[Federal Register Volume 64, Number 246 (Thursday, December 23, 1999)]
[Notices]
[Pages 72123-72125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33345]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42241; File No. SR-MSRB-99-8]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Order Granting Approval to Proposed Rule Change Relating to
Reports of Sales and Purchases, Pursuant to Rule G-14
December 16, 1999.
I. Introduction
On September 7, 1999, the Municipal Securities Rulemaking Board
(``MSRB'' or ``Board'') submitted to the Securities and Exchange
Commission (``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to produce a daily report
containing information on individual transactions in frequently traded
municipal securities.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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The proposed rule change was published for comment in the Federal
Register on November 8, 1999,\3\ No comments were received on the
proposal. This order approves the proposal.
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\3\ Securities Exchange Act Release No. 42090 (November 2,
1999), 64 FR 60865.
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II. Description of the Proposal
The Board proposed to institute a service (``Service'') to produce
a daily public report containing information on individual transactions
in frequently traded municipal securities (``Daily Transaction Report''
or ``Report''). The transaction information in the Report will come
from dealer reports made to the Board pursuant to MSRB Rule G-14, which
governs reports of sales or purchases.
Currently, the MSRB publishes transaction data in the Combined
Daily Report and the Inter-Dealer Report. Like
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these other reports, the Daily Transaction Report will contain
information about transactions made in ``frequently traded'' municipal
issues. As with the current reports, the phrase ``frequently traded''
will be defined as issues trading at least four or more times on a
business day for which the prices are reported. In addition, like the
current transaction reports, the proposed Report will be produced and
made available electronically by approximately 7:00 a.m. on the
business day following the trade date. The main difference between the
proposed Daily Transaction Report and the current reports is that the
proposed Report will provide transaction detail on each reported trade
in a frequently traded issue, rather that merely providing the high,
low, and average prices.
The Daily Transaction Report will be available by subscription.
Subscribers will be required to sign a subscription agreement, but will
not be charged a fee for the Report.
As described above, the proposed Report will provide information on
individual transactions in frequently traded municipal securities. In
particular, the Report will contain, for each transaction, the CUSIP
number, a short description of the issue, the par value traded, the
time of the trade reported by the dealer, and the price of the
transaction.\4\ The Report will classify transactions into three
categories: (1) Sales by dealers to customers, (2) purchases by dealers
from customers, and (3) inter-dealer trades. The Report will be
organized by issue, with the most frequently traded issues listed
first. Within each issue, trades will be listed in order of the time of
trade, from the earliest reported to the latest.
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\4\ A dollar price is given for each transaction listed on the
report. If the dealer submits a yield with the transaction report,
the yield is included with the dollar price. There are instances,
however, when a yield is not reported. For example, dealers for
secondary market inter-dealer transactions do not submit yields
because the automated comparison system used to report inter-dealer
trades cannot accept yield information on those transactions. In
addition, dealers cannot report a yield for customer transactions
done on a dollar price basis that involve defaulted or variable rate
securities. Transactions including customers or dealers in new
issues without a determined settlement date may be effected and
reported by dealers wither with a dollar price or yield. The MSRB
Transaction Reporting System will calculate a dollar price from
yields submitted for these transactions, using an assumed settlement
date if necessary. There must be, however, sufficient securities
data available to make this calculation (e.g., coupon, dated date,
maturity date, first interest payment date, etc.). For additional
information, see ``Public Reporting of Transactions in Municipal
Securities: Rule G-14,'' MSRB Reports, Vol. 18, No. 2 (August 1998)
at 25-27.
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The Board will provide details on how to subscribe to the report
via the Internet before the Report becomes operations.
III. Discussion
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to the Board.\5\ In particular, the
Commission believes the proposed rule change is consistent with Section
15B(b)(2)(C),\6\ which requires, among other things, that the rules of
the Board 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.
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\5\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78(c)(f).
\6\ 15 U.S.C. 78o-4(b)(2)(C).
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The Commission finds that the proposed Daily Transaction Report
should enhance and increase transparency in the municipal securities
market. The proposed Report will provide municipal securities investors
with more transaction information about the issues that are currently
being traded. In particular, investors will now have access to specific
price information, trade size information and information about the
parties involved. Further, this expanded information will be provided
to investors in a timely fashion, by 7:00 a.m. on the date following
the reported trade. Upon approval of this proposed rule change,
municipal securities investors will have detailed information about
actual transactions that occurred the previous trading day. This
detailed Report will allow investors to monitor and analyze individual
trades in frequently traded municipal securities, which should assist
municipal securities investors in making informed investment decisions.
The Report should help investors in the price discovery process.
The proposed Report will contain detailed price information in
frequently traded issues. In addition, the Report will identify what
type of transaction occurred, such as whether a frequently traded issue
was traded in the inter-dealer market or involved customer trading. The
Report should provide a more complete picture of the municipal
securities market, which could enhance liquidity in the municipal
securities market.
One of the Commission's main objectives is to increase transparency
in our securities markets. The Commission believes that transparency in
the securities markets helps to preserve the market's integrity,
assists in the price discovery process, and enhances liquidity. The
Commission commends the MRSB's efforts to increase municipal market
transparency by looking for means to update its reporting programs and
systems.
The Commission is satisfied with the current definition of
``frequently traded.'' The Commission appreciates that such a
definition has been appropriate given the extensive number of municipal
securities issues that trade very infrequently and concerns about the
market impact of reporting trades in such securities. The Commission,
however, believes that MSRB should consider whether to lower the
frequently traded threshold in the future to further increase municipal
securities transparency. In addition, the Commission agrees that the
MSRB should continue to consider the feasibility of a real-time
transaction reporting system for municipal securities in the near
future.\7\
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\7\ The Commission notes that the MSRB recently submitted a
proposed rule change, which demonstrated possible methods for
dissemination of real-time transactions reports based on the
transactions information collected via the Board's Transaction
Reporting System. See Exchange Act Release No. 41916 (September 27,
1999), 64 FR 53759 (October 4, 1999).
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In conclusion, the Commission believes that the proposed rule
change is consistent with the Act because it provides investors with
more detailed market data upon which the municipal securities investors
will be able to make better informed investment decisions. The Daily
Transaction Report should further enhance the integrity of the
municipal securities market because it provides a view of the
transactions occurring in the market. As a result, the municipal
securities market should enjoy greater transparency and liquidity.
III. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-MSRB-99-08) is approved.
\8\ 15 U.S.C. 78s(b)(2).
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[[Page 72125]]
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-33345 Filed 12-22-99; 8:45 am]
BILLING CODE 8010-01-M