[Federal Register Volume 77, Number 217 (Thursday, November 8, 2012)]
[Notices]
[Pages 67047-67052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27266]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68134; File No. SR-MSRB-2012-08]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Proposed Rule Change Consisting of 
Amendments to Streamline New Issue Information Submission Requirements 
Under MSRB Rules G-32 and G-34

November 1, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on October 23, 2012, the Municipal Securities 
Rulemaking Board (``MSRB'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change 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 is filing with the Commission a proposed rule change 
consisting of amendments to Rules G-8, on books and records, G-14 RTRS 
Procedures, G-32, on disclosures in connection with primary offerings, 
G-34, on CUSIP numbers, new issue, and market information requirements, 
and the Electronic Municipal Market Access

[[Page 67048]]

(EMMA[supreg]) \3\ system facility (the ``proposed rule change''). The 
MSRB requested an effective date for the proposed amendments no later 
than May 6, 2013, or such earlier date to be announced by the MSRB in a 
notice published on the MSRB Web site with at least a thirty day 
advance notification prior to the effective date.
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    \3\ EMMA is a registered trademark of the MSRB.
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    The text of the proposed rule change is available on the MSRB's Web 
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2012-Filings.aspx, at the MSRB's principal office, and at the Commission's 
Public Reference Room.

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 proposed rule change. 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
    The proposed rule change amends Rules G-32 and G-34 to allow 
underwriters to satisfy certain of their submission requirements under 
Rule G-32 in connection with new issues of municipal securities by 
their submission of data, pursuant to Rule G-34, to the New Issue 
Information Dissemination Service (``NIIDS'') operated by the 
Depository Trust and Clearing Corporation (``DTCC''). In addition, the 
proposed rule change revises deadlines for the submission of data to 
NIIDS, removes certain exceptions from the NIIDS submission 
requirements under Rule G-34 for certain short term instruments, 
modifies the EMMA system to include certain elements of the NIIDS data 
on the EMMA Web site, and eliminates language describing auction rate 
securities as having a short ``effective maturity,'' as further 
described below under ``Summary of Proposed Rule Change'' and under 
``Discussion of Comments.''
Background
    Rule G-32 requires underwriters to submit selected information 
about most new issues of municipal securities to the MSRB by completing 
electronic Form G-32 through EMMA's Primary Market Disclosure Service. 
This information includes, among other items, the issuer name and issue 
description for the new issue and, for each maturity of the new issue, 
the CUSIP numbers, principal amounts and initial offering prices or 
yields. Separately, Rule G-34 requires underwriters for most new issues 
to submit comprehensive information to NIIDS. Information required to 
be submitted to NIIDS generally includes all of the information 
required for dealers to produce a ``when, as and if issued'' \4\ 
customer trade confirmation and also includes many of the same items of 
information included in Form G-32.
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    \4\ The term, ``when, as and if issued'' is used to describe the 
time period in the life of a new issue of municipal securities from 
the original date of the sale by the issuer to the delivery of the 
securities to, and payment by, the underwriter. Sales made during 
the ``when, as and if issued'' period (also called the ``when-
issued' period'') are subject to issuance of the securities.
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    New Issue EMMA Submission Requirements Under Rule G-32. EMMA is an 
information facility of the MSRB for receiving electronic submissions 
of official statements, initial offering prices and other information 
about new issues as well as on-going municipal securities disclosure 
and other key documents and related information. EMMA makes such 
documents and information, together with trade price and interest rate 
information, available to the public at no charge on an Internet Web 
site or by paid subscription. The submission of data under Rule G-32 to 
EMMA's Primary Market Disclosure Service in connection with new issues 
is required to be commenced by no later than the end of the day of 
first execution of transactions in the offered municipal securities.\5\ 
The submission of documents relating to issues of municipal securities, 
including official statements or preliminary official statements (if 
applicable), and of certain additional items of information, is subject 
to other submission deadlines as outlined in Rule G-32.\6\
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    \5\ Under Rule G-32(b)(vi)(C)(1) and Section 2.6.2 of the EMMA 
Dataport Manual (Information by the Date of First Execution of 
Transactions), underwriters are required to initiate the Form G-32 
submission process by no later than the date of first execution of 
transactions in securities sold in the offering by submitting 
certain issue-specific information about the new issue. ``Date of 
first execution'' is defined in Rule G-32(d)(xi) as: ``the date on 
which the underwriter executives its first transactions with a 
customer or another broker, dealer or municipal securities dealer in 
any security offered in a primary offering; provided that, for 
offerings subject to Rule G-34(a)(ii)(C), `date of first execution' 
shall mean the date corresponding to the Time of First Execution as 
defined in Rule G-34(a)(ii)(C)(1)(b); further provided that, solely 
for purposes of this rule, the date of first execution shall be 
deemed to occur by no later than the closing date.''
    \6\ Securities 2.6.4 and 2.6.5 of the EMMA Dataport Manual set 
out the basic timeframes for submitting documents and information to 
EMMA in connection with a new issue.
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    New Issue NIIDS Submission Requirements Under Rule G-34. NIIDS is a 
centralized system for collecting from underwriters and disseminating 
to market participants standardized electronic information describing 
new issue securities. It was developed to ensure that all market 
participants have access to information necessary for processing 
transactions once the underwriter executes its first transactions in 
the new issue. The information submitted by underwriters to NIIDS, 
required to be completed by no later than two hours after Time of 
Formal Award \7\ for most new issues of municipal securities,\8\ is 
disseminated in real time to DTCC participants and other subscribers, 
such as information vendors. Submissions to NIIDS also provide a 
mechanism for underwriters to communicate the Time of Formal Award and 
Time of First Execution \9\ to market participants that may trade in 
the new issue to promote orderly trade execution and processing on the 
first day of trading in a new issue. Consistent communication of these 
events ensures that all market participants have sufficient data to 
process and time to prepare pending trades in new issues for execution, 
real-time trade reporting \10\

[[Page 67049]]

and sending of when-issued customer confirmations.
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    \7\ ``Time of Formal Award'' is defined in Rule G-
34(a)(ii)(C)(1)(a) as: ``for competitive issues, the later of the 
time the issuer announces the award or the time the issuer notifies 
the underwriter of the award, and, for negotiated issues, the later 
of the time the contract to purchase the securities from the issuer 
is executed or the time the issuer notifies the underwriter of its 
execution. If the underwriter and issuer have agreed in advance on a 
Time of Formal Award, that time may be submitted to the new issue 
information dissemination system in advance of the actual Time of 
Formal Award.''
    \8\ Rule G-34(a)(ii)(C) currently provides exceptions to the 
submission requirements for certain short-term instruments, 
including variable rate instruments, auction rate products and 
commercial paper. In addition, this requirement does not apply to 
new issues that do not meet the eligibility criteria for CUSIP 
number assignments or that consist of municipal fund securities 
(such as interests in 529 college savings plans) under the general 
exemption provided in Rule G-34(d).
    \9\ ``Time of First Execution'' is defined in Rule G-
34(a)(ii)(C)(1)(b) as: ``the time the underwriter plans to execute 
its first transaction [sic] in the new issue. The underwriter shall 
designate a Time of First Execution that is no less than two hours 
after all information required by paragraph (a)(ii)(C) has been 
transmitted to the new issue information dissemination system.''
    \10\ ``Real-time trade reporting'' refers to the reporting of 
certain information about each purchase and sale transaction 
effected in municipal securities to the MSRB's Real-Time Transaction 
Reporting System (``RTRS''), as prescribed by Rule G-14, Rule G-14 
RTRS Procedures and the RTRS Users Manual.'
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    Planned Integration of EMMA and NIIDS New Issue Submission 
Requirements. The MSRB launched EMMA as a pilot on March 31, 2008.\11\ 
On September 30, 2008, amendments to Rule G-34 became effective that 
instituted the requirement for underwriters to provide new issue 
information to NIIDS.\12\ During the early stages of planning for EMMA, 
the MSRB had planned on integrating into EMMA's Primary Market 
Disclosure Service the NIIDS data submitted by underwriters under Rule 
G-34 for the purpose of also fulfilling the data submission 
requirements under Rule G-32 and making such information available to 
the public through the EMMA Web site. Due to divergent development 
schedules and limited opportunities to ensure effective 
interoperability between the two systems, the Primary Market Disclosure 
Service was launched on June 1, 2009 requiring a separate submission of 
new issue data to EMMA through Form G-32, although at that time the 
MSRB continued to plan for future integration of the submission 
processes under Rules G-32 and G-34.\13\
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    \11\ See Release No. 34-57577 (March 28, 2008), 73 FR 18022 
(April 2, 2008) (File No. SR-MSRB-2007-06) (November 15, 2007).
    \12\ See Release No. 34-57750 (May 7 [sic], 2008), 73 FR 25815 
(May 7, 2008) (File No. SR-MSRB-2007-08) (November 27, 2007).
    \13\ See MSRB Notice 2009-07 (March 23, 2009), in which the MSRB 
noted that it would advise market participants of any future 
development of a functionality providing for the use of NIIDS data 
to fulfill Rule G-32 information submission requirements.
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    The MSRB believes there would be significant benefits in 
integrating the NIIDS data into the EMMA submission process. While the 
information required to be submitted under Rule G-32 is less extensive 
than the information required for a NIIDS submission pursuant to Rule 
G-34, re-keying information under both Rules G-32 and G-34 is time 
consuming and this duplication of effort may increase the possibility 
of error. In addition to reducing the submission burden on 
underwriters, elimination of this duplicative data entry would result 
in improved data quality on EMMA and throughout the marketplace. It 
would allow both underwriters and enforcement agencies to concentrate 
their compliance activities on ensuring exacting data submissions 
through this single pipeline through which data would flow uniformly to 
EMMA as well as to other market data vendors receiving the NIIDS 
subscription feed.
    The integration of the NIIDS data into the EMMA submission process 
also would accelerate the availability of Form G-32 data on EMMA by 
displaying such information in real time upon receipt from NIIDS by no 
later than two hours after the Time of Formal Award as provided under 
Rule G-34, rather than by the close of business on the date of first 
execution as currently provided under Rule G-32. In particular, use of 
the NIIDS data to populate EMMA will allow for more rapid intra-day, 
rather than end of day, dissemination of the maturity schedule, 
interest rates and initial offering prices \14\ for new issues within 
two hours after the Time of Formal Award. Furthermore, additional NIIDS 
data elements not currently available through EMMA, such as the Time of 
Formal Award and Time of First Execution as announced by the 
underwriter, would be displayed on EMMA. To enhance transparency for a 
broader scope of new issues of municipal securities, the MSRB is also 
proposing to eliminate exceptions under Rule G-34 for submitting data 
for certain new issues to NIIDS.
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    \14\ Initial offering prices or yields currently must be, and 
would continue to be, disclosed for all maturities, including those 
otherwise designated as ``not reoffered,'' through both EMMA and 
NIIDS. See Release No. 34-67908 (September 21, 2012), 77 FR 59427 
(September 27, 2012) (File No. SR-MSRB-2012-06) (June 28, 2012).
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Summary of Proposed Rule Change
    The proposed rule change revises Rule G-32 to provide that an 
underwriter's obligations to submit data about a new issue under that 
rule would be fulfilled through submission of such data through NIIDS 
as required pursuant to Rule G-34. Data for certain types of offerings 
not required to use NIIDS (as described below) would continue to be 
subject to existing Rule G-32 data submission requirements. In 
addition, certain data elements that are not included in NIIDS, such as 
underwriting spread (if not included in the official statement), the 
existence of a continuing disclosure undertaking and the timing for 
issuer submission of annual financial information, would be required to 
be submitted to EMMA pursuant to existing timeframes set forth in Rule 
G-32 and the EMMA Dataport Manual.
    Rule G-34 currently requires that information about most new issues 
of municipal securities be submitted to NIIDS by no later than two 
hours following the Time of Formal Award of a new issue. Rule G-34 
currently exempts certain types of short-term instruments (including 
variable rate instruments, auction rate products, and commercial 
paper), as well as municipal fund securities (such as interests in 529 
college savings plans) and issues ineligible for CUSIP number 
assignment. The proposed rule change revises Rule G-34 to remove the 
exception for underwriters to submit to NIIDS information about short-
term instruments such as variable rate instruments, auction rate 
products and notes maturing in less than nine months, but would retain 
this exception for commercial paper issues, municipal fund securities 
and issues ineligible for CUSIP number assignment. The proposed rule 
change adds a narrow exception from the requirement to provide a 
minimum of two hours advance notice of the planned Time of First 
Execution for offerings of variable rate instruments with a planned 
settlement cycle of one day or less.
    The proposed rule change revises the EMMA facility by adding to the 
EMMA display and to the EMMA primary market subscription the Time of 
First Execution and Time of Formal Award.
    In addition, the proposed rule change includes amendments to Rule 
G-8 to conform recordkeeping requirements to amended Rules G-32 and G-
34, and amendments to the Rule G-14 RTRS Procedures and Rules G-32 and 
G-34 to make certain non-substantive technical changes. The technical 
amendments to Rule G-32 correct a cross-reference to Exchange Act Rule 
15c2-12, correct a mis-numbered paragraph defining the term ``obligated 
person'' and eliminate section (e), which operated as a transitional 
provision in June 2009 from the former pre-EMMA official statement 
submission process under former Rule G-36 to the EMMA-based submission 
process under current Rule G-32. The technical amendments to Rule G-34 
improve the organization of certain provisions of the rule.
    Finally, the technical amendments to section (a)(ii)(B) of the Rule 
G-14 RTRS Procedures under Rule G-14 revise language in such RTRS 
Procedures that is parallel to the language regarding short-term 
instruments that is being removed from Rule G-34 by the amendments 
described above. Such amendments would more clearly describe the types 
of securities to which the end-of-day RTRS reporting exception for 
short-term instruments applies and also eliminate language describing 
auction rate securities as having a short ``effective maturity.'' The 
MSRB believes that auction rate securities should not be characterized 
as having an effective short-term maturity

[[Page 67050]]

and has previously noted that, unlike other short-term municipal 
securities with long-term maturity dates and short-term interest rate 
reset periods (such as variable rate demand obligations), auction rate 
securities generally do not have ``put'' features or liquidity 
facilities that allow holders to tender their securities back to an 
issuer-appointed representative on a periodic basis.\15\ Thus, the MSRB 
is eliminating the use of the term ``effective maturity'' in the 
context of auction rate securities in order to avoid any potential 
implication that holders of auction rate securities have assurances of 
liquidity on a short-term basis.
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    \15\ See MSRB Notice 2008-09 (February 19, 2008), in which the 
MSRB published an alert regarding investor protection concerns 
arising in the market for auction rate securities after widespread 
auction failures began to occur at the beginning of 2008. The MSRB 
also published educational information regarding this key difference 
in the EMMA Education Center upon launch of the EMMA pilot on March 
31, 2008, which states: ``An important distinction between auction 
rate securities and variable rate demand obligations is that 
investors in auction rate securities do not have a `put' right. 
Thus, there is no assurance that the investor will be able to sell 
its holdings during an auction. Instead, investors are dependent on 
the success of the auction process. Among many other factors, the 
pool of purchase bids that may be entered can vary widely from 
auction to auction, and bids entered by broker-dealers, banks and 
other market professionals that have the effect of supporting market 
liquidity, if permitted, generally are not required under the legal 
documents and therefore investors cannot be assured that such bids 
will be entered in any particular auction. See http://emma.msrb.org/EducationCenter/WhatAreBonds.aspx. The MSRB thereafter launched its 
Short-term Obligation Rate Transparency (``SHORT'') system on 
January 30, 2009 pursuant to which certain key information regarding 
periodic auctions for auction rate securities is made available to 
the public through EMMA.
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Effective Date of Proposed Rule Change
    The MSRB requested an effective date for the proposed amendments no 
later than May 6, 2013, or such earlier date to be announced by the 
MSRB in a notice published on the MSRB Web site with at least a thirty 
day advance notification prior to the effective date.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Exchange Act, which provides that the 
MSRB'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 and 
municipal financial products, to remove impediments to and perfect 
the mechanism of a free and open market in municipal securities and 
municipal financial products, and, in general, to protect investors, 
municipal entities, obligated persons, and the public interest.

    The proposed rule change is consistent with Section 15B(b)(2)(C) of 
the Exchange Act. There will be significant benefits in integrating the 
NIIDS data into the EMMA submission process that will assist in 
removing impediments to and perfecting the mechanism of a free and open 
market, and that will also improve protections to all market 
participants. The current requirement to re-key significant amounts of 
information under both Rules G-32 and G-34 is time consuming and this 
duplication of effort may increase the possibility of error. In 
addition to reducing the submission burden on underwriters, elimination 
of this duplicative data entry will result in improved data quality on 
EMMA and throughout the marketplace. It will allow both underwriters 
and enforcement agencies to concentrate their compliance activities on 
ensuring exacting data submissions through this single pipeline through 
which data would flow uniformly to EMMA as well as to other market data 
vendors receiving the NIIDS subscription feed.
    The integration of the NIIDS data into the EMMA submission process 
will also accelerate the availability of Form G-32 data on EMMA by 
displaying such information in real time upon receipt from NIIDS, which 
will occur by no later than two hours after the Time of Formal Award as 
provided under Rule G-34, rather than by the close of business on the 
date of first execution as currently provided under Rule G-32. 
Furthermore, additional NIIDS data elements not currently available 
through EMMA, such as the Time of Formal Award and Time of First 
Execution as announced by the underwriter, will be displayed on EMMA.
    Finally, the proposed rule change eliminates exceptions under Rule 
G-34 for submitting data for certain new issues to NIIDS. Thus, 
enhanced real-time access to primary market data would become available 
to the marketplace, both through NIIDS data disseminated by DTCC to 
information vendors and EMMA data disseminated by the MSRB to market 
participants and the general public, for a broader scope of new issues 
of municipal securities.

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

    The MSRB does not believe that the proposed rule change would 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Exchange Act, since it would apply 
equally to all dealers that serve as underwriters of new issues of 
municipal securities. The enhanced and more timely information flow 
resulting from the proposed rule change would make such information 
available to all persons on an equal and non-discriminatory basis.
    The marketplace and the general public would realize the 
substantial benefits of more prompt, more complete and more accurate 
information about new issue municipal securities, resulting in greater 
marketplace efficiency that enhances liquidity and the quality of 
pricing. In addition, the proposed rule change would reduce the burden 
on dealers that serve as underwriters for new issues of municipal 
securities. Such dealers would benefit from the reduced burden of 
significantly diminished levels of duplicative data entry into two 
separate information systems--including the burden of entering such 
data and of undertaking appropriate quality control--with only a 
minimal, one-time burden of reviewing and, if necessary, making minor 
modifications to their internal policies and procedures with respect to 
data submissions under MSRB rules. In addition to the reduced burden to 
dealers resulting from the more efficient use of dealer resources to 
ensure the accuracy of data submissions through this single pipeline, 
the resultant improvement in data quality upon initial submission would 
reduce the burden of making corrections at a later time when errors are 
detected by market participants and would reduce the incidence of 
potential problems with secondary market activity that can arise from 
inaccuracies in the indicative data used by market participants to 
price and process transactions.
    Some underwriters of new issues bearing short-term interest rates 
previously exempted from the NIIDS submission requirements under Rule 
G-34 would be required to modify their new issue information 
dissemination processes to use NIIDS for such dissemination, rather 
than the currently permissible use of other means of announcing 
relevant new issue information promptly in a manner reasonably designed 
to reach market participants that may trade the new issue. Such 
underwriters, however, have not previously been exempted from the EMMA 
submission requirements under Rule G-32, and the proposed rule change 
would provide for much of the data currently required to be provided 
through EMMA under Rule G-32 to instead be provided through NIIDS under 
Rule G-34. Thus, such underwriters would realize a reduced burden of 
compliance with Rule G-32

[[Page 67051]]

while facing a potential incremental change in the burden under Rule G-
34. Whether such incremental change in burden under Rule G-34 is an 
increase or decrease would depend on whether, and to what extent, using 
NIIDS to disseminate new issue information is more or less burdensome 
than the alternative means currently used by such underwriters to 
comply with Rule G-34 and the procedures and processes they currently 
maintained for using two or more separate data submission processes for 
new issues rather than a single process through NIIDS. If and to the 
extent that such balance results in a net burden rather than a net 
benefit, the bulk of such net burden likely would occur as up-front 
costs of modifying procedures and likely would be minimal on an ongoing 
basis.
    On balance, the MSRB believes that the benefits of the proposed 
rule change greatly exceed any potential increased burden resulting 
therefrom.

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

    On April 10, 2012, the MSRB requested comment on a proposal to 
streamline new issue information submission requirements under Rules G-
32 and G-34 by allowing underwriters to satisfy certain of their 
submission requirements under Rule G-32 by their submission of data to 
NIIDS pursuant to Rule G-34.\16\ Specifically, the MSRB sought comment 
on whether: (i) The timeframe under Rule G-32 for submission of data 
for issues not subject to the NIIDS requirement or of data elements not 
included in NIIDS should be accelerated to coincide with the Time of 
First Execution, which typically would be within two-to-four hours 
after the Time of Formal Award; \17\ (ii) removing the exception in 
NIIDS for certain short-term instruments would present compliance 
challenges; (iii) additional items of information available through 
NIIDS that are not currently available through EMMA should be added to 
the EMMA display; (iv) to extend the business day for purposes of 
determining timeframes for compliance with Rule G-34 deadlines; \18\ or 
(v) to shorten the time after the formal award occurs for first 
executions of transactions and other related timeframes under Rule G-
34. The MSRB received comment letters from the Securities Industry and 
Financial Markets Association (``SIFMA'') and TD Securities (USA) LLC 
(``TD'').
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    \16\ See MSRB Notice 2012-19 (April 10, 2012).
    \17\ Rule G-34 generally requires that underwriters submit 
required data to NIIDS within two hours of the Time of Formal Award, 
and that such NIIDS data be disseminated to the marketplace for at 
least two hours prior to the Time of First Execution.
    \18\ Rule G-34 currently provides that only the hours between 
9:00 a.m. and 5:00 p.m. Eastern Time on a Business Day for the 
MSRB's Real-time Transaction Reporting System (RTRS) are used for 
purposes of the timeframes set out in the rule.
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Discussion of Comments
    SIFMA stated that it ``believe[s] this move towards straight-
through processing will be beneficial for market participants by 
reducing transaction costs and increasing data integrity.'' TD stated 
that it ``welcome[d] the effort to have one centralized system and one 
pass in establishing the information necessary to satisfy the 
regulations.'' The MSRB discusses additional comments from these 
commenters below.
    Accelerating the deadline for completing submission of Form G-32 
data not eligible to be submitted to NIIDS. While no written comments 
were received on this question, the MSRB understands from conversations 
with various industry participants that accelerating the submission 
requirements for Form G-32 data not eligible to be submitted to NIIDS 
may present compliance challenges for some industry participants, 
particularly those that make manual submissions of information to NIIDS 
and Form G-32. Thus, the MSRB determined not to accelerate such 
timeframes but instead retain the existing timeframe for submission of 
those Form G-32 data elements not able to be populated using NIIDS 
data. Similarly, for those securities that are not eligible for 
submission to NIIDS and therefore would continue to be submitted 
through Form G-32, the MSRB is retaining all existing timeframes for 
submission.
    Removing the exception for certain short term instruments from the 
data submission requirements under Rule G-34. SIFMA noted that while 
eliminating the exception under Rule G-34 for short term notes with 
maturities of nine months or less would not be a challenge, eliminating 
the exception for variable rate demand obligations (``VRDOs'') would 
present operational challenges. SIFMA noted that daily and weekly VRDOs 
are usually priced, allocated, ticketed and settled on the same or next 
day. Removing the exception for VRDOs under Rule G-34 would subject 
VRDOs to deadlines for both data submission and Time of First Execution 
under Rule G-34. As SIFMA noted, issuers and underwriters already 
typically agree in advance to a Time of Formal Award to avoid DTCC 
disincentive fees for short settlements, which means that underwriters 
generally are able to comply with the data submission requirements for 
trade eligibility under Rule G-34. Based on additional feedback from 
SIFMA, the larger concern results from the fact that purchasers of 
VRDOs require same day cash settlement within a short period of time 
following time of pricing and formal award and, as a result, the 
mandatory minimum two hour time period between Time of Formal Award and 
Time of First Execution required by Rule G-34 would present operational 
challenges to ensure same day cash settlement.
    The purpose of the required two hour advanced notification 
timeframe between disseminating NIIDS data and the announced Time of 
First Execution is to ensure that dealers with pending trades in new 
issues are able to receive and enter into trade processing systems 
NIIDS data before the first transactions in the new issue are executed. 
For VRDOs, there typically are not multiple dealers with pending 
transactions in new issues, so the two hour advanced notification 
timeframe is not as important as for other types of new issues with a 
broad distribution. However, the MSRB believes that it is important 
that as many types of securities as possible benefit from the 
centralized data collection and dissemination of information provided 
by NIIDS. Accordingly, the proposed rule change removes the exception 
for short-term instruments (including VRDOs and auction rate securities 
but not including commercial paper) from Rule G-34 with respect to the 
requirement to submit information to NIIDS and announce the Time of 
Formal Award and Time of First Execution, which can be done within the 
existing timeframes of typical VRDO offerings. However, the proposed 
rule change also adds a narrow exception from the requirement to 
provide a minimum two hours of advance notice of the planned Time of 
First Execution for offerings of variable rate instruments with a 
planned settlement cycle of one day or less.
    Dissemination of Additional NIIDS information on EMMA. SIFMA 
supported the dissemination of the Time of First Execution and Time of 
Formal Award on EMMA but suggested that the addition of more NIIDS data 
to EMMA be carefully considered to avoid obscuring important data. 
SIFMA suggested that those that require additional NIIDS data consider 
a subscription feed for such data. The MSRB agrees that careful 
selection of NIIDs data is necessary and will consider this issue as it 
reviews the full range of NIIDS data for potential

[[Page 67052]]

inclusion on EMMA at a future date. The MSRB determined that the only 
new data elements from NIIDS to be added to the EMMA display and to the 
EMMA primary market subscription product at this time are Time of First 
Execution and Time of Formal Award.
    Extending Rule G-34 Business Day hours. SIFMA said that, while 
expanding the 9:00 a.m. to 5:00 p.m. Eastern timeframe for the 
deadlines in Rule G-34 may not be problematic for dealers operating in 
the Eastern Time zone, expanding these hours could cause significant 
staffing challenges to those dealers operating in other time zones. 
SIFMA suggested the MSRB not alter the existing 9:00 a.m. to 5:00 p.m. 
Eastern timeframe in Rule G-34. The MSRB decided against changing the 
Rule G-34 Business Day hours.
    Shortening advanced notification timeframe between the submission 
of all data to NIIDS and the Time of First Execution. TD said that the 
two hour window between the time of disseminating NIIDS data and first 
executions was ``tough enough'' especially for smaller shops that were 
limited in staff, and that shortening the time period would create 
undue pressure and add little to transparency. SIFMA stated that, 
because most dealers receive the NIIDS data from one or more 
information providers, the two hour dissemination period is frequently 
needed to integrate the data into their own systems, irrespective of 
the type of underwriting. However, SIFMA suggested that, where a dealer 
has submitted data to NIIDS to make an issue ``trade eligible'' between 
3:00 p.m. and 5:00 p.m. on a trading day, Rule G-34's current carry-
forward of the two hour dissemination period through to the first hours 
of the following day may not be necessary because the dealer has been 
able to disseminate and integrate the data through information 
providers overnight. SIFMA therefore suggested that underwriters of any 
issue that is made ``trade eligible'' between 3:00 p.m. and 5:00 p.m. 
Eastern Time should be permitted to elect to waive the two business 
hour dissemination period and set the Time of First Execution to be 
9:00 a.m. Eastern Time the following morning.\19\ SIFMA noted that this 
option would enable dealers to reduce the risk of carrying these 
securities.
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    \19\ Currently, an underwriter disseminating NIIDS data at, for 
example, 4:00 p.m. Eastern Time would not be able to set a Time of 
First Execution for earlier than 10:00 a.m. Eastern Time the 
following business day since the two hour advanced notification 
timeframe must occur between the hours of 9:00 a.m. to 5:00 p.m. 
Eastern Time.
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    Recognizing these operational challenges, the MSRB decided against 
shortening the required two hour minimum period between the time an 
underwriter disseminates NIIDS information and the Time of First 
Execution that can be set by an underwriter. However, the MSRB decided 
that underwriters setting a Time of First Execution for the business 
day following the day NIIDS data is disseminated should be able to set 
a Time of First Execution for the following day as early as 9:00 a.m. 
Eastern Time without having to wait until the full two-hour period has 
elapsed. Acknowledging that dealers would have sixteen hours between 
5:00 p.m. Eastern Time and the earliest possible Time of First 
Execution at 9:00 a.m. Eastern Time to integrate disseminated NIIDS 
data and prepare for the underwriter's announced Time of First 
Execution, the MSRB believes that it would be appropriate that 
underwriters wanting to set a Time of First Execution as early as 9:00 
a.m. Eastern Time should be able to do so.

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

    Within 45 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 or disapprove 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 Exchange 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 email to [email protected]. Please include 
File Number SR-MSRB-2012-08 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.
All submissions should refer to File Number SR-MSRB-2012-08. This file 
number should be included on the subject line if email 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 Web site viewing and 
printing in the Commission's Public Reference Room on official business 
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 
filing also will be available for inspection and copying at the 
principal offices 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-2012-08, and should be submitted on or before 
November 29, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27266 Filed 11-7-12; 8:45 am]
BILLING CODE 8011-01-P