[Federal Register Volume 67, Number 65 (Thursday, April 4, 2002)]
[Notices]
[Pages 16139-16140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-8137]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45674; File No. SR-MSRB-2002-04]


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

March 29, 2002.
    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 March 27, 2002 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-
2002-04) as described in Items I, II, and III below, which Items have 
been prepared by the MSRB. 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 MSRB has filed with the Commission a proposed rule change with 
regard to Rule G-14, on reports of sales or purchases, to increase 
transparency in the municipal securities market. The proposed rule 
change would not change the wording of Rule G-14.

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 
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
    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. One 
product of the Board's Transaction Reporting Program is its Daily 
Transaction Report (the ``Report''), which has been provided to 
subscribers each day since January 2000. The report is made available 
each morning by 7 am and includes details of transactions in municipal 
securities which were ``frequently traded'' the previous business day. 
Since the beginning of the Transaction Reporting Program in 1995, 
``frequently traded'' securities have been defined as those that were 
traded four or more times on a given business day.
    In designing the transparency reports that appear on the day after 
trade date (T+1), the Board has 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 has made a commitment to review the use of these 
reports as experience is obtained and eventually to move to 
transparency reporting on a more contemporaneous and comprehensive 
basis.\3\
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    \3\ 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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    Since 1995, the Board has made ongoing efforts to increase price 
transparency in the municipal securities market in measured steps, 
culminating in comprehensive, real-time price transparency. The first 
price transparency report, begun in 1995, was a T+1 report that 
summarized inter-dealer trades in frequently traded municipal 
securities. In 1998, the Board added customer trades to the T+1 summary 
reports, and in January 2000 began publishing individual transaction 
data on frequently traded securities in addition to summarizing their 
high, low and average prices. The Board has also introduced 
``comprehensive'' transaction reports for this market, which list all 
municipal securities transactions (regardless of frequency of trading), 
but which are available no less than two weeks after trade date.\4\
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    \4\ The first comprehensive report was introduced in October 
2000 and listed all trades after a one-month delay. The latest 
comprehensive report began operation in November 2001 and has a two-
week delay. See Securities Exchange Act Release No. 44894 (October 
2, 2001), 66 FR 51485 (October 9, 2001).
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    At this time, the Board believes that the next appropriate step in 
this process is to change the threshold for determining that a 
municipal security is ``frequently traded'' for purposes of the T+1 
transparency report. The proposed rule change would lower the threshold 
from four to three trades per day.
Impact of Proposed Report on Transparency
    The proposed threshold change would increase substantially the 
proportion of municipal securities market activity that is reported on 
the day after trading. The present report, with a threshold of four or 
more trades per day, includes an average of 11,600 trades in 1,100 
different issues, with a total par value of about 3.9 billion

[[Page 16140]]

dollars. Under the proposed threshold, the report is expected to 
include an average of 14,400 trades in 2,600 issues, with a total par 
value of about 5.2 billion dollars. This represents a 24 percent 
increase in the number of trades reported, a more-than-twofold increase 
in the number of issues reported, and a 33 percent increase in par 
value reported.\5\
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    \5\ These data are based upon market activity from April 1, 2001 
through July 31, 2001.
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Description of Service
    The enhanced Daily Transaction Report with the three-trade 
threshold will replace the current report and will be available each 
day to subscribers via the Internet. Subscribers to the current Service 
receive the report free of charge, and their subscriptions will 
continue should the proposed Service be implemented. New subscriptions 
will be available free to parties who sign a subscription agreement. In 
addition, recent reports will continue to be available for examination, 
also free of charge, at the Board's Public Access Facility in 
Alexandria, VA.
Implementation Schedule
    The enhanced report will be available to subscribers as soon as 
practical after SEC approval of the proposed rule change. It is 
estimated that the period between approval and implementation will not 
exceed two weeks.
2. Basis
    The MSRB has adopted the proposed rule change pursuant to Section 
15B(b)(2)(I) of the Act, which authorizes the MSRB to adopt rules that 
provide for the operation and administration of the Board.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The MSRB does not believe that the proposed rule change will impose 
any burden on competition in that 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 Written 
comments on the proposed rule change were neither solicited nor 
received.

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 self-regulatory organization 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 submissions, 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 MSRB's principal offices. 
All submissions should refer to File No. SR-MSRB-2002-04 and should be 
submitted by April 25, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-8137 Filed 4-3-02; 8:45 am]
BILLING CODE 8010-01-P