after the Time of Trade).\22\ This ``as soon as practicable''
requirement would also apply to trades subject to longer trade
reporting deadlines under the two new exceptions for dealers with
limited trading activity pursuant to Rule G-14 RTRS Procedures Section
(a)(ii)(C)(1) and Supplementary Material .01, or trades with a manual
component pursuant to Rule G-14 RTRS Procedures Section (a)(ii)(C)(2)
and Supplementary Material .02.\23\ Although Rule G-14 RTRS Procedures
do not currently explicitly prohibit a dealer from waiting until the
existing 15-minute deadline to report a trade notwithstanding the fact
that the dealer could reasonably have reported such trade more rapidly,
the MSRB notes that under the proposed rule change a dealer could not
simply await the deadline to report a trade if it were practicable to
report such trade more rapidly.\24\
---------------------------------------------------------------------------

\22\ See Notice, 89 FR at 5386.
\23\ Id.
\24\ Id.
---------------------------------------------------------------------------

As provided in more detail in the Notice, proposed Supplementary
Material .03 would provide guidance relating to policies and procedures
for complying with the ``as soon as practicable'' reporting
requirement.\25\ The MSRB noted that dealers must not purposely
withhold trade reports, for example, by programming their systems to
delay reporting until the last permissible minute or by otherwise
delaying reports to a time just before the deadline if it would have
been practicable to report such trades more rapidly.\26\ For trades
with a manual component, and consistent with Supplementary Material
.03(b) of FINRA Rule 6730, the MSRB recognized that the trade reporting
process may not be completed as quickly as, for example, where an
automated trade reporting system is used.\27\ The MSRB explained that
it expected that the regulatory authorities that examine dealers and
enforce compliance with this requirement would take into consideration
the manual nature of the dealer's trade reporting process in
determining whether the dealer's policies and procedures are reasonably
designed to report the trade ``as soon as practicable'' after
execution.\28\
---------------------------------------------------------------------------

\25\ Id. Where a dealer has reasonably designed policies,
procedures and systems in place, the dealer generally would not be
viewed as violating the ``as soon as practicable'' requirement
because of delays in trade reporting due to extrinsic factors that
are not reasonably predictable and where the dealer does not intend
to delay the reporting of the trade (for example, due to a systems
outage).
\26\ Id.
\27\ Id.
\28\ Id.
---------------------------------------------------------------------------

ii. Time of Trade Discussion
The ``Time of Trade'' is defined as the time at which a contract is
formed for a sale or purchase of municipal securities at a set quantity
and set price.\29\ For transaction reporting purposes, the MSRB stated
that the Time of Trade is the same as the time that a trade is
``executed'' and, generally, is consistent with the ``time of

[[Page 78957]]

execution'' for recordkeeping purposes.\30\
---------------------------------------------------------------------------

\29\ See current Rule G-14 RTRS Procedures Section (d)(iii).
\30\ See Notice, 89 FR at 5386-87 (discussing time of execution
and note 22 for additional guidance on the time of execution); MSRB
Letter at 13 (MSRB further explaining that the Time of Trade is the
time at which a meeting of the minds has occurred, for example,
where parties have already reached agreement regarding the terms and
elements of execution and at what point a contract is formed for the
transaction).
---------------------------------------------------------------------------

iii. Valid Contract Discussion
In general, to form a valid contract, there must be at least an
offer and acceptance of that offer. As a result, the MSRB noted that
dealers should consider the point in time at which an offer to buy or
sell municipal securities was met with an acceptance of that offer.
This ``meeting of the minds,'' \31\ cannot occur before the final
material terms, such as the exact security, price and quantity, have
been agreed to and such terms are known by the parties to the
transaction.\32\ The MSRB further explained that dealers should be
clear in their communications regarding the final material terms of the
trade and how such terms would be conveyed between the parties \33\ to
ensure that such a valid trade contract has been formed.\34\
---------------------------------------------------------------------------

\31\ See generally FINRA Regulatory Notice 16-30 (Trade
Reporting and Compliance Engine (TRACE): FINRA Reminds Firms of
their Obligation to Report Accurately the Time of Execution for
Transactions in TRACE-eligible Securities) (Aug. 2016); MSRB Notice
2016-19 (MSRB Provides Guidance on MSRB Rule G-14, on Reports of
Sales or Purchases of Municipal Securities (Aug. 9, 2016) (the
``2016 RTRS FAQs'') at questions 1 and 2.
\32\ See generally MSRB Notice 2004-18 (Notice Requesting
Comment on Draft Amendments to Rule G-34 to Facilitate Real-Time
Transaction Reporting and Explaining Time of Trade for Reporting New
Issue Trades) (June 18, 2004); 2016 RTRS FAQs at question 1.
\33\ See Notice, 89 FR at 5386 n.26.
\34\ Id. at 5387 (discussing the particulars for when
transactions have been executed, confirmed, and reported).
---------------------------------------------------------------------------

iv. Exceptions to the Baseline Reporting Requirement
Proposed amendments to Rule G-14 RTRS Procedures Section (a)(ii)
add two new exceptions to the proposed one-minute reporting
requirement: (a) New Section (C)(1) provides an exception for a dealer
with ``limited trading activity,'' and (b) New Section (C)(2) provides
an exception for a dealer reporting a ``trade with a manual
component.'' \35\
---------------------------------------------------------------------------

\35\ Id. (explaining how these exceptions have a narrowly
tailored purpose).
---------------------------------------------------------------------------

a. Exception for Dealers With Limited Trading Activity
Proposed new Section (a)(ii)(C)(1) would except a dealer with
``limited trading activity'' from the one-minute reporting requirement
and would instead be required to report its trades as soon as
practicable, but no later than 15 minutes after the Time of Trade for
so long as the dealer remains qualified for the limited trading
activity exception, as further specified in new Supplementary Material
.01.\36\ Proposed Section (d)(xi) of Rule G-14 RTRS Procedures would
define a dealer with limited trading activity as a dealer that, during
at least one of the prior two consecutive calendar years, reported to
an RTRS Portal fewer than 2,500 purchase or sale transactions with
customers or other dealers,\37\ excluding transactions exempted under
Rule G-14(b)(v) and transactions specified in Rule G-14 RTRS Procedures
Sections (a)(ii)(A) and (B). A dealer relying on this exception to
report trades within the 15-minute timeframe, rather than the new
standard one-minute timeframe, would have to confirm that it meets the
criteria for a dealer with limited trading activity for each year
during which it continues to rely on the exception (e.g., the dealer
could confirm its eligibility based on its internal trade records and
by checking MSRB compliance tools which would indicate a dealer's
transaction volume for a given year).\38\
---------------------------------------------------------------------------

\36\ The MSRB noted that transactions effected by such a dealer
with a Time of Trade outside the hours of an RTRS Business Day would
be permitted to be reported no later than 15 minutes after the
beginning of the next RTRS Business Day pursuant to Rule G-14 RTRS
Procedures Section (a)(iii). The MSRB also noted that, as is the
case today, transactions for which an end-of-trade-day or post-
trade-day reporting exception is available under redesignated
Sections (A) and (B) would continue to have that exception
available. See Notice, 89 FR at 5387 n.29.
\37\ The original proposed rule change established a threshold
of 1,800 trades. See Notice, 89 FR at 5387. The MSRB recalculated
the appropriate threshold for the definition of ``dealer with
limited trading activity'' to take into account both sell-side and
buy-side inter-dealer trade reports together with reports of dealer
trades with customers, regardless of whether the dealer bought or
sold in the customer transaction. See Amendment No. 1; MSRB Letter
at 22 n.81. The MSRB stated that there is no material impact to the
economic analysis contained in the original proposed rule change as
a result of the increased threshold. See MSRB Letter at 23.
\38\ See Notice, 89 FR at 5387-88 (MSRB using a hypothetical to
illustrate variations in dealer eligibility for the limited trading
exception).
---------------------------------------------------------------------------

b. Exception for Trades With a Manual Component
Rule G-14 RTRS Procedures Section (a)(ii)(C)(2) would except a
``trade with a manual component'' as defined in new Section (d)(xii) of
Rule G-14 RTRS Procedures from the one-minute reporting requirement.
The MSRB noted that dealers with such trades would be required to
report such trades as soon as practicable and within the time periods
specified in new Supplementary Material .02, unless another exception
from the one-minute reporting requirement applies under proposed Rule
G-14 RTRS Procedures Sections (a)(ii)(A) and (B) (i.e., transactions
having an end-of-trade-day or post-trade-day reporting exception) or
(a)(ii)(C)(1) (i.e., transactions by dealers with limited trading
activity).\39\ Section (d)(xii) of Rule G-14 RTRS Procedures would
define a ``trade with a manual component'' as a transaction that is
manually executed or where the dealer must manually enter any of the
trade details or information necessary for reporting the trade directly
into an RTRS Portal (for example, by manually entering trade data into
the RTRS Web Portal) or into a system that facilitates trade reporting
(for example, by transmitting the information manually entered into a
dealer's in-house or third-party system) to an RTRS Portal. As
described below and more fully in the Notice, a dealer reporting to the
MSRB a trade meeting the definition for a ``trade with a manual
component'' would be required to append a new trade indicator so that
the MSRB can identify manual trades.\40\
---------------------------------------------------------------------------

\39\ As explained by the MSRB, transactions effected with a Time
of Trade outside the hours of an RTRS Business Day would be
permitted to be reported no later than 15 minutes after the
beginning of the next RTRS Business Day pursuant to Rule G-14 RTRS
Procedures Section (a)(iii). See Notice, 89 FR at 5388 n.38.
\40\ Such new indicator would be required for any trade with a
manual component, whether the dealer reports such trade within the
new one-minute timeframe or the dealer seeks to take advantage of
the longer timeframes permitted for trades with a manual component.
See Notice, 89 FR at 5388 n.39.
---------------------------------------------------------------------------

As explained by the MSRB, this ``manual'' exception would apply
narrowly, and would normally encompass any human participation,
approval or other intervention necessary to complete the initial
execution and reporting of trade information after execution,
regardless of whether undertaken by electronic means (e.g., keyboard
entry), physical signature or other physical action. To qualify as a
trade with a manual component, the manual aspect(s) of the trade
generally would have to occur after the relevant Time of Trade (i.e.,
the time at which a contract is formed for the transaction).\41\ As
further explained by the MSRB, any manual aspects that precede the time
of trade (e.g., phone calls to locate bonds to be sold to a customer
before the dealer agrees to sell such bonds to a purchasing customer)
would normally not be relevant for purposes of the exception unless
they have a direct impact on the activities that must be

[[Page 78958]]

undertaken post-execution to enter information necessary to report the
trade.\42\
---------------------------------------------------------------------------

\41\ Id. at 5388.
\42\ The MSRB provided various scenarios to illustrate
application of the manual exception would apply. See generally id.
at 5389 n.40. The MSRB further clarified that the exception is
intended to apply only to the trade execution and reporting portions
of the workflow. See MSRB Letter at 13.
---------------------------------------------------------------------------

The MSRB provided the following non-exhaustive list of situations
in which trades would be considered to have a manual component:
where a dealer executes a trade by manual or hybrid means,
such as voice or negotiated trading by telephone, email, or through a
chat/messaging function, and subsequently must manually enter into a
system that facilitates trade reporting all or some of the information
required to book the trade and report it to RTRS; \43\
---------------------------------------------------------------------------

\43\ See Notice, 89 FR at 5389.
---------------------------------------------------------------------------

where a dealer executes a trade (typically a larger-sized
trade) that requires additional steps to negotiate and confirm details
of the trade with a client and manually enters the trade into risk and
reporting systems; \44\
---------------------------------------------------------------------------

\44\ See Notice, 89 FR at 5389.
---------------------------------------------------------------------------

where a dually-registered broker-dealer/investment adviser
executes a block transaction that requires allocations of portions of
the block trade to the individual accounts of the firm's advisory
clients that must be manually inputted in connection with a trade; \45\
---------------------------------------------------------------------------

\45\ Id.
---------------------------------------------------------------------------

where an electronically or manually executed trade is
subject to manual review by a second reviewer for risk management
(e.g., transactions above a certain dollar or par amount or other
transactions meriting heightened risk review) and, as part of or
following the review, the trade must be manually approved, amended or
released before the trade is reported to RTRS; \46\
---------------------------------------------------------------------------

\46\ Id.
---------------------------------------------------------------------------

where a dealer's trade execution processes may entail
further diligence following the Time of Trade involving a manual step
(e.g., manually checking another market to confirm that a better price
is not available to the customer); \47\
---------------------------------------------------------------------------

\47\ The MSRB noted that dealers experiencing significant levels
of post-Time of Trade price adjustments due to such post-trade best
execution processes should consider whether these processes are well
suited to the dealer's obligations under MSRB Rule G-18 and whether
the dealer is appropriately evaluating when a contract has in fact
been formed with its customer. Id. at 5389 n.41.
---------------------------------------------------------------------------

where a dealer trades a municipal security, whether for
the first time or under other circumstances where the security master
information may not already be populated (e.g., information has been
removed or archived due to a long lapse in trading the security), and
additional manual steps are necessary to set up the security and
populate the associated indicative data in the dealer's systems prior
to executing and reporting the trade; \48\
---------------------------------------------------------------------------

\48\ Id. at 5389.
---------------------------------------------------------------------------

where a dealer receives a large order or a trade list
resulting in a portfolio of trades with potentially numerous unique
securities involving rapid execution and frequent communications on
multiple transactions with multiple counterparties, and the dealer must
then book and report those transactions manually, one by one; \49\
---------------------------------------------------------------------------

\49\ The MSRB explained that in instances where a dealer trades
a basket of securities at a single price for the full basket, rather
than individual prices for each security based on its then-current
market price, such price likely would be away from the market,
requiring inclusion of the ``away from market'' special condition
indicator and qualifying for an end-of-trade-day reporting exception
under proposed Rule G-14 RTRS Procedures Section (a)(ii)(A)(3). See
Notice, 89 FR at 5389 n.42.
---------------------------------------------------------------------------

where a broker's broker engages in mediated transactions
that involve multiple transactions with multiple counterparties; \50\
and
---------------------------------------------------------------------------

\50\ Id. at 5389.
---------------------------------------------------------------------------

where a dealer reports a trade manually through the RTRS
Web Portal.\51\
---------------------------------------------------------------------------

\51\ Id.
---------------------------------------------------------------------------

The MSRB noted that appropriateness of treating any step in the
trade execution and reporting process as being manual must be assessed
in light of the anti-circumvention provision included in the proposed
rule change with regard to the delay in execution or insertion of
manual tasks for the purpose of meeting this new exception.\52\
---------------------------------------------------------------------------

\52\ Id. at 5390 (discussing the prohibition on purposeful
insertion of manual steps in trade reporting process).
---------------------------------------------------------------------------

New Supplementary Material .02(a) would require all trades with a
manual component to be reported as soon as practicable and would
specify that in no event may a dealer purposely delay the execution of
an order, introduce any manual steps following the Time of Trade, or
otherwise modify any steps prior to executing or reporting a trade for
the purpose of utilizing the exception for manual trades.\53\
---------------------------------------------------------------------------

\53\ Id.
---------------------------------------------------------------------------

New Supplementary Material .03 would require that dealers adopt
policies and procedures for complying with the as soon as practicable
reporting requirement, including by implementing systems that commence
the trade reporting process without delay upon execution and provides
for additional guidance for regulatory authorities that enforce and
examine dealers for compliance with this requirement to take into
consideration the manual nature of the dealer's trade reporting
process.\54\
---------------------------------------------------------------------------

\54\ For trades with a manual component, the MSRB explained that
it recognized that the trade reporting process may not be completed
as quickly as, for example, where an automated trade reporting
system is used. The MSRB further explained that in these cases, the
MSRB expects that the regulatory authorities that examine dealers
and enforce compliance with this requirement would take into
consideration the manual nature of the dealer's trade reporting
process in determining whether the dealer's policies and procedures
are reasonably designed to report the trade ``as soon as
practicable'' after execution. See id. at 5388.
---------------------------------------------------------------------------

The MSRB also noted that dealers should consider the types of
transactions in which they regularly engage and whether they can
reasonably reduce the time between a transaction's Time of Trade and
its reporting, and more generally should make a good faith effort to
report their trades as soon as practicable.\55\ The MSRB currently
collects and analyzes data regarding dealers' historic reporting of
transactions to RTRS under various scenarios and such data will
continue to be available to the regulators for analysis under the
proposed one-minute standard. Subject to Commission approval of the
proposed rule change, the MSRB explained that it would be reviewing the
use of the manual exception and would share with the examining
authorities any analyses resulting from such reviews.\56\
---------------------------------------------------------------------------

\55\ Id. at 5389.
\56\ Id. at 5390.
---------------------------------------------------------------------------

1. Phase-In Period for Trades With a Manual Component
New Supplementary Material .02(b) would subject trades with a
manual component to a phase-in period for timely reporting over three
years (``phase-in period''). During the first calendar year of
effectiveness of the exception, trades meeting this definition would be
required to be reported as soon as practicable, but no later than 15
minutes after the Time of Trade.\57\ For the second and third calendar
years from effectiveness of the exception, such trades would be
required to be reported as soon as practicable, but no later than 10
minutes after the Time of Trade.\58\
---------------------------------------------------------------------------

\57\ Id. at 5389; Amendment No. 1, Supplementary Material
.02(b)(i).
\58\ Under the original proposed rule change, trades with a
manual component would have been required to be reported as soon as
practicable, but no later than five minutes after the Time of Trades
after the second calendar year from effectiveness and thereafter.
See Notice, 89 FR at 5390; Amendment No. 1, Supplementary Material
.02(b)(ii).
---------------------------------------------------------------------------

Following the conclusion of the third calendar year and thereafter,
such trades

[[Page 78959]]

would be required to be reported as soon as practicable, but no later
than five minutes after the Time of Trade.\59\ The MSRB stated that
dealers should remember that the ``as soon as practicable'' reporting
obligation may, depending on the facts and circumstances, require
quicker reporting than the applicable outer reporting obligation during
and after the phase-in period.
---------------------------------------------------------------------------

\59\ See Notice, 89 FR at 5387. The MSRB explained that it would
be monitoring the implementation of the proposed rule change and
would analyze trade data to determine, among other things, whether
the eventual five-minute trade reporting timeframe continues to be
feasible and appropriate in light of the empirical data collected
through the earlier phases of implementation. See Amendment No. 1.
The MSRB further explained that any further reduction in reporting
timeframe, or elimination of the manual trade exception, could not
be possible without additional formal rulemaking by the MSRB that
would be filed with the Commission. See Amendment No. 1.
---------------------------------------------------------------------------

2. Prohibition on Purposeful Insertion of Manual Steps in Trade
Reporting Process
New Supplementary Material .02(a) would specifically prohibit
dealers from purposely delaying the execution of an order, introducing
any manual steps following the Time of Trade, or otherwise purposefully
modifying any steps to execute or report a trade to utilize the
exception for manual trades. The MSRB notes that this requirement would
not prohibit reasonable manual steps that are taken for legitimate
purposes and would not apply to any steps that are taken prior to the
time of trade that do not have the effect of delaying the subsequent
reporting of such trade.\60\
---------------------------------------------------------------------------

\60\ See Notice, 89 FR at 5390.
---------------------------------------------------------------------------

3. Manual Trade Indicator
Proposed amendments to Rule G-14 RTRS Procedures Section (b)(iv)
would require the report of a trade meeting the MSRB's definition for a
``trade with a manual component,'' as defined in proposed Section
(d)(xii) of Rule G-14 RTRS Procedures,\61\ to append a new trade
indicator \62\ to such a trade report. The MSRB noted that this
indicator would be mandatory for every trade that meets the standard to
append the indicator,\63\ regardless of whether the trade is actually
reported within one minute after the Time of Trade, is reported within
the applicable timeframe under the manual trade exception or is
otherwise subject to another reporting exception.
---------------------------------------------------------------------------

\61\ See generally id. at 5388-90.
\62\ Id. at 5391 n.51 (discussing how the manual trade indicator
would be used for regulatory purposes).
\63\ Current Rule G-14 RTRS Procedures Section (a)(iv) requires
that transaction data that is not submitted in a timely and accurate
manner must be submitted or corrected as soon as possible. The
manual trade indicator is not intended to be used to reflect the
manual nature of any correction to a prior trade report. Id. at 5390
n.50.
---------------------------------------------------------------------------

v. Pattern or Practice of Late Trade Reporting
Current Rule G-14 RTRS Procedures Section (a)(iv) requires that
transaction data that is not submitted in a timely and accurate manner
must be submitted or corrected as soon as possible--even when a dealer
is late in reporting a trade, the dealer remains obligated to report
such trade as soon as possible. The proposed rule change further
provides that any transaction that is not reported within the
applicable time period shall be designated as ``late.'' \64\ The MSRB
stated that a pattern or practice of late reporting without exceptional
circumstances or reasonable justification may be considered a violation
of Rule G-14.\65\ The MSRB further noted that the determination of
whether exceptional circumstances or reasonable justifications exist
for late trade reporting is dependent on the particular facts and
circumstances and whether such circumstances are addressed in the
dealer's systems and procedures.\66\ The MSRB explained that it
expected that the regulatory authorities that examine dealers and
enforce compliance with the reporting timeframes established under Rule
G-14 RTRS Procedures would focus their examination for and enforcement
of the rule's timing requirements on the consistency of timely
reporting and the existence of effective controls to limit late
reporting to exceptional circumstances or where reasonable
justifications exist for a late trade report, rather than on individual
late trade report outliers.\67\ Notwithstanding such expectation, where
facts and circumstances indicate that an individual late report was
intentional or otherwise egregious, or could reasonably be viewed as
potentially giving rise to an associated fair practice, fair pricing,
best execution or other material regulatory concern under MSRB or
Commission rules with respect to that or a related transaction, the
MSRB noted that the regulatory authorities could reasonably determine
to take action with respect to such late trade in the examination or
enforcement context.\68\
---------------------------------------------------------------------------

\64\ See generally id. at 5391 n.52 (MSRB explaining that late
trade designations are currently, and would continue to be,
available to regulators and, through the MSRB compliance tool
described below in the Notice under ``Purpose--Proposed Rule
Change--Compliance Tools,'' to the dealer submitting the late
trade).
\65\ Id. at 5391.
\66\ Id.
\67\ Id.
\68\ Id.
---------------------------------------------------------------------------

vi. Compliance Tools
The MSRB explained that it would continue to provide various
compliance tools to assist dealers with compliance and for examining
authorities to monitor for compliance.\69\
---------------------------------------------------------------------------

\69\ Id.
---------------------------------------------------------------------------

vii. Other Proposed Amendments
a. Technical Amendments
Technical amendments to Rule G-14 RTRS Procedures Section (a)(ii)
regroup and renumber its current Sections (A) through (C) to new
Sections (A)(1) through (A)(3), renumber current Sections (D) and (E)
to new Sections (B)(1) and B(2), and correct a cross-reference in
Section (b)(iv) to certain of these Sections to be consistent with such
renumbering.\70\ In addition, a technical amendment to Rule G-14 RTRS
Procedures Section (a)(ii) changes the word ``of'' to ``after'' and
omits the word ``within'' in the phrase ``within 15 minutes of Time of
Trade'' for clarity and consistency of usage throughout the Rule G-14
RTRS Procedures as amended.\71\
---------------------------------------------------------------------------

\70\ Id. at 5392.
\71\ Id.
---------------------------------------------------------------------------

b. Clarifying Amendments--Special Condition Indicators and Trades on an
Invalid RTTM Trade Date
Rule G-14 RTRS Procedures Section (b)(iv) currently sets forth
information regarding certain existing special condition indicators
while also referencing the existence of other special condition
indicators in Section 4.3.2 of the Specifications for Real-Time
Reporting of Municipal Securities Transactions. The MSRB stated that
the proposed clarifying amendments to Section (b)(iv) of Rule G-14 RTRS
Procedures would incorporate into the language thereof reference to all
applicable special condition indicators, including the new trade with a
manual component indicator and existing special condition indicators
previously adopted by the MSRB but that are currently only documented
explicitly in the Specifications for Real-Time Reporting of Municipal
Securities Transactions.\72\ Other than the addition of the new trade
with a manual component indicator, the MSRB noted that the proposed
clarifying amendments to this provision would not make any changes to
the types or usage of existing special condition

[[Page 78960]]

indicators.\73\ Rule G-14 RTRS Procedures Section (a)(iii) would be
amended to reflect that, in addition to trades effected outside the
hours of the RTRS Business Day, inter-dealer trades may be executed on
certain holidays (other than those recognized as non-RTRS Business
Days) that are not valid RTTM trade dates (``invalid RTTM trade
date''), and in either case such trades are to be reported no later
than within 15 minutes after the beginning of the next RTRS Business
Day. Such invalid RTTM trade date transactions are already subject to
this same next RTRS Business Day reporting requirement.\74\ The MSRB
believes that a proposed clarifying amendment to this provision would
not make any changes to the circumstances or timing of reporting of
such trades.\75\
---------------------------------------------------------------------------

\72\ See generally id. at 5392 n.55.
\73\ Id. at 5392.
\74\ See Section 4.3.2 of the Specifications for Real-Time
Reporting of Municipal Securities Transactions; Exchange Act Release
No. 55957 (June 26, 2007), 72 FR 36532 (July 3, 2007), File No. SR-
MSRB-2007-01.
\75\ See Notice, 89 FR at 5392.
---------------------------------------------------------------------------

c. Proposed Conforming Amendments to Rule G-12 and RTRS Information
Facility
Proposed amendments to Rule G-12, on uniform practice, would make
conforming changes to Section (f)(i) thereof to require that each
transaction effected during the RTRS Business Day shall be submitted
for comparison as soon as practicable, but no later than one minute
after the Time of Trade unless an exception applies. The proposed rule
change would also modify the IF-1 to clarify lateness checking against
the applicable reporting deadline(s) provided for in proposed
amendments to Rule G-14 RTRS Procedures, as opposed to the current 15-
minute requirement.\76\
---------------------------------------------------------------------------

\76\ Id.
---------------------------------------------------------------------------

III. Summary of Comments Received and the MSRB's Response

As noted previously, the Commission received fourteen (14) comments
letters in response to the Notice, ten (10) letters in response to the
OIP, and six (6) letters in response to Amendment No. 1.\77\ The MSRB
responded to the comment letters received on the Notice and OIP in the
MSRB Letter.\78\ The MSRB reiterated that it continues to believe that
the proposed rule change would promote just and equitable principles of
trade because it would further reduce information asymmetry between
market professionals (such as dealers and institutional investors) and
retail investors by ensuring progressively increased access to more
timely information about executed municipal securities transactions for
all investors.\79\ Additionally, the MSRB explained that the proposed
rule change would foster cooperation and coordination with persons
engaged in regulating and processing information, facilitating a
consistent standard for trade reporting across many fixed income
products, including municipal securities.\80\ The MSRB further noted
that the proposed rule change would remove impediments to a free and
open market in municipal securities by making publicly available more
timely information about the market and the prices at which municipal
securities transactions are executed and promote investor protection
and the public interest through increased market transparency.\81\
Commenters generally supported the MSRB's goal of facilitating equal
access to information and market transparency.\82\
---------------------------------------------------------------------------

\77\ See supra notes 4, 7, and 12. Separately, the MSRB
published a request for information soliciting stakeholder input
regarding the impact of MSRB rules on smaller regulated entities
(``Small Firm RFI'') on December 4, 2023. Eight (8) of the comments
received by the MSRB in response to the Small Firm RFI discussed the
original proposed rule change or a draft version of the original
proposed rule change previously published for comment. See letters
to Ronald W. Smith, Corporate Secretary, MSRB, from: Mike Petagna,
President, Amuni Financial, Inc. dated Jan. 8, 2024 (``Amuni RFI
Letter''); Mr. Kamler, Sanderlin Securities LLC dated Jan. 26, 2024
(``Sanderlin Securities RFI Letter''); Robert S. Searle, President,
Searle & Co., Inc. dated Feb. 16, 2024 (``Searle RFI Letter''); Brad
Harris, Director of Fixed Income--Municipal Bonds, Herold & Lantern
Investments dated Feb. 22, 2024 (``HLI RFI Letter''); Jessica R.
Giroux, General Counsel, ASA dated Feb. 26, 2024 (``ASA RFI
Letter''); Mr. Decker, BDA dated Feb. 26, 2024 (``BDA RFI Letter'');
Leslie M. Norwood, Managing Director and Associate General Counsel,
Head of Municipal Securities, SIFMA dated Feb. 26, 2024 (``SIFMA RFI
Letter''); and Stern Brothers & Co. dated Feb. 26, 2024 (``Stern
Bros. RFI Letter''). The comment letters received in response to the
Small Firm RFI are available at: https://www.msrb.org/Regulatory-Documents?id=13895.
\78\ See supra note 10.
\79\ See MSRB Letter at 4.
\80\ Id.
\81\ Id.
\82\ See, e.g., letters from SIFMA; BDA; ICI; Dimensional Fund
Advisors; Belle Haven; Bernardi Securities; Piper Sandler; LPL.
---------------------------------------------------------------------------

A. One-Minute Reporting

i. Benefit to Municipal Securities Market
Some commenters expressed concern that the scope of the proposed
rule was overly broad and could have unintended consequences on the
municipal securities market as a whole.\83\
---------------------------------------------------------------------------

\83\ See, e.g., letters from BDA, Noto, State of Florida,
Sanderlin Securities, SIFMA, ASA, Falcon Square Capital.
---------------------------------------------------------------------------

One commenter ``generally agree[d] with the proposal to have those
trades which can reasonably be reported within one minute be required
by rulemaking to be reported within such time,'' \84\ but challenged
the ``benefit of an across-the-board shortening of reporting times and
[had] concerns about the costs and risks associated with
implementation.'' \85\ Another commenter questioned ``what sort of
benefit this almost-immediate reporting delivers or if the rule may
very well adversely impact certain types of liquidity.'' \86\ One
commenter stated that ``[a]ccelerating the timeframe for trade
reporting [would] not result in any additional protection for investors
and may well further inhibit capital being deployed in the
marketplace,'' \87\ further noting that ``increasing the cost and
compliance burden [would] impair liquidity and the willingness of firms
to commit capital to their municipal business.'' \88\ A further
commenter noted that the ``transition to one-minute reporting has
neither been adequately examined or justified'' \89\ and did not
``believe that the proposed one-minute reporting rule [could] be
adopted without exposing the broker-dealer community to significant
liability and creating risk to the function of some fixed income
markets'' \90\ and that ``subjecting the fixed income market to trade
reporting requirements that appear to be inspired by the equities
market is misguided.'' \91\ Building on its 2022 letter, an additional
commenter reiterated that the ``[p]roposals lack evidence of a market
failure to justify such a change'' and ``[would] not provide a tangible
benefit to investors.'' \92\ This commenter also expressed the view
that ``regulatory changes based upon incomplete assumptions would be
harmful to investors and threaten the participation of small and
midsized broker-dealers.'' \93\ A commenter stated that the proposed
rule change did ``not provide evidence to support how the reporting
change would result in a material

[[Page 78961]]

improvement of the fixed-income securities market'' \94\ and that the
proposed rule change ``appear[ed] to extrapolate the effects of the
2005 change in reporting time . . . to support the claim that a further
reduction in reporting time would provide more market transparency and
immediate access to data for the remaining 26.3% of trades that were
not reported to the MSRB within one minute during 2022.'' \95\ One
commenter stated that the MSRB failed to ``provide carefully detailed
analysis of the clear and substantial benefit to the municipal
securities marketplace;'' \96\ ``provide adequate evidence upon which
the SEC can reach a determination as to whether to approve or
disapprove the proposed rule change;'' \97\ and ``advance quantifiable
data to support its assertion that investors will save millions of
dollars through such radically reduced reporting times.'' \98\ A
further commenter expressed ``concern that the [proposed rule change]
will expose broker-dealers to significant regulatory risk and clients
to diminished liquidity and service from their broker-dealers.'' \99\
Another commenter expressed a positive view by stating that
``transparency fosters a fair and efficient market and that market
quality is improved when public information is disseminated evenly to
all market participants'' \100\ enhancing ``investors' power to
negotiate with dealers, leading to reduced transaction costs.'' \101\
One commenter ``question[ed] whether one-minute trade reporting is
suitable across the board for all fixed income markets'' and believed
that the ``current trade reporting framework already strikes an
appropriate balance between transparency, the ability to reasonably
comply, and market liquidity.'' \102\ Additionally, this commenter
noted that the proposed rule change ``lack[ed] sufficient evidence and
reasoning as to why shortening the reporting timeframe is necessary,
much less achievable.'' \103\
---------------------------------------------------------------------------

\84\ See BDA Letter at 1. BDA generally reiterated its position
in the BDA OIP Letter and BDA Amendment No. 1 Letter.
\85\ See BDA Letter at 1.
\86\ See Noto Letter.
\87\ See State of Florida Letter at 1.
\88\ Id. at 2.
\89\ See SIFMA Letter at 2.
\90\ Id.
\91\ Id.
\92\ ASA Letter at 1. ASA generally reiterated its position in
the ASA OIP Letter and ASA Amendment No. 1 Letter.
\93\ Id. at 2. ASA included its 2022 comment letter which
already explained that the ``Proposals are notable in that they
offer scant evidence for why current reporting requirements are
inadequate or how investors would benefit by a shift to a mandated
one-minute time frame.'' Id. at 5-6.
\94\ See Falcon Square Capital Letter at 1. Falcon Square
Capital generally reiterated its position in the Falcon Square
Capital Amendment No. 1 Letter.
\95\ See Falcon Square Capital Letter at 1-2.
\96\ See Belle Haven Letter at 3.
\97\ Id. at 1.
\98\ Id. Belle Haven generally reiterated its position in the
Belle Haven Amendment No. 1 Letter.
\99\ LPL OIP Letter at 1.
\100\ See Dimensional Fund Advisors Letter at 1.
\101\ Id.
\102\ See FHN Financial OIP Letter at 2.
\103\ Id.
---------------------------------------------------------------------------

In response to comments, the MSRB explained that one way to assess
the magnitude of the benefits of the proposed rule change is to compare
the amount investors are paying (or might pay in the future as a result
of rulemaking) to the amount they would otherwise pay in a more
efficient market.\104\ The MSRB further explained that when it
previously shortened the trade reporting deadline from end-of-day to 15
minutes from the Time of Trade in 2005, the MSRB's analysis of data
collected showed a significant reduction in average customer trade
effective spreads.\105\ The MSRB also noted that its analysis also
showed that effective spreads for customer trades continued to decline
in the last decade with progressively faster trade reporting due to
technology improvements undertaken by the industry to execute trades
more quickly and efficiently but that this downward trend had become
less pronounced in recent years.\106\ The MSRB stated that it believes
that it has appropriately demonstrated the estimated costs and benefits
that the proposed rule change would likely provide to the municipal
securities market \107\ because the proposed rule change would result
in reduced transaction costs for investors (i.e., reduced effective
bid-ask spread on customer trades) and increased trading volume from
the effective spread reduction because investors are more likely to
trade when the cost to trade is lowered.\108\ Further, the MSRB
explained that it expects that the universe of potentially benefited
transactions and trading volume would be significantly larger than one
commenter \109\ described and that a shorter trade reporting window
would likely result in yield curves that more accurately reflect the
prevailing market conditions because of lower information lags in
reported trade prices.\110\
---------------------------------------------------------------------------

\104\ See MSRB Letter at 6.
\105\ Id. at 6-7.
\106\ Id. at 7.
\107\ Id. at 6.
\108\ Id. at 7.
\109\ See Belle Haven Letter at 3.
\110\ See MSRB Letter at 8 (citing the Notice, 89 FR at 5395
n.74 and 5398).
---------------------------------------------------------------------------

ii. Impact on Competition and Liquidity
Some commenters expressed views that shortening the reporting
timeframe disproportionally impacted less active and smaller dealers,
potentially leading to a decline in liquidity, capital resources, and
concentration of municipal bond trading among the largest dealers in
the industry. One commenter noted that the proposed rule change
``grossly underestimated the costs of the proposed rule'' \111\ and
forecasted that the proposed rule change would put many firms out of
business.\112\ Such commenter further explained that the ``retail
investor's liquidity and negotiating power will be eliminated with the
competitive landscape reduced to the largest of firms which do not
negotiate with retail investors.'' \113\ A further commenter raised
concerns ``that significant regulatory changes--particularly when based
upon incomplete assumptions--would be harmful to investors and threaten
the participation of small and mid-sized broker-dealers in these
markets.'' \114\ An additional commenter raised the concern that a
``unilateral reduction to a one-minute reporting timeframe could create
undue burdens on execution quality and liquidity with respect to large
volume trades or trades in less liquid securities'' \115\ because
``dealers may have insufficient time to hedge their positions or
allocate risk with respect to large-sized trades or transactions in
thinly trades securities and therefore lead to less willingness by
dealers to provide liquidity'' for these types of trades.\116\ Another
commenter noted that the proposed rule change ``[p]unished'' \117\
small broker-dealers and would ``ultimately reduce liquidity for
investors.'' \118\ In response to comments, the MSRB stated that it
believes that the potential adverse impacts on competition and
liquidity are appropriately mitigated by the two exceptions from the
one-minute reporting requirement included in the proposed rule change,
which would allow dealers of all sizes, levels of market activity,
manners of executing transactions, and business models to continue to
engage in municipal securities activities to promote a fair, efficient,
robust and more modern municipal securities market consistent with
investor protection.\119\
---------------------------------------------------------------------------

\111\ See Belle Haven Letter at 6.
\112\ Id.
\113\ Id. at 5.
\114\ See ASA Letter at 9.
\115\ See ICI Letter at 3.
\116\ Id. at 2 n.4.
\117\ See Sanderlin Securities Letter at 3.
\118\ Id. at 3.
\119\ See MSRB Letter at 10.
---------------------------------------------------------------------------

iii. Technology Costs
Some commenters raised concerns that the proposed rule change would
impose increased costs of new technology infrastructure. One commenter
expressed the view that small firms that do not qualify for the limited
trading exception would have to ``implement more sophisticated and
expensive automated reporting

[[Page 78962]]

systems'' \120\ that they estimated at half a million dollars each year
\121\ which would be ``cost prohibitive to smaller firms'' and would
lead to ``curtail[ing] customer access to the fixed income securities
market.'' \122\ Another commenter noted that the ``technology to report
all transactions involving a manual component within five minutes does
not currently exist and may never exist, given the structure of the
market'' and expressed the view that ``members [would] need significant
time to review systems to ensure that one-minute reporting can be
accomplished; create systems, policies and procedures for manual trade
indicators, and train staff'' and also noted the ``high costs of
systems development'' necessary to make operational changes to effect
the original proposed rule change.\123\ A further commenter explained
that ``[b]uilding compliant systems for all aspects of the Proposals
[would] require major investments by dealers and vendors in technology,
training, and revisions to supervisory procedures'' and that
``[i]mplementation [would] be especially challenging for smaller . . .
members who have fewer resources to commit to not only these changes,
but the plethora of other new rules and amendments on the regulatory
horizon.'' \124\ Additionally, this commenter explained that many firms
``rely on third-party vendors to report all or most of their trades to
TRACE and RTRS.'' \125\ This commenter stated that ``vendors that need
to update their infrastructure to accommodate changing reporting
timelines will pass on this expense to dealers that rely on their
service.'' \126\
---------------------------------------------------------------------------

\120\ See Falcon Square Capital Letter at 2. Falcon Square
Capital reiterated its position in the Falcon Square Capital
Amendment No. 1 Letter.
\121\ See Falcon Square Capital Letter at 2
\122\ Id. at 6.
\123\ See SIFMA Letter at 10.
\124\ See BDA Letter at 4.
\125\ Id. at 3.
\126\ Id. at 4.
---------------------------------------------------------------------------

In response to comments, the MSRB observed that most small and mid-
sized firms that would otherwise need to shoulder higher technology or
service costs would likely qualify as dealer with limited trading
activity for which the proposed exception from the one-minute reporting
timeframe would apply.\127\ The MSRB further explained that such firms
would not need to obtain additional, and potentially more
sophisticated, technology infrastructure or services beyond their
current arrangements.\128\ The MSRB stated that it believes that the
potential adverse impacts on competition and liquidity raised by some
commenters are appropriately mitigated by the two exceptions from the
one-minute reporting which would allow dealers of all sizes, levels of
market activity, manners or executing transactions, and business models
to continue to engage in municipal securities activities to promote a
fair, efficient, robust and more modern municipal securities market
consistent with investor protection.\129\
---------------------------------------------------------------------------

\127\ See MSRB Letter at 9.
\128\ Id.
\129\ Id. at 10.
---------------------------------------------------------------------------

B. General Comments on Exceptions to One-Minute Reporting

Commenters expressed several views relating to the exceptions. One
commenter believes that the ``current exceptions contained in the
proposals represent essential elements to ensure industry compliance''
and that ``[w]ith the exceptions in place, the Proposals strike a
reasonable balance between regulatory modernization and operational
limitations which prevent may trades from meeting the one-minute
reporting standard.'' \130\ This commenter further emphasized that
``without the exceptions for dealers with limited trading activity and
for trades with a manual component, the Proposals would be
unworkable.'' \131\ Another commenter stated that the exceptions are
critical to protect smaller dealer members and would be required if the
proposed rule change moves forward.\132\ A further commenter supported
the manual exception and noted that the scope of the manual trade
exception should be consistent between SROs.\133\ One commenter,
however, noted that the ``exceptions do not appreciably alter market
dynamics'' \134\ and expressed concern over the idea that either of the
``exceptions could be reduced over time without being proposed for
public comment'' \135\ which ``would also set a troubling precedent
that would allow SROs to implement changes without an evidentiary or
legal justification for doing so.'' \136\ One commenter advocated for
the complete phase out of the exceptions so that all trades subject to
the 15-minute reporting timeframe will be reported within one
minute.\137\ An additional commenter stated that its support for the
original proposed rule change is conditioned on retaining the
exceptions for firms with limited trading activity and for trades with
a manual component.\138\
---------------------------------------------------------------------------

\130\ See BDA Letter at 1.
\131\ See id.; BDA Amendment No. 1 Letter at 2 (expressing the
view that the exceptions are made stronger by the changes made by
Amendment No. 1).
\132\ See, e.g, SIFMA Letter at 2. SIFMA reiterated its position
in the SIFMA OIP Letter and SIFMA Amendment No. 1 Letter at 2
(expressing the view that the proposed manual trade exception ``is
not a panacea since a mandatory one-minute requirement remains
unworkable even for certain fully-electronic trades.'').
\133\ See FIF I Letter at 2; FIF OIP Letter at 2 (expressing the
view that the proposed manual trade exception ``is important to
avoid disruption to current trading practices for bonds.'').
\134\ See ASA Letter at 1.
\135\ Id. at 2.
\136\ Id.
\137\ See Dimensional Fund Advisors Letter at 2.
\138\ See Piper Sandler OIP Letter at 1.
---------------------------------------------------------------------------

In response to comments, the MSRB agreed that the exceptions are
important components of the proposed rule change and agreed with
commenters that asserted that that the exceptions are critical to
making the proposed rule change workable and provide for an orderly
transition to a more rapid trade reporting paradigm \139\ and noted
that it ``fully intends for the proposed new intra-day exceptions for
trade reporting of municipal securities work in the same manner and at
the same pace, and therefore consistent with, requirements for other
fixed income securities.'' \140\ The MSRB further explained that
``consideration of whether or when one or both of the proposed
exceptions should be phased out is premature, because the MSRB
currently lacks sufficient data so support such a decision.'' \141\ The
MSRB stated that it ``intends to monitor trade reporting activity and
potential impacts on the marketplace to determine whether any changes
to the proposed rule change should be considered in the future.'' \142\
---------------------------------------------------------------------------

\139\ See MSRB Letter at 11.
\140\ Id. at 12.
\141\ Id. at 11.
\142\ Id.
---------------------------------------------------------------------------

i. Trades With a Manual Component Exception
Commenters generally noted that the trades with a manual component
exception balances shortening reporting requirements while avoiding
undue disruptions to the municipal securities market. One commenter
stated that it believed that the trades with a manual component
exception is an ``appropriate balance between shortening reporting
timeframes and avoiding disruption to the marketplace or causing undue
burdens.'' \143\ Another commenter requested that the MSRB should
``implement a broad exception for manual trades.'' \144\ Several
commenters raised questions about the application of the exception
where manual steps may have been taken prior to trade execution but
where the execution itself and the

[[Page 78963]]

subsequent trade reporting workflow may be fully automated.\145\
Commenters provided examples where systems processing limitations would
prevent certain fully automated trades to be reported within one
minute.\146\ Some commenters requested clarification in the context of
dual registrants and situations where a dealer allocates a block trade
to allocate trades.\147\ One such commenter noted that ``maintaining
the reporting time at 15 minutes is necessary, considering the
complexities involved in the manual trade reporting process.'' \148\
---------------------------------------------------------------------------

\143\ See ICI Letter at 3.
\144\ See LPL OIP Letter at 2.
\145\ See, generally, BDA Letter; FIF I Letter; ICI Letter;
SIFMA Letter; ASA Letter.
\146\ See, e.g., BDA Letter at 4; Searle RFI Letter at 2; SIFMA
Letter at 3, 7-9; FIF I Letter at 3.
\147\ See, e.g., BDA Letter at 4; SIFMA Letter at 7; Falcon
Square Capital Letter at 3-4; FIF I Letter at 3; LPL OIP Letter at
2; SIFMA OIP Letter at 5; BDA OIP Letter at 1-2.
\148\ See ASA Letter at 2.
---------------------------------------------------------------------------

With respect to qualifying as a trade with a manual component, the
MSRB reiterated that ``the manual aspect of the trade workflow
generally would only occur after the relevant Time of Trade.'' \149\
The MSRB explained that ``where trade execution and reporting processes
are fully electronic, a minimal triggering action (e.g., click
``accept'') to prompt the electronic execution of a trade at the
beginning of the process, by itself, typically would not be sufficient
to constitute a manual step qualifying the trade for the manual trade
exception.'' \150\ As it relates to system processing limitations,
including trades involving large post-trade automated allocations,
portfolio trades, trades involving batch processing, and trades where
multiples systems are involved in a trade workflow, the MSRB stated
that ``analysis of such scenarios related to fully automated trades
under the [proposed rule change] is likely to be highly fact
specific.'' \151\ Because it is a facts and circumstances
determination, the MSRB further explained that it is impossible to
create an exhaustive list of examples and that ``dealers should
document the circumstances giving rise to [any reporting] delays and
consider potential alternatives for reasonable ways to improve the
timing of trade reporting such circumstances.'' \152\ The MSRB reminded
dealers of the ``overarching obligation to report trades as soon as
practicable in light of the effects of such circumstances or
justification'' \153\ even if not within the applicable one-minute
timeframe.\154\ The MSRB further explained that ``failure to report
such trades as soon practicable could be a factor weighing against the
determination of whether the exceptional circumstances or reasonable
justification provisions of the [proposed rule change] would be
available to a dealer making such late reports.'' \155\ With respect to
large or block transaction, the MSRB explained that depending on the
specific facts and circumstances, ``where a dealer executes a large or
block transaction that requires allocations of portions of the trade to
individual accounts, unless the initial large or block trade
independently qualifies for the manual trade exception and absent
another exception, the large or block transaction normally would not
qualify for the manual trade exception and instead would be subject to
the one-minute reporting requirement.'' \156\ The MSRB further noted
that the ``manual trade exception may, however, be available for any
resulting allocations to individual accounts that may be required to be
reported and such reporting involves manual input or other manual
steps.'' \157\
---------------------------------------------------------------------------

\149\ See MSRB Letter at 13 (citing Notice, 89 FR 5386-87).
\150\ Id. at 13.
\151\ Id. at 14.
\152\ Id.
\153\ Id.
\154\ Id.
\155\ Id.
\156\ See MSRB Letter at 15 and accompanying notes 55 through 57
(citing the Notice, 89 FR at 5389).
\157\ Id.
---------------------------------------------------------------------------

a. Phase-In Period
Several commenters addressed the phase-in of the shortening
reporting timeframe for trades with a manual component.\158\ Some
commenters requested that the MSRB propose for notice and comment each
reduced outer limit timeframe for the trades with a manual component
exception to allow market participants the opportunity to submit
valuable data and comment prior to the MSRB shortening the reporting
timeframe.\159\ One commenter expressed the view that this exception
was not a true exception \160\ and requested that the MSRB ``collect
data to support a reduction in reporting time for manual trades before
it proposes a rule to do so'' \161\ as, according to this commenter,
the MSRB did not ``cite a scintilla of statistical or objective support
for the need to ``phase in'' a reduction of reporting for manual
reporters'' \162\ or ``provide the SEC with evidence that manual
reporters are not currently reporting as fast as practicable.'' \163\
This commenter also raised the concern that the phase-in period may
eliminate small firms which are incapable of meeting the phased-in time
periods.\164\ One commenter noted uncertainty regarding the
technological capabilities to meet the proposed phase-in timeframes,
and requested the MSRB to undertake ongoing monitoring, analysis, and
stakeholder engagement.\165\ A further commenter requested that the
MSRB ``[e]xamine impacts to liquidity, depth, concentration, and
transparency prior to decreasing reporting times to shorter intervals
to ensure markets are not harmed.'' \166\ One commenter also expressed
being troubled by the language of the manual trade exception because it
``suggests the possibility of reassessing the reporting timeframe,
potentially leading to further reductions or even the elimination of
the manual trade exception altogether.'' \167\
---------------------------------------------------------------------------

\158\ See, e.g., BDA Letter at 3; ICI Letter at 3-4; Falcon
Square Capital Letter at 4; Falcon Square Capital Amendment No. 1
Letter at 3-4; SIFMA Letter at 6; SIFMA OIP Letter at 6; SIFMA
Amendment No. 1 Letter at 3; ASA OIP Letter at 2; ASA Amendment No.
1 Letter at 1; Belle Haven Letter at 5-9; Belle Haven Amendment No.
1 at 3-4; BDA OIP Letter at 3, 5; LPL OIP Letter at 2.
\159\ Id.
\160\ See Belle Haven Letter at 6.
\161\ Id. at 9.
\162\ Id. at 7.
\163\ Id. at 7.
\164\ Id. at 5.
\165\ See SIFMA Letter at 6-7. See generally ICI Letter at 3-4
(noting potential impacts of implementing the proposed phase-in
timeframes and requesting that the MSRB propose for notice and
comment each reduced outer limit timeframe to allow market
participants the opportunity to submit valuable data and comments
prior to potentially shortening reporting timeframes).
\166\ See LPL OIP Letter at 2.
\167\ See ASA Letter at 2.
---------------------------------------------------------------------------

The MSRB noted that ``it does not have specific evidence that
dealers are currently, as a matter of practice, reporting trades less
rapidly than as soon as practicable'' \168\ but ``believes that the new
requirement for reporting as soon as practicable would have the effect
of increasing the proportion of trades being reported within shorter
timeframes than they currently are, without regard to a one-minute,
five-minute or 15-minute deadline, potentially translating into
significant improvement in market-wide average reporting times.'' \169\
The MSRB also stated that it ``would monitor the implementation of the
[proposed rule change] and, going forward, would analyze trade data
related to the operation of the proposed two new exceptions to, among
other things, determine whether the eventual five-minute trade
reporting timeframe that would become applicable after two years
continues to be feasible and appropriate in light of the empirical data
collected through the earlier phases

[[Page 78964]]

of implementation.'' \170\ To address concerns expressed by commenters
regarding potential difficulties in meeting the shortened reporting
timeframes and make the necessary changes to processes and technology
to achieve such shortened timeframes, the MSRB has ``determined to
modify the pace of phasing-in the shortened reporting timeframe for
trades with a manual component to extend the period during which such
trades would be reportable by no later than 10 minutes after the Time
of Trade from one year to two years.'' \171\ To alleviate commenters
concerns related to the the elimination of the of the trades with a
manual component exception, the MSRB explained that the proposed rule
change ``sets out a phased-in implementation of the exception for
manual trades that would provide for an ultimate five-minute timeframe
for the reporting of such trades. No further reductions in such
timeframe, and no elimination of the manual trade exception could be
possible without additional formal rulemaking by the MSRB that would be
filed with the Commission, and any such change would be subject to the
required notice and comment process under Section 19 of the Exchange
Act.'' \172\
---------------------------------------------------------------------------

\168\ See MSRB Letter at 17.
\169\ Id.
\170\ Id. at 20.
\171\ Id.
\172\ See MSRB Letter at 20 (citing 15 U.S.C. 78s).
---------------------------------------------------------------------------

b. Manual Trade Indicator
Several commenters addressed the manual trade indicator.\173\
Commenters requested that the trade indicator apply instead to fully
automated trades subject to the one-minute reporting requirement.\174\
One commenter recommended that the MSRB default the manual trade
indicator for any transaction that is reported initially through the
RTRS web portal.\175\ Commenters requested that the MSRB institute an
interim period where firms are permitted, but not required, to report
the manual trade indicator.\176\ One commenter also requested
clarification on the use of a portfolio trade modifier in specific
scenarios.\177\
---------------------------------------------------------------------------

\173\ See BDA Letter at 3; SIFMA Letter at 9; SIFMA OIP Letter
at 7-8; FIF Letter I at 3-4; FIF Letter II generally.
\174\ See BDA Letter at 3; SIFMA Letter at 9; SIFMA OIP Letter
at 7-8.
\175\ See FIF I Letter at 4.
\176\ Id. at 6; SIFMA OIP Letter at 8.
\177\ See generally FIF I Letter (scenarios where a firm
corrects a technical issue and then submits automatically); FIF II
Letter (consisting of examples of such scenarios and requesting
corresponding clarification); FIF OIP Letter (FIF requested
clarification on the use of a portfolio trade modifier to RTRS where
a dealer receives a large order or a trade list resulting in a
portfolio of trades with potentially numerous unique securities
involving rapid execution and frequent communications on multiple
transactions with multiple counterparties, with the dealer having to
book and report those transactions manually. In response, the MSRB
clarified that the ``Notice was not intended to create a requirement
for portfolio trades to be reported with a trade indicator under
MSRB Rule G-14, and no such portfolio indicator is proposed or would
be required pursuant to the proposed rule change.'' See MSRB Letter
at 16. The MSRB further explained ``that it has not made a
determination as to whether an ``away from market' indicator would
be required in connection with any particular portfolio
transaction.''). Id. at 17.
---------------------------------------------------------------------------

After considering comments, the MSRB explained that ``to the extent
that these trades are fully automated--both the execution and the trade
reporting--the manual trade indicator would not apply and should not be
used, and the exception for trades with a manual component also would
not apply.'' \178\ The MSRB further noted that since ``dealers are
already successfully processing other trade indicators that must be
applied on an individualized basis in the context of manual and
electronic trades[,] the MSRB believes that existing processes can be
modified to include the manual trade indicator with only limited
additional effort and expense.'' \179\ In response to the requested
interim period for optional use, the MSRB ``contemplates providing
dealers with sufficient time to implement and test the use of the
indicator and does not intend at this time to provide an optional
reporting period.'' \180\ Additionally, the MSRB explained that since
``one of the intended purposes of the manual trade indicator is to
provide regulators with the information necessary to make thoughtful
and pragmatic changes and identify roadblocks to achieving faster trade
reporting for trades with a manual component'' \181\ the MSRB stated
that it ``will be using the manual trade indicator to assess whether
taking further action in the course of such phase-in might be
warranted.'' \182\
---------------------------------------------------------------------------

\178\ See MSRB Letter at 14.
\179\ Id. at 18-19.
\180\ Id. at 24.
\181\ Id. at 18 n.66.
\182\ Id.
---------------------------------------------------------------------------

C. Limited Trading Activity Exception

Several commenters addressed the limited trading activity
exception.\183\ One commenter noted that the ``[limited trading
activity] exception is appropriately based on trade numbers that are
correctly sized to protect minority, veteran and women owned business
enterprises and small dealers from incurring the significant costs
associated with the proposed rule'' \184\ while the proposed two-year
look back period ``[would] allow newly impacted members some time to
attempt to implement systems to attempt to achieve compliance.'' \185\
Another commenter supported the limited trading activity exception,
believing many firms in the market will benefit greatly from this
exception.\186\ An additional commenter expressed the view that the
proposed 1,800-trade threshold is ``far too low'' \187\ and requested
that the MSRB either significantly expand the threshold or conduct
further analysis and provide data to support the 1,800 threshold.\188\
---------------------------------------------------------------------------

\183\ See, e.g., SIFMA Letter; BDA Letter; Falcon Square Capital
Letter; Belle Haven Letter; FIF I Letter. See also BDA OIP Letter;
SIFMA OIP Letter.
\184\ See SIFMA Letter at 9.
\185\ Id.
\186\ See BDA Letter at 2.
\187\ See Falcon Square Capital Letter at 3.
\188\ Id. at 3.
---------------------------------------------------------------------------

After considering comments received, the MSRB determined to
increase the threshold to 2,500 trades.\189\ As explained by the MSRB,
``the revised 2,500 threshold is expected to exempt a clear majority of
dealers, i.e., 476 out of 651 dealers or approximately 73 percent of
dealers based on 2021 and 2022 trade reporting data and these dealers
would remain eligible to report their trades in 15 minutes or less.''
\190\ As stated by the MSRB, ``these limited activity dealers account
for 1.4 percent of total trades and 2.3 percent of the total par value
traded, and therefore would have a

[[Page 78965]]

minimal impact on market transparency.'' \191\
---------------------------------------------------------------------------

\189\ See MSRB Letter at 22 n.81 (explaining that ``upon further
review of the methodology used for proposing a 1,800-trade threshold
for qualifying for the dealer with limited trading activity
exception in the original proposed rule change, the MSRB has
determined to increase the threshold to 2,500 trades based on a
modification of its methodology described below. In establishing the
original proposed threshold of 1,800 trades, the MSRB had used an
approach consistent with other instances where MSRB rules and
related transparency activities are based on inter-dealer trade
report activity that rely solely on the sell-side inter-dealer trade
reports so as to avoid, for those specific purposes, potential
double counting if both the sell-side and buy-side were to be used.
For example, the manner in which the MSRB disseminates trade reports
for compared inter-dealer trades and assesses its transaction and
trade count fees for inter-dealer trades under MSRB Rule A-13(d) is
based solely on sell-side trade reports for the reasons described in
Amendment No. 1. As a result, the calculations discussed in the MSRB
Filing Notice underlying the 1,800-trade threshold in the proposed
definition of ``dealer with limited trading activity'' was lower and
did not fully account for inter-dealer trade reports since only the
sell-side inter-dealer trade reports were taken into account. In
order to maintain compatibility with the plain meaning of the
language of the MSRB's proposed definition of ``dealer with limited
trading activity,'' the MSRB has recalculated the applicable
threshold for such definition to be 2,500 trades, taking into
account both sell-side and buy-side inter-dealer trade reports
together with reports of dealer trades with customers, regardless of
whether the dealer bought or sold in the customer transaction.'').
See also Amendment No. 1.
\190\ See MSRB Letter at 23.
\191\ Id. at 23 (referring to Table 2 in Amendment No. 1).
---------------------------------------------------------------------------

D. Consistency in Implementation

Commenters recommended an implementation path for municipal
securities that is staggered with other fixed income securities.\192\
In response to comments, the MSRB ``emphasize[d] that greater
consistency in implementing changes across the various fixed income
markets can be better achieved if the proposed requirements are applied
to the entire fixed income industry at the same time. Consistency, not
only in reporting requirements but also implementation of those
requirements, helps avoid confusing and different reporting standards
for the industry.'' \193\
---------------------------------------------------------------------------

\192\ See, e.g., BDA Letter at 4; FIF I Letter at 5-6; ICI
Letter at 2; SIFMA Letter at 10.
\193\ See MSRB Letter at 12.
---------------------------------------------------------------------------

E. Implementation Period

Two commenters requested a two-year implementation period and
requested that the MSRB remain open to the creation of FAQs or the
provision of implementation guidance to achieve greater
compliance.\194\ One commenter requested an eighteen-month
implementation period from the date the MSRB publishes technical
specifications and guidance, requested a testing period with additional
supports and enhancements ahead of final implementation, and a
transitional period during which dealers would not be required to
include the manual indicator on trades with a manual component.\195\ In
response to comments, the MSRB stated that it ``continues to intend to
maintain an implementation schedule for the proposed rule change that
is aligned with the implementation for other fixed income securities.''
\196\ The MSRB also explained that it will ``endeavor to publish
updated technical specifications as far as possible in advance of the
effective date(s) and will work with dealers to provide interpretive
guidance, where needed'' \197\ as is generally the protocol for RTRS
and Information Facility changes and ``will facilitate free testing
that would include test CUSIP numbers and other appropriate support to
ensure that all dealers have a significant opportunity to prepare their
systems and processes to achieve full compliance with the requirements
of the proposed rule change, if approved.'' \198\ In response to the
requested interim period for optional use of the manual trade
indicator, the MSRB ``contemplates providing dealers with sufficient
time to implement and test the use of the indicator and does not intend
at this time to provide an optional reporting period.'' \199\
---------------------------------------------------------------------------

\194\ See BDA Letter at 4; SIFMA Letter at 10.
\195\ See FIF I Letter at 5-7; SIFMA OIP Letter at 8.
\196\ See MSRB Letter at 24.
\197\ Id.
\198\ Id.
\199\ Id.
---------------------------------------------------------------------------

F. Consistency With the Act

Some commenters challenged the proposed rule change as
circumventing regulatory obligations and requested that the MSRB
conduct further analysis before implementation of the proposed rule
change.\200\ One commenter expressed the view that the MSRB relied on
``conclusory statements without background data in support'' \201\ and
requested that the Commission deny and return the proposed rule change
to the MSRB for further study and consideration.\202\ Another commenter
asserted that the Commission ``want[ed] to avoid conducting a robust
economic cost/benefit analysis'' \203\ and ``strongly recommend[ed]
these Proposals be abandoned in their entirety.'' \204\ An additional
commenter strongly encouraged the Commission to require the MSRB to
revisit the proposed rule change in order to ``consider the economic
challenges of smaller firms before modifying the current rule.'' \205\
Another commenter raised issues regarding whether the proposed rule
change conforms with the requirements of the Administrative Procedure
Act (``APA'').\206\ Some commenters defended the process undertaken by
the MSRB in connection with the proposed rule change.\207\
---------------------------------------------------------------------------

\200\ See generally Belle Haven Letter; ASA Letter; ASA OIP
Letter; Falcon Square Capital Letter.
\201\ See Belle Haven Letter at 2.
\202\ Id.
\203\ See ASA Letter at 3.
\204\ Id.
\205\ See Falcon Square Capital Letter at 6.
\206\ See ASA Letter at 3; ASA OIP Letter at 2.
\207\ See, e.g., Bernardi Securities OIP Letter at 2; Piper
Sandler OIP Letter at 1-2.
---------------------------------------------------------------------------

In response, the MSRB stated that it ``is confident that the
current rulemaking has been undertaken fully in compliance with
applicable statutory and regulatory requirements and has had the
benefit of fulsome input from market participants and is backed by
extensive data analysis.'' \208\ The MSRB further stated that while not
statutorily required, the MSRB ``published a draft version of the
proposal for comment in October 2022, including a preliminary economic
analysis of such draft proposal, and received over 50 comment letters
in response.'' \209\ The MSRB explained how the MSRB ``revised the
draft version in response to comments received and, upon approval by
the MSRB's board of directors, filed it with the Commission as the
original proposed rule change as required under Section 19(b) of the
Exchange Act. Also as required by Section 19(b) of the Exchange Act,
the Commission published the MSRB Filing Notice for comment.'' \210\
The MSRB further explained how, in response to comments received, the
Commission instituted proceedings to obtain further input on the
original proposed rule change and the MSRB has now addressed the
comments received on the MSRB Filing Notice in this letter.'' \211\ The
MSRB further stated that ``[i]n part due to such extensive input, the
MSRB has determined to file Amendment No. 1 to the original proposed
rule change.'' \212\ The MSRB further stated that ``while the MSRB has
consulted with FINRA and the Commission throughout this rulemaking
process, the MSRB board of directors and staff have exercised their
independent judgment in formulating the proposed rule change, which
represents the culmination of MSRB deliberation on this topic
stretching back to 2013.'' \213\
---------------------------------------------------------------------------

\208\ See MSRB Letter at 24.
\209\ Id. at 24-25. All comment letters received in response to
the 2022 Request for Comment are available at https://www.msrb.org/sites/default/files/2023-03/All-Comments-to-Notice-2022-07.pdf.
\210\ See MSRB Letter at 25.
\211\ Id.
\212\ Id.
\213\ Id. at 25 n.95 (listing MSRB Notice 2013-02 (Jan. 17,
2013); MSRB Notice 2013-14 (July 31, 2013); MSRB Notice 2014-14
(Aug. 13, 2014).
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

The Commission has carefully considered the proposed rule change,
as well as comment letters received, and the MSRB Letter. The
Commission finds that the proposed rule change is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to the MSRB.
In particular, the Commission believes that the proposed rule
change is consistent with the provisions of Section 15B(b)(2)(C) of the
Exchange Act and the rules and regulations thereunder.\214\ Section
15B(b)(2)(C) of the Exchange Act provides, in part, that the MSRB's
rules shall be designed to promote just and equitable principles of
trade, to foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing

[[Page 78966]]

information with respect to, and facilitating transactions in municipal
securities, to remove impediments to and perfect the mechanism of a
free and open market in municipal securities, and, in general, to
protect investors and the public interest.\215\
---------------------------------------------------------------------------

\214\ 15 U.S.C. 78o-4(b)(2)(C).
\215\ Id.
---------------------------------------------------------------------------

The Commission believes that the proposed rule change is consistent
with the Exchange Act because the proposed rule change is reasonably
designed to remove impediments to and perfect the mechanism of a free
and open market in municipal securities by bringing about greater
market transparency through more timely disclosures and dissemination
of information provided through the RTRS. Accordingly, the Commission
finds that the proposed rule change is consistent with Section
15B(b)(2)(C) of the Act, as further described below, because the
proposed rule change will (i) promote just and equitable principles of
trade; (ii) 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; (iii) remove impediments to and perfect the
mechanism of a free and open market in municipal securities and
municipal financial products; and (iv) protect investors and the public
interest.

A. Promote Just and Equitable Principles of Trade

The Commission finds the proposed rule change will promote just and
equitable principles of trade by providing the market with more timely
pricing information. As noted by the MSRB, some market professionals
may in some circumstances have better or more rapid access to
information about trade prices which retail investors do not have
access.\216\ The Commission believes that such reduced timeframe for
trade reporting would improve market transparency by reducing
information asymmetries between market participants and enhancing
investor confidence in the market. The Commission also anticipates that
the MSRB will monitor trade reporting activity and potential impacts on
the marketplace to determine whether any changes to the proposed rule
change should be considered in the future. The Commission will consider
any future proposed rule changes filed with the Commission.
---------------------------------------------------------------------------

\216\ See Notice, 89 FR at 5393.
---------------------------------------------------------------------------

B. Foster Cooperation and Coordination

The Commission finds that the proposed rule change would foster
cooperation and coordination between the SEC, the MSRB, and FINRA by
establishing consistent trade reporting requirements across various
classes of fixed income securities. As noted by the MSRB, consistent
trade reporting requirements reduce the risk of potential confusion and
may reduce compliance burdens resulting from inconsistent obligations
and standards for different classes of securities.\217\ A similar
proposed rule change by FINRA, on which the MSRB closely coordinated
with FINRA,\218\ would result in a consistent standard for trade
reporting for municipal securities and the TRACE-eligible securities
covered by the FINRA proposed rule change.\219\ Accordingly, the
Commission believes that the proposed rule change will provide
regulatory clarity and would foster cooperation and coordination
between the MSRB and FINRA by establishing consistent trade reporting
requirements across various classes of fixed income securities.
Consistent trade reporting requirements for municipal securities
covered by the proposed rule change and the TRACE-eligible securities
covered by the FINRA proposed rule change also may reduce compliance
burdens resulting from inconsistent obligations and standards for
different classes of fixed income securities. Additionally, the
Commission finds that the proposed rule change will allow the municipal
securities market to produce more timely transaction data which will
enhance surveillance of the market by enforcement agencies.
---------------------------------------------------------------------------

\217\ Id.
\218\ The Commission did not direct the MSRB to file the
proposed rule change and is not using the MSRB as a conduit to enact
the proposed rule change. One commenter cites a speech by the Chair
in stating to the contrary, but that speech does not specifically
address the RTRS trade reporting timeframe at all. See ASA Amendment
No. 1 Letter at 2 n.4 (citing Gary Gensler, Chair, Securities and
Exchange Commission, Prepared Remarks before SEC Speaks: U.S.
Capital Markets and the Public Good (Apr. 2, 2024) (transcript
available at https://www.sec.gov/newsroom/speeches-statements/prepared-remarks-sec-speaks-us-capital-markets-public-good). And, in
any event, the speech reflects the views of the Chair alone, not the
Commission.
\219\ See supra note 15.
---------------------------------------------------------------------------

C. Remove Impediments to and Perfect the Mechanism of a Free and Open
Market in Municipal Securities and Municipal Financial Products

The Commission finds that the proposed rule change would remove
impediments to, and perfect the mechanism of, a free and open market in
municipal securities by making publicly available more timely
transaction data at which municipal securities transactions are
executed. As noted by the MSRB, prices at which transactions are
executed is central to fairly priced municipal securities and a
dealer's ability to make informed quotations.\220\ The Commission
believes that the proposed rule change could mitigate certain
information asymmetries that may exist, thereby enabling market
participants to make more informed decisions. Further, the proposed
exceptions reasonably balance the benefits to market participants of
increased transparency while mitigating commenters' concern of a
shortened trade reporting deadline. In this regard, the proposed rule
change is reasonably designed to not permit unfair discrimination
between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

\220\ See Notice, 78 FR at 5393.
---------------------------------------------------------------------------

D. Protect Investors, Municipal Entities, Obligated Persons, and the
Public Interest

The Commission finds that the proposed rule change will protect
investors and the public interest by increasing market transparency and
providing the market with more efficient pricing information.
In approving the proposed rule change, the Commission has
considered the proposed rule change's impact on efficiency,
competition, and capital formation.\221\ Exchange Act Section
15B(b)(2)(C) \222\ requires that MSRB rules not be designed to impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Exchange Act.
---------------------------------------------------------------------------

\221\ 15 U.S.C. 78c(f).
\222\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

The Commission does not believes that the proposed rule change
would impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Exchange Act because the proposed
rule change takes into account competitive and liquidity concerns that
could arise as a result of the costs associated with complying with a
shortened reporting timeframe that could lead some dealers to exit the
market, curtail their activities or consolidate with other firms. The
MSRB has made efforts to minimize the impact of the proposed rule
change on dealers in response to commenters including: (i) amending the
definition of a dealer with limited trading activity in proposed
subparagraph (d)(xi) of Rule G-14 RTRS Procedures by increasing the
threshold for qualifying as a dealer with limited trading activity from
1,800 transactions to 2,500 transactions; and (ii) extending

[[Page 78967]]

the phase-in period for the manual trade exception in proposed new
Supplementary Material .02(b) of Rule G-14 RTRS Procedures by one
additional year. While the MSRB does not intend at this time to provide
an interim period for optional use of the manual trade indicator, the
MSRB intends to provide a sufficient implementation timeframe, publish
updated technical specifications and will work with dealers to provide
interpretive guidance, facilitate free testing and other appropriate
support to ensure that all dealers have significant opportunity to
prepare systems and processes to achieve full compliance with the
proposed rule change.\223\ The Commission believes that the MSRB,
through its responses and through proposed changes in Amendment No. 1
has addressed commenters' concerns.
---------------------------------------------------------------------------

\223\ See MSRB Letter at 24.
---------------------------------------------------------------------------

The Commission has also reviewed the record for the proposed rule
change and notes that the record does not contain any information to
indicate that the proposed rule change would have a negative effect on
capital formation. Further, the Commission finds that the possible
increased investor protections offered by reducing the timeframe for
trade reporting could foster greater faith in the integrity of the
municipal securities market, increasing participation in this market,
thereby increasing capital formation.
The Commission also finds that the proposed rule change includes
provisions that help promote efficiency. In particular, the Commission
believes that the reduced timeframe for trade reporting could further
reduce information asymmetries between market professionals and retail
investors by increasing access to more timely information about
executed transactions.
For the reasons noted above, the Commission believes that the
proposed rule change is consistent with the Act.

V. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\224\ that the proposed rule change (SR-MSRB-2024-01), as modified
by Amendment No. 1, be, and hereby is, approved.
---------------------------------------------------------------------------

\224\ 15 U.S.C. 78s(b)(2).

For the Commission, pursuant to delegated authority.\225\
---------------------------------------------------------------------------

\225\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-22028 Filed 9-25-24; 8:45 am]
BILLING CODE 8011-01-P

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