[Federal Register Volume 64, Number 191 (Monday, October 4, 1999)]
[Notices]
[Pages 53759-53760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25668]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41916; File No. SR-MSRB-99-9]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Municipal Securities 
Rulemaking Board Relating to Reports of Sales and Purchases, Pursuant 
to Rule G-14

September 27, 1999.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 7, 1999, the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') a proposed rule change. The 
proposed rule change is described in Items, I, II, and III below, which 
Items have been prepared by the Board. The MSRB has designated this 
proposal as one constituting a stated policy, practice or 
interpretation with respect to the enforcement of an existing rule 
under Section 19(b)(3)(A) \3\ of the Act, which renders the proposal 
effective upon receipt of the filing by the Commission. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \15\ U.S.C. 78s(b)(3)(A).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Board is filing a proposed rule change describing its plan to 
use transaction information collected under the Board's current 
Transaction Reporting System \4\ to demonstrate a possible method for 
disseminating ``real-time'' transaction reports in the municipal 
securities market. The Demonstration System can be accessed from the 
Board's web site, www.msrb.org. The Board is requesting comment on this 
Demonstration System to assist it in designing its next major phase of 
the Transaction Reporting Program.
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    \4\ See, e.g., Securities Exchange Act Release No. 37998 
(November 29, 1996), 61 FR 64782 (December 6, 1996), in which the 
Commission approved the current system for collecting transaction 
information.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Board included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The 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, the Board's Transaction Reporting Program has provided 
increasing levels of transaction price information using transaction 
data that is reported to the Board each day by brokers, dealers and 
municipal securities dealers (``dealers'') pursuant to Board Rule G-14 
on Transaction Reporting The Board is reviewing ways too make the 
transaction price information now available to the public more 
comprehensive and more contemporaneous with the execution of trades in 
the market. The Board is now making available a Demonstration System, 
designed to show a possible means of publicly disseminating transaction 
information that, in the future, the Board expects to collect from 
dealers on a ``real-time'' basis. The Demonstration System can be 
accessed from the Board's web site, www.msrb.org. The Board is 
requesting comments on the content and format of information in the 
planned demonstration.
    Background: Current Daily Reports of Transaction Prices. The 
Transaction Reporting Program now produces two Daily Reports that 
summarize the municipal securities market by providing high, low and 
average prices for the ``frequently traded'' issues, i.e., issues 
trading four or more times on a given day. The Inter-Dealer Daily 
Report gives a view of the inter-dealer market, and the Combined Daily 
Report covers both inter-dealer transactions and transactions between 
dealers and customers. Before the end of the year, the Board expects to 
produce a new ``Daily Transaction Report'' that will cover the same 
transactions as the Combined Daily Report, but that will list 
individual prices and quantities for each transaction, instead of 
giving the high, low and average prices for the issue.\5\
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    \5\ See ``Public Reporting of Individual Transactions in 
Frequently Traded Municipal Securities: Rule G-14,'' MSRB Reports, 
Vol. 19, No. 3 (September 1999), and File No. SR-99-8 (September 7, 
1999).
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    Goal: ``Real-Time'' Transaction Reports. Both the current Daily 
Reports and the planned Daily Transaction Report make prices available 
early on the morning of the day after the trade date, and the prices 
given on the reports are only for ``frequently traded'' issues. The 
MSRB, however, is looking at ways to make available transaction price 
information in a more comprehensive and contemporaneous manner and is 
in the early stages of designing a system for that purpose.
    There are a number of issues that must be addressed before a system 
can be designed to make municipal securities transaction prices 
available to all interested parties on a ``real-time'' basis or a near 
``real-time'' basis. For example, many dealers have automated trade 
processing systems that are set up to process and transmit trade data 
using an ``overnight batch'' method. Time will be needed to work 
through the steps necessary for the industry to convert from overnight 
trade processing to data processing environment that approaches real-
time. The MSRB will be working with dealers, their clearing brokers, 
service bureaus, and industry utilities to find the most efficient and 
cost-effective manner to complete this transition.
    Separate from the issue of how data is to be collected from dealers 
is the issue of how trade data will be made available to investors, 
dealers and others interested in following prices in the market. The 
Demonstration System is intended to generate comment on this issue. It 
simulates one way in which transaction prices might be formatted and 
disseminated to investors, dealers and others through the world wide 
web. Comments on the Demonstration System from potential users of the 
system will not only assist the Board in arriving at the best possible 
system for disseminating trade data, but also may help the MSRB to 
arrive at the procedures and systems necessary for collecting this data 
from dealers.
    Description of Demonstration System. Like the existing Daily 
Reports, the Demonstration System is structured to take into account 
the unique nature of the municipal securities markets. In contrast to 
the approximately 10,000 issues of stock traded in the equity markets, 
there are over 13 million different issues of municipal securities. 
Because of this large number of issues and the infrequent trading of 
most

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issues, it is not practical to list each issue. Therefore, the 
Demonstration System allows the user to view simulated transaction 
activity during the day, regarding either a specific security or the 
most frequently traded issues.
    The Demonstration System uses actual transaction prices reported to 
the Board for trade date November 4, 1998. On that day, 22,606 
transactions were reported as having occurred in 9,660 separate issues 
of municipal securities. Most of these trade records were reported to 
the Board, as required by the current Rule G-14, on the night of trade 
date. The Demonstration System uses the ``time of trade'' reported on 
each trade to simulate how a ``real-time'' transaction reporting system 
might look if the transactions were being reported simultaneously with 
execution. In a real system, of course, some time would be necessary 
for the dealer to create the trade record and enter it into its own 
system and for that record to be received, processed and disseminated 
by the Board's system. Nevertheless, the use of actual transaction data 
should give potential users a sense of what a ``real-time'' system 
would be like.
    For each transaction reported, the Demonstration System shows the 
CUSIP number, a short description of the issue, the par value traded, 
the time of trade reported by the dealer, and the individual price of 
the transaction. Yield is included if it was submitted by the dealer 
with the transaction report. Transaction reports are categorized as one 
of three transaction types: (i) sales by dealers to customers, (ii) 
purchases by dealers from customers, and (iii) inter-dealer trades. 
These three categories of transactions are meant to provide additional 
useful information to system users, beyond the mere fact that a 
transaction was effected at a specific price. These categories of 
transactions are similar to the categories the Board has proposed in 
the Daily Transaction Report, mentioned above. The Demonstration System 
by default will use the time of the user's computer to simulate a time 
of day on November 4. However, the user may change the default time to 
simulate any time of day desired.
    Comments Requested. The Board is requesting comment on the content 
and format of information in the Demonstration System. Comments can be 
sent to the Board by letter or by e-mail to [email protected].\6\ All 
comments, whether by letter or e-mail, should refer to ``Web 
Demonstration System,'' should contain the name and address of the 
commentator, and should indicate whether the comments offered are on 
behalf of a specific organization or company.
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    \6\ The Demonstration System includes an option for sending e-
mail comments directly to this address.
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2. Basis
    The Board believes the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Act,\7\ which provides that the Board's 
rules shall:

    \7\ 15 U.S.C. 78o-4(b)(2)(C).

* * * be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in 
regulating * * * 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 * * *

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 because it applies equally to all 
dealers in municipal securities.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Comments on the production of the Demonstration System have neither 
been solicited nor received. The Demonstration System itself, however, 
has been produced specifically to obtain comment on the Board's view of 
``real-time'' transaction reporting for municipal securities. The Board 
expects to make one or more filings with the Commission in the future 
on ``real-time'' transaction reporting and will discuss comments that 
have been made on the Demonstration System at that time.

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 of an existing Board rule under 
Section 19(b)(3)(A) \8\ of the Act, and Rule 19b-4(f)(1) thereunder,\9\ 
which renders the proposed rule change effective upon receipt of this 
filing by the Commission. The data used in the Demonstration System was 
collected by the Board under Rule G-14 and the Board's Transaction 
Reporting System, a rule and facility that previously have been 
approved by the Commission.\10\ The proposed rule change describes a 
demonstration designed to obtain comment on a dissemination system for 
``real-time'' transaction reporting so that the Board may move 
expeditiously forward with its previously announced plan to make public 
transaction data more contemporaneous and comprehensive.\11\ 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.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(1).
    \10\ See supra note 4.
    \11\ See letter from Robert Drysdale, Chairman, MSRB, to Arthur 
Levitt, Chairman, SEC, dated November 3, 1994.
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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 20549-0609. 
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 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-99-9 and should be 
submitted by October 25, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-25668 Filed 10-1-99; 8:45 am]
BILLING CODE 8010-01-M