[Federal Register Volume 89, Number 147 (Wednesday, July 31, 2024)]
[Notices]
[Pages 61516-61518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16796]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100589; File No. SR-MSRB-2024-01]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Amendment No. 1 to Proposed Rule Change 
Consisting of Amendments to MSRB Rule G-14 To Shorten the Timeframe for 
Reporting Trades in Municipal Securities to the MSRB

July 25, 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\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Exchange Act Release No. 99402 (Jan. 19, 2024), 89 FR 
5384 (Jan. 26, 2024) (``Notice'').
    \4\ Id. at 5384.
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    The Commission received comments in response to the proposed rule 
change.\5\ On April 22, 2024, the Commission instituted 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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    \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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    On July 18, 2024, the Commission, pursuant to Section 19(b)(2) of 
the Act,\7\ designated September 20, 2024, as the date by which the 
Commission shall either approve or disapprove the

[[Page 61517]]

proposed rule change.\8\ On July 18, 2024, the MSRB responded to 
comments \9\ and filed Amendment No. 1 to the original proposed rule 
change (``Amendment No. 1''). The text of Amendment No. 1 is available 
on the MSRB's website.\10\
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ See Exchange Act Release No. 100557 (July 18, 2024), 89 FR 
59951 (July 24, 2024) (``Extension'').
    \9\ See Letter from Ernesto A. Lanza, Chief Regulatory and 
Policy Officer, MSRB, to Secretary, Commission, dated July 18, 2024, 
available at https://www.sec.gov/comments/sr-msrb-2024-01/srmsrb202401-491663-1411646.pdf.
    \10\ Amendment No. 1 is available at https://www.msrb.org/sites/default/files/2024-07/MSRB-2024-01-A-1.pdf.
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II. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Amendment

    As described further below, the MSRB filed Amendment No. 1 to amend 
the proposed rule change to (i) revise the definition of a ``dealer 
with limited trading activity'' in proposed subsection (d)(xi) of Rule 
G-14 RTRS Procedures \11\ and (ii) modify the pace of phasing-in the 
shortened reporting timeframe for a ``trade with a manual component'' 
in proposed Supplementary Material .02(b).
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    \11\ The MSRB stated that the revision to the proposed 
definition of dealer with limited trading activity does not have a 
material impact on the MSRB's economic analysis included in the 
original proposed rule change. See Amendment No. 1 at 9.
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A. Exception for Dealers With Limited Trading Activity

    The MSRB noted that upon further review of the methodology used for 
proposing a 1,800-trade threshold for qualifying for the dealer with 
limited trading activity exception in the original proposed rule 
change, the MSRB had determined to increase the threshold to 2,500 
trades in connection with a modification of its methodology.\12\
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    \12\ See Amendment No. 1 at 7.
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    In establishing the original proposed threshold of 1,800 trades, 
the MSRB explained that it had used an approach, consistent with other 
instances where MSRB rules and related transparency activities had been 
based on inter-dealer trade activity, that relied solely on the sell-
side inter dealer trade reports to avoid, for those specific purposes, 
potential double counting if both the sell-side and buy-side were 
used.\13\ The MSRB stated that the calculations discussed in the Notice 
underlying the 1,800-trade threshold in the proposed definition of 
``dealer with limited trading activity'' resulted in a lower threshold 
and did not fully account for inter-dealer trade reports since only the 
sell-side inter-dealer trade reports were taken into account.\14\ In 
order to maintain comparability with the threshold used by the 
Financial Industry Regulatory Authority, Inc. (``FINRA'') in its 
proposed definition of ``member with limited trading activity'' \15\ 
and in light of the plain meaning of the language of the MRSB's 
proposed definition of ``dealer with limited trading activity,'' the 
MSRB explained that it had recalculated the appropriate threshold for 
such definition to be 2,500 trades, taking into account both sell-side 
and buy-side inter-dealer trade reports together with reports of dealer 
trades with customers, regardless of whether the dealer bought or sold 
in the customer transaction.\16\ The MSRB also stated that Amendment 
No. 1 would add clarifying language to reflect that the threshold is 
based on both sell-side and buy-side inter-dealer and customer trade 
reports.\17\ Thus, proposed subparagraph (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 two prior consecutive calendar 
years, reported to an RTRS Portal fewer than 2,500 purchase or sale 
transactions with customers or other dealers, excluding certain 
exempted transactions as specified therein.\18\ The MSRB further noted 
that the proposed new threshold would continue to account for only a 
very small portion of the market volume and therefore would have 
minimal impact on overall trading.\19\
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    \13\ Id. at 7-8.
    \14\ Id. at 8.
    \15\ See Exchange Act Release No. 99404 (Jan. 19, 2024), 89 FR 
5034 (Jan. 24, 2024) (``FINRA Notice'').
    \16\ See Amendment No. 1 at 8. The MSRB explained that reports 
of dealer trades with customers, regardless of whether the dealer 
bought or sold in the transaction, were included in the original 
methodology and continue to be included in the revised methodology. 
Based on this change in methodology, the total number of trade 
reports in 2022 has changed to 16.8 million when counting both the 
buy-side and the sell-side trades for inter-dealer trades. 
Previously, when only counting the sell side trades for inter-dealer 
trades, the total number of reported trades in 2022 was 12.1 
million. See Amendment No. 1 n. 21.
    \17\ See Amendment No. 1 at 8.
    \18\ Id.
    \19\ See Amendment No. 1 at 9. The MSRB stated that the revised 
number of transactions under Amendment No. 1 would be expected to 
continue to capture approximately 1.5 percent of the trades in the 
municipal securities markets in a given calendar year, based on 
transaction data from calendar year 2022.
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B. Exception for Trades With a Manual Component

    The MSRB noted concerns expressed by commenters regarding potential 
difficulties in achieving dramatically shortened reporting timeframes 
for at least some trades with a manual component and whether dealers 
would have sufficient time to make the necessary changes to processes 
and technology to achieve such shortened timeframes, and determined to 
modify the pace of phasing-in the shortened reporting timeframe for 
trades with a manual component to extend the period during which such 
trades would be reportable by no later than 10 minutes after the Time 
of Trade from one year to two years.\20\
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    \20\ See Amendment No. 1 at 9.
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    The MSRB explained that Amendment No. 1 would, in part, amend 
proposed Supplementary Material .02(b) to provide in clause (ii) that a 
trade with a manual component must be reported no later than 10 minutes 
after the Time of Trade for the second and third calendar years (rather 
than only the second year) from the effective date of the proposed rule 
change and to provide in clause (iii) that a trade with a manual 
component would become reportable no later than five minutes after the 
Time of Trade after the conclusion of the third calendar year (rather 
than the second calendar year) from the effective date of the proposed 
rule change.\21\
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    \21\ Id.
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    The MSRB further explained that the proposed rule change sets out a 
phased-in implementation of the exception for manual trades that would 
provide for an ultimate five-minute timeframe for the reporting of such 
trades. The MSRB also noted that no further reductions in such 
timeframe, and no elimination of the manual trade exception, could be 
possible without additional formal rulemaking by the MSRB that would be 
filed with the Commission, and that any such change would be subject to 
the required notice and comment process under Section 19 of the 
Exchange Act.\22\
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    \22\ 15 U.S.C. 78s. See Amendment No. 1 at 9.
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    Furthermore, the MSRB stated that it would monitor the 
implementation of the proposed rule change and, going forward, would 
analyze trade data related to the operation of the proposed two new 
exceptions to, among other things, determine whether the eventual five-
minute trade reporting timeframe that would become applicable after two 
years continues to be feasible and appropriate in light of the 
empirical data collected through the earlier phases of 
implementation.\23\ The MSRB further explained that it would be 
prepared to take action to provide appropriate guidance or undertake 
appropriate modifications in connection with the phase-in of the manual 
trade exception should circumstances warrant any such action, 
including, but not limited to

[[Page 61518]]

potentially filing a proposed rule change to extend the implementation 
period for the eventual five-minute timeframe for trades with a manual 
component.\24\
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    \23\ See Amendment No. 1 at 9.
    \24\ Id.
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    As noted by the MSRB, Amendment No. 1 would provide for a modified 
phase-in of the shortened reporting timeframe for trades with a manual 
component that the MSRB believes would foster a more orderly transition 
to more rapid reporting of manual trades.\25\ Additionally, the MSRB 
explained that Amendment No. 1 would allow the MSRB to undertake a more 
meaningful and timely analysis of potential impacts of the intermediate 
10-minute reporting stage in the phase-in process.\26\ Specifically, 
the MSRB observed the extended timeframe would provide more time and 
data for the MSRB to understand whether any adverse impacts have 
developed as a result of the shortened reporting timeframe to 10 
minutes so that the MSRB can determine whether it should undertake 
additional rulemaking to modify implementation or phase-in of the final 
step to a five-minute timeframe.\27\
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    \25\ Id. at 10.
    \26\ Id.
    \27\ Id.
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III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the filing as 
amended by Amendment No. 1 is consistent with the Act. 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 (http://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; 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 August 21, 2024.

    For the Commission, pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-16796 Filed 7-30-24; 8:45 am]
BILLING CODE 8011-01-P