[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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    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