[Federal Register Volume 77, Number 247 (Wednesday, December 26, 2012)]
[Notices]
[Pages 76146-76148]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-31013]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68472; File No. SR-MSRB-2012-08]


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

December 19, 2012.

I. Introduction

    On October 23, 2012, the Municipal Securities Rulemaking Board 
(``MSRB'') filed with the Securities and Exchange Commission 
(``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 consisting of amendments to Rule G-8 (books and 
records); Rule G-14 RTRS Procedures; \3\ Rule G-32 (disclosures in 
connection with primary offerings); Rule G-34 (CUSIP numbers, new 
issue, and market information requirements); and the Electronic 
Municipal Market Access (``EMMA[supreg]'') system facility, to 
streamline the manner in which underwriters, in connection with new 
issues of municipal securities, satisfy certain of their submission 
requirements under Rule G-32. The proposed rule change was published 
for comment in the Federal Register on November 8, 2012.\4\ The 
Commission received no comment letters regarding the proposed rule 
change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ ``RTRS'' refers to the Real-time Transaction Reporting 
System, which is an MSRB facility for collecting and disseminating 
information about transactions in municipal securities.
    \4\ Securities Exchange Act Release No. 68134 (November 1, 
2012), 77 FR 67047 (SR-MSRB-2012-08) (``Notice'').
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II. Description of the Proposed Rule Change

    The MSRB proposes to amend Rules G-32 and G-34 to streamline 
certain

[[Page 76147]]

new issue submission requirements. Rules G-32 and G-34 set forth the 
reporting requirements for new issues of municipal securities. Rule G-
32 requires underwriters to submit certain information \5\ about new 
issues of municipal securities to the MSRB on or prior to the date of 
first execution by completing electronic Form G-32 through EMMA's 
Primary Market Disclosure Service.\6\ Information submitted pursuant to 
Rule G-32 becomes available to the public on the EMMA Web site 
immediately upon submission and typically by the end of the date of 
first execution.\7\ Rule G-34 requires underwriters for most new issues 
to submit comprehensive information \8\ to the New Issue Information 
Dissemination Service (``NIIDS''), operated by the Depository Trust and 
Clearing Corporation (``DTCC''), no later than two hours after the Time 
of Formal Award.\9\ DTCC disseminates this information to its 
subscribers upon submission by underwriters.\10\ The information that 
underwriters must submit to NIIDS under Rule G-34 is generally more 
extensive than the information that underwriters must submit to EMMA 
under Rule G-32 and includes many, but not all of, the same items.\11\
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    \5\ 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.
    \6\ See MSRB Rule G-32(b)(vi)(C)(1). Rule G-32(d)(xi) defines 
``date of first execution'' as ``the date on which the underwriter 
executes 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.''
    \7\ See Notice, supra note 4, 77 FR at 67049.
    \8\ According to the MSRB, this information includes all of the 
information required for dealers to produce a ``when, as and if 
issued'' customer trade confirmation as well as many of the same 
items of information included in Form G-32. The term ``when, as and 
if issued'' refers to 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 
are subject to issuance of the securities. See Notice, supra note 4, 
77 FR at 67048.
    \9\ The ``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.''
    \10\ See Notice, supra note 4, 77 FR at 67048.
    \11\ See Notice, supra note 4, 77 FR at 67048-49. Submissions to 
NIIDS provide a mechanism for underwriters to communicate the Time 
of Formal Award and Time of First Execution to market participants 
that trade in the new issue. See id. at 67048. Rule G-
34(a)(ii)(C)(1)(b) defines ``Time of First Execution'' as ``the time 
the underwriter plans to execute its first transactions in the new 
issue.''
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    For any primary offering of municipal securities that is a new 
issue eligible for submission of information to NIIDS under Rule G-
34(a)(ii)(C), the MSRB proposes to require that the underwriter submit 
all information required under Rule G-32(b)(i)(A) at such times and in 
such manner as required under Rule G-34(a)(ii)(C). The submission of 
information per Rule G-34(a)(ii)(C) in a full and timely manner shall 
be deemed to be in compliance with the submission requirement of Rule 
G-32(b)(i)(A)(1).\12\ In addition, the revised Rule G-32(b)(i)(A)(1)(a) 
would require that any items of information required to be included on 
Form G-32, but for which no corresponding data element is then 
available through NIIDS, be submitted to EMMA at the times and in the 
manner prescribed by Rule G-32(b)(vi) and set forth in the EMMA 
Dataport Manual.\13\
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    \12\ See MSRB Rule G-32(b)(i)(A)(1). The MSRB is also revising 
the EMMA facility to add to the EMMA display and the EMMA primary 
market subscription the Time of First Execution and the Time of 
Formal Award. See Notice, supra note 4, 77 FR at 67049.
    \13\ Any corrections to data submitted pursuant to Rule G-
34(a)(ii)(C) must be made promptly and, to the extent feasible, in 
the manner originally submitted. See MSRB Rule G-32(b)(i)(A)(1)(b).
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    For any primary offering of municipal securities that is not a new 
issue eligible for submission of information to NIIDS under Rule G-
34(a)(ii)(C) or that is exempt from such submission requirement under 
Rule G-34(d), the underwriter will be required to initiate the 
submission of Form G-32 information on or prior to the date of first 
execution and complete the submission at such times and in such manner 
as required under Rule G-32(b)(vi) and set forth in the EMMA Dataport 
Manual.\14\
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    \14\ See MSRB Rule G-32(b)(i)(A)(2).
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    Rule G-34(a)(ii)(C) currently exempts certain types of short-term 
instruments from the NIIDS submission requirement. The MSRB is amending 
Rule G-34(a)(ii)(C) to remove exceptions for notes maturing in less 
than nine months, variable rate instruments, and auction rate products. 
Accordingly, underwriters for these types of issues will now be 
required to announce the Time of Formal Award and the Time of First 
Execution and to use NIIDS to disseminate information about new 
issues.\15\ The MSRB is retaining the exception for commercial paper, 
and underwriters will continue to be able to use other means to 
announce relevant new issue information promptly in a manner reasonably 
designed to reach market participants that may trade the new issue.\16\
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    \15\ See Notice, supra note 4, 77 FR at 67050.
    \16\ See MSRB Rule G-34(a)(ii)(C)-(D).
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    Rule G-34(a)(ii)(C) currently requires underwriters to designate a 
Time of First Execution that is no less than two hours after all 
information has been transmitted to NIIDS. Because the hours counted in 
determining the responsibilities of an underwriter include only the 
hours of 9:00 a.m. and 5:00 p.m. Eastern Time, in the event a dealer 
submits data to NIIDS to make an issue trade eligible between 3:00 p.m. 
and 5:00 p.m. on a trading day, the two-hour dissemination period 
carries through to the first hours of the following day. The MSRB 
proposes to amend Rule G-34(a)(ii)(C)(1)(b)(ii) to permit underwriters 
who submit information to NIIDS between 3:00 p.m. and 5:00 p.m. Eastern 
Time to designate a Time of First Execution as early as 9:00 a.m. 
Eastern Time on the next RTRS Business Day, regardless of whether two 
Business Hours have elapsed.\17\ In addition, Rule G-
34(a)(ii)(C)(1)(b)(ii) would permit underwriters for new issues of 
variable rate instruments with a planned settlement cycle of one day or 
less to designate a Time of First Execution any time after all 
information required by Rule G-34(a)(ii)(C) has been transmitted to 
NIIDS.\18\
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    \17\ See MSRB Rule G-34(a)(ii)(C)(1)(b)(ii)(B). The MSRB is 
revising Rule G-34(a)(ii)(C)(2) to define ``Business Hours'' to 
``include only the hours from 9:00 a.m. to 5:00 p.m. Eastern Time on 
an RTRS Business Day.'' See MSRB Rule G-34(a)(ii)(C)(2)(a). ``RTRS 
Business Day'' shall have the meaning set forth in Rule G-14 RTRS 
Procedures section (d)(ii). See MSRB Rule G-34(a)(ii)(C)(2)(b).
    \18\ See Notice, supra note 4, 77 FR at 67049; and MSRB Rule G-
34(a)(ii)(C)(1)(b)(ii)(A).
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    The MSRB is also amending Rule G-8(a)(xiii)(C) to require 
underwriters to keep records of all documents, notices, and information 
required to be submitted under Rule G-32(b), but only to the extent 
that the information is not included in the information that is 
submitted through NIIDS in satisfaction of the requirements of Rule G-
32(b) and properly maintained pursuant to Rule G-8(a)(xxiii). The 
proposed rule change also includes certain technical changes to Rule G-
14 RTRS Procedures, Rule G-32, and Rule G-34.\19\
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    \19\ The technical amendments to Rule G-14 RTRS Procedures 
clarify the types of securities that are not subject to the RTRS 
reporting requirement that transactions be reported within 15 
minutes of the time of trade and remove language describing auction 
rate securities as having a short ``effective maturity.'' The 
technical amendments to MSRB Rule G-32 include correcting a cross-
reference to Rule 15c2-12 under the Act and a misnumbered paragraph 
containing the definition of the term ``obligated person,'' as well 
as removing certain transitional provisions that were operational 
during the period between the former pre-EMMA submission process and 
the EMMA-based submission process.

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[[Page 76148]]

III. Discussion and Commission Findings

    The Commission has carefully considered the proposed rule change 
and finds that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to the MSRB.\20\ In particular, the proposed rule change is 
consistent with Section 15B(b)(2)(C) of the 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.\21\
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    \20\ In approving the proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \21\ 15 U.S.C. 78o-4(b)(2)(C).
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    The Commission believes that the proposed rule change is designed 
to remove impediments to and perfect the mechanism of a free and open 
market in municipal securities by reducing the submission burden on 
underwriters and improving data quality on EMMA and in the municipal 
securities marketplace. The proposed rule change revises Rule G-32 to 
provide that an underwriter's obligations to submit data about a new 
issue under Rule G-32 would be fulfilled by submitting that data 
through NIIDS as required pursuant to Rule G-34, while data elements 
not included in NIIDS and data for certain types of offerings not 
required to use NIIDS would continue to be subject to existing Rule G-
32 data submission requirements. Allowing underwriters to submit 
information to NIIDS in satisfaction of certain EMMA submission 
requirements should help to streamline the submission process and 
accelerate the availability of Form G-32 data on EMMA. In addition, the 
proposed rule change would require underwriters to announce the Time of 
Formal Award and the Time of First Execution and to use NIIDS to 
disseminate information about new issues of notes maturing in less than 
nine months, variable rate instruments, and auction rate products, 
which will provide market participants and the general public with 
enhanced access to primary market data for a broader scope of new 
issues of municipal securities.
    The proposed rule change would permit underwriters of any issue 
that is made ``trade eligible'' between 3:00 p.m. and 5:00 p.m. Eastern 
Time to set a Time of First Execution for as early as 9:00 a.m. Eastern 
Time on the next RTRS Business Day without having to wait for the two 
Business Hour period to elapse. The Commission notes that dealers would 
still have sixteen hours between 5:00 p.m. Eastern Time and the 
earliest possible Time of Execution to integrate NIIDS data and prepare 
for the underwriter's announced Time of First Execution. The proposed 
rule change adds an exception from this requirement for variable rate 
instruments with a planned settlement cycle of one day or less. 
According to the MSRB, the two-hour advanced notification timeframe is 
not as important for these types of instruments as for other types of 
new issues. The Commission notes, however, that the requirement to 
announce the Time of Formal Award and the Time of First Execution and 
to use NIIDS to disseminate information would apply to these 
instruments.

IV. Conclusion

    For the foregoing reasons, 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 MSRB and, in 
particular, Section 15B(b)(2)(C) \22\ of the Act. The proposal will 
become effective 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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    \22\ 15 U.S.C. 78o-4(b)(2)(C).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\23\ that the proposed rule change (SR-MSRB-2012-08) is approved.
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    \23\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-31013 Filed 12-21-12; 4:15 pm]
BILLING CODE 8011-01-P