
[Federal Register Volume 77, Number 208 (Friday, October 26, 2012)]
[Notices]
[Pages 65433-65434]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-26340]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68081; File No. SR-MSRB-2012-07]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Order Approving a Proposed Rule Change To Amend the Real-Time 
Transaction Reporting System Information System and Subscription 
Service

October 22, 2012.

I. Introduction

    On August 24, 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 to enhance the transaction data publicly 
disseminated from the Real-Time Transaction Reporting System (``RTRS'') 
information system. The proposed rule change was published for comment 
in the Federal Register on September 12, 2012.\3\ The Commission 
received three comment letters regarding the proposed rule change.\4\ 
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\ Securities Exchange Act Release No. 67792 (September 6, 
2012), 77 FR 56244 (SR-MSRB-2012-07) (``Notice'').
    \4\ See Letters from Dorothy Donohue, Deputy General Counsel-
Securities Regulation, Investment Company Institute, to Elizabeth M. 
Murphy, Secretary, Commission, dated September 28, 2012; Michael 
Nicholas, Chief Executive Officer, Bond Dealers of America, to 
Elizabeth M. Murphy, Secretary, Commission, dated October 3, 2012; 
and Michael Decker, Managing Director and Co-Head of Municipal 
Securities, Securities Industry and Financial Markets Association, 
to Elizabeth M. Murphy, Secretary, Commission, dated October 3, 
2012. All three commenters supported the proposed rule change.
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II. Description of the Proposal

    RTRS is a facility for the collection and dissemination of 
information about transactions occurring in the municipal securities 
markets. MSRB Rule G-14 requires brokers, dealers, and municipal 
securities dealers (collectively, ``dealers'') to report all 
transactions in municipal securities to RTRS within fifteen minutes of 
the time of trade, with limited exceptions. The MSRB makes transaction 
information available to the public through subscription services as 
well as for free on the Electronic Municipal Market Access 
(``EMMA[supreg]'') Web site.
    Currently, transaction information disseminated from RTRS includes 
the exact par value on all transactions with a par value of $1 million 
or less, but includes an indicator of ``1MM+'' in place of the exact 
par value on transactions where the par value is greater than $1 
million. The exact par value of transactions having a par value greater 
than $1 million is disseminated from RTRS five business days later. The 
MSRB implemented this approach in response to concerns that, given the 
prevalence of thinly traded securities in the municipal securities 
market, it is sometimes possible to identify institutional investors 
and dealers by the exact par value included on trade reports.\5\
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    \5\ See Notice, supra note 3, at 56245.
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    The MSRB now proposes to include in transaction data publicly 
disseminated from RTRS in real-time

[[Page 65434]]

the exact par value on all transactions with a par value of $5 million 
or less, and to include an indicator of ``MM+'' in place of the exact 
par value on transactions where the par value is greater than $5 
million.\6\ The exact par value of transactions having a par value 
greater than $5 million would be disseminated from RTRS five business 
days later.\7\
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    \6\ Instead of changing the indicator to ``5MM+,'' the MSRB 
plans to include an indicator of ``MM+'' so that the par value 
threshold can be changed in the future without requiring subscribers 
to make system changes to accommodate a new indicator. See id. at 
56245 n.6.
    \7\ See id. at 56244.
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    According to the MSRB, a foundational principle of RTRS is that all 
market participants have equal access to transaction information. In a 
recent report on municipal securities market structure, the Government 
Accountability Office (``GAO'') observed that certain market 
participants are able to determine, through their relationships with 
dealers, the par amount of large transactions for which the par value 
is masked in RTRS subscription services and on EMMA.\8\ According to 
the MSRB, the GAO's observation undermines the purpose of masking the 
exact par value, as well as the foundational principle of RTRS, since 
the equality of access to transaction information is lost for the five 
business day period that certain institutional customers have access to 
the exact par value while the rest of the marketplace must await the 
unmasking of such information by RTRS five business days after the 
trade was reported.\9\ Additionally, while commenters opposed the 
MSRB's original proposal to eliminate the practice of masking large 
trade sizes entirely,\10\ commenters stated that raising the par value 
threshold for masking large trade sizes to $5 million would provide 
additional transparency to the municipal securities market without 
adversely impacting liquidity.\11\
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    \8\ See U.S. Government Accountability Office, Municipal 
Securities: Overview of Market Structure, Pricing, and Regulation, 
GAO-12-265, January 17, 2012.
    \9\ See Notice, supra note 3, at 56245.
    \10\ The MSRB has indicated it plans to continue to evaluate 
whether this threshold can be raised further, or completely 
eliminated, with a view towards bringing full transparency of exact 
par values to the municipal securities market in real-time. The MSRB 
plans to evaluate any impacts on liquidity from the near-term 
increase of the trade size mask threshold to $5 million to assist it 
in determining whether any future changes to this threshold are 
merited or could result in unanticipated consequences. See id.
    \11\ See supra note 4. See also Notice, supra note 3, at 56245.
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III. Discussion and Commission's Findings

    The Commission has carefully considered the proposed rule change, 
as well as the comment letters received and the MSRB's response, and 
finds that the proposed rule change is consistent with the requirements 
of the Exchange Act and the rules and regulations thereunder applicable 
to the MSRB.\12\ In particular, 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.\13\
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    \12\ 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).
    \13\ 15 U.S.C. 78o-4(b)(2)(C).
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    The Commission recently urged the MSRB promptly to pursue 
enhancements to its EMMA Web site so that retail investors have better 
access to pricing and other municipal securities information, noting 
that retail investors continue to have access to substantially less 
pricing information than institutional investors and dealers.\14\ The 
MSRB believes that raising the par value masking threshold to par 
values over $5 million is an appropriate first step to take in the 
short term as it would greatly reduce the number of trades subject to 
the par value mask.\15\ The Commission believes the proposed rule 
change is reasonably designed to remove impediments to and perfect the 
mechanism of a free and open market in municipal securities by 
increasing the number of transactions disseminated from RTRS in real-
time that include the exact par value of such transactions, thereby 
providing more transparency to market participants, including retail 
investors, about transactions disseminated from RTRS.
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    \14\ See Report on the Municipal Securities Market, July 31, 
2012, available at http://www.sec.gov/news/studies/2012/munireport073112.pdf.
    \15\ According to the MSRB, based on 2011 trade data, 342,906 
trades were subject to the over $1 million trade size mask, while 
97,124 trades had par values over $5 million. See Notice, supra note 
3, at 56245.
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IV. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the requirements of the Exchange Act and 
the rules and regulations thereunder applicable to the MSRB and, in 
particular, Section 15B(b)(2)(C)\16\ of the Exchange Act. The proposal 
will become effective on November 5, 2012.
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    \16\ 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,\17\ that the proposed rule change (SR-MSRB-2012-07) be, and it 
hereby is, approved.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-26340 Filed 10-25-12; 8:45 am]
BILLING CODE 8011-01-P


