[Federal Register Volume 89, Number 82 (Friday, April 26, 2024)]
[Notices]
[Pages 32485-32491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08943]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100003; File No. SR-MSRB-2024-01]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove a Proposed Rule Change Consisting of Proposed Rule Change To 
Amend MSRB Rule G-14 To Shorten the Timeframe for Reporting Trades in 
Municipal Securities to the MSRB

April 22, 2024.

I. Introduction

    On January 12, 2024, the Municipal Securities Rulemaking Board 
(``MSRB'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to (1) amend MSRB Rule G-14 
(``Rule G-14''), on reports of sales or purchases, to (i) shorten the 
amount of time within which brokers, dealers, and municipal securities 
dealers (collectively, ``dealers,'' and each individually, a 
``dealer'') must report most transactions to the MSRB; and (ii) require 
dealers to report certain transactions with a new trade indicator, and 
make certain clarifying amendments, and (2) make conforming amendments 
to MSRB Rule G-12, on uniform practice (``Rule G-12''), and the MSRB's 
Real-Time Transaction Reporting System (``RTRS'') Information Facility 
(``IF-1'') to reflect the shortened reporting timeframe (collectively, 
the ``proposed rule change'').\3\ The proposed rule change was 
published for comment in the Federal Register on January 26, 2024.\4\ 
The Commission received comments in response to the proposed rule 
change.\5\ This order institutes proceedings under Section 19(b)(2)(B) 
of the Act \6\ to determine whether to approve or disapprove the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-99402 (Jan. 19, 
2024), 89 FR 5384 (Jan. 26, 2024) (``Notice'').
    \4\ Notice, 89 FR at 5384.
    \5\ Comment letters received by the Commission are available on 
our website at https://www.sec.gov/comments/sr-msrb-2024-01/srmsrb202401.htm.
    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change

    Rule G-14 on reports of sales or purchases requires dealers to 
report their transactions to RTRS within 15 minutes of the Time of 
Trade,\7\ absent an exception,\8\ in accordance with Rule G-14, the 
Rule G-14 RTRS Procedures, and the RTRS Users Manual.\9\ Since the 
current 15-minute requirement went into effect in 2005, the fixed 
income markets have changed dramatically, including a significant 
increase in the use of electronic trading platforms or other electronic 
communication protocols to facilitate the execution of transactions. As 
described in more detail in the Notice, the proposed rule change is 
intended to bring about greater market transparency through more timely 
disclosure and dissemination of information to market participants and 
market-supporting vendors so that the information better reflects 
current market conditions on a real-time basis, while carefully 
balancing the considerations raised by commenters throughout the 
rulemaking process.\10\ Additionally, the proposed rule change would 
also make certain conforming technical changes to Rule G-12(f)(i) and 
IF-1. The MSRB has stated that it will review the available trade 
reporting information and data arising from implementation of the 
changes to trade reporting introduced by the proposed rule change, 
including but not limited to the two exceptions to the one-minute 
reporting requirement,\11\ to inform any further potential changes by 
the MSRB, through future rulemaking, to the trade reporting 
requirements due to increasing marketplace and technology efficiencies, 
process improvements, continuing or new barriers to accelerated 
reporting, unanticipated market impacts, or other factors.\12\
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    \7\ Rule G-14 RTRS Procedures Section (d)(iii) defines ``Time of 
Trade'' as the time at which a contract is formed for a sale or 
purchase of municipal securities at a set quantity and set price.
    \8\ See Notice, 89 FR at 5384 n.5 (describing transactions 
currently exempt from the reporting requirements under Rule G-
14(b)(v)).
    \9\ The RTRS Users Manual is available at https://www.msrb.org/RTRS-Users-Manual.
    \10\ Id.
    \11\ Id.
    \12\ Id.
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A. New Baseline Reporting Requirement: One Minute After the Time of 
Trade

    The proposed amendments to Rule G-14 RTRS Procedures Section 
(a)(ii) generally would provide that transactions effected with a Time 
of Trade during the hours of an RTRS Business Day \13\ must be reported 
to an RTRS Portal \14\ ``as soon as practicable, but no later than one 
minute'' (rather than within the current 15-minute standard) after the 
Time of Trade, subject to several existing reporting exceptions, which 
would be retained in the amended rule,\15\ and two new intra-day 
reporting exceptions relating to dealers with limited trading activity 
and trades with a manual component that would be added by the proposed 
rule change.\16\ Except for those trades that would qualify for a 
reporting exception, all trades currently required to be reported 
within 15 minutes after the Time of Trade would, under the proposed 
rule change, be required to be reported no later than one minute after 
the Time of Trade.
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    \13\ Rule G-14 RTRS Procedures Section (d)(ii) defines ``RTRS 
Business Day'' as 7:30 a.m. to 6:30 p.m., Eastern Time, Monday 
through Friday, unless otherwise announced by the MSRB.
    \14\ See Notice, 89 at 5385 n.13 (discussing the various 
portals).
    \15\ See Notice, 89 FR at 5385 n.14 (describing the existing 
exceptions).
    \16\ The two new intra-day reporting exceptions, consisting of 
trades by dealers with limited trading activity and trades with a 
manual component, would be designated as Rule G-14 RTRS Procedures 
Sections (a)(ii)(C)(1) and (2), respectively. See Notice, 89 FR at 
5385 n.15.
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i. New Requirement To Report Trades ``as Soon as Practicable''
    Section (a)(ii) of the proposed amendment to Rule G-14 RTRS 
Procedures adds a new requirement that, absent an exception, trades 
must be reported as soon as practicable (but no later than one minute 
after the Time of Trade).\17\ This ``as soon as practicable'' 
requirement would also apply to trades subject to longer trade 
reporting deadlines under the two new exceptions for dealers with 
limited trading activity pursuant to Rule G-14 RTRS Procedures Section 
(a)(ii)(C)(1) and Supplementary Material .01, or trades with a manual 
component pursuant to Rule G-14 RTRS Procedures Section (a)(ii)(C)(2) 
and Supplementary Material .02.\18\ Although Rule G-14 RTRS Procedures 
do not currently explicitly prohibit a dealer from waiting until the 
existing 15-minute deadline to report a trade notwithstanding the fact 
that the dealer could reasonably have reported such

[[Page 32486]]

trade more rapidly, the MSRB notes that under the proposed rule change 
a dealer could not simply await the deadline to report a trade if it 
were practicable to report such trade more rapidly.\19\
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    \17\ Notice, 89 FR at 5386.
    \18\ Id.
    \19\ Id.
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    As provided in more detail in the Notice, proposed Supplementary 
Material .03 would provide guidance relating to policies and procedures 
for complying with the ``as soon as practicable'' reporting 
requirement.\20\ The MSRB noted that dealers must not purposely 
withhold trade reports, for example, by programming their systems to 
delay reporting until the last permissible minute or by otherwise 
delaying reports to a time just before the deadline if it would have 
been practicable to report such trades more rapidly.\21\ For trades 
with a manual component, and consistent with Supplementary Material 
.03(b) of FINRA Rule 6730, the MSRB recognized that the trade reporting 
process may not be completed as quickly as, for example, where an 
automated trade reporting system is used.\22\ The MSRB explained that 
it expected that the regulatory authorities that examine dealers and 
enforce compliance with this requirement would take into consideration 
the manual nature of the dealer's trade reporting process in 
determining whether the dealer's policies and procedures are reasonably 
designed to report the trade ``as soon as practicable'' after 
execution.\23\
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    \20\ Id. Where a dealer has reasonably designed policies, 
procedures and systems in place, the dealer generally would not be 
viewed as violating the ``as soon as practicable'' requirement 
because of delays in trade reporting due to extrinsic factors that 
are not reasonably predictable and where the dealer does not intend 
to delay the reporting of the trade (for example, due to a systems 
outage).
    \21\ Id.
    \22\ Id.
    \23\ Id.
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ii. Time of Trade Discussion
    The ``Time of Trade'' is the time at which a contract is formed for 
a sale or purchase of municipal securities at a set quantity and set 
price.\24\ For transaction reporting purposes, the Time of Trade is the 
same as the time that a trade is ``executed'' and, generally, is 
consistent with the ``time of execution'' for recordkeeping 
purposes.\25\
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    \24\ See current Rule G-14 RTRS Procedures Section (d)(iii).
    \25\ See Notice, 89 FR at 5386 for a discussion on time of 
execution and note 22 for additional guidance material on the time 
of execution.
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iii. Valid Contract Discussion
    In general, to form a valid contract, there must be at least an 
offer and acceptance of that offer. As a result, the MSRB noted that 
dealers should consider the point in time at which an offer to buy or 
sell municipal securities was met with an acceptance of that offer. 
This ``meeting of the minds,'' \26\ cannot occur before the final 
material terms, such as the exact security, price and quantity, have 
been agreed to and such terms are known by the parties to the 
transaction.\27\ The MSRB further explained that dealers should be 
clear in their communications regarding the final material terms of the 
trade and how such terms would be conveyed between the parties \28\ to 
ensure that such a valid trade contract has been formed.\29\
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    \26\ See generally FINRA Regulatory Notice 16-30 (Trade 
Reporting and Compliance Engine (TRACE): FINRA Reminds Firms of 
their Obligation to Report Accurately the Time of Execution for 
Transactions in TRACE-eligible Securities) (Aug. 2016); MSRB Notice 
2016-19 (MSRB Provides Guidance on MSRB Rule G-14, on Reports of 
Sales or Purchases of Municipal Securities (Aug. 9, 2019) (the 
``2016 RTRS FAQs'') at questions 1 and 2.
    \27\ See generally MSRB Notice 2004-18 (Notice Requesting 
Comment on Draft Amendments to Rule G-34 to Facilitate Real-Time 
Transaction Reporting and Explaining Time of Trade for Reporting New 
Issue Trades) (June 18, 2004); 2016 RTRS FAQs at question 1.
    \28\ Notice, 89 FR at 5386 n.26.
    \29\ See Notice 89 FR at 5387 (discussing the particulars for 
when transactions have been executed, confirmed, and reported).
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iv. Exceptions to the Baseline Reporting Requirement
    Proposed amendments to Rule G-14 RTRS Procedures Section (a)(ii) 
add two new exceptions to the proposed one-minute reporting 
requirement: (a) New Section (C)(1) provides an exception for a dealer 
with ``limited trading activity,'' and (b) new Section (C)(2) provides 
an exception for a dealer reporting a ``trade with a manual 
component.'' \30\
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    \30\ Notice, 89 FR at 5387 (explaining how these exceptions have 
a narrowly tailored purpose).
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a. Exception for Dealers With Limited Trading Activity
    New Section (a)(ii)(C)(1) would except a dealer with ``limited 
trading activity'' from the one-minute reporting requirement and would 
instead be required to report its trades as soon as practicable, but no 
later than 15 minutes after the Time of Trade for so long as the dealer 
remains qualified for the limited trading activity exception, as 
further specified in new Supplementary Material .01.\31\ Proposed 
Section (d)(xi) of Rule G-14 RTRS Procedures would define a dealer with 
limited trading activity as a dealer that, during at least one of the 
prior two consecutive calendar years, reported to an RTRS Portal fewer 
than 1,800 transactions, excluding transactions exempted under Rule G-
14(b)(v) and transactions specified in Rule G-14 RTRS Procedures 
Sections (a)(ii)(A) and (B) (i.e., transactions having an end-of-trade-
day reporting exception).\32\ A dealer relying on this exception to 
report trades within the 15-minute timeframe, rather than the new 
standard one-minute timeframe, would have to confirm that it meets the 
criteria for a dealer with limited trading activity for each year 
during which it continues to rely on the exception (e.g., the dealer 
could confirm its eligibility based on its internal trade records and 
by checking MSRB compliance tools which would indicate a dealer's 
transaction volume for a given year).\33\ Notwithstanding the 
foregoing, the MSRB reminded dealers with limited trading activity of 
the new overarching obligation to report trades as soon as 
practicable.\34\
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    \31\ The MSRB noted that transactions effected by such a dealer 
with a Time of Trade outside the hours of an RTRS Business Day would 
be permitted to be reported no later than 15 minutes after the 
beginning of the next RTRS Business Day pursuant to Rule G-14 RTRS 
Procedures Section (a)(iii). The MSRB also noted that, as is the 
case today, transactions for which an end-of-trade-day or post-
trade-day reporting exception is available under redesignated 
Sections (A) and (B) would continue to have that exception 
available. Notice, 89 FR at 5387 n.29.
    \32\ This number of transactions is expected to capture 
approximately 1.5 percent of the trades in the municipal securities 
markets in a given calendar year. Notice, 89 FR at 5387 n.30.
    \33\ See Notice, 89 FR at 5387-5388 (using a hypothetical to 
illustrate variations in dealer eligibility for the limited trading 
exception).
    \34\ See Notice, 89 FR at 5386 discussing the new requirement to 
report trades as soon as practicable.
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b. Exception for Trades With a Manual Component
    Rule G-14 RTRS Procedures Section (a)(ii)(C)(2) would except a 
``trade with a manual component'' as defined in new Section (d)(xii) of 
Rule G-14 RTRS Procedures from the one-minute reporting requirement. 
Dealers with such trades would be required to report such trades as 
soon as practicable and within the time periods specified in new 
Supplementary Material .02, unless another exception from the one-
minute reporting requirement applies under proposed Rule G-14 RTRS 
Procedures Sections (a)(ii)(A) and (B) (i.e., transactions having an 
end-of-trade-day or post-trade-day reporting exception) or 
(a)(ii)(C)(1) (i.e., transactions by dealers with limited trading 
activity).\35\ Section (d)(xii) of Rule G-14 RTRS Procedures would 
define a ``trade with a manual component'' as a transaction that is

[[Page 32487]]

manually executed or where the dealer must manually enter any of the 
trade details or information necessary for reporting the trade directly 
into an RTRS Portal (for example, by manually entering trade data into 
the RTRS Web Portal) or into a system that facilitates trade reporting 
(for example, by transmitting the information manually entered into a 
dealer's in-house or third-party system) to an RTRS Portal. As 
described below and in the Notice, a dealer reporting to the MSRB a 
trade meeting the definition for a ``trade with a manual component'' 
would be required to append a new trade indicator so that the MSRB can 
identify manual trades.\36\
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    \35\ As explained by the MSRB, transactions effected with a Time 
of Trade outside the hours of an RTRS Business Day would be 
permitted to be reported no later than 15 minutes after the 
beginning of the next RTRS Business Day pursuant to Rule G-14 RTRS 
Procedures Section (a)(iii). Notice, 89 FR at 5387 n.38.
    \36\ Such new indicator would be required for any trade with a 
manual component, whether the dealer reports such trade within the 
new one-minute timeframe or the dealer seeks to take advantage of 
the longer timeframes permitted for trades with a manual component. 
Notice, 89 FR at 5388 n.39.
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    As explained by the MSRB, this ``manual'' exception would apply 
narrowly, and would normally encompass any human participation, 
approval or other intervention necessary to complete the initial 
execution and reporting of trade information after execution, 
regardless of whether undertaken by electronic means (e.g., keyboard 
entry), physical signature or other physical action. To qualify as a 
trade with a manual component, the manual aspect(s) of the trade 
generally would occur after the relevant Time of Trade (i.e., the time 
at which a contract is formed for the transaction). As further 
explained by the MSRB, any manual aspects that precede the time of 
trade (e.g., phone calls to locate bonds to be sold to a customer 
before the dealer agrees to sell such bonds to a purchasing customer) 
would normally not be relevant for purposes of the exception unless 
they have a direct impact on the activities that must be undertaken 
post-execution to enter information necessary to report the trade.\37\
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    \37\ The MSRB provided various scenarios to illustrate 
application of the manual exception would apply. See generally 
Notice, 89 FR at 5389 n.40 and 5390 n.50.
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    The MSRB provided the following non-exhaustive list of situations 
in which trades would be considered to have a manual component: where a 
dealer executes a trade by manual or hybrid means, such as voice or 
negotiated trading by telephone, email, or through a chat/messaging 
function, and subsequently must manually enter into a system that 
facilitates trade reporting all or some of the information required to 
book the trade and report it to RTRS; where a dealer executes a trade 
(typically a larger-sized trade) that requires additional steps to 
negotiate and confirm details of the trade with a client and manually 
enters the trade into risk and reporting systems; where a dually-
registered broker-dealer/investment adviser executes a block 
transaction that requires allocations of portions of the block trade to 
the individual accounts of the firm's advisory clients that must be 
manually inputted in connection with a trade; where an electronically 
or manually executed trade is subject to manual review by a second 
reviewer for risk management (e.g., transactions above a certain dollar 
or par amount or other transactions meriting heightened risk review) 
and, as part of or following the review, the trade must be manually 
approved, amended or released before the trade is reported to RTRS; 
where a dealer's trade execution processes may entail further diligence 
following the Time of Trade involving a manual step (e.g., manually 
checking another market to confirm that a better price is not available 
to the customer); \38\ where a dealer trades a municipal security, 
whether for the first time or under other circumstances where the 
security master information may not already be populated (e.g., 
information has been removed or archived due to a long lapse in trading 
the security), and additional manual steps are necessary to set up the 
security and populate the associated indicative data in the dealer's 
systems prior to executing and reporting the trade; where a dealer 
receives a large order or a trade list resulting in a portfolio of 
trades with potentially numerous unique securities involving rapid 
execution and frequent communications on multiple transactions with 
multiple counterparties, and the dealer must then book and report those 
transactions manually, one by one; \39\ where a broker's broker engages 
in mediated transactions that involve multiple transactions with 
multiple counterparties; and where a dealer reports a trade manually 
through the RTRS Web Portal.
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    \38\ The MSRB noted that dealers experiencing significant levels 
of post-Time of Trade price adjustments due to such post-trade best 
execution processes should consider whether these processes are well 
suited to the dealer's obligations under MSRB Rule G-18 and whether 
the dealer is appropriately evaluating when a contract has in fact 
been formed with its customer. Notice, 89 FR at 5389 n.41.
    \39\ The MSRB explained that in instances where a dealer trades 
a basket of securities at a single price for the full basket, rather 
than individual prices for each security based on its then-current 
market price, such price likely would be away from the market, 
requiring inclusion of the ``away from market'' special condition 
indicator and qualifying for an end-of-trade-day reporting exception 
under proposed Rule G-14 RTRS Procedures Section (a)(ii)(A)(3). 
Notice, 89 FR at 5389 n.42.
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    The MSRB stated that the appropriateness of treating any step in 
the trade execution and reporting process as being manual must be 
assessed in light of the anti-circumvention provision included in the 
proposed rule change with regard to the delay in execution or insertion 
of manual tasks for the purpose of meeting this new exception.\40\ New 
Supplementary Material .02(a) would require all trades with a manual 
component to be reported as soon as practicable and would specify that 
in no event may a dealer purposely delay the execution of an order, 
introduce any manual steps following the Time of Trade, or otherwise 
modify any steps prior to executing or reporting a trade for the 
purpose of utilizing the exception for manual trades.\41\
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    \40\ See Notice, 89 FR at 5390 (discussing the prohibition on 
purposeful insertion of manual steps in trade reporting process).
    \41\ Id.
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    New Supplementary Material .03 would require that dealers adopt 
policies and procedures for complying with the as soon as practicable 
reporting requirement, including by implementing systems that commence 
the trade reporting process without delay upon execution and provides 
for additional guidance for regulatory authorities that enforce and 
examine dealers for compliance with this requirement to take into 
consideration the manual nature of the dealer's trade reporting 
process.\42\
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    \42\ For trades with a manual component, the MSRB explained that 
it recognized that the trade reporting process may not be completed 
as quickly as, for example, where an automated trade reporting 
system is used. The MSRB further explained that in these cases, the 
MSRB expects that the regulatory authorities that examine dealers 
and enforce compliance with this requirement would take into 
consideration the manual nature of the dealer's trade reporting 
process in determining whether the dealer's policies and procedures 
are reasonably designed to report the trade ``as soon as 
practicable'' after execution. Notice, 89 FR at 5388.
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    The MSRB also noted that dealers should consider the types of 
transactions in which they regularly engage and whether they can 
reasonably reduce the time between a transaction's Time of Trade and 
its reporting, and more generally should make a good faith effort to 
report their trades as soon as practicable.\43\ The MSRB currently 
collects and analyzes data regarding dealers' historic reporting of 
transactions to RTRS under various scenarios and such data will 
continue to be available to the regulators for analysis under the 
proposed one-minute

[[Page 32488]]

standard. Subject to Commission approval of the proposed rule change, 
the MSRB explained that it would be reviewing the use of the manual 
exception and would share with the examining authorities any analyses 
resulting from such reviews.\44\
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    \43\ Id. at 5389.
    \44\ Id. at 5390.
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1. Phase-In Period for Trades With a Manual Component
    New Supplementary Material .02(b) would subject trades with a 
manual component to a phase-in period for timely reporting over three 
years (``phase-in period''). During the first year of effectiveness of 
the exception, trades meeting this definition would be required to be 
reported as soon as practicable, but no later than 15 minutes after the 
Time of Trade.\45\ During the second year, such trades would be 
required to be reported as soon as practicable, but no later than 10 
minutes after the Time of Trade. After the second year and thereafter, 
such trades would be required to be reported as soon as practicable, 
but no later than five minutes after the Time of Trade. Dealers should 
remember that the ``as soon as practicable'' reporting obligation may, 
depending on the facts and circumstances, require quicker reporting 
than the applicable outer reporting obligation during and after the 
phase-in period.
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    \45\ While the deadline for reporting during this first year 
would remain the same as the current 15-minute timeframe, such trade 
reports would also be subject to the new requirement that they be 
reported as soon as practicable. See Notice, 89 FR at 5390 n.48.
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    The MSRB explained that it would be reviewing the available trade 
reporting information and data arising from implementation of the 
proposed rule, as well as marketplace developments, feedback from 
market participants, and examination or enforcement findings from the 
Commission, FINRA and the other appropriate regulatory agencies to 
inform any further potential changes to the trade reporting 
requirements.\46\
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    \46\ Notice, 89 FR at 5390.
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2. Prohibition on Purposeful Insertion of Manual Steps in Trade 
Reporting Process
    New Supplementary Material .02(a) would specifically prohibit 
dealers from purposely delaying the execution of an order, introducing 
any manual steps following the Time of Trade, or otherwise purposefully 
modifying any steps to execute or report a trade to utilize the 
exception for manual trades. This requirement would not prohibit 
reasonable manual steps that are taken for legitimate purposes and 
would not apply to any steps that are taken prior to the time of trade 
that do not have the effect of delaying the subsequent reporting of 
such trade.\47\
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    \47\ Notice, 89 FR at 5890.
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3. Manual Trade Indicator
    Proposed amendments to Rule G-14 RTRS Procedures Section (b)(iv) 
would require the report of a trade meeting the MSRB's definition for a 
``trade with a manual component,'' as defined in proposed Section 
(d)(xii) of Rule G-14 RTRS Procedures,\48\ to append a new trade 
indicator \49\ to such a trade report. This indicator would be 
mandatory for every trade that meets the standard to append the 
indicator,\50\ regardless of whether the trade is actually reported 
within one minute after the Time of Trade, is reported within the 
applicable timeframe under the manual trade exception or is otherwise 
subject to another reporting exception.
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    \48\ See generally Notice, 89 FR at 5388-90.
    \49\ See Notice, 89 FR at 5391 n.51 (discussing how the manual 
trade indicator would be used for regulatory purposes).
    \50\ Current Rule G-14 RTRS Procedures Section (a)(iv) requires 
that transaction data that is not submitted in a timely and accurate 
manner must be submitted or corrected as soon as possible. The 
manual trade indicator is not intended to be used to reflect the 
manual nature of any correction to a prior trade report. Notice, 89 
FR at 5390 n.50.
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v. Pattern or Practice of Late Trade Reporting
    Current Rule G-14 RTRS Procedures Section (a)(iv) requires that 
transaction data that is not submitted in a timely and accurate manner 
must be submitted or corrected as soon as possible--even when a dealer 
is late in reporting a trade, the dealer remains obligated to report 
such trade as soon as possible. The proposed amendments further provide 
that any transaction that is not reported within the applicable time 
period shall be designated as ``late.'' \51\ The MSRB stated that a 
pattern or practice of late reporting without exceptional circumstances 
or reasonable justification may be considered a violation of Rule G-14. 
The MSRB further noted that the determination of whether exceptional 
circumstances or reasonable justifications exist for late trade 
reporting is dependent on the particular facts and circumstances and 
whether such circumstances are addressed in the dealer's systems and 
procedures.\52\ The MSRB explained that it expected that the regulatory 
authorities that examine dealers and enforce compliance with the 
reporting timeframes established under Rule G-14 RTRS Procedures would 
focus their examination for and enforcement of the rule's timing 
requirements on the consistency of timely reporting and the existence 
of effective controls to limit late reporting to exceptional 
circumstances or where reasonable justifications exist for a late trade 
report, rather than on individual late trade report outliers.\53\ 
Notwithstanding such expectation, where facts and circumstances 
indicate that an individual late report was intentional or otherwise 
egregious, or could reasonably be viewed as potentially giving rise to 
an associated fair practice, fair pricing, best execution or other 
material regulatory concern under MSRB or Commission rules with respect 
to that or a related transaction, the MSRB noted that the regulatory 
authorities could reasonably determine to take action with respect to 
such late trade in the examination or enforcement context.\54\
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    \51\ See generally id. at 5391 n.52 (MSRB explaining that late 
trade designations are currently, and would continue to be, 
available to regulators and, through the MSRB compliance tool 
described below in the Notice under ``Purpose--Proposed Rule 
Change--Compliance Tools,'' to the dealer submitting the late 
trade).
    \52\ See Notice, 89 FR at 5391 for non-exhaustive list of 
factors that would be considered in determining whether a rule 
violation has occurred.
    \53\ Id.
    \54\ Id.
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vi. Compliance Tools
    The MSRB explained that it would continue to provide various 
compliance tools to assist dealers with compliance and for examining 
authorities to monitor for compliance.\55\
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    \55\ Id. (discussing the various compliance tools).
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vii. Proposed Technical Amendments
a. Non-Substantive Amendments
    Non-substantive amendments to Rule G-14 RTRS Procedures Section 
(a)(ii) regroup and renumber its current Sections (A) through (C) to 
new Sections (A)(1) through (A)(3), renumber current Sections (D) and 
(E) to new Sections (B)(1) and B(2), and correct a cross-reference in 
Section (b)(iv) to certain of these Sections to be consistent with such 
renumbering.\56\ In addition, a technical amendment to Rule G-14 RTRS 
Procedures Section (a)(ii) changes the word ``of'' to ``after'' and 
omits the word ``within'' in the phrase ``within 15 minutes of Time of 
Trade'' for clarity and consistency of usage throughout the Rule G-14 
RTRS Procedures as amended.\57\
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    \56\ Id. at 5392.
    \57\ Id.

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[[Page 32489]]

b. Clarifying Amendments--Special Condition Indicators and Trades on an 
Invalid RTTM Trade Date
    Rule G-14 RTRS Procedures Section (b)(iv) currently sets forth 
information regarding certain existing special condition indicators 
while also referencing the existence of other special condition 
indicators in Section 4.3.2 of the Specifications for Real-Time 
Reporting of Municipal Securities Transactions. The proposed clarifying 
amendments to Section (b)(iv) of Rule G-14 RTRS Procedures would 
incorporate into the language thereof reference to all applicable 
special condition indicators, including the new trade with a manual 
component indicator and existing special condition indicators 
previously adopted by the MSRB but that are currently only documented 
explicitly in the Specifications for Real-Time Reporting of Municipal 
Securities Transactions.\58\ Other than the addition of the new trade 
with a manual component indicator, the proposed clarifying amendments 
to this provision would not make any changes to the types or usage of 
existing special condition indicators.\59\ Rule G-14 RTRS Procedures 
Section (a)(iii) would be amended to reflect that, in addition to 
trades effected outside the hours of the RTRS Business Day, inter-
dealer trades may be executed on certain holidays (other than those 
recognized as non-RTRS Business Days) that are not valid RTTM trade 
dates (``invalid RTTM trade date''), and in either case such trades are 
to be reported no later than within 15 minutes after the beginning of 
the next RTRS Business Day. Such invalid RTTM trade date transactions 
are already subject to this same next RTRS Business Day reporting 
requirement.\60\ The proposed clarifying amendment to this provision 
would not make any changes to the circumstances or timing of reporting 
of such trades.\61\
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    \58\ See generally Notice, 89 FR at 5392 n.55.
    \59\ Id. at 5392.
    \60\ See Section 4.3.2 of the Specifications for Real-Time 
Reporting of Municipal Securities Transactions; Exchange Act Release 
No. 55957 (June 26, 2007), 72 FR 36532 (July 3, 2007), File No. SR-
MSRB-2007-01.
    \61\ Notice, 89 FR at 5392.
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c. Proposed Conforming Amendments to Rule G-12 and RTRS Information 
Facility
    Proposed amendments to Rule G-12, on uniform practice, would make 
conforming changes to Section (f)(i) thereof to require that each 
transaction effected during the RTRS Business Day shall be submitted 
for comparison as soon as practicable, but no later than one minute 
after the Time of Trade unless an exception applies. The proposed rule 
change would also modify the IF-1 to clarify lateness checking against 
the applicable reporting deadline(s) provided for in proposed 
amendments to Rule G-14 RTRS Procedures, as opposed to the current 15-
minute requirement.\62\
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    \62\ Id.
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III. Summary of Comments Received

    The Commission received thirteen comment letters on the proposed 
rule change.\63\ Commenters generally supported the MSRB's goal of 
facilitating equal access to information and market transparency.\64\ 
However, many commenters expressed concern that the MSRB failed to 
demonstrate how a one-minute reporting requirement would clearly and 
substantially benefit the municipal securities market.\65\ To this end, 
several commenters raised concern that the one-minute reporting 
requirement would increase costs of new technology infrastructure 
which, commenters argued, could impair municipal market liquidity by 
putting small and mid-size firms out of business.\66\ Commenters 
maintained that the exceptions to the one-minute reporting requirement 
were requisite to implementing the proposed rule change.\67\ Otherwise, 
commenters asserted that a general one-minute reporting requirement 
would be unworkable.\68\ One commenter, however, strongly encouraged 
the MSRB to fully phase-out the exceptions.\69\ Another commenter noted 
a similar proposal \70\ by the Financial Industry Regulatory Authority, 
Inc. (``FINRA''), and requested that the MSRB and FINRA harmonize the 
scope of the manual trade exception.\71\
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    \63\ See letters to Vanessa A. Countryman, Secretary, 
Commission, from Michael Noto, FINRA Registered Representative dated 
Jan. 31, 2024 (``Noto''); J. Ben Watkins, Director, Division of Bond 
Finance, State of Florida dated Feb. 13, 2024 (``State of 
Florida''); Matthew Kamler, President, Sanderlin Securities LLC 
dated Feb. 14, 2024 (``Sanderlin Securities''); Gerard O'Rielly, Co-
Chief Executive Officer and Co-Chief Investment Officer and David A. 
Plecha, Global Head of Fixed Income, Dimensional Fund Advisors LP 
dated Feb. 15, 2024 (``Dimensional Fund Advisors''); Michael Decker, 
Senior Vice President, Bond Dealers of America dated Feb. 15, 2024 
(``BDA''); Sarah A. Bessin, Deputy General Counsel, Investment 
Company Institute dated Feb. 15, 2024 (``ICI''); Kenneth E. Bentsen, 
Jr., President and CEO, Securities Industry and Financial Markets 
Association dated Feb. 15, 2024 (``SIFMA''); Howard Meyerson, 
Managing Director, Financial Information Forum dated Feb. 15, 2024 
(``FIF I''); Gregory Babyak, Global Head of Regulatory Affairs, 
Bloomberg L.P. dated Feb. 16, 2024 (``Bloomberg''); Melissa P. 
Hoots, CEO/COO, Falcon Square Capital, LLC dated Feb. 16, 2024 
(``Falcon Square Capital''); Matt Dalton, Chief Executive Officer, 
Belle Haven Investments, LP dated Feb. 16, 2024 (``Belle Haven''); 
Christopher A. Iacovella, President & Chief Executive Officer, 
American Securities Association dated Feb. 16, 2024 (``ASA''). Also, 
after the close of the comment period, one commenter submitted a 
supplemental letter. See letter from Financial Information Forum 
dated Feb. 26, 2024 (``FIF II''). The Commission's Office of 
Municipal Securities held a meeting with a representative from the 
State of Florida on Feb. 13, 2024, and the Commission's Offices of 
Municipal Securities and Trading and Markets held a meeting with 
representatives from the BDA. See Memoranda from the Office of 
Municipal Securities regarding 2024 meetings.
    \64\ See, e.g., letters from SIFMA; BDA; ICI; Dimensional Fund 
Advisors; Belle Haven.
    \65\ See, e.g., BDA Letter at 1; Noto Letter; State of Florida 
Letter at 1-2; Sanderlin Securities Letter at 2-4; SIFMA Letter at 
2; ASA Letter at 1 and 5-6; Falcon Square Capital Letter at 1-2; 
Belle Haven Letter at 3-6; ICI Letter at 2, FN4.
    \66\ See, e.g., BDA Letter at 3-4; State of Florida Letter at 2; 
Sanderlin Securities Letter at 1-3; Falcon Square Capital Letter at 
2.
    \67\ See, e.g., BDA Letter at 1; ICI Letter at 3; SIFMA Letter 
at 2; FIF I Letter at 2.
    \68\ See generally BDA Letter; ICI Letter, SIFMA Letter; FIF I 
Letter; Belle Haven Letter.
    \69\ Dimensional Fund Advisors Letter at 2.
    \70\ See Securities Exchange Act Release No. 99404 (Jan. 19, 
2024), 89 FR 5034 (Jan. 24, 2024) (``FINRA Notice'').
    \71\ See FIF I Letter at 3.
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    Commenters offered several views relating to the exceptions. Some 
commenters noted that the manual trade exception balances shortening 
reporting requirements while avoiding undue disruptions to the 
municipal securities market.\72\ However, one commenter argued that the 
MSRB had not provided any data to support a reduction in reporting time 
for manual trades or any evidence that firms that are currently 
reporting manually are not already reporting as soon as 
practicable.\73\ This commenter also maintained that the phase-in 
period could eliminate small firms which are incapable of meeting the 
phased-in time periods.\74\ Another commenter remained troubled by the 
language of the manual trade exception as it suggested the possibility 
of leading to further reductions or even the elimination of the manual 
trade exception.\75\ As a potential solution, commenters noted that the 
MSRB could collect data and conduct impact assessments prior to each 
phase-in period to ensure continued market integrity.\76\ Some 
commenters stated that the proposed use of the manual trade indicator 
could not be effectively implemented or monitored for compliance and 
proposed that trades subject to the one-minute reporting requirement 
should be flagged

[[Page 32490]]

instead.\77\ Commenters generally viewed the limited trading activity 
exception favorably.\78\ One commenter, however, argued that the 
proposed 1,800-trade threshold was far too low and requested that the 
MSRB either significantly expand the threshold or conduct further 
analysis to justify the 1,800 threshold.\79\
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    \72\ See, e.g., ICI Letter at 3; SIFMA Letter at 3-4 (noting 
that the proposed manual trade exception is an attempt to promote 
continued liquidity of the subject fixed-income markets).
    \73\ Belle Haven Letter at 7.
    \74\ Id. at 5.
    \75\ ASA Letter at 2.
    \76\ See, e.g., SIFMA Letter at 6-7; ICI Letter at 3-4; BDA 
Letter at 3.
    \77\ See, e.g., SIFMA Letter at 9; BDA Letter at 3.
    \78\ See, e.g., SIFMA Letter at 9; BDA Letter at 2; Falcon 
Square Capital Letter at 3; Belle Haven Letter at 6; FIF I Letter at 
2.
    \79\ Falcon Square Capital Letter at 3.
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    Some commenters addressed the proposed implementation period. Two 
commenters requested a two-year implementation and requested that the 
MSRB and FINRA remain open to the creation of FAQs or the provision of 
implementation guidance to achieve greater compliance.\80\ One 
commenter requested an eighteen-month implementation period from the 
date the MSRB and FINRA publish updated technical specifications and 
guidance.\81\
---------------------------------------------------------------------------

    \80\ See BDA Letter at 4; SIFMA Letter at 10.
    \81\ See FIF I Letter at 5-7 (commenter also requested a free 
testing period of 90-days instead of the standard 30-days).
---------------------------------------------------------------------------

    Commenters also challenged the proposed rule change as 
circumventing regulatory obligations pursuant to the Exchange Act and 
requested that the MSRB conduct further analysis before implementing 
the proposed rule change.\82\
---------------------------------------------------------------------------

    \82\ See, e.g., Belle Haven Letter at 2; ASA Letter at 3; Falcon 
Square Capital Letter at 6.
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove SR-MSRB-
2024-01 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \83\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of proceedings is 
appropriate at this time in view of the legal and policy issues raised 
by the proposed rule change. Institution of proceedings does not 
indicate, however, that the Commission has reached any conclusion with 
respect to any of the issues involved. Rather, as described below, the 
Commission seeks and encourages interested persons to comment on the 
proposed rule change.
---------------------------------------------------------------------------

    \83\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\84\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission believes it is appropriate to institute proceedings at 
this time in view of the legal and policy issues raised by the 
proposal. In particular, Section 15B(b)(2) of the Act \85\ requires 
that the MSRB propose and adopt rules to effect the purposes of the Act 
with respect to transactions in municipal securities effected by 
brokers, dealers, and municipal securities dealers and advice provided 
to or on behalf of municipal entities or obligated persons by brokers, 
dealers, municipal securities dealers, and municipal advisors with 
respect to municipal financial products, the issuance of municipal 
securities, and solicitations of municipal entities or obligated 
persons undertaken by brokers, dealers, municipal securities dealers, 
and municipal advisors. In addition, Section 15B(b)(2)(C) of the Act 
\86\ requires, among other things, that the MSRB's rules 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 facilitating transactions in municipal 
securities and municipal financial products, to remove impediments to 
and perfect the mechanisms 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 Commission asks that commenters address the 
sufficiency of MSRB's statements in support of the proposed rule 
change, which are set forth in the Notice, in addition to any other 
comments they may wish to submit about the proposed rule change. In 
particular, the Commission is instituting proceedings to allow for 
additional analysis of, and input from commenters with respect to, the 
scope and implementation of the proposed exceptions to the one-minute 
reporting timeframe.
---------------------------------------------------------------------------

    \84\ Id.
    \85\ 15 U.S.C. 78o4-(b)(2).
    \86\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

V. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their data, views, and arguments with respect to the 
issues identified above, as well as any others concerns they may have 
with the proposed rule change. In particular, the Commission invites 
the written views of interested persons concerning whether the proposed 
rule change is inconsistent with the Exchange Act and the rules and 
regulations thereunder. Although there do not appear to be any issues 
relevant to approval or disapproval which would be facilitated by an 
oral presentation of views, data, and arguments, the Commission will 
consider, pursuant to Rule 19b-4 under the Act,\87\ any request for an 
opportunity to make an oral presentation.\88\
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    \87\ 17 CFR 240.19b-4.
    \88\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change should be approved 
or disapproved by May 17, 2024. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
May 31, 2024.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MSRB-2024-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-MSRB-2024-01. 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 website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the MSRB. All comments received 
will be posted without change;

[[Page 32491]]

the Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. We may redact in part or withhold entirely from 
publication submitted material that is obscene or subject to copyright 
protection.
    All submissions should refer to File Number SR-MSRB-2024-01 and 
should be submitted on or before May 17, 2024. Rebuttal comments should 
be submitted May 31, 2024.

    For the Commission, pursuant to delegated authority.\89\
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    \89\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-08943 Filed 4-25-24; 8:45 am]
BILLING CODE 8011-01-P