[Federal Register Volume 65, Number 145 (Thursday, July 27, 2000)]
[Notices]
[Pages 46188-46189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18960]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43060; File No. SR-MSRB-00-08]


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

July 20, 2000.
    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 June 15, 2000, the Municipal Securities Rulemaking Board (``Board'' 
or ``MSRB'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') a proposed rule change as 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 to institute a service 
(``Service'') to provide historical information on all transactions in 
municipal securities (``Comprehensive Transaction Report'' or 
``Report''). The transaction information on the Report would come from 
reports made to the Board by brokers, dealers and municipal securities 
dealers (``dealers'') pursuant to Rule G-14, which governs reports of 
sales or purchases. This rule currently requires dealers to report 
essentially all inter-dealer and customer transactions in municipal 
securities to the Board by midnight of trade date.
    The proposed Report would be the fourth product offered by the 
Board to increase the amount of price transparency in the municipal 
securities market. The three existing products all provide information 
on ``frequency traded'' issues--issues on which at least four 
transaction reports were received for a given trade date. The existing 
products are produced and made available electronically by 
approximately 7 a.m. each business day and cover the previous day's 
trading. In contrast, the proposed Comprehensive Transaction Report 
would provide information on every municipal security transaction, 
including transactions in issues that are traded less than four times 
during a day. The Comprehensive Transaction Report would be made 
available on a delayed (historical) basis, once a month, covering the 
previous month's trading.
    The proposed Comprehensive Transaction Report would be available by 
a subscription service. Each month, computer-readable compact disks, 
each containing information on all trades done during the previous 
month, would be provided to subscribers. The subscription fee would be 
$2,000 per year.

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 above. 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
a. Introduction
    The Board has a long-standing policy to increase price transparency 
in the municipal securities market, with the ultimate goal of 
disseminating comprehensive and contemporaneous pricing data. Since 
1995, the Board has expanded the scope of the public transparency 
reports in several steps. Each step has provided industry participants 
and the public with successively more information about the market.\3\
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    \3\ The report summarizing prices for issues that are frequently 
traded on the inter-dealer market began operation in 1995; in 1998, 
dealer-customer prices were added in a second summary report; and in 
January 2000, a report with details of trades in frequently traded 
issues was added. See Securities Exchange Act Release No. 42241 
(December 16, 1999), 64 FR 72123 (December 23, 1999). The proposed 
rule change would not affect the summary and detailed public reports 
of frequently traded issues.
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    Until now, all the Board's reports have provided information about 
``frequently traded'' municipal securities. ``Frequently traded'' 
securities are those that are traded four or more times on a given 
business day. The existing reports are produced daily on a T+1 basis, 
i.e., with information for trades effected during the preceding day.
    In designing the first T+1 transparency report and subsequent 
enhanced versions, the Board adopted the threshold of four trades a day 
because of the concern that an isolated transaction may not necessarily 
provide a reliable indicator of ``market price'' and might be 
misleading to an observer not familiar with the market. At the same 
time, the Board made a commitment to review the use of these reports as 
experience was obtained and eventually to move to a more 
contemporaneous and comprehensive price transparency report.\4\
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    \4\ See, e.g., ``Board to Proceed with Pilot Program to 
Disseminate Inter-Dealer Transaction Information,'' MSRB Reports, 
Vol. 14, No. 1 (January 1994). In its approval order for the Inter-
Dealer Daily Report, the Commission noted that the Board, in 
proceeding to subsequent levels of transparency, ``should continue 
to work toward publicly disseminating the maximum level of useful 
information to the public while ensuring that the information and 
manner in which it is presented is not misleading.'' See Securities 
Exchange Act Release No. 34955 (November 9, 1994), 59 FR 59810 
(November 18, 1994).
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    The Board believes that the next appropriate step in this process 
is to add, on a delayed basis, information on transactions in 
infrequently traded securities--those that were traded once, twice or 
three times on a given day. The Board therefore is proposing to release 
data about each trade in a Comprehensive Transaction Report that would 
be made available approximately 30 days after month-end. In proposing 
this Report, the Board is responding to informal requests from 
prospective subscribers to the current transparency reports. There 
persons have noted they could compile more complete databases of price 
information, which would be helpful in evaluating current trades, if 
historical data on infrequently traded issues were available. For 
example, comprehensive data might enable ``matrix pricing'' analysts to 
refine their evaluations of securities, and might help dealers to 
establish more accurate market prices for their current inventories. 
The comprehensive data also would be useful to persons studying the 
market from a market research or an academic perspective. Several 
prospective users of comprehensive data have mentioned that these data 
would be useful even if only available on a delayed basis rather than 
on T+1.
    As experience is gained with reporting all transactions on a 
delayed basis, the Board will evaluate how best to expand price 
reporting in subsequent steps, for example, by including more data on 
infrequently traded issues on a T+1 basis, by shortening the delay for 
publication of the Comprehensive

[[Page 46189]]

Transportation Report, or by other collection and dissemination 
methods. As the Board previously has noted, its goal is ultimately to 
provide comprehensive and contemporaneous transaction reports to the 
market. \5\
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    \5\ See Securities Exchange Act Release No. 42090 (November 2, 
1999), 64 FR 60865 (November 8, 1999).
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b. Description of Proposed Report
    The proposed Comprehensive Transaction Report would provide 
information on individual municipal securities transactions. Data about 
each trade on the proposed Report would be similar to that on the 
current Daily Transaction Report. For each trade, the proposed Report 
would show the trade date, the CUSIP number of the issue traded, a 
short issue description, the par value traded, the time of trade 
reported by the dealer, the price of the transaction, and the dealer-
reported yield of the transaction, if any. Each transaction would be 
categorized as a sale by a dealer to a customer, a purchase from a 
customer, or an inter-dealer trade.
C. Impact of Proposed Report on Transparency
    The proposed Comprehensive Transaction Report would represent a 
substantial increase in the number of trades on which information is 
made available. An average of about 29,000 transactions per day would 
be included, which is more than three times as many as are included in 
the current T+1 daily reports. The number of issues reported would 
increase from about 1,600 on a typical day to about 14,000. \6\
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    \6\ These trade volume statistics are based on February 2000 
market activity.
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    In addition to information on infrequently traded issues, the 
proposed Report also would provide information on two other types of 
trades not in the current Daily Transaction Reports: trades reported 
late (after trade date), and corrected trades (trades reported 
incorrectly on trade date that subsequently are corrected by the 
dealer). These would improve the accuracy of the reported information 
as well as make it more comprehensive. \7\
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    \7\ To enable the Board to compile a comprehensive trades 
database for enforcement purposes, dealers report certain data after 
trade date. These data are, of course, not available to the Board in 
time to be included in the T+1 daily reports. The post-trade date 
data also include ``corrections'' to trades that were initially 
reported inaccurately with regard to price, par, etc. All together, 
corrected and late trades in frequently traded issues amount to 
about six percent of the number of trades in the current T+1 daily 
reports.
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d. Description of Proposed Service
    The proposed Service would make the Comprehensive Transaction 
Report available once a month to subscribers. The Board would send 
subscribers each month a compact disk containing all trades effected 
during the previous calendar month. The Board plans to make sample 
disks with a single month's data available to prospective users without 
charge, so that they may determine whether they wish to subscribe.
    The Board is establishing a fee for an annual subscription to the 
Service of $2,000. The proposed fee is structured approximately to 
defray the Board's cost for production of 12 monthly data sets, 
transcription to compact disks, mailing, and subscription maintenance.
2. Statutory Basis
    The Board believes the proposed rule change is consistent with the 
requirements of Section 15B(b)(2)(C) of the Act, \8\ 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.
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    \8\ 15 U.S.C. 78o-4(b)(2)(C).
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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

    The Board did not solicit nor receive written comments.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the MSRB consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-00-08 and should be 
submitted by August 17, 2000.

    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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Jonathan G. Katz,
Secretary.
[FR Doc. 00-18960 Filed 7-26-00; 8:45 am]
BILLING CODE 8010-01-M