[Federal Register Volume 85, Number 109 (Friday, June 5, 2020)]
[Notices]
[Pages 34661-34663]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12167]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88986; File No. SR-MSRB-2020-03]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Waive MSRB Market Activity Fees Related to Transactions With 
the Municipal Liquidity Facility Established by the Board of Governors 
of the Federal Reserve System

June 1, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on May 28, 2020 the Municipal Securities 
Rulemaking Board (``MSRB'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the MSRB. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change 
consisting of a proposed amendment to MSRB Rule A-13 regarding 
underwriting and transaction assessments for brokers, dealers and 
municipal securities dealers (collectively ``dealers'') to waive 
certain underwriting, transaction and technology assessments (``market 
activity fees'') related to transactions with the Municipal Liquidity 
Facility (``Facility'' or ``MLF'') established by the Board of 
Governors of the Federal Reserve System (``Federal Reserve'') (the 
``proposed rule change'') as described below. The MSRB has designated 
the proposed rule change as ``establishing or changing a due, fee, or 
other charge'' under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 
19b-4(f)(2) \4\ thereunder, which renders the proposal effective upon 
filing with the Commission.
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    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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    The text of the proposed rule change is available on the MSRB's 
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2020-Filings.aspx, at the MSRB's principal office, and at the Commission's 
Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the MSRB included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The MSRB has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The MSRB is closely monitoring the impact of the coronavirus 
disease (``COVID-19'') pandemic on the municipal market and municipal 
market participants, including issuers, investors, dealers and 
municipal advisors.\5\ The Federal Reserve, noting that ``[t]he 
municipal securities market is an important part of the financial 
system, which helps provide states, cities, and counties (and their 
political subdivisions and other governmental entities) with the 
funding needed to provide essential public services to their 
citizens,'' \6\ established the MLF, which has been authorized under 
Section 13(3) of the Federal Reserve Act.\7\ ``The immediate purpose of 
the MLF is to enhance the liquidity of the primary short-term municipal 
securities market through the purchase at issuance of Tax Anticipation 
Notes (``TANs''), Tax and Revenue Anticipation Notes (``TRANs''), Bond 
Anticipation Notes (``BANs''), and similar short-term notes'' 
(collectively, ``Eligible Notes'').\8\
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    \5\ Wall Street Journal: How the Muni Market Became the 
Epicenter of the Liquidity Crisis (April 2, 2020) https://www.wsj.com/articles/how-the-muni-market-became-the-epicenter-of-the-liquidity-crisis-11585823404.
    \6\ Federal Reserve Bank of New York, FAQs: Municipal Liquidity 
Facility (``Fed FAQs'') https://www.newyorkfed.org/markets/municipal-liquidity-facility/municipal-liquidity-facility-faq.
    \7\ 12 U.S.C. 343 (1932).
    \8\ Fed FAQs.
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    The MSRB continues to monitor announcements by the Federal Reserve 
to understand how the Facility will operate in conjunction with MSRB 
rules.\9\ The Facility intends to provide a liquidity backstop to 
certain issuers through a special purpose vehicle (``SPV''). The SPV 
may purchase certain Eligible Notes through a direct sale to the SPV 
or, if there is a competitive sale process, the SPV generally will not 
submit a bid in the competitive sale process, but instead may agree to 
purchase such municipal securities that are not awarded to other 
bidders.\10\
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    \9\ See e.g., Federal Reserve Bank of New York, Term Sheet 
regarding the Facility (May 11, 2020) (``Fed Term Sheet'') https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200511a1.pdf.
    \10\ See Fed FAQs.
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    Based on the information currently available regarding the 
operation of the MLF, the MSRB believes that the MLF would be a 
customer for purposes of Rule A-13 and, therefore, the underwriting, 
transaction and technology assessments under Rule A-13 would be 
applicable to dealers' transactions with the MLF. The MSRB recognizes 
that dealers are experiencing operational challenges coupled with 
unprecedented conditions in the municipal market due to the COVID-19 
pandemic.\11\ The MSRB is proposing to waive these market activity fees 
for transactions conducted with the MLF. Specifically, the MSRB is 
proposing to provide a temporary waiver to dealers for the assessment 
of the:
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    \11\ Supra note 5.
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     Underwriting fee in the amount .00275% ($.0275 per $1,000) 
of the par value pursuant to Rule A-13(c)(i) on the par amount of the 
primary offering that is purchased by or on behalf of the MLF;
     Transaction fee on sales to the MLF in the amount equal to 
.001% ($.01 per $1,000) of the total par value of sales to customers 
that it reports to the Board under MSRB Rule G-14(b), on reports of 
sales and purchases, pursuant to Rule A-13(d)(ii); and
     Technology fee of $1.00 per transaction for sales to the 
MLF that it reports to the Board under Rule G-14(b), pursuant to Rule 
A-13(d)(iv)(b).
    The MSRB intends the waiver to be temporary and to expire at the 
same time as the MLF. The MLF is currently scheduled to cease 
purchasing Eligible Notes on December 31, 2020, unless the Federal 
Reserve Board of Governors and the Treasury Department extend the 
program.\12\ The MSRB will waive the market activity fees assessed on

[[Page 34662]]

transactions with the MLF by issuing a credit for the amount of the 
applicable assessment. The amount of the fees to be waived will be 
displayed on a monthly statement as a credit against the gross billing 
and netted to indicate the amount due. Consistent with Rule A-13(e), 
the amount due is to be paid within 30 days of the sending of the 
invoice by the Board.
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    \12\ The Federal Reserve Bank will continue to fund the SPV 
after such date until the SPV's underlying assets mature or are 
sold. See Fed Term Sheet.
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2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Act,\13\ which provides that the MSRB's 
rules shall:
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    \13\ 15 U.S.C. 78o-4(b)(2)(C).

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, 
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municipal entities, obligated persons, and the public interest.

    The MSRB believes that dealers' transactions with the MLF will 
serve to facilitate the smooth functioning of the municipal securities 
market during times of strain resulting from the COVID-19 pandemic. 
Providing a waiver of market activity fees resulting from such 
transactions will help to provide liquidity for the municipal market 
and serve to remove impediments to and perfect the mechanism of a free 
and open market in municipal securities without impacting the 
protection of investors, municipal entities, obligated persons, and the 
public interest.
    The MSRB also believes that the proposed rule change is consistent 
with Section 15B(b)(2)(J) of the Act \14\ which requires, in pertinent 
part, that the MSRB's rules shall provide that each municipal 
securities broker, municipal securities dealer, and municipal advisor 
shall pay to the Board such reasonable fees and charges as may be 
necessary or appropriate to defray the costs and expenses of operating 
and administering the Board and that such rules shall specify the 
amount of such fees and charges.
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    \14\ 15 U.S.C. 78o-4(b)(2)(J).
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    The MSRB recognizes that dealers are experiencing operational 
challenges coupled with unprecedented conditions in the municipal 
market due to the COVID-19 pandemic and believes this temporary waiver 
of certain market activity fees will provide some relief. The temporary 
waiver would be applicable to a limited number of transactions for a 
limited duration, consistent with the operation of the MLF.\15\ The 
MSRB believes that the waiver would not materially alter the total 
amount of fees collected by the MSRB or negatively impact its long-term 
sustainability, thereby continuing to ensure that the MSRB is 
sufficiently capitalized to meet its regulatory responsibilities. 
Accordingly, the MSRB believes that the proposed waiver of certain 
assessments on a temporary basis is reasonable and appropriate.
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    \15\ See Fed Term Sheet.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Act \16\ requires that MSRB rules be 
designed not to impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The goal of the 
proposed rule change is to provide relief during the exigent 
circumstances of the COVID-19 pandemic. The relief will apply equally 
to all dealers and extend for the duration of the MLF.\17\ Accordingly, 
the MSRB does not believe that the proposed rule change would result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Exchange Act.
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    \16\ 15 U.S.C. 78o-4(b)(2)(C).
    \17\ Currently, the MLF is planning to only purchase Eligible 
Notes until December 31, 2020. See Fed Term Sheet.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received on the 
proposed rule change.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \18\ and paragraph (f) of Rule 19b-4 
thereunder.\19\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MSRB-2020-03 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-2020-03. 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 written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MSRB-2020-03 and should be submitted on 
or before June 26, 2020.


[[Page 34663]]


    For the Commission, pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-12167 Filed 6-4-20; 8:45 am]
 BILLING CODE 8011-01-P


