[Federal Register Volume 69, Number 226 (Wednesday, November 24, 2004)]
[Notices]
[Pages 68432-68434]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3309]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50692; File No. SR-MSRB-2004-07]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Municipal Securities 
Rulemaking Board To Establish Implementation Plan for Real-Time 
Transaction Reporting and Price Dissemination

November 18, 2004.
    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 November 15, 2004, the Municipal Securities Rulemaking Board 
(``MSRB'' or ``Board'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the MSRB. The MSRB has designated this proposal as constituting a 
stated policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the MSRB under 
Section 19(b)(3)(A)(i) of the Act \3\ and Rule 19b-4(f)(1) 
thereunder,\4\ which renders the proposal effective upon filing with 
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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB is filing with the Commission a proposal to establish the 
implementation plan for its real-time transaction reporting and price 
dissemination, which includes the amendments to Rule G-14, on 
transaction reporting, and Rule G-12(f), on automated comparison of 
inter-dealer transactions. No changes to the text of MSRB rules are 
required by this proposal.

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 MSRB included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposal. The text of these 
statements may be examined at the places specified in Item IV below. 
The MSRB 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
    On August 31, 2004, the SEC approved a proposed rule change 
relating to the MSRB's implementation of real-time transaction 
reporting and price dissemination--the Real-Time Transaction Reporting 
System or ``RTRS.'' \5\ That rule change includes amendments to Rule G-
14 and Rule G-12(f), which will become effective concurrently with the 
operation of RTRS, that will require dealers to report most municipal 
securities transactions to the MSRB within 15 minutes of the time of 
trade execution rather than by midnight on trade date, as is currently 
required,\6\ and to submit inter-dealer transactions to the central 
comparison system within the same time frame. The new requirements are 
designed to increase price transparency in the municipal securities 
market and to enhance the surveillance database and audit trail used by 
enforcement agencies.\7\ In that filing, the MSRB stated that it 
expected to make a second filing on the RTRS facility in the future, 
stating the date of effectiveness, describing the technical means of 
data dissemination, and proposing fees to be charged for RTRS data 
products.
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    \5\ Exchange Act Release No. 50294 (August 31, 2004), 69 FR 
54170 (September 7, 2004); see ``Approval by the SEC of Real-Time 
Transaction Reporting and Price Dissemination: Rules G-12(f) and G-
14,'' MSRB Notice 2004-29 (September 2, 2004), at http://www.msrb.org.
    The text of the rule change, along with a description of the 
RTRS facility, can be found in the MSRB's notice announcing its 
filing with the SEC. See ``Real-Time Transaction Reporting: Notice 
of Filing of Proposed Rule Change to Rules G-14 and G-12(f),'' MSRB 
Notice 2004-13 (June 1, 2004), at http://www.msrb.org.
    \6\ For operational reasons, the rule will allow dealers more 
than 15 minutes to report certain kinds of transactions. These 
transactions still will be reported to subscribers immediately upon 
receipt at RTRS.
    \7\ The RTRS filing noted that certain trade reports made by 
dealers, which are coded by the dealers to indicate that the trade 
is for a specific reason not done at a market price, will not be 
disseminated but will be available to regulators as part of the 
surveillance function offered by RTRS. The RTRS Notice also noted 
that certain other types of ``transactions'' that are required to be 
reported exclusively for audit trail purposes (relating to clearing 
brokers and their correspondents in certain fully-disclosed clearing 
arrangements where the correspondent does not take a principal 
position) also will not be disseminated but will be available to 
regulators.
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    On October 25, 2004, the MSRB filed a proposal describing the 
proposed RTRS service for dissemination of real-time transaction price 
data (which is named the Real-Time Transaction Price Service) and 
proposed an annual subscription fee of $5,000.\8\ That filing also 
described the fees, if any, associated with other RTRS data products. 
Thus, this proposal addresses the final remaining aspect of RTRS by 
establishing the implementation plan.
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    \8\ File No. SR-MSRB-2004-06. See ``Notice of Filing to Create 
the Real-Time Transaction Price Service and Establish an Annual 
Subscription Fee,'' MSRB Notice 2004-35 (October 26, 2004), at 
http://www.msrb.org.
    It should be noted that the transaction data will be available 
free-of-charge through The Bond Market Association's Web site at 
http://www.investinginbonds.com, as well as through other means.
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Implementation Plan

    As announced in MSRB Notice 2003-44, dated December 11, 2003, the 
MSRB is implementing its real-time transaction reporting requirements 
for brokers, dealers and municipal securities dealers (collectively, 
``dealers'') in January 2005. The implementation plan for the January 
transition is described below.

[[Page 68433]]

    The conversion to real-time transaction reporting requires dealers 
and the MSRB to implement new systems and procedures for transaction 
reporting. Trade reporting will be accomplished through a new MSRB 
system--the Real-Time Transaction Reporting System (``RTRS''). The two 
major components of RTRS with which dealers will interface are: (i) The 
RTRS Web Portal for inputting trade data and reviewing the status of 
trade reports within RTRS; and (ii) the message-based trade input and 
feedback facility operated by National Securities Clearing Corporation 
(the ``Message Portal''). These are described in the RTRS Operational 
Plan contained in MSRB Notice 2003-44 and in the RTRS Message 
Specifications and other explanatory documents subsequently published 
at www.msrb.org.
    To facilitate a smooth transition to dealer use of the Web Portal 
and the Message Portal, implementation will occur in two phases on 
January 10 and January 31, 2005. Dealers will be required to 
incorporate use of the RTRS Web Portal into their transaction reporting 
procedures on January 10, on which date the MSRB also will convert its 
internal production processing and dealer-feedback systems to RTRS 
formats. Accomplishing this transition on January 10 will allow the 
MSRB and dealers to resolve any implementation issues associated with 
these system changes prior to the January 31 date for mandatory real-
time trade reporting by all dealers. On January 31, the amendments to 
Rule G-12(f) and Rule G-14 that require real-time inter-dealer 
comparison and transaction reporting will become effective, use of the 
Message Portal will become mandatory, and the MSRB will begin real-time 
dissemination of trades in transparency reports.
    Further details on the changes that will occur on January 10 and 
January 31 as part of the implementation plan are described below.
    January 10, 2005--On this date, the MSRB will convert its own 
production system for processing transaction reports to RTRS. Dealers 
will not be required by rule to report in real-time on this date but 
will be encouraged to do so to ease the transition when real-time 
reporting becomes mandatory on January 31. On January 10, the RTRS 
database will become the ``database of record'' and dealers will need 
to employ the RTRS Web browser in their production environment. It 
should be noted that dealers that have tested successfully can already 
convert to real-time comparison and trade reporting procedures, 
although without all of the ``feedback'' functionally that will become 
available in the production environment on January 10. The MSRB's 
conversion to RTRS as the production processing system on January 10 
will allow the MSRB to give these dealers full RTRS ``feedback'' 
capability on that date.
    There will be no change in the timing of transparency reports on 
January 10. However, subscribers to the existing transparency reports 
can begin receiving T+1 reports in the RTRS revised record formats 
(including the new fields of trade information offered by RTRS) on that 
date. The following features of the existing transaction reporting 
system will be changed or terminated on January 10:
     The old ``batch'' style formats for reporting inter-dealer 
and customer trades through NSCC will still be accepted, but the 
deadline for reporting customer trades will be changed from midnight to 
10:00 p.m. The deadline for inter-dealer trade reports will remain 8:00 
p.m.
     Because of the MSRB's change to RTRS as the production 
processing system, dealers must use 16-digit (rather than 20-digit) 
control numbers to identify trades, both in real-time and in batch 
trade reports. Only 16-digit control numbers will be returned to 
dealers in message feedback.
     Regardless of whether a dealer is using the new RTRS 
formats or old batch style formats, the MSRB will discontinue sending 
``feedback'' information in batch files and faxes for customer trades. 
Real-time system responses, e-mails and RTRS Web instead will be 
available to provide feedback to dealers on their trade reports.
     Dealers who submit their low-volume trade input through 
the current ``TRS dial-up'' facility must convert to the RTRS Web 
Portal by January 10.
    January 31, 2005--On this date, the amendments to Rule G-14, on 
transaction reporting, and Rule G-12(f), on automated comparison of 
inter-dealer transactions, will become fully effective, requiring 
securities transactions to be reported, in most cases, within 15 
minutes of the time of trade execution. Use of RTRS trade reporting 
formats and procedures will become mandatory and the old ``batch'' 
style reporting formats will no longer be compliant with Rules G-12(f) 
and G-14. (The MSRB will discontinue its support of the non-compliant 
trade reporting methodology soon after January 31.) The MSRB will make 
real-time transaction price data available to subscribers to its Real-
Time Transaction Price Service beginning on this date.
2. Statutory Basis The MSRB has adopted the proposed rule change 
pursuant to Section 15B(b)(2)(C) of the Act,\9\ which authorizes the 
MSRB to adopt rules that shall:
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    \9\ 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, 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 
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the public interest.

    The MSRB 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 MSRB has expanded the scope of its public transparency 
reports in several steps, and each step has provided industry 
participants and the public with more information about municipal 
securities transactions. This process has culminated in the RTRS 
system. The implementation plan establishes the date on which dealers 
will be required to report their municipal securities transactions to 
the MSRB in real-time and RTRS will formally begin operating. The MSRB 
encourages the redistribution of the data obtained through RTRS and 
believes that achieving the widest possible dissemination of 
transaction information will help ensure the fairest and most accurate 
pricing of municipal securities transactions.

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 not necessary or appropriate in furtherance 
of the purposes of the Act.

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

    Written comments were neither solicited nor received.

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

    The MSRB 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 MSRB rule under Section

[[Page 68434]]

19(b)(3)(A)(i) of the Act,\10\ and Rule 19b-4(f)(1) thereunder,\11\ 
which renders the proposed rule change effective upon filing with the 
Commission.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4.
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    At any time within 60 days of this filing, the Commission may 
summarily abrogate this proposal 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.\12\
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    \12\ See 15 U.S.C. 78s(b)(3)(C).
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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 proposal is 
consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-MSRB-2004-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-MSRB-2004-07. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 such 
filing also will be available for inspection and copying at the office 
of the MSRB. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
MSRB-2004-07 and should be submitted on or before December 15, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E4-3309 Filed 11-23-04; 8:45 am]
BILLING CODE 8010-01-P