[Federal Register Volume 63, Number 71 (Tuesday, April 14, 1998)]
[Notices]
[Pages 18242-18244]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9806]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39835; File No. SR-MSRB-98-5]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Municipal Securities
Rulemaking Board Relating to the Board's Transaction Reporting Program
April 7, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on April 1,
1998, the Municipal Securities Rulemaking Board (``Board'' or ``MSRB'')
filed with the Securities and Exchange Commission (``Commission'' or
``SEC'') a proposed rule change (File No. SR-MSRB-98-5). The proposed
rule change is described in Items I, II, and III below, which Items
have been prepared by the Board. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The MSRB is filing herewith a proposed rule change concerning the
Board's Transaction Reporting Program (``Reporting Program''). The
proposed rule change states the Board's intention to publish for
comment five sample Daily Reports containing summary price and volume
information on inter-dealer and customer municipal securities
transactions reported by dealers under rule G-14. The proposed rule
change also states that the Board intends to make the Daily Report
available on an operational basis in the third quarter of 1998. The
proposed rule change is as follows.
Notice--Sample Transaction Reporting Data Available for Review
Since 1995, rule G-14 has required dealers to report to the MSRB
their inter-dealer transactions in municipal securities via the
automated comparison system for municipal securities operated by
National Securities Clearing Corporation (``NSCC''). The Board has used
this information to create a database of transaction information used
by regulators for market surveillance purposes. The Board also uses the
reported transaction information to create a daily public report
summarizing price and volume information for municipal securities that
were reported as trading in the inter-dealer market four or more times
on the previous business day. The Daily Report, which is made available
on T+1 prior to the beginning of the trading day, is used by market
participants to help gauge the value of municipal securities. The Board
currently has eight subscribers to the Daily Report. Most of the
subscribers are information vendors that redistribute the information
to their own subscribers and/or use the information in various
securities valuation products that they market.
In 1996, the Board filed plans with the Commission to add
transactions between dealers and customers to the Reporting Program.
Customer transaction data will be included in the surveillance database
that the Board makes available to market regulators, and in the Daily
Reports of price and volume activity. Since March 1, 1998, dealers have
been required to submit customer transaction data on a daily basis.\1\
Beginning April 9, 1998, the MSRB will publish samples of a proposed
Daily Report that includes both customer and inter-dealer transaction
data and will invite public comment on the sample reports.
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\1\ See Exchange Act Release No. 37998 (Nov. 29, 1996), 61 FR
64782 (December 6, 1996) (approval of amendment to rule G-14);
Exchange Act Release No. 39495 (December 29, 1997), 63 FR 585
(January 6, 1998) (delay of effectiveness to March 1, 1998).
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The criteria for inclusion of municipal securities on the sample
Daily Reports are the same as for the current inter-dealer Daily
Report. If a municipal security (identified by a CUSIP number) is
reported as having been traded four or more times on a given day, the
high, low and average price and par value total of all of the trades
reported in that security will be on the Daily Report on the next
morning. Calculation of average price also is the same as in the
current inter-dealer Daily Report. It is an arithmetic mean and is
based exclusively on reported transactions (if any) between $100,000
and $1,000,000 in par value.
In applying the criteria for producing the sample Daily Reports,
inter-dealer and customer transactions are considered together. This
means that any combination of inter-dealer and customer transactions
totaling four or more qualifies that CUSIP for inclusion of price
information for that CUSIP on the Daily Report. In determining whether
a reported transaction will be included for purposes of the Daily
Report eligibility, certain transaction records are eliminated from
consideration if they contain what appear to be obvious errors (e.g.,
invalid or unknown CUSIP number, missing dollar price). An attempt is
made to calculate a dollar price on when-issued transactions submitted
with a yield, but no dollar price. However, such transactions are not
considered for Daily Report purposes if there is insufficient
securities data (e.g., coupon and dated date) to calculate dollar price
from yield or if there is an indication that the securities are not
calculated using a standard semiannual compounding formula and a 30/360
day-count.
The sample Daily Reports will be available beginning Thursday,
April 9, 1998. The five sample Daily Reports will include information
on transactions reported to the Board, by midnight on trade date,
between March 30, 1998 and April 3, 1998. Market participants may wish
to comment on the Daily Reports, particularly with respect to the
format of the reports, so that the Board can make the Daily Reports as
useful as possible. The sample Daily Reports will be available on the
Board's Web site at WWW.MSRB.ORG and will be available in printed form
from the Board's offices. Subscribers to the current inter-dealer Daily
Report will be able to access the sample Daily Reports through the
computer bulletin board that they normally use to access Daily Reports.
The Board requests that comment on the sample Daily Report be made
in writing prior to May 8, 1998. The Board plans to make the Daily
Report available on a daily basis during the third quarter of 1998.
Prior to that time, the Board must file a plan with the Commission that
specifies the final format of the report and that announces the yearly
subscription price.
II. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
In its filing with the Commission, the Board included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comment it received on the proposed rule change. The
texts of these statements may be examined at the places specified in
Item IV below. The Board has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Since 1995, rule G-14 has required dealers to report to the MSRB
their inter-dealer transactions in municipal
[[Page 18243]]
securities via the automated comparison system for municipal securities
operated by the NSCC. The Board has used this information to create a
database of transaction information that can be used for market
surveillance purposes and to produce daily report summarizing price and
volume information for municipal securities that traded four or more
times in the inter-dealer market on the previous business day.
In 1996, the Board filed plans with the Commission to add
transactions between dealers and customers to the Transaction Reporting
Program.\2\ This will allow the Board to include customer transaction
data in the surveillance database that the Board makes available to
market regulators, and in the Daily Reports of price and volume
activity in the market. The 1996 filing included an amendment to rule
G-14, requiring dealers to report their customer transactions in
municipal securities to the Board in certain prescribed formats.\3\ The
Commission approved this amendment and it became effective March 1,
1998.\4\ The Board has been receiving customer transaction data since
that time and is now ready to publish samples of a proposed Daily
Report that includes both customer and inter-dealer transactions.
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\2\ Exchange Act Release No. 37859 (Oct. 23, 1996), 61 FR 56072
(October 23, 1996).
\3\ See MSRB Rule G-14(b)(ii) and Rule G-14 Transaction
Reporting Procedures.
\4\ Securities Exchange Act Release 37998 (Nov. 29, 1996)
(approval of amendment to rule G-14); Securities Exchange Act
Release 39495 (Dec. 29, 1997) (delay of effectiveness to March 1,
1998).
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The criteria for inclusion of municipal securities on the sample
Daily Reports will be the same as in the current inter-dealer Daily
Report. If a municipal security (i.e., CUSIP number) is reported as
having been traded four or more times on a given day, the high, low and
average price and par value total of all of the trades reported in that
security will be on the Daily Report on the next morning. Calculation
of average price will be an arithmetic mean and will be based
exclusively on reported transactions (if any) between $100,000 and
$1,000,000 in par value. In applying these criteria, inter-dealer and
customer transactions will be considered together. This means that any
combination of inter-dealer and customer transactions totaling four or
more will trigger the inclusion of price information for that CUSIP on
the Daily Report.
The five sample Daily Reports being released for comment will
include information on inter-dealer and customer transactions reported
to the Board, on trade date, between March 30, 1998 and April 3, 1998.
They will be released during the week of April 7, 1998. The sample
Daily Reports will be available on the Board's Web site at WWW.MSRB.ORG
will be available in printed form from the Board's offices. Subscribers
to the current inter-dealer Daily Report will be able to access the
sample Daily Reports through the normal means of accessing Daily
Reports, which is a computer bulletin board.
Although the Board is now receiving customer transaction data from
dealers, it is not yet prepared to begin production of Daily Reports
containing summary price and volume information on an operational
basis. This is due to several factors, including the need for further
testing of the software that produces the Daily Report, the need for
additional efforts to assure that the data within the Daily Report
reliably reflects transaction data reported to the Board, and the need
for additional analysis to help assure that the data submitted by
dealers is accurate, timely and complete. Prior to operational status
being achieved, it also will be necessary for the Board to convert its
current testing and development computer systems to operational
systems, which require higher standards of reliability and operational
readiness. The Board estimates that these objectives can be attained
during the third quarter of 1998. Prior to that time, the Board will
file a more complete plan with the final format of the Daily Reports
and a detailed description of the process by which the Daily Report is
produced.
2. Statutory Basis
The Board believes that the proposed rule change is consistent with
Section 15B(b) (C) of the Act, which provides that the Board's rules
shall:
be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect
to, and facilitating transactions in municipal securities, to remove
impediments to and perfect the mechanism of a free and open market
in municipal securities, and, in general, to protect investors and
the public interest.
The Board believes that the proposed rule change is necessary so
that Daily Report operations can begin as soon as possible. The Board
believes that the operation of the Reporting Program, in general, will
facilitate the statutory purposes noted above because the Reporting
Program will provide an additional degree of price transparency in the
municipal securities market and will provide a surveillance audit trail
that may be used by market regulators in furtherance of their
regulatory purposes.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Board does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act since it would apply equally to
all brokers, dealers and municipal securities dealers and merely
provides sample data for comment for a program the general parameters
of which previously have been approved by the Commission.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
Written comments were neither requested nor received on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The Board has designated this proposed rule change as constituting
a stated policy, practice, or interpretation with respect to the
meaning, administration, or enforcement or an existing Board rule under
Section 19(b)(3)(A) of the Act, which renders the proposed rule change
effective upon receipt of this filing by the Commission. The proposed
rule change merely describes the plan for the Board to provide a sample
of transaction data from the municipal securities market so that the
Board can expeditiously continue with its plan, previously approved by
the Commission, to add customer transaction data to the existing
Reporting Program. At any time within sixty days of the filing of the
proposed rule change, the Commission may summarily abrogate such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
Copies of the submission, all subsequent
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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, 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
inspection and copying in the Commission's Public Reference Room.
Copies of the filing will also be available for inspection and copying
at the Board's principal offices. All submissions should refer to File
No. SR-MSRB-98-5 and should be submitted by May 5, 1998.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-9806 Filed 4-13-98; 8:45 am]
BILLING CODE 8010-01-M