[Federal Register Volume 87, Number 152 (Tuesday, August 9, 2022)]
[Notices]
[Pages 48530-48546]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17002]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95417; File No. SR-MSRB-2022-06]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Amend Certain Rates of Assessment for Rate Card Fees Under 
MSRB Rules A-11 and A-13, Institute an Annual Rate Card Process for 
Future Rate Amendments, and Provide for Certain Technical Amendments to 
MSRB Rules A-11, A-12, and A-13

August 3, 2022.
    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 July 29, 2022, the Municipal Securities 
Rulemaking Board (``MSRB'' or ``Board'') filed with the Securities

[[Page 48531]]

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 to amend:
    (i) Rule A-11, on assessments for municipal advisor professionals, 
to modify the rate of assessment for the annual professional fee for 
each person associated with a municipal advisory firm who is qualified 
as a municipal advisor representative in accordance with Rule G-3, on 
professional qualification requirements, and for whom the municipal 
advisory firm has an active Form MA-I on file with the Commission as of 
January 31st of each year (each individual being a ``covered 
professional'' and such fee amount on each covered professional the 
``Municipal Advisor Professional Fee''); \3\
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    \3\ ``Form MA-I: Information Regarding Natural Persons Who 
Engage in Municipal Advisory Activities,'' is an SEC form that must 
be completed and filed by a municipal advisory firm with respect to 
each natural person associated with the firm and engaged in 
municipal advisory activities on the firm's behalf, including 
employees of the firm. Independent contractors are included in the 
definition of ``employee'' for these purposes. A natural person 
doing business as a sole proprietor must complete and file Form MA-I 
in addition to Form MA. Form MA-I is also used to amend a previously 
submitted form, including in such cases where an individual is no 
longer an associated person of the municipal advisory firm or no 
longer engages in municipal advisory activities on the firm's 
behalf. See ``Instructions for the Form MA Series,'' available at 
https://www.sec.gov/about/forms/formmadata.pdf. For purposes of Rule 
A-11 and the calculation of the Municipal Advisor Professional Fee, 
if a firm has filed an amendment to indicate that an individual is 
no longer an associated person of the municipal advisory firm or no 
longer engages in municipal advisory activities on its behalf, then 
that individual's Form MA-I would not be deemed as active for 
purposes of the Municipal Advisor Professional Fee and would not be 
counted in the January 31st calculation regarding the assessment of 
the Municipal Advisor Professional Fee.
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    (ii) Rule A-13, on underwriting and transaction assessments for 
brokers, dealers, and municipal securities dealers (collectively, 
``dealers''), to modify the rate of assessments on dealers for certain 
underwriting, transaction, and trade count fees \4\ (collectively, the 
``Market Activity Fees'' and, such Market Activity Fees together with 
the Municipal Advisor Professional Fee, the ``Rate Card Fees''); \5\ 
and
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    \4\ As further described herein, the proposed rule change would 
provide a technical amendment to Rule A-13 to change the terminology 
for this fee from ``technology fee'' to ``trade count fee.'' To 
avoid confusion, the proposed rule change utilizes the amended name 
except as context requires for clarity, such as describing this 
specific technical amendment and providing certain historical 
revenue data in Exhibit 3(a). See discussion infra entitled 
``Technical Amendments to Rule A-13 and Related Cross-References.''
    \5\ Underwriting assessments charged pursuant to Rule A-
13(c)(ii) to certain dealers acting as underwriters of municipal 
fund securities are not included in the Market Activity Fees that 
would be amended by this proposed rule change.
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    (iii) Rule A-11, Rule A-12, on registration, and Rule A-13 to 
provide greater regulatory clarity for the assessment of fees on 
municipal securities brokers, municipal securities dealers, and 
municipal advisors (collectively, ``MSRB regulated entities'') under 
these rules.
    The proposed amendments to the rates of assessment of the Rate Card 
Fees are referred to as the ``Rate Card Amendments.'' The Rate Card 
Amendments would establish the Rate Card Fees in accordance with the 
following table.

------------------------------------------------------------------------
                                            Basis          Proposed rate
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Underwriting Fee..................  Per $1,000 Par               $0.0297
                                     Underwritten.
Transaction Fee...................  Per $1,000 Par                0.0107
                                     Transacted.
Trade Count Fee...................  Per Trade...........            1.10
Municipal Advisor Professional Fee  Per Covered                    1,060
                                     Professional.
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    The proposed technical amendments to Rule A-11, Rule A-12, and Rule 
A-13 are referred to as the ``Technical Amendments.'' The Rate Card 
Amendments and the Technical Amendments together are referred to as the 
``proposed rule change.''
    The MSRB has designated the proposed rule change for immediate 
effectiveness.\6\ The Rate Card Amendments and the Technical Amendments 
are designated to have an operative date of October 1, 2022. The Board 
currently anticipates the amended Rate Card Fees proposed by the Rate 
Card Amendments to be operative for a period of fifteen months from 
October 1, 2022 to December 31, 2023. In addition, any further 
amendments to the Rate Card Fees would be established in accordance 
with the MSRB's annual rate process consistent with the Board's funding 
policy that will be effective October 1, 2022, currently available at 
https://msrb.org/About-MSRB/Financial-and-Other-Information/Financial-Policies/Future-Funding-Policy (hereinafter, the ``revised funding 
policy). In addition, any such amendments to the Rate Card Fees would 
be filed with the Commission pursuant to the provisions of Section 
19(b)(1) of the Exchange Act.\7\
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    \6\ The MSRB has designated the Rate Card Amendments as 
establishing or changing a due, fee, or other change under Section 
19(b)(3)(A)(ii) of the Act (15 U.S.C. 78s(b)(3)(A)(ii)) and Rule 
19b-4(f)(2) (17 CFR 240.19b-4(f)(2)) thereunder. The MSRB has 
designated the Technical Amendments as being immediately effective 
upon filing pursuant to Section 19(b)(3)(A)(iii) of the Exchange Act 
(15 U.S.C. 78s(b)(3)(A)(iii)) and Rule 19b-(f)(6) (17 CFR 240.19b-
4(f)(6)) thereunder.
    \7\ See discussion infra under ``Proposed Annual Rate Card 
Approach.'' As further described therein, the Board presently 
anticipates filing proposed rule changes with the Commission to 
amend the rates of assessment of the Rate Card Fees on an annual 
basis going forward, as applicable. Accordingly, to the extent 
warranted, the first set of such amendments would be filed with the 
Commission prior to or in the last quarter of calendar year 2023 to 
become operative on January 1, 2024.
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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/2022-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.

[[Page 48532]]

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

1. Purpose
    The purpose of the Rate Card Amendments is to amend the rate of 
assessment for the Board's Rate Card Fees effective on October 1, 2022. 
The description of the Rate Card Amendments provides transparency 
regarding the internal process for how the Board, if warranted, would 
amend such fees on an annual basis going forward. Specifically, the 
Board will conduct an annual review of the Rate Card Fees and, if the 
Board determines an adjustment is necessary or appropriate to defray 
the costs and expenses of operating and administering the Board, the 
Board will file a proposed rule change with the Commission in the last 
quarter of the calendar year to effectuate a new ``Annual Rate Card'' 
for the next calendar year.\8\ The MSRB anticipates that any such 
proposed rule change would be filed to be effective as of January 1 of 
each calendar year and operative until December 31 for that year.\9\ In 
addition to the proposed Rate Card Amendments, the proposed rule change 
also proposes the Technical Amendments to Rule A-11, Rule A-12, and 
Rule A-13 to provide greater regulatory clarity for the assessment of 
fees on MSRB regulated entities under these rules.
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    \8\ See Section 15B(b)(2)(J) of the Act (15 U.S.C. 78o-
4(b)(2)(J)).
    \9\ Unlike any future amendments, the Rate Card Amendments for 
Fiscal Year 2023 are expected to be effective for a 15-month period 
from October 1, 2022 to December 31, 2023.
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Purpose and Description of the Rate Card Amendments
    As a self-regulatory organization, the Board discharges its 
statutory mandate under the Exchange Act by establishing rules for 
regulated entities, enhancing the transparency of the municipal 
securities market through technology systems, and publicly 
disseminating data about the municipal securities market. Consistent 
with the Exchange Act, the Board funds its activities primarily through 
the assessment of fees and charges on regulated entities as is 
necessary or appropriate to defray the costs and expenses of operating 
and administering the Board.\10\ The Board, which, consistent with the 
Exchange Act, consists of a majority of public members as well as 
members who are associated with and representative of regulated 
entities, including municipal advisors and dealers,\11\ directs and 
oversees the MSRB's budgeting process to ensure that fees that fund the 
budget are fair and equitable and independently manages and monitors 
its financial position on an ongoing basis to ensure that the 
organization has sufficient revenue and organizational reserves to 
maintain its operations in accordance with the Act,\12\ without 
interruption, even in economic downturns and other unforeseen 
circumstances.
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    \10\ See Section 15B(b)(2)(J) of the Act (15 U.S.C. 78o-
4(b)(2)(J)).
    \11\ See Section 15B(b)(1) of the Act; MSRB Rule A-3.
    \12\ Id.
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Current Fee Structure
    The Board has previously established, and currently applies, the 
following fee assessments on regulated entities to ensure the MSRB's 
ongoing operations (the ``current fee structure''): \13\
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    \13\ The Market Activity Fees listed do not indicate the current 
temporary fee reductions that expire on September 30, 2022. See Rule 
A-13(h) (specifying a temporary underwriting assessment of .00165% 
($0.0165 per $1,000) of the par value; a temporary transaction 
assessment of .0006% ($0.006 per $1,000) of the par value; and a 
temporary technology assessment of $0.60 per transaction); see also 
Exchange Act Release No. 91247 (Mar. 3, 2021), 86 FR 13593 (Mar. 9, 
2021) File No. SR-MSRB-2021-02 (hereinafter, ``2021 Temporary Fee 
Reduction''). Consistent with the language of the 2021 Temporary Fee 
Reduction, these reduced fee rates will expire on September 30, 
2022; and the related rule text would be deleted effective as of 
October 1, 2022 by operation of the Technical Amendments proposed 
herein.
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    (i) Municipal Advisor Professional Fee: A fee of $1,000 for each 
covered professional as of January 31 of each year; \14\
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    \14\ Current Rule A-11(a)(i).
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    (ii) Initial Registration Fee: A $1,000 one-time registration fee 
to be paid by each dealer to register with the MSRB before engaging in 
municipal securities activities and by each municipal advisor to 
register with the MSRB before engaging in municipal advisory 
activities; \15\
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    \15\ Rule A-12(b). Initial registration assessments charged 
pursuant to Rule A-12(b) are not included in the Rate Card Fees that 
would be amended by this proposed rule change. Given that the amount 
of the initial registration fee historically has been set with the 
intention of defraying a significant portion of the administrative 
and operational costs associated with the processing of a regulated 
entity's initial registration, the Board determined that, at this 
time, it was not beneficial or necessary to incrementally adjust 
such fees each year through an annual rate setting process. See 
Exchange Act Release No. 75751 (Aug. 24, 2015), 80 FR 52352 (Aug. 
28, 2015) File No. SR-MSRB-2015-08 (stating the initial registration 
fee is to help defray a significant portion of the administrative 
and operational costs associated with processing an initial 
registration). See also discussion infra under ``Board Review of the 
Current Fee Structure'' and ``Proposed Annual Rate Card Approach.''
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    (iii) Annual Registration Fee: A $1,000 annual fee to be paid by 
each dealer and municipal advisor registered with the MSRB; \16\
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    \16\ Rule A-12(c). Annual registration assessments charged 
pursuant to Rule A-12(c) are not included in the Rate Card Fees that 
would be amended by this proposed rule change. Given that the rate 
of assessment for the annual registration fee is intended to serve 
as a fixed, baseline contribution from all registered regulated 
entities, irrespective of a regulated entity's actual total market 
activities, the Board determined that, at this time, it was not 
beneficial or appropriate to incrementally adjust such fees each 
year through an annual rate setting process. See also discussion 
infra under ``Board Review of the Current Fee Structure'' and 
``Proposed Annual Rate Card Approach.''
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    (iv) Late Fee: A $25 monthly late fee and a late fee on the overdue 
balance (computed according to the prime rate) until paid on balances 
not paid within 30 days of the invoice date by the dealer or municipal 
advisor; \17\
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    \17\ Rule A-11(b) and Rule A-12(d). As discussed herein, the 
Technical Amendments would remove the current reference in Rule A-
12(d) to late fees for payments due pursuant to Rule A-13 and 
incorporate this concept into Rule A-13. See Rule A-12(d) (``Any 
broker, dealer, municipal securities dealer or municipal advisor 
that fails to pay any fee assessed under this rule or Rule A-13 
within 30 days of the invoice date shall pay a monthly late fee of 
$25 and a late fee on the overdue balance, computed according to the 
Prime Rate, as provided for in the MSRB Registration Manual, until 
paid.'' (emphasis added)).
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    (v) Underwriting Fee: A fee amount of $.0275 per $1,000 of the par 
value paid by a dealer on all municipal securities purchased from an 
issuer by or through such dealer, whether acting as principal or agent 
as part of a primary offering (the ``Underwriting Fee''); \18\
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    \18\ Current Rule A-13(c)(i).
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    (vi) Municipal Funds Underwriting Fee: A fee amount of $.005 per 
$1,000 of the total aggregate assets for the reporting period (i.e., 
the 529 savings plan fee on underwriters), in the case of an 
underwriter (as defined in Rule G-45) of a primary offering of certain 
municipal fund securities; \19\
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    \19\ Current Rule A-13(c)(ii). Assessments charged pursuant to 
Rule A-13(c)(ii) related to certain municipal fund securities are 
not included in the Rate Card Fees that would be amended by this 
proposed rule change. The basis upon which the municipal funds 
underwriting fee is assessed (i.e., the total aggregate assets for 
the reporting period) is not subject to the same type of volatility 
as the Market Activity Fees, but instead is expected to generally 
continue to grow over time. For example, municipal funds 
underwriting fee revenue amounted to approximately $1,332,000 in 
Fiscal Year 2021, approximately $1,167,000 in Fiscal Year 2020, and 
approximately $991,000 in Fiscal Year 2019. See MSRB 2021 Annual 
Report, available at https://www.msrb.org/-/media/Files/Resources/MSRB-2021-Annual-Report.ashx?. As a result, the Board determined 
that, at this time, it was not beneficial or necessary to 
incrementally adjust the rate of assessment each year through an 
annual rate setting process. See discussion infra under ``Board 
Review of the Current Fee Structure'' and ``Proposed Annual Rate 
Card Approach.''
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    (vii) Transaction Fee: A fee amount of .001% ($.01 per $1,000) of 
the total par value to be paid by a dealer, except in

[[Page 48533]]

limited circumstances, for inter-dealer sales and customer sales 
reported to the MSRB pursuant to Rule G-14(b), on transaction reporting 
requirements (the ``Transaction Fee''); \20\
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    \20\ Rule A-13(d)(i) (transaction fee on inter-dealer sales) and 
Rule A-13(d)(ii) (transaction fee on customer sales).
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    (viii) Technology Fee: \21\ A fee of $1.00 paid per transaction by 
a dealer for each inter-dealer sale and for each sale to customers 
reported to the MSRB pursuant to Rule G-14(b) (the ``Trade Count 
Fee''); \22\ and
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    \21\ As further described herein, the proposed rule change would 
provide a technical amendment to this provision of Rule A-13 to 
rename this fee to the ``trade count fee.''
    \22\ Rule A-13(d)(vi).
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    (ix) Examination Fee: A $150 test development fee assessed per 
candidate for each MSRB examination.\23\
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    \23\ Rule A-16. Assessments charged pursuant to Rule A-16 
related to such examination fees are not included in the Rate Card 
Fees that would be amended by this proposed rule change. Given that 
the rate of assessment for the examination fee historically has been 
set with the intention of defraying a portion of the overall costs 
of the MSRB's professional qualification and testing program, the 
Board determined that, at this time, it was not beneficial or 
necessary to incrementally adjust the rate of assessment of such fee 
each year through an annual rate setting process. See Exchange Act 
Release No. 85135 (Feb. 14, 2019), 84 FR 5513 (Feb. 21, 2019) File 
No. SR-MSRB-2019-02 (stating the examination fee is intended to 
partially offset the overall program costs to the MSRB of its 
professional qualification and testing program). See also discussion 
infra under ``Board Review of the Current Fee Structure'' and 
``Proposed Annual Rate Card Approach.''
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    In addition to these fees assessed on regulated entities, the Board 
also receives revenues from certain other sources, such as investment 
income, regulatory fine sharing,\24\ and MSRB data subscription 
fees.\25\ These revenue sources contribute a much smaller portion to 
the overall MSRB funding.\26\
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    \24\ Fine revenue became a revenue source as first provided in 
2010 under the Dodd-Frank Wall Street Reform and Consumer Protection 
Act (the ``Dodd-Frank Act''). See 15 U.S.C. 78o-4(c)(9).
    \25\ The MSRB charges data subscription service fees for 
subscribers, including regulated entities and non-regulated 
entities, seeking direct electronic delivery of municipal trade data 
and disclosure documents associated with municipal bond issues. This 
information is also available without direct electronic delivery on 
the MSRB's Electronic Municipal Market Access (``EMMA'') website 
without charge.
    \26\ For example, fine-sharing revenue amounted to approximately 
0.9% of the MSRB's overall revenue in Fiscal Year 2021 (or 
approximately $322,000), 3.3% in Fiscal Year 2020 (or approximately 
$1.5 million), and 0.4% (or approximately $151,000) in Fiscal Year 
2019. See MSRB 2021 Annual Report, available at https://www.msrb.org/-/media/Files/Resources/MSRB-2021-Annual-Report.ashx?. 
Given that this revenue is collected by FINRA and the SEC for 
violations of MSRB rules and the fact that the Board does not set 
the rates of assessment for the collection of such fines, the Board 
does not believe that it is appropriate to separately consider fine-
sharing revenue for potential rebates to regulated entities by 
operation of the proposed Annual Rate Cards and the annual rate 
setting process.
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Board Review of the Current Fee Structure
    Early in Fiscal Year 2021, the Board determined that it should 
review the current fee structure in relation to the MSRB's long term 
financial position and near-term anticipated funding needs (the ``Fee 
Review''). Through its Fee Review, the Board sought to identify 
potential improvements to the MSRB's current fee structure that would: 
(i) maintain a fair and equitable balance of reasonable fees and 
charges among regulated entities; \27\ (ii) mitigate the impact of 
market volatility on the amount of fee revenue actually paid each year 
\28\ and, correspondingly, facilitate the Board's ability to manage the 
amount held by the MSRB in organizational reserves year-to-year; \29\ 
and (iii) prudently fund the MSRB's anticipated near-term operating 
expenses.\30\
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    \27\ While engaging in the Fee Review, and consistent with the 
MSRB's funding policy, the Board considered how potential 
modifications to the current fee structure would impact the 
diversity of the MSRB's funding sources. See MSRB's funding policy, 
available at https://www.msrb.org/About-MSRB/Financial-and-Other-Information/Financial-Policies/Funding-Policy (hereinafter, the 
``current funding policy''). Both the current funding policy and the 
revised funding policy, effective October 1, 2022, available at 
https://msrb.org/About-MSRB/Financial-and-Other-Information/Financial-Policies/Future-Funding-Policy, state that the ``MSRB 
strives to diversify funding sources among regulated entities and 
other entities that fund MSRB services in a manner that ensures 
long-term sustainability, seeking to achieve an equitable balance 
among regulated entities and a fair allocation of the costs of 
systems and services among other users and regulated entities to the 
extent allowed by law.''
    \28\ Market Activity Fees are driven by market dynamics and are 
inherently unpredictable. Because of this unpredictability, the 
amount of Market Activity Fees collected by the MSRB has often 
exceeded the amount budgeted in recent fiscal years. The MSRB's 
Financial Statements for recent fiscal years are available at http://msrb.org/About-MSRB/Financial-and-Other-Information/Annual-Reports.aspx. See Exhibit 3(a), ``Chart 2--Historical Budget vs. 
Actual Revenue for the Rate Card Fees'' and ``Chart 4--Rate Card 
Fees: Historical Activity Volume Variance Budget to Actual.''
    \29\ The Board established a reserves target to ensure that the 
organization maintains a prudent level of financial resources to 
fund operations and ensure the long-term financial sustainability of 
the organization, taking into consideration a range of reasonably 
foreseeable market conditions for a dynamic market and expected 
expenditures over a three-year time horizon. The reserves target is 
determined after conducting a detailed and comprehensive analysis of 
the liquidity needs in four categories: (1) working capital, (2) 
risk reserves, (3) strategic investment reserves, and (4) regulatory 
reserves. See MSRB funding policies (link at note 27 supra) (these 
four categories are identified in the discussion under ``Reserve 
Considerations''). The Board reviews and adjusts the reserves target 
on an annual basis to ensure that it remains appropriately aligned 
with the organization's needs. See MSRB Fiscal Year 2022 Budget for 
a further discussion of the MSRB's budget and reserves, available at 
https://www.msrb.org/-/media/Files/Resources/MSRB-FY-2022-Budget-Summary.ashx?.
    \30\ See, e.g., Exhibit 3(a), ``Chart 8--Historical Actual 
Expenses,'' ``Chart 10--Historical and Projected Revenue without 
Rate Card Model Compared to Historical and Pro Forma Expenses,'' 
``Chart 11--Historical and Projected Revenue with Rate Card Model 
Compared to Historical and Pro Forma Expenses.''
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    Maintaining a Fair and Equitable Balance of Fees. As part of its 
Fee Review, the Board evaluated the MSRB's current fee structure to 
determine whether the fees and charges assessed upon regulated entities 
remain reasonable, fair, and equitable. Among other factors considered 
during the Fee Review, the Board: (i) analyzed publicly available data 
on the revenue models of dealers and municipal advisors across 
geographic areas; \31\ (ii) examined MSRB expense allocations to inform 
its understanding of how much of the MSRB's expense budget relates to 
various activities; \32\ (iii) evaluated historical budgeted revenue 
versus actual revenues generated for the existing fee categories; \33\ 
(iv) gauged the MSRB's fee distribution across varying business models 
of dealer and municipal advisory firms; \34\ and (v) deliberated upon 
feedback from stakeholder discussions and prior written comments on the 
topic of the MSRB's fees and expenses.\35\
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    \31\ The Board considered market data from various external and 
internal sources, such as the Texas Bond Review Board State and 
Local Annual Reports (http://www.brb.state.tx.us/publications.aspx), 
the California State Treasurer's Office--California Debt and 
Investment Advisory Commission (CDIAC) (https://data.debtwatch.treasurer.ca.gov/Government/CDA-All-Data/yng6-vaxy), 
primary market data included in official statements and other 
offering documents, and trading and other secondary market data. See 
also, e.g., the MSRB's published Fact Books, which provide various 
historical data sets related to market activities, such as the 
distribution of municipal trades by dealers, available at https://www.msrb.org/Market-Transparency/Market-Data-Publications/MSRB-Fact-Book.aspx.
    \32\ See, e.g., Exhibit 3(a), ``Chart 9--Historical Budgeted 
Expense by Function.''
    \33\ See Exhibit 3(a), ``Chart 1--Historical Revenue Variances: 
Budget vs. Actual'' and ``Chart 2--Historical Budget vs. Actual 
Revenue for the Rate Card Fees.''
    \34\ As non-exhaustive examples, the Board considered fee 
distribution across the business models of: (i) small, medium, and 
large firms, (ii) dually registered firms versus firms registered 
only as dealers or municipal advisors, and (iii) firms that engage 
in underwriting activities versus secondary market activities. See 
also Exhibit 3(a), ``Chart 14--Distribution of Registrants by Range 
of Total Fees Assessed Under Current Fee Structure Compared to 
Projected Distribution Under the Rate Card Model (Exclusive of Late 
Fees and Examination Fees).''
    \35\ See, e.g., MSRB Notice 2020-19: ``MSRB Requests Input on 
Strategic Goals and Priorities'' (Dec. 7, 2020), available at 
https://msrb.org/-/media/Files/Regulatory-Notices/RFCs/2020-19.ashx??n=1, and related stakeholder comments (hereinafter, the 
``Stakeholder Comments to the MSRB's Strategic Priorities''), 
available at https://msrb.org/Rules-and-Interpretations/Regulatory-Notices/2020/2020-19?c=1. See also, e.g., comments provided on 
Exchange Act Release No. 87075 (Sep. 24, 2019), 84 FR 51698 (Sep. 
30, 2019) File No. SR-MSRB-2019-11, available at https://www.sec.gov/comments/sr-msrb-2019-11/srmsrb201911.htm, and comments 
provided on Exchange Act Release No. 81264 (July 31, 2017), 82 FR 
36472 (Aug. 4, 2017) File No. SR-MSRB-2017-05, available at https://www.sec.gov/comments/sr-msrb-2017-05/msrb201705.htm.

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[[Page 48534]]

    Based on these factors considered, the Board found that the current 
fee structure--including the basis on which fees are assessed and the 
relative contribution of revenue from each of the current fees assessed 
on regulated entities--overall remains reasonable, fair, and equitable. 
As the MSRB has previously noted, it is impractical for a regulatory 
organization to specifically apportion the costs and benefits of 
rulemaking, systems development, operational and administrative 
activities between regulated entities with the constraint of 
determining whether such activities bear a close relationship to the 
level of funding obtained from dealers and municipal advisors at a 
particular point in time.\36\ The Act does not impose such a 
requirement; rather, the Act requires that the Board's rules provide 
that each regulated entity ``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.'' \37\
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    \36\ See Letter from Gail Marshall, Associate General Counsel--
Enforcement Coordination, MSRB, to Secretary, SEC dated Sept. 30, 
2015, available at, https://www.sec.gov/comments/sr-msrb-2015-08/msrb201508-4.pdf.
    \37\ Section 15B(b)(2)(J) of the Act.
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    The MSRB must be adequately funded to undertake rulemaking, 
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.\38\ In addition, given that numerous 
operations and services are executed with the intent to protect 
investors, municipal issuers, and obligated persons and provide market 
transparency to facilitate a fair and efficient market, there is not an 
exact correlation between revenue streams and expenses.\39\ The Board 
seeks to establish a reasonable fee structure that ensures long-term 
sustainability and continues to believe that its overall fee structure 
is reasonable, achieves general equity across its regulated entities, 
and correlates fees with those firm components that drive the MSRB's 
regulatory costs to the extent feasible. However, as further discussed 
below, the Board has determined that the current fee structure could be 
improved with certain process changes and is proposing rule amendments 
to address the challenges associated with (i) the revenue impact of 
market volatility and (ii) the MSRB's anticipated near-term funding 
needs.
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    \38\ Section 15B(b)(2)(C) of the Act.
    \39\ For example, municipal trade data and issuers' disclosure 
documents associated with bond issuances are available on EMMA for 
free to all market participants, including investors and issuers, 
who do not contribute to the MSRB's revenue.
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    Mitigating the Impact of Market Volatility. As part of the Fee 
Review, the Board analyzed the historical revenue generated under the 
MSRB's current fee structure as compared to the historical amounts 
budgeted over the same fiscal years.\40\ While the various fees paid by 
regulated entities have, in some recent fiscal years, marginally 
exceeded or underperformed their budgeted amounts, the Board found that 
the amount of the three Market Activity Fees collected have often 
exceeded their annual budget targets by more than marginal amounts.\41\ 
The Board also found that the recurring variances between budgeted 
amounts and actual amounts of the Market Activity Fees collected, 
resulting from the inherent imprecision associated with budgeting 
future market volumes related to underwriting and trading activity that 
exists within the overall dynamic of the municipal securities market, 
directly contributed to the periodic build-up of excess reserves and, 
consequently, precipitated the need for the MSRB to use rebates or 
temporary fee reductions as a mechanism to rightsize organizational 
reserve positions back to the Board's target.\42\ Based on these causal 
links between fluctuations in market activity year-to-year, variances 
in the amount of Market Activity Fees actually collected versus 
budgeted amounts, and the need for rebates or temporary fee reductions 
to rightsize organizational reserves, the Board prioritized the 
identification of alternative fee approaches that would better mitigate 
the impact of the inevitable, year-to-year fluctuations in activity in 
the municipal securities market and, as a result, provide more 
certainty to regulated entities.
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    \40\ See, e.g., Exhibit 3(a), ``Chart 1--Historical Revenue 
Variances: Budget vs. Actual'' and ``Chart 2--Historical Budget vs. 
Actual Revenue for the Rate Card Fees.''
    \41\ See Exhibit 3(a), ``Chart 1--Historical Revenue Variances: 
Budget vs. Actual,'' ``Chart 2--Historical Budget vs. Actual Revenue 
for the Rate Card Fees,'' and ``Chart 4--Rate Card Fees: Historical 
Activity Volume Variance Budget to Actual.'' Relatedly, the Board 
determined that such recurring variances could not be fully 
addressed with further refinements to the MSRB's budgeting process; 
rather, the variances were inherent to the imprecision associated 
with budgeting future market volumes related to underwriting and 
trading activity that exists within the overall dynamic of the 
municipal securities market.
    \42\ Compare, e.g., Exhibit 3(a), ``Chart 2--Historical Budget 
vs. Actual Revenue for the Rate Card Fees,'' Chart 5--Historical 
Effective Fee Rate Changes'' and ``Chart 12--Total Reserves vs. 
Target: Historical and Projected without Rate Card Model.''
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    After considering alternatives, the Board first determined that the 
Municipal Advisor Professional Fee and the current set of Market 
Activity Fees--i.e., Underwriting Fees, Transaction Fees, and Trade 
Count Fees--remain the most reasonable and practical mechanisms for 
assessing fees on regulated entities and so should not be replaced with 
alternative fee mechanisms. The Board came to this determination 
primarily because it continues to believe that the respective 
mechanisms for assessing the Municipal Advisor Professional Fee and the 
Market Activity Fees remain superior to potential alternatives--some of 
which may require establishing significantly more burdensome 
recordkeeping and reporting requirements to achieve comparatively 
greater precision in the alignment of the total amount of the fees 
assessed on a given firm with such firm's total regulated activities; 
\43\ and, therefore, these fee mechanisms remain the best option among 
alternatives to ensure that the amount of the Municipal Advisor 
Professional Fees and Market Activity Fees paid by a given firm is both 
(i) appropriately balanced to the burdens and benefits of the MSRB's 
regulatory and transparency activities, and also (ii) generally 
proportional to the differing resources devoted to the regulation of 
firms with different business models and differing degrees of 
complexity.\44\ These existing fee

[[Page 48535]]

methods also have the advantage of being established mechanisms for 
assessing fees on regulated entities; and, in this regard, the Board 
believes that maintaining this current set of fee methods is more 
advantageous than other alternatives because firms already understand 
and have embedded such assessments into their business operations.
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    \43\ See also related discussion infra under ``Self-Regulatory 
Organization's Statement on Burden on Competition--Baseline and 
Reasonable Alternative Approaches.''
    \44\ The Board considers the distribution of its fees among 
regulated entities of differing sizes, complexities, and business 
models and strives for proportionality in the distribution of fees 
as much as feasible within the broader set of considerations 
described in its funding policy. See, e.g., related discussion supra 
under ``Board Review of the Current Fee Structure--Maintaining a 
Fair and Equitable Balance of Fees'' and Exhibit 3(a), ``Chart 14--
Distribution of Registrants by Range of Total Fees Assessed Under 
Current Fee Structure Compared to Projected Distribution Under the 
Rate Card Model (Exclusive of Late Fees and Examination Fees).'' See 
also Release No. 34-87075 (Sep. 24, 2019), 84 FR 51698 (Sep. 30, 
2019) File No. SR-MSRB-2019-11 (providing for increases to the 
Municipal Advisor Professional Fee and discussing the superiority of 
maintaining the Municipal Advisor Professional Fee in light of 
possible alternatives that would require creating a novel and, 
therefore, likely more burdensome reporting requirement).
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    While the Board determined that the mechanisms for assessing the 
Municipal Advisor Professional Fee and the Market Activity Fees should 
not be replaced, the Board also determined it would be beneficial to 
refine its approach to review and amend these fee rates for each 
calendar year on an annual basis going forward. Specifically, to avoid 
the MSRB accumulating excess reserves through the collection of fee 
revenue above budgeted amounts over multiple fiscal years and then 
utilizing short-term fee reductions to return the excess revenues to 
the regulated entities who paid the fees, the Board is proposing to 
review and incrementally refine the rates of assessment for each of 
these fees each year.
    This revised approach would more closely align the rates of 
assessment for the Municipal Advisor Professional Fee and the Market 
Activity Fees to the MSRB's annual revenue requirements, including by 
factoring revenue surpluses and shortfalls against budgeted amounts for 
each of these fees from the prior year directly into the annual rate 
calculation process. As further described in the section below entitled 
``Proposed Annual Rate Card Approach,'' the Board's proposed approach 
would (i) better mitigate the impact of market volatility on the MSRB's 
revenue structure (and, consequently, better mitigate the impact of 
market volatility on the MSRB's organizational reserves), and (ii) 
maintain rates within a reasonably predictable range that, while 
subject to more incremental changes each year, would provide regulated 
entities a comparably more stable fee structure over the long term than 
the MSRB's current fee structure.\45\
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    \45\ See related discussion infra under ``Proposed Annual Rate 
Card Approach--Limitations on Rate Changes to Promote Predictability 
and Stability'' (discussing various limitations on future increases 
of the Rate Card Fees). See also Exhibit 3(a), ``Chart 5--Historical 
Effective Fee Rate Changes.''
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    Funding the MSRB's Anticipated Near-Term Operating Expenses. In 
addition to analyzing the impact of variable market activity as part of 
its Fee Review, the Board also analyzed the MSRB's current budget 
projections for Fiscal Year 2023 and the anticipated funding needs in 
the near term beyond Fiscal Year 2023.\46\ Specific to the projections 
for Fiscal Year 2023, the MSRB's pro forma estimate currently 
anticipates an operating deficit for the twelve-month period, based on 
preliminary projected expenses and projected revenue under the current 
fee structure (and without the proposed Rate Card Amendments). Beyond 
Fiscal Year 2023, the Board assumed at least modest expense growth in 
the near-term fiscal years in line with the MSRB's ten-year compound 
annual growth rate,\47\ particularly in consideration of the current 
impacts of inflation and other key expenses associated with modernizing 
and operating the MSRB's technology systems. Based on these budgetary 
expectations, the Board analyzed options for how expense control and 
additional revenue generation could address both the projected 
operating deficit for Fiscal Year 2023 and the likelihood of expense 
growth in future near-term fiscal years.
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    \46\ Specific to the scope of the Board's near-term funding 
analysis, the Board considered various funding scenarios for Fiscal 
Year 2023 through Fiscal Year 2025. See, e.g., Exhibit 3(a), ``Chart 
8--Historical Actual Expenses'' (showing a ten-year historical 
compound annual growth rate of 4.2%), ``Chart 10--Historical and 
Projected Revenue without Rate Card Model Compared to Historical and 
Pro Forma Expenses,'' ``Chart 11--Historical and Projected Revenue 
with Rate Card Model Compared to Historical and Pro Forma 
Expenses.''
    \47\ See Exhibit 3(a), ``Chart 8--Historical Actual Expenses.''
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    In terms of expense control, the MSRB remains committed to 
responsibly managing expenses and aligning its resources to the 
fulfillment of the Board's statutory mandate.\48\ Accordingly, the 
Board reviewed anticipated expenses against various factors, including 
(i) the MSRB's ``Strategic Plan--Fiscal Years 2022-2025;'' \49\ (ii) 
actual historical expenses versus budgeted expenses for certain 
activities; \50\ and (iii) stakeholder feedback and comments.\51\ Based 
on these and other aspects of its Fee Review, the Board determined that 
the MSRB's Strategic Plan should serve as the main budgetary guidepost 
for how the MSRB allocates its limited resources and resolves competing 
fiscal priorities, particularly because various stakeholders provided 
significant written input regarding the Strategic Plan.\52\ 
Consequently, the Board determined that the MSRB's expenditures in 
Fiscal Year 2023 and future near-term fiscal years generally should 
align with the expenses necessary to discharge its statutory mandate in 
accordance with the Strategic Plan.\53\ As a result, at least modest 
expense growth, in line with the MSRB's ten-year compound annual growth 
rate,\54\ is assumed given various considerations, including the 
current Strategic Plan's emphasis on the modernization of the MSRB's 
technology systems and the MSRB's ongoing efforts to advance the 
quality, accessibility, security, and value of the MSRB's market data 
for all participants in the municipal securities market. The Board will 
continue to actively monitor and manage its financial position to 
ensure prudent expense alignment to the MSRB's statutory mandate and 
the corresponding objectives of the MSRB's Strategic Plan.
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    \48\ See, e.g., ``Controlling Expenses'' in MSRB Fiscal Year 
2022 Budget at page 12 and related discussion, available at https://msrb.org/-/media/Files/Resources/MSRB-FY-2022-Budget-Summary.ashx?. 
See also Exhibit 3(a), ``Chart 6--Historical Expense Variances: 
Budget vs. Actual.''
    \49\ The MSRB's Strategic Plan--Fiscal Years 2022-25 is 
available at https://msrb.org/-/media/Files/Resources/MSRB-Strategic-Plan-2022-2025.ashx? (the ``Strategic Plan'').
    \50\ See Exhibit 3(a), ``Chart 6--Historical Expense Variances: 
Budget vs. Actual'' and ``Chart 9--Historical Budgeted Expense by 
Function.''
    \51\ See, e.g., Stakeholder Comments to the MSRB's Strategic 
Priorities (link at note 34 supra).
    \52\ Id.
    \53\ The MSRB notes that its anticipated expenditures for the 
near-term fiscal years beyond Fiscal Year 2023 are subject to 
greater uncertainty caused by the higher potential for changing 
circumstances and, correspondingly, its budgetary assumptions for 
these years are also less certain.
    \54\ See Exhibit 3(a), ``Chart 8--Historical Actual Expenses.''
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    In terms of revenue, the Board determined that the current fee 
structure should be amended to increase total revenue and, thereby, 
reduce the likelihood of a near-term operating deficit for Fiscal Year 
2023.\55\ The Board is proposing to raise this additional revenue in 
accordance with a new rate setting approach as described in the 
following section entitled ``Proposed Annual Rate Card Approach.'' The 
Board considered comments from regulated entities about the 
consequences associated with the MSRB collecting more fee revenue than 
needed

[[Page 48536]]

and with the MSRB maintaining organizational reserves in excess of what 
is required.\56\ In response to such concerns, the Board has undertaken 
significant efforts to determine the level of organizational reserves 
needed and, correspondingly, refined and reduced its organizational 
reserves target.\57\ To bring the MSRB's excess organizational reserves 
in-line with this refined target, the Board has intentionally budgeted 
operating deficits in recent fiscal years, primarily by temporarily 
reducing certain fees on regulated entities and, thereby, collecting 
less revenue as a result of those fee reductions.\58\ At the same time, 
the Board has designated funds from the MSRB's organizational reserves 
for necessary multiyear systems modernization initiatives, which has 
further aligned organizational reserves to target.\59\ As a result of 
these efforts, the MSRB's organizational reserves presently are on 
track to be aligned with the Board's reserves target for Fiscal Year 
2023, which is $37.7 million.\60\ In this way, while the Board 
determined that additional funding is needed for Fiscal Year 2023, the 
Board also determined that such funding would be best obtained through 
an increase in fees as opposed to the further drawing down of 
organizational reserves below target.\61\
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    \55\ See Exhibit 3(a), ``Chart 10--Historical and Projected 
Revenue without Rate Card Model Compared to Historical and Pro Forma 
Expenses'' and ``Chart 11--Historical and Projected Revenue with 
Rate Card Model Compared to Historical and Pro Forma Expenses.''
    \56\ See, e.g., letter from Mike Nicholas, Chief Executive 
Officer, Bond Dealers of America (``BDA''), (Jan. 11, 2021) 
(hereinafter, the ``BDA Comment Letter'') (responding to the MSRB's 
Request for Input on Strategic Goals and Priorities and stating 
``[w]e strongly urge the Board to take a comprehensive look at its 
finances with the goal of once and for all establishing a funding 
mechanism that fairly allocates the MSRB's expenses among regulated 
entities and does not assess the industry for more money than the 
MSRB needs''), available at https://www.msrb.org/rfc/2020-19/Dbamerica.pdf.
    \57\ See Exhibit 3(a), ``Chart 12--Total Reserves vs. Target: 
Historical and Projected without Rate Card Model'' and ``Chart 13--
Total Reserves vs. Target: Historical and Projected with Rate Card 
Model.''
    \58\ See the 2021 Temporary Fee Reduction (citation and link at 
note 12 supra); Exchange Act Release No. 85400 (Mar. 22, 2019), 84 
FR 11841 (Mar. 28, 2019) File No. SR-MSRB-2019-06 (providing for a 
temporary fee reduction); and Exchange Act Release No. 83713 (July 
26, 2018), 83 FR 37538 (Aug. 1, 2018) File No. SR-MSRB-2018-06 
(providing for a temporary fee reduction). See also Exhibit 3(a), 
``Chart 1--Historical Revenue Variances: Budget vs. Actual,'' 
``Chart 2--Historical Budget vs. Actual Revenue for the Rate Card 
Fees,'' ``Chart 5--Historical Effective Fee Rate Changes,'' and 
``Chart 7--Historical Budgeted Revenue and Budgeted Expense.''
    \59\ See the MSRB's Fiscal Year 2022 Budget, at page 13 
(discussing the MSRB's system modernizations investments), available 
at https://msrb.org/-/media/Files/Resources/MSRB-FY-2022-Budget-Summary.ashx?. See also, e.g., the MSRB's 2021 Annual Report, at 
page 2 (link at note 25 supra); the MSRB's 2020 Annual Report, at 
page 35 (discussing certain modernization investment efforts), 
available at https://msrb.org/-/media/Files/Resources/MSRB-2020-Annual-Report.ashx?; and the MSRB's 2019 Annual Report, at page 11 
(discussing the MSRB's cloud investments), available at https://msrb.org/-/media/Files/Resources/MSRB-2019-Annual-Report.ashx?.
    \60\ See Exhibit 3(a), ``Chart 13--Total Reserves vs. Target: 
Historical and Projected with Rate Card Model.''
    \61\ See Exhibit 3(a), ``Chart 10--Historical and Projected 
Revenue without Rate Card Model Compared to Historical and Pro Forma 
Expenses,'' ``Chart 11--Historical and Projected Revenue with Rate 
Card Model Compared to Historical and Pro Forma Expenses,'' and 
``Chart 12--Total Reserves vs. Target: Historical and Projected 
without Rate Card Model,'' and ``Chart 13--Total Reserves vs. 
Target: Historical and Projected with Rate Card Model.''
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Proposed Annual Rate Card Approach
    Consistent with the Board's analysis and conclusions discussed 
above, the Board proposes to amend the Municipal Advisor Professional 
Fee assessed pursuant to Rule A-11 and the Market Activity Fees 
assessed pursuant to Rule A-13 (i.e., the Rate Card Fees). Underlying 
the proposed textual amendments to Rule A-11 and Rule A-13 is a revised 
fee approach to better mitigate the impact of market volatility on the 
MSRB's revenue structure and organizational reserves levels and 
maintain rates within a reasonably predictable range that, while 
subject to more incremental changes each year, would provide regulated 
entities a comparably more stable fee structure over the long term than 
the MSRB's current fee structure. The Board anticipates reviewing the 
Rate Card Fees each year and, as may be necessary, modifying them 
through the filing of a proposed rule change with the Commission. When 
necessary, these proposed rule changes will establish an Annual Rate 
Card with amended rates of assessment for each of the four fees on 
regulated entities that make up the Rate Card Fees (i.e., Underwriting 
Fees, Transaction Fees, Trade Count Fees, and Municipal Advisor 
Professional Fees). Subsequent to the Annual Rate Card described in 
this proposed rule change,\62\ the Board anticipates that any future 
proposed rule change enumerating the Annual Rate Cards to be effective 
as of January 1st of each calendar year beginning with January 1, 
2024.\63\
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    \62\ Because of the expiration of the 2021 Temporary Fee 
Reduction on September 30, 2022, the proposed rule change's Annual 
Rate Card for Fiscal Year 2023 and the first quarter of Fiscal Year 
2024 will become effective on October 1, 2022, and, in this way, is 
intended to be operative for a fifteen-month period running from 
October 1, 2022, to December 31, 2023.
    \63\ As the proposed rule change is structured, a given Annual 
Rate Card would remain effective and operative until a subsequent 
proposed rule change amending such rates is filed, effective, and 
operative. As stated, the MSRB anticipates that subsequent Annual 
Rate Cards for future years will be filed with the Commission 
through a proposed rule change and the MSRB would seek to have such 
rates operative for twelve months running from January 1 to December 
31 (i.e., a calendar-year basis). In order to execute the Annual 
Rate Card Process, the MSRB determined to establish the Annual Rate 
Card on a calendar-year basis. This allows the MSRB to determine any 
prior fiscal year variances and return excess revenue or assess 
revenue shortfalls through the new Rate Card Fees. Nevertheless, as 
changing fiscal circumstances may warrant, the MSRB will retain the 
flexibility to amend the rates of assessment specified by a given 
Annual Rate Card under this modified approach in accordance with 
applicable statutory requirements governing any such proposed rule 
change.
---------------------------------------------------------------------------

    The Annual Rate Card approach conducted by the Board is expected to 
ensure the MSRB's financial model remains sustainable, while (i) 
adequately funding future MSRB expenses and also (ii) providing a 
greater degree of flexibility than the MSRB's current fee structure to 
mitigate the impact of market volatility (and effectively manage 
organizational reserve levels). The Annual Rate Card approach differs 
from the MSRB's current approach by instituting a framework that can 
result in more frequent, but also more incremental adjustments, to the 
four fees that generate the vast majority of the MSRB's annual revenue. 
The increased frequency of the MSRB's amendments to the Rate Card Fees 
is meant to avoid the accumulation of excess reserves resulting from 
additional revenue collected due to market volatility as compared to 
budget expectations and, thereby, the need for rate amendments in the 
form of more significant, ad hoc temporary fee reductions or 
rebates.\64\ To ensure that the Board's adjustments to the Annual Rate 
Card will remain incremental, the Board is proposing certain maximum 
caps on the amount of such year-to-year increases, as discussed below 
under the section entitled ``Limitations on Rate Changes to Promote 
Predictability and Stability.'' \65\
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    \64\ The proposed rule change would not amend the underlying 
activities that are the subject of such assessments. In other words, 
the respective volumes of underwriting and transaction activities of 
a dealer firm would continue to serve as the basis upon which Market 
Activity Fees are assessed under Rule A-13; and the number of 
covered professionals associated with a municipal advisory firm 
would continue to serve as the basis upon which the rate of the 
Municipal Advisor Professional Fee is assessed under Rule A-11. 
Other fees assessed on regulated entities--specifically, the initial 
registration fee, annual registration fee, late fee, municipal funds 
underwriting fee, and examination fees--will be unchanged.
    \65\ If the proposed rule change becomes operative on October 1, 
2022, the MSRB's revised funding policy, which reflects this Annual 
Rate Card approach, will likewise become operative. There are 
maximum caps incorporated into the Annual Rate Card Process (as 
defined infra) and specifically provided for under Supplementary 
Material .01 of the proposed amendments to Rule A-11 and Rule A-13. 
See related discussion infra under ``Limitations on Rate Changes to 
Promote Predictability and Stability.''

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[[Page 48537]]

    Objectives of the Annual Rate Card. Adjustments to the Annual Rate 
Card will be used to revise the Rate Card Fees to annual levels that 
the MSRB anticipates will be sufficient to: (i) cover anticipated 
expenses for the related fiscal year; \66\ (ii) maintain target 
contribution balances between fees on regulated entities in line with 
recent historical precedents; \67\ (iii) address any prior-year 
variance between the amounts of each of the Rate Card Fees actually 
collected versus budget (i.e., ``Rate Card Fee Variances''); \68\ and 
(iv) address any variance between the amount of the Board's 
organizational reserves versus the Board's target (i.e., ``Reserves 
Variances'').\69\ Fee rates may increase year-to-year, subject to 
certain limitations discussed in additional detail below, or decrease 
from year-to-year, as needed to meet these objectives.
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    \66\ As noted, the MSRB anticipates that, subsequent to the 
Annual Rate Card proposed herein and currently anticipated to be 
operative for the fifteen months from October 1, 2022 to December 
31, 2023, future Annual Rate Cards would become effective, after 
such submission to the Commission pursuant to the provisions of 
Section 19(b)(1) of the Exchange Act, on January 1, while the MSRB 
fiscal year would start on the prior October 1. See also Exhibit 
3(a), ``Chart 11--Historical and Projected Revenue with Rate Card 
Model Compared to Historical and Pro Forma Expenses.''
    \67\ That is, this factor is intended to maintain a 
proportionate percentage amount of the MSRB's anticipated expenses 
for the fiscal year among each of the Market Activity Fees and the 
Municipal Advisor Professional Fee. The Rate Card Fees proposed in 
this filing were established based on the following target 
contribution balances: Underwriting Fee 37%, Transaction Fee 39%, 
Trade Count Fee 16%, Municipal Advisor Professional Fee 8%. See, 
e.g., Exhibit 3(a), ``Chart 3--Historical Actual Revenue for the 
Rate Card Fees as a Percentage of the Total Rate Card Fee Revenue'' 
and ``Chart 14--Distribution of Registrants by Range of Total Fees 
Assessed Under Current Fee Structure Compared to Projected 
Distribution Under the Rate Card Model (Exclusive of Late Fees and 
Examination Fees)'' (reflecting that the distribution of registrants 
by range of total fees assessed under the current fee structure are 
currently anticipated to be relatively stable if the proposed Rate 
Card Amendments are implemented).
    \68\ A positive variance may occur, for example, when the actual 
revenue from Rate Card Fees collected for a fiscal year exceeds 
budgeted amounts (a ``Positive Rate Card Fee Variance''). See, e.g., 
Exhibit 3(a), ``Chart 2--Historical Budget vs. Actual Revenue for 
the Rate Card Fees,'' at Fiscal Year 2020 (reflecting the actual 
revenue generated from the Underwriting Fee and Transaction Fee 
exceeding budget). A negative variance may occur, for example, when 
the actual revenue from Rate Card Fees collected for a fiscal year 
is below budgeted amounts (a ``Negative Rate Card Fee Variance''). 
See, e.g., Exhibit 3(a), ``Chart 2--Historical Budget vs. Actual 
Revenue for the Rate Card Fees,'' at Fiscal Year 2020 (reflecting 
the actual revenue generated from the Technology Fee below budget).
    \69\ A positive variance above the reserves target may occur, 
for example, due to actual expense savings, actual revenue above 
budget from sources other than Rate Card Fees, or the Board's 
determination to decrease the reserves target in light of revised 
organizational needs (a ``Positive Reserves Variance''). See, e.g., 
Exhibit 3(a), ``Chart 12--Total Reserves vs. Target: Historical and 
Projected without Rate Card Model,'' at Fiscal Year 2021 (reflecting 
actual reserves exceeding target). A negative variance below the 
reserves target may occur, for example, due to an increase in actual 
expenses, shortfall in revenue from sources other than Rate Card 
Fees, or the Board's determination to increase the reserves target 
in light of revised organizational needs (a ``Negative Reserves 
Variance''). See, e.g., Exhibit 3(a), ``Chart 12--Total Reserves vs. 
Target: Historical and Projected without Rate Card Model,'' at 
Fiscal Year 2011 (reflecting actual reserves below target).
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    Process for Setting the Annual Rate Card. The Board will develop an 
Annual Rate Card for future fiscal years through a uniform process 
consistent with the objectives discussed above (the ``Annual Rate Card 
Process'').\70\ The Annual Rate Card Process is intended to establish a 
fee structure that is more transparent and predictable for the MSRB's 
stakeholders while also retaining the Board's ability to flexibly react 
to changing circumstances when establishing reasonable fees on 
regulated entities. The Annual Rate Card Process will consist of the 
activities below.
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    \70\ The amended Annual Rate Cards resulting from the Annual 
Rate Card Process will be filed with the Commission as proposed rule 
changes consistent with the Act.
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    Development of the Fiscal Year Operational Funding Level. 
Consistent with its existing budgeting process, the Board will approve 
the annual expense budget and, thereby, establish the baseline revenue 
that the organization will need to operate for that fiscal year (i.e., 
the ``Operational Funding Level''). As previously discussed, the MSRB 
anticipates the Operational Funding Level in the near-term fiscal years 
to align with the discharge of the Board's statutory mandate and 
corresponding initiatives outlined in the MSRB's current Strategic 
Plan. Once the Board sets the Operational Funding Level, any Reserves 
Variances may further adjust the amount of the Operational Funding 
Level, as discussed below.
    Reconciliation of Any Material Reserves Variances. If there are 
material Reserves Variances in future fiscal years, the amount of such 
Reserves Variances will be considered and may be added to or subtracted 
from the Operational Funding Level to develop a final ``Budgeted 
Revenue Target'' for a given fiscal year. For example, if there is a 
Negative Reserves Variance, the Board may determine, in accordance with 
the its revised funding policy, that some or all of the reserves 
shortfall may be incorporated into the total revenue that needs to be 
collected for that fiscal year.\71\ Conversely, if there is a material 
Positive Reserves Variance, the Board may determine, in accordance with 
its revised funding policy, that some or all of the excess may offset 
an amount of the total revenue that needs to be collected for that 
fiscal year.\72\
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    \71\ Stated differently, the Board may decide that some or all 
of such a Negative Reserves Variance amount may be added to that 
fiscal year's Operational Funding Level when determining the 
cumulative Budgeted Revenue Target for that fiscal year. Notably, 
the Board would have the flexibility to close the Negative Reserves 
Variance (i.e., increase reserves funding to reach the target) over 
a period of multiple fiscal years, rather than all in one fiscal 
year, and so could determine to only address some of the Negative 
Reserves Variance in a given fiscal year. For example, if the 
Operational Funding Level was determined to be $45 million and there 
was a Negative Reserves Variance of $1 million (i.e., actual 
reserves were under target by $1 million), then the Board could seek 
to resolve that difference by increasing the target amount of 
revenue to be generated from the applicable Annual Rate Card by $1 
million and set a final Budgeted Revenue Target of $46 million. 
Alternatively, the Board may determine to seek to resolve the $1 
million difference over the course of two Annual Rate Cards and set 
the final Budgeted Revenue Target for the first of those two Annual 
Rate Cards at, for example, $45.5 million.
    \72\ Stated differently, the Board may decide that some or all 
of such a Positive Reserves Variance amount may be subtracted from 
that fiscal year's Operational Funding Level to determine the 
Budgeted Revenue Target for that fiscal year. As discussed in the 
immediately prior footnote, the Board would have the flexibility to 
close the Positive Reserves Variance (i.e., decrease reserves 
funding to target) over a period of multiple fiscal years, rather 
than all in one fiscal year, and so could determine to only address 
some of the Positive Reserves Variance in a given fiscal year. For 
example, if the Operational Funding Level was determined to be $45 
million and there was a Positive Reserves Variance of $1 million 
(i.e., actual reserves were over target by $1 million), then the 
Board could seek to resolve that variance by decreasing the target 
amount of revenue to be generated from the applicable Annual Rate 
Card by $1 million and set a final Budgeted Revenue Target of $44 
million. Alternatively, the Board may determine to seek to resolve 
the $1 million variance over the course of two Annual Rate Cards and 
set the final Budgeted Revenue Target for the first of those two 
Annual Rate Cards at, for example $44.5 million.
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    Incorporation of Other Anticipated Revenue. Revenue from sources 
other than the Rate Card Fees (e.g., annual and initial fees, data 
subscriptions, municipal fund underwriting fees and fine revenue), will 
be forecasted, and that estimate will be credited against the Budgeted 
Revenue Target. The amount remaining after these revenue estimates are 
incorporated will be the remaining revenue amount that will determine 
the total amount of funding needed to be generated from the Rate Card 
Fees (the ``Rate Card Funding Amount'').
    Reconciliation of Any Rate Card Fee Variances from the Prior Fiscal 
Year. Each of the four Rate Card Fees will be responsible for a 
proportionate amount of the overall Rate Card Funding Amount (each a 
``Proportional Contribution Amount''). The MSRB will maintain a fair 
and equitable balance of

[[Page 48538]]

the Proportional Contribution Amounts in line with recent historical 
precedents.\73\ Specifically, for the Rate Card Fees proposed in this 
filing intended to be operative beginning on October 1, 2023, the Rate 
Card Funding Amount was allocated as follows to determine the 
Proportional Contribution Amount for each of the Rate Card Fees: 
Underwriting Fee 37%, Transaction Fee 39%, Trade Count Fee 16%, 
Municipal Advisor Professional Fee 8%.\74\ Beginning with the Annual 
Rate Card for Fiscal Year 2024, any Rate Card Fee Variances between the 
budget and actual results of the Rate Card Fees for the prior fiscal 
year will be added to (or subtracted from) the Proportional 
Contribution Amount (``Final Contribution Amount'').\75\ For example, 
if new issuance underwriting volume were to exceed the budgeted amount 
in Fiscal Year 2023, resulting in a Positive Rate Card Fee Variance for 
that fee, the Proportional Contribution Amount for the Underwriting Fee 
would be adjusted downward sufficient to offset the excess Underwriting 
Fee revenue collected (and vice versa). In this way, Rate Card Fee 
Variances related to a specific Rate Card Fee will only impact the 
Proportional Contribution Amount for that specific fee.
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    \73\ The Board will consider whether contribution targets should 
be revisited when setting rates each year. However, to maintain 
fairness and equity in fees, the Board intends contribution targets 
to be relatively stable over time, unless there is a durable, 
material shift in market structure or circumstances that would 
indicate that the expectations for the relative contributions from 
one or more fees are no longer reasonable or appropriate. See 
Exhibit 3(a), ``Chart 3--Historical Actual Revenue for the Rate Card 
Fees as a Percentage of the Total Rate Card Fee Revenue'' and also 
``Chart 14--Distribution of Registrants by Range of Total Fees 
Assessed Under Current Fee Structure Compared to Projected 
Distribution Under the Rate Card Model.''
    \74\ These contribution targets were determined based on the 
distribution of revenue assessed over the past two fiscal years 
(Fiscal Year 2020 and Fiscal Year 2021), calculated to adjust for 
the impact of the temporary fee reduction on Market Activity Fees in 
place for the second half of Fiscal Year 2021 and calculated as if 
the current Municipal Advisor Professional Fee rate of $1,000 per 
covered professional had been in place in Fiscal Year 2020 (rather 
than the interim rate of $750 in place for that fiscal year), 
rounded to the nearest whole percent.
    \75\ More specifically, a Negative Rate Card Fee Variance will 
increase the rate of assessment for a Rate Card Fee by increasing 
its Final Contribution Amount. A Positive Rate Card Fee Variance 
will reduce the rate of assessment for a Rate Card Fee by reducing 
its Final Contribution Amount. See note 63 supra and related 
discussion regarding Rate Card Fee Variances.
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    Forecast of Expected Activity and Setting the Annual Rate Card. The 
MSRB will use the best available information to set expected volume of 
activity for the coming fiscal year. Based on the anticipated volume of 
activity, the MSRB will calculate rates of assessment for each of the 
Rate Card Fees to generate their respective Final Contribution Amounts.
    Limitations on Rate Changes to Promote Predictability and 
Stability. To alleviate the potential for greater uncertainty among 
regulated entities regarding the variability of the Rate Card Fees 
under this revised approach, the Board has also established certain 
limitations on fee increases from year-to-year to promote greater 
predictability and stability.\76\
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    \76\ If the full amount of a Negative Rate Card Fee Variance 
cannot be recaptured in a single year due to these limitations, the 
remaining amount of such variance will carry over into the 
calculation of the Rate Card Funding Amount for the following fiscal 
year(s) and, all else being equal, increase the rate of assessment 
for such Rate Card Fee as described above. Conversely, there are no 
limits on potential decreases to the rates of assessment for the 
Rate Card Fees that may result from Positive Rate Card Fee Variances 
and, if warranted, Positive Reserves Variances.
---------------------------------------------------------------------------

    10% Maximum Cap on Targeted Revenue. The first limitation is a 10% 
cap on the maximum increase in the targeted revenue for a Rate Card Fee 
based on the highest amount of such targeted revenue in the previous 
two annual rate cards.\77\ This cap is intended to limit large 
increases in the rate of assessment for the Rate Card Fees to ensure 
that fee increases remain incremental and, accordingly, regulated 
entities have the time to operationalize such increases into their 
business models.
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    \77\ Note that the 10% revenue cap is based on targeted revenue 
dollars. The underlying market activity volume will likely vary 
based on projected market conditions for the respective fiscal year. 
For illustrative purposes only, if the target revenue for one of the 
Rate Card Fees in Year 1 is $13,000,000, the maximum target revenue 
in Year 2 would be $14,300,000. In addition, if target revenue 
decreased in Year 2 to $12,000,000--such as to return excess revenue 
collected in Year 1--then the cap for Year 3 would be calculated 
based on the higher revenue target in the year prior to the decrease 
(i.e., the higher prior revenue level in Year 1, which is 
$13,000,000 in this example).
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    25% Maximum Cap on Assessment Rate Increases. The second limitation 
is a 25% cap on the maximum increase in the assessment rate for a Rate 
Card Fee based on the highest assessment rate in the previous two 
annual rate cards.\78\ This secondary cap is intended to limit large 
increases in rates of assessment for the Rate Card Fees in instances 
where expected volume decreases significantly from the prior year.\79\
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    \78\ For illustrative purposes only, if the Trade Count Fee is 
set at $1.10 in Year 1, the maximum rate in Year 2 would be $1.38 
under the 25% maximum cap on assessment rate increases. In addition, 
if the assessment rate decreased in Year 2 to $1.05--such as to 
return excess revenue collected in Year 1--then the cap for Year 3 
would be calculated based on the higher assessment rate in the year 
prior to the decrease (i.e., the higher prior assessment rate in 
Year 1, which is $1.10 in this example).
    \79\ Because the rates of assessment for Rate Card Fees are 
based on both the targeted revenue for the Rate Card Fee and the 
underlying volume or activity level on which the fee is assessed, 
the rates themselves are subject to a potentially higher level of 
variability than the underlying targeted revenue intended to be 
generated by each fee. As the Annual Rate Card Process returns any 
Positive Rate Card Fee Variances in the subsequent year, 
outperforming volume in one year cannot be used to buffer under-
performing volume in another year. The 10% maximum cap on targeted 
revenue is intended to be the primary limitation on revenue 
increases. The 25% maximum cap on assessment rate increases is 
intended to be a supplemental limitation that balances the potential 
impact of rate changes driven by underlying volume changes while 
retaining the MSRB's ability to assess and collect sufficient 
revenue to fund the organization's expenses. As an example, if the 
targeted revenue for the Municipal Advisor Professional Fee was 
$3,000,000 in Year 1 and the estimated number of covered 
professionals was 3,000, the Municipal Advisor Professional Fee in 
Year 1 would be $1,000 per covered professional. In Year 2, the 
targeted revenue for the Municipal Advisor Professional Fee would be 
no more than $3,300,000, a 10% increase. If the estimated number of 
covered professionals in Year 2 remained at 3,000, then the 
Municipal Advisor Professional Fee for Year 2 would be no more than 
$1,100 per covered professional, also a 10% increase. If instead, 
the estimated number of covered professionals in Year 2 dropped to 
2,500, the Municipal Advisor Professional Fee for Year 2 would be 
limited to $1,250, a 25% increase. In this scenario, to the extent 
that the 25% maximum cap on the assessment rate increase results in 
less revenue collected from the Municipal Advisor Professional Fee 
in Year 2 than targeted, the amount of the Negative Rate Card Fee 
Variance for the Municipal Advisor Professional Fee would be 
incorporated into the Annual Rate Card Process in Year 3, again 
subject to the maximum caps on target revenue and assessment rate 
increase.
---------------------------------------------------------------------------

    If the proposed rule change becomes operative on October 1, 2022, 
the new funding policy, available at https://msrb.org/About-MSRB/Financial-and-Other-Information/Financial-Policies/Future-Funding-Policy, which reflects the Annual Rate Card Process, including the 
Maximum Cap on Targeted Revenue and the Maximum Cap on Assessment Rate 
Increases, will likewise become operative.
    If the Annual Rate Card Process becomes operative, any future 
proposed amendment to the rates of assessment for the Rate Card Fees 
that would exceed the Maximum Cap on Targeted Revenue or the Maximum 
Cap on Assessment Rate Increases would be addressed in the 
corresponding proposed rule change that would be filed with the 
Commission pursuant to the provisions of Section 19(b)(1) of the 
Exchange Act.
Proposed Rate Card Amendments
    The proposed Rate Card Amendments are designed to promote the 
collection of reasonable fees and charges from MSRB regulated entities 
as are necessary or appropriate to defray the

[[Page 48539]]

costs and expenses of operating and administering the Board.\80\ The 
Board believes that the Annual Rate Card Process enables it to consider 
the necessary factors and to sufficiently deliberate on those factors 
in order to arrive at reasonable fees and charges as may be necessary 
or appropriate to defray the costs and expenses of operating and 
administering the Board. Accordingly, among the other reasons discussed 
herein, the Board believes that the proposed rule change achieves 
reasonable fees and charges consistent with the Act because the Rate 
Card Amendments adhered to the Annual Rate Card Process. Specifically, 
the Board (i) developed the Operational Funding Level for Fiscal Year 
2023 based on existing pro forma estimates, (ii) incorporated other 
anticipated revenue into its funding analysis, and (iii) forecasted 
expected volume activity to appropriately set the rates of assessment 
for each of the Rate Card Fees, all as further described above.
---------------------------------------------------------------------------

    \80\ See Section 15B(b)(2)(J) of the Act (15 U.S.C. 78o-
4(b)(2)(J)).
---------------------------------------------------------------------------

    Proposed Annual Rate Card. The Rate Card Amendments would establish 
the Municipal Advisor Professional Fee specified in Rule A-11 and the 
Market Activity Fees specified in Rule A-13 in accordance with the 
chart below.
---------------------------------------------------------------------------

    \81\ The Rate Card Fees listed do not indicate the current 
temporary fee reductions for the Market Activity Fees that expire on 
September 30, 2022. See Rule A-13(h) and the 2021 Temporary Fee 
Reduction (citation and description at note 12 supra).

----------------------------------------------------------------------------------------------------------------
                                                                                   Current rate
                                                              Basis                    \81\        Proposed rate
----------------------------------------------------------------------------------------------------------------
Underwriting Fee..............................  Per $1,000 Par Underwritten.....         $0.0275         $0.0297
Transaction Fee...............................  Per $1,000 Par Transacted.......          0.0100          0.0107
Trade Count Fee...............................  Per Trade.......................            1.00            1.10
Municipal Advisor Professional Fee............  Per Covered Professional........           1,000           1,060
----------------------------------------------------------------------------------------------------------------

    These revised rates would become effective on October 1, 2022 and 
are expected to apply to activities occurring through December 31, 
2023. The Board anticipates amending the rates of assessment specified 
in this proposed Annual Rate Card with a subsequent rule filing with 
the Commission that would become effective as of January 1, 2024.\82\
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    \82\ The Rate Card Amendments are intended to revise the rates 
of assessment for the Market Activity Fees prior to the expiration 
of the 2021 Temporary Fee Reduction on October 1, 2022.
---------------------------------------------------------------------------

Purpose and Description of the Technical Amendments
    Consistent with the Board's Fee Review, the MSRB identified 
instances across Rule A-11, Rule A-12, and Rule A-13 where amendments 
would improve the clarity of application of these MSRB rules. 
Specifically, the MSRB determined that Rule A-11, Rule A-12, and Rule 
A-13 could benefit from: (i) the creation of defined terms for existing 
concepts that would help streamline the rule text and improve 
readability; (ii) the clarification of existing terms and concepts 
through the consolidation of previously published regulatory guidance 
into the proposed rule change and the direct incorporation of cross-
referenced definitions from other MSRB rules into the proposed rule 
change; and (iii) the deletion of obsolete rule language to streamline 
the rule text and avoid the potential for regulatory confusion as to 
why such obsolete language continues to be incorporated into MSRB 
rules. Accordingly, the proposed rule change would also amend Rule A-
11, Rule A-12, and Rule A-13 with certain technical, non-substantive 
amendments.
Technical Amendments to Rule A-11
    The proposed Technical Amendments would amend Rule A-11 to (i) 
create a separately defined term for the concept of a ``covered 
professional;'' (ii) reformat the applicable subsections of Rule A-11 
with the appropriate subsection designations and update the applicable 
cross-references in the rule text; and (iii) directly incorporate the 
definition for ``Prime Rate'' into the text of the rule. Importantly, 
the proposed definition for the new term ``covered professional'' is 
intended to be non-substantive and to match the existing rule text and 
understanding of the descriptive phrase in Rule A-11 regarding a 
``person associated with the municipal advisor who is qualified as a 
municipal advisor representative in accordance with Rule G-3 and for 
whom the municipal advisor has on file with the Commission a Form MA-I 
as of January 31 of each year.'' The proposed amendment would also 
incorporate the concept of an ``active'' Form MA-I to make expressly 
clear the existing application of Rule A-11 that, if a firm has filed 
an amendment to indicate that an individual is no longer an associated 
person of the municipal advisory firm or no longer engages in municipal 
advisory activities on its behalf, then that individual's Form MA-I 
would not be deemed as active for purposes of the Municipal Advisor 
Professional Fee and would not be counted in the January 31st 
calculation regarding the assessment of the Municipal Advisor 
Professional Fee. In this way, the proposed amendments are intended to 
define the same category of associated persons as the existing text of 
the rule and, all else being equal, would not capture any greater or 
fewer individuals in its scope. Consequently, the proposed defined term 
for a covered professional would not change the MSRB's current method 
for calculating and applying the amount of the Municipal Advisor 
Professional Fee under Rule A-11. The proposed amendment is merely 
intended to provide greater regulatory clarity for the application of 
Rule A-11. Therefore, the MSRB believes it is a technical, clarifying 
amendment to the rule text that would improve its readability and would 
not modify any existing regulatory burdens or obligations, nor create 
any new regulatory burdens or obligations.
    Consistent with separately defining the term ``covered 
professional,'' the proposed rule change would also reformat the 
applicable subsections of Rule A-11 with the appropriate subsection 
designations and update the applicable cross-references in the rule 
text. These related amendments are merely intended to provide internal 
consistency to Rule A-11 in light of the other amendments and, 
therefore, the MSRB believes they are technical, non-substantive 
amendments.
    Lastly, the proposed Technical Amendments to Rule A-11 would strike 
the current reference to the MSRB Registration Manual from current 
subsection (b) and directly incorporate the definition for ``Prime 
Rate'' in Supplementary Material .02. The new definition provided in 
Supplementary Material .02 would match the existing definition provided 
in the MSRB Registration Manual, stating that ``. . . the Prime Rate is 
the annual rate of the commercial prime rate of interest as last 
published in The Wall Street Journal

[[Page 48540]]

prior to the date such charge is computed.'' Given that this proposed 
definition is the same as the one currently provided in the MSRB 
Registration Manual, the MSRB believes this amendment is a technical, 
clarifying amendment to the rule text that would improve regulatory 
understanding of Rule A-11 and would not modify any existing regulatory 
burdens or obligations, nor create any new regulatory burdens or 
obligations. Moreover, the MSRB believes that moving this language 
directly into Rule A-11 consolidates the operative regulatory text and, 
thereby, is likely to lead to less regulatory confusion for regulated 
entities, who would no longer have to separately reference Rule A-11 
and the MSRB Registration Manual.
Technical Amendments to Rule A-12
    The proposed Technical Amendments would amend Rule A-12 to (i) 
eliminate its existing reference to Rule A-13 regarding the imposition 
of late fees under Rule A-13; (ii) delete the now obsolete language in 
Supplementary Material .01 regarding the temporary suspension of late 
fees from March 1, 2020 to July 1, 2020; and (iii) directly incorporate 
the definition for ``Prime Rate'' into the text of the rule. In terms 
of deleting the reference to the imposition of late fees owed pursuant 
to Rule A-13, the MSRB believes that regulatory clarity would be 
improved if this fee concept was deleted from Rule A-12 and 
incorporated directly into Rule A-13. The proposed amendment to Rule A-
13 that would incorporate this concept in an amendment to that rule 
text and, thereby, retain this fee concept in the MSRB's fee structure 
is discussed in the following section. Notably, the deletion of this 
fee concept in Rule A-12 and its incorporation in Rule A-13 would not 
change the MSRB's current method for calculating and applying the 
amount of such late fees; and, therefore, the MSRB believes it is a 
technical, clarifying amendment to the rule text that improves its 
readability and does not modify any existing regulatory burdens or 
obligations, nor create any new regulatory burdens or obligations.
    In terms of deleting the language in Supplementary Material .01 of 
Rule A-12, the language is no longer operative at this time and, 
therefore, the MSRB believes that deleting it from the rule text would 
improve the clarity of the application of Rule A-12. Specifically, the 
deletion of the text of Supplementary Material .01 from Rule A-12 would 
help streamline the rule text and reduce the potential for regulatory 
confusion as to why it continues to be included in the text of the 
rule.
    In addition, the proposed Technical Amendments to Rule A-12 would 
strike the reference to the MSRB Registration Manual from subsection 
(d) and directly incorporate the definition for ``Prime Rate'' in 
Supplementary Material .01. The new definition provided in 
Supplementary Material .01 would match the existing definition provided 
for in the MSRB Registration Manual, stating that ``. . . the Prime 
Rate is the annual rate of the commercial prime rate of interest as 
last published in The Wall Street Journal prior to the date such charge 
is computed.'' Given that this proposed definition is the same as the 
one currently provided in the MSRB Registration Manual, the MSRB 
believes this amendment is a technical, clarifying amendment to the 
rule text that would improve regulatory understanding of Rule A-12 and 
would not modify any existing regulatory burdens or obligations, nor 
create any new regulatory burdens or obligations. Moreover, the MSRB 
believes that moving this language directly into Rule A-12 consolidates 
the operative regulatory text and, thereby, is likely to lead to less 
regulatory confusion for regulated entities, who would no longer have 
to separately reference Rule A-12 and the MSRB Registration Manual.
Technical Amendments to Rule A-13
    The proposed Technical Amendments would amend Rule A-13 to: (i) 
reformat and clarify the definition of ``primary offering'' consistent 
with the historical understanding and current application of Rule A-13; 
(ii) further clarify that certain transactions in municipal securities 
must meet the definition of a ``variable rate demand obligation'' or 
``VRDO'' under Rule G-34, on CUSIP numbers, new issue, and market 
information requirements, in order to be exempt from Transaction Fees 
pursuant to Rule A-13(d)(iii)(c)'s subsection identifying 
``Transactions Not Subject to Transaction Fee;'' \83\ (iii) uniformly 
revise Rule A-13's references to the term ``technology fee'' to ``trade 
count fee;'' (iv) incorporate the existing concept regarding the 
imposition of late fees into the rule text (which concept currently 
exists in Rule A-12, but is being deleted from Rule A-12 as part of the 
proposed amendments, as discussed above); (v) delete the language that 
would become obsolete on September 30, 2022 regarding the temporary fee 
reduction of the Market Activity Fees for activities occurring between 
April 1, 2021 through September 30, 2022; (vi) delete the now obsolete 
language in Supplementary .01 regarding the waiving of certain 
assessments for transactions with the Municipal Liquidity Facility 
established by the Federal Reserve Board of Governors; (vii) directly 
incorporate the definition for ``Prime Rate'' into the text of the 
rule; and (viii) correct an inaccurate cross-reference in the 
definition of ``commercial paper''.
---------------------------------------------------------------------------

    \83\ This language is currently found in subsection (d)(iii)(c) 
of Rule A-13 and the proposed rule change would not amend its 
location.
---------------------------------------------------------------------------

    The proposed Technical Amendments regarding the definition of 
primary offering for purposes of Rule A-13 would reformat the existing 
definition to the first subsection of the rule, as well as incorporate 
clarifying revisions expressly codifying the existing application of 
Rule A-13 to private placements.\84\ Specifically, the proposed 
amendment would incorporate text expressly stating that, consistent 
with the definition for the same term found in Rule 15c2-12(f)(7) under 
the Act,\85\ certain circumstances where a dealer acts as an agent for 
an issuer to arrange the placement of a new issue of municipal 
securities would be included in the definitional scope of a ``primary 
offering'' under Rule A-13. Accordingly, the MSRB believes that these 
amendments are technical, clarifying modifications to the rule text 
that (i) would improve the readability of Rule A-13 and facilitate 
greater regulatory clarity regarding the current application of the 
Underwriting Fee and (ii) would not modify any existing regulatory 
burdens or obligations, nor create any new regulatory burdens or 
obligations.
---------------------------------------------------------------------------

    \84\ Since the inception of the Underwriting Fee, the 
application of Rule A-13 has encompassed those primary offerings 
where a municipal securities dealer acts agent for the issuer 
arranging the direct placement of new issue municipal securities 
with institutional customers or individuals. See ``Underwriting 
assessment: application to private placements'' (Feb. 22, 1982), 
available at https://msrb.org/Rules-and-Interpretations/MSRB-Rules/Administrative/Rule-A-13?tab=2. Given this amendment to Rule A-13, 
the February 22, 1982 guidance will be removed from the MSRB rule 
book as of the operative date of the Technical Amendments and will 
be archived by relocating it to a dedicated MSRB Archived 
Interpretive Guidance page at: www.msrb.org/Rules-andInterpretations/Archived-Guidance-Rule-Book-Review.aspx. The 
guidance will be clearly labeled with its date of archival and can 
be accessed for its historical value.
    \85\ 17 CFR 240.15c2-12(f)(7) (stating that the term ``primary 
offering'' means ``an offering of municipal securities directly or 
indirectly by or on behalf of an issuer of such securities'').
---------------------------------------------------------------------------

    In addition, the proposed Technical Amendments to Rule A-13 would 
clarify that only transactions in municipal securities that meet the 
definition of a ``variable rate demand

[[Page 48541]]

obligation'' under Rule G-34 are exempt from Transaction Fees pursuant 
to Rule A-13's language regarding ``Transactions Not Subject to 
Transaction Fee.'' Specifically, the current definitional language in 
that subsection of Rule A-13 does not precisely match the corresponding 
definition in Rule G-34.\86\ Yet, the MSRB's internal billing process 
currently relies on reports made pursuant to Rule G-34's Short-term 
Obligation Rate Transparency System and, thereby, Rule G-34's variable 
rate demand obligation definition, to identify such transactions that 
should not be billed under Rule A-13. To avoid the possibility of any 
potential unintended consequences resulting from the differences 
between the definition currently stated in Rule A-13 versus the 
variable rate demand obligation definition in Rule G-34 that is 
currently utilized for purposes of the MSRB's internal billing logic, 
the proposed rule change would amend Rule A-13 to expressly cross-
reference Rule G-34(e)(viii) and expressly restate the variable rate 
demand obligation definition directly in the text of Rule A-13. The 
MSRB believes that the proposed amendments to expressly incorporate 
Rule G-34's variable rate demand obligation definition into Rule A-13 
will improve regulatory clarity for regulated entities regarding the 
MSRB's billing process and which transactions are exempt from certain 
fees. In this way, the proposed definition is intended to define the 
same category of activity and instruments as the existing text of the 
rule and, all else being equal, would not capture any greater or fewer 
transactions than the current application of the Rule A-13.
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    \86\ See Rule G-34(e)(viii) (``The term `variable rate demand 
obligation' shall mean securities in which the interest rate resets 
on a periodic basis with a frequency of up to and including every 
nine months, where an investor has the option to put the issue back 
to the trustee, tender agent or other agent of the issuer or 
obligated person at any time, typically within a notification 
period, and a broker, dealer or municipal securities dealer acts as 
a remarketing agent responsible for reselling to new investors 
securities that have been tendered for purchase by a holder.'')
---------------------------------------------------------------------------

    As previously mentioned above, the proposed Technical Amendments 
would uniformly revise Rule A-13's references to the term ``technology 
fee'' to the term ``trade count fee.'' The MSRB believes that this non-
substantive change is warranted because the use of the phrase 
``technology fee'' is outdated. The MSRB believes ``trade count'' fee 
is a better descriptor because the revenue generated from this fee is 
not strictly used for technology expenses but is aggregated with the 
other fee revenue the MSRB collects and utilized for the most 
appropriate organizational uses.\87\ Accordingly, the MSRB believes 
that the term ``trade count fee'' is a more accurate descriptor and, 
thereby, less likely to lead to regulatory confusion about this fee.
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    \87\ See Exchange Act Release No. 75751 (Aug. 24, 2015), 80 FR 
52352 (Aug. 28, 2015) File No. SR-MSRB-2015-08, at 52355 (discussing 
the fact that the revenue from the technology fee will no longer be 
designated exclusively for capitalized hardware and software 
expense).
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    Consistent with Technical Amendments to Rule A-11 and Rule A-12, 
the proposed Technical Amendments to Rule A-13 would also copy language 
into new Rule A-13(g) incorporating the existing concept currently 
articulated in current Rule A-12(d) regarding the imposition of late 
fees on the fees assessed pursuant to Rule A-13. As noted above, 
currently, the operative rule text for this late fee concept is 
provided for in Rule A-12(d), and the proposed rule change would delete 
this language from Rule A-12(d) specific to Rule A-13's fees. 
Importantly, the incorporation of this language directly into new Rule 
A-13(g) would not change the MSRB's current method for calculating and 
applying the amount of such late fees; and, therefore, the MSRB 
believes it is a technical, clarifying amendment to the rule text that 
improves the readability of both Rule A-12 and also Rule A-13 and would 
not modify any existing regulatory burdens or obligations, nor create 
any new regulatory burdens or obligations. The MSRB believes that 
moving this language into Rule A-13 consolidates the operative 
regulatory text and, thereby, is likely to lead to less regulatory 
confusion for regulated entities, who would no longer have to 
separately reference Rule A-12 to identify that such late fees were 
applicable to the fees assessed pursuant to Rule A-13.
    Relatedly, and similar to the proposed amendments to Rule A-11 and 
Rule A-12 on the same topic of late fees, the proposed Technical 
Amendments to Rule A-13 would also directly incorporate the definition 
for ``Prime Rate'' in new Supplementary Material .02. This definition 
provided in Supplementary Material .02 would match the current 
definition provided in the MSRB Registration Manual, stating that ``. . 
. the Prime Rate is the annual rate of the commercial prime rate of 
interest as last published in The Wall Street Journal prior to the date 
such charge is computed.'' Given that this proposed definition is the 
same as the one currently provided for in the MSRB Registration Manual, 
the MSRB believes this amendment is a technical, clarifying amendment 
to the rule text that would improve regulatory understanding of Rule A-
13 and would not modify any existing regulatory burdens or obligations, 
nor create any new regulatory burdens or obligations.
    In addition, the proposed Technical Amendments to Rule A-13 would 
delete the language that would become obsolete on September 30, 2022, 
regarding the temporary fee reduction of the Market Activity Fees for 
those activities occurring between April 1, 2021 through September 30, 
2022. Given the MSRB's proposed effective date for this proposed rule 
change, the MSRB believes that this deletion would improve regulatory 
clarity for regulated entities because this language would no longer be 
operative as of October 1, 2022, and, therefore, its continued 
inclusion in the rule text may cause regulatory confusion. Similarly, 
the proposed Technical Amendments would delete the now obsolete 
language in Supplementary .01 of Rule A-13 regarding the waiving of 
certain assessments for transactions with the Municipal Liquidity 
Facility (the ``MLF'') established by the Federal Reserve Board of 
Governors. Given that the MLF and the language used to reference it 
here is no longer operative, the MSRB believes that this deletion would 
improve regulatory clarity for regulated entities.
    Lastly, consistent with all the other proposed Technical Amendments 
to Rule A-13, the proposed rule change would also reformat the 
applicable subsections of Rule A-13 with the appropriate subsection 
designation and update the applicable cross-references in the rule 
text, including correcting the inaccurate cross reference in the 
definition of ``commercial paper'' from G-32(d) to G-32(c). These 
related amendments are merely intended to provide internal consistency 
to Rule A-13 in light of the other amendments and, therefore, the MSRB 
believes they are technical, non-substantive amendments.
2. Statutory Basis
Statutory Basis for the Rate Card Amendments
    The MSRB believes that the proposed Rate Card Amendments are 
consistent with Section 15B(b)(2)(J) of the Act,\88\ which states 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

[[Page 48542]]

as may be necessary or appropriate to defray the costs and expenses of 
operating and administering the Board.\89\ Such rules must specify the 
amount of such fees and charges, which may include charges for failure 
to submit to the Board, or to any information system operated by the 
Board, within the prescribed timeframes, any items of information or 
documents required to be submitted under any rule issued by the 
Board.\90\
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    \88\ 15 U.S.C. 78o-4(b)(2)(J).
    \89\ Id.
    \90\ Id.
---------------------------------------------------------------------------

    The MSRB believes that the Rate Card Amendments provide for 
reasonable fees and charges to be paid by regulated entities. Moreover, 
the MSRB believes that the Rate Card Amendments are necessary and 
appropriate to fund the operation and administration of the Board and, 
thereby, satisfy the requirements of Section 15B(b)(2)(J) \91\ through 
the achievement of a reasonable fee structure that ensures (i) an 
equitable balance of necessary and appropriate fees among regulated 
entities and (ii) a fair allocation of the burden of defraying the 
costs and expenses of the MSRB.\92\ Specifically, the Board believes 
that the Rate Card Amendments will achieve reasonable fees on regulated 
entities \93\ that (i) are necessary and appropriate to sustain the 
operation and administration of the Board by defraying the MSRB's 
anticipated Fiscal Year 2023 operating and administrative expenses; 
\94\ (ii) reasonably and appropriately allocate fees among firms by 
equitably distributing fees in accordance with each individual firm's 
overall market activities; \95\ and (iii) reasonably and appropriately 
adjust for the annual fluctuations in the volume of market activity as 
compared to budget expectation by incorporating the actual amounts of 
Market Activity Fees collected as compared to budget into this and 
future rate-setting processes.\96\ As a result, the MSRB believes that 
the proposed rule change satisfies the applicable requirements of 
Section 15B(b)(2)(J) of the Act,\97\ and the Board has developed a 
reasonable and appropriate fee mechanism that will sufficiently fund 
future expenses and better manage reserves at appropriate levels.\98\
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    \91\ Id.
    \92\ See, e.g., Exhibit 3(a), ``Chart 14--Distribution of 
Registrants by Range of Total Fees Assessed Under Current Fee 
Structure Compared to Projected Distribution Under the Rate Card 
Model (Exclusive of Late Fees and Examination Fees).''
    \93\ In addition to the following citations within this sentence 
in support of the reasonability of the Rate Card Amendments, see 
also related discussion supra under ``Board Review of the Current 
Fee Structure--Maintaining a Fair and Equitable Balance of Fees,--
Mitigating the Impact of Market Volatility, and--Funding the MSRB's 
Anticipated Near-Term Operating Expenses'' and ``Proposed Rate Card 
Amendments.'' See also related discussion infra under ``Self-
Regulatory Organization's Statement on Burden on Competition.''
    \94\ See Exhibit 3(a), ``Chart 10--Historical and Projected 
Revenue without Rate Card Model Compared to Historical and Pro Forma 
Expenses'' and ``Chart 11--Historical and Projected Revenue with 
Rate Card Model Compared to Historical and Pro Forma Expenses.''
    \95\ See related discussion supra under section entitled ``Board 
Review of the Current Fee Structure--Mitigating the Impact of Market 
Volatility.'' See also Exhibit 3(a), ``Chart 14--Distribution of 
Registrants by Range of Total Fees Assessed Under Current Fee 
Structure Compared to Projected Distribution Under the Rate Card 
Model (Exclusive of Late Fees and Examination Fees)'' (reflecting 
that the distribution of registrants by range of total fees assessed 
under the current fee structure are currently anticipated to be 
relatively stable if the proposed Rate Card Amendments are 
implemented).
    \96\ See related discussion supra under section entitled ``Board 
Review of the Current Fee Structure--Mitigating the Impact of Market 
Volatility.'' See also Exhibit 3(a), ``Chart 2--Historical Budget 
vs. Actual Revenue for the Rate Card Fees'' and ``Chart 4--Rate Card 
Fees: Historical Activity Volume Variance Budget to Actual.''
    \97\ 15 U.S.C. 78o-4(b)(2)(J).
    \98\ See also related discussion supra under ``Board Review of 
the Current Fee Structure--Maintaining a Fair and Equitable Balance 
of Fees,--Mitigating the Impact of Market Volatility, and--Funding 
the MSRB's Anticipated Near-Term Operating Expenses'' and ``Proposed 
Rate Card Amendments.'' See also related discussion infra under 
``Self-Regulatory Organization's Statement on Burden on 
Competition.''
---------------------------------------------------------------------------

Statutory Basis for the Technical Amendments
    The MSRB believes that the proposed Technical Amendments are 
consistent with Section 15B(b)(2)(C) of the Act,\99\ which states 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.\100\
---------------------------------------------------------------------------

    \99\ 15 U.S.C. 78o-4(b)(2)(C).
    \100\ Id.
---------------------------------------------------------------------------

    The MSRB believes that the Technical Amendments would promote just 
and equitable principles of trade by ensuring that existing rule 
provisions are accurate and understandable by: (i) creating newly 
defined terms for existing concepts that will help streamline the rule 
text and improve its readability; (ii) clarifying the application of 
existing terms and concepts through the consolidation of previously 
published regulatory guidance into the proposed rule change and the 
direct incorporation of cross-referenced definitions from other MSRB 
rules into the proposed rule change; and (iii) deleting obsolete rule 
language to streamline the rule text and avoid the potential for 
regulatory confusion as to why such language continues to be 
incorporated into MSRB rules. While the Technical Amendments would 
affect rules applicable to MSRB regulated entities, the amendments are 
meant to clarify Rule A-11, Rule A-12, and Rule A-13, respectively, and 
would not (i) modify any existing regulatory burdens or obligations, 
(ii) create any new regulatory burdens or obligations, or (iii) affect 
the registration status of any persons under MSRB rules.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Exchange Act requires that MSRB rules 
not be designed to impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Exchange Act.\101\ 
The MSRB has considered the economic impact of the proposed rule 
change, including a comparison to reasonable alternative regulatory 
approaches.\102\
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    \101\ Id.
    \102\ Id.
---------------------------------------------------------------------------

    The Annual Rate Card Process proposed by the Rate Card Amendments 
is intended to introduce a new fee structure that would (i) better 
mitigate the impact of market volatility on the MSRB's revenue 
structure (and, consequently, also better mitigate the impact of market 
volatility on the MSRB's organizational reserves), and (ii) maintain 
rates within a reasonably predictable range that, while subject to more 
incremental changes each year, would be comparably more stable over the 
long term than the MSRB's current fee structure.\103\ Furthermore, the 
Annual Rate Card process applies equally to all those MSRB regulated 
entities who may pay dealer Market Activity Fees and/or the Municipal 
Advisor Professional Fees. Accordingly, the MSRB believes that the 
proposed Annual Rate Card Process would not have an impact on 
competition and,

[[Page 48543]]

consequently, would not impose any burden on competition, relieve a 
burden on competition, nor promote competition. The MSRB therefore 
believes the Annual Rate Card Process would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Exchange Act.
---------------------------------------------------------------------------

    \103\ See related discussion supra under ``Board Review of the 
Current Fee Structure--Mitigating the Impact of Market Volatility'' 
and ``Proposed Annual Rate Card Approach--Limitations on Rate 
Changes to Promote Predictability and Stability'' (discussing 
various limitations on future increases of the Rate Card Fees). See 
also Exhibit 3(a), ``Chart 5--Historical Effective Fee Rate 
Changes.''
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    The increase in the rates of assessment for the Rate Card Fees 
proposed by the Rate Card Amendments (i.e., the Underwriting Fee, 
Transaction Fee, Trade Count Fee, and Municipal Advisor Professional 
Fee) are necessary and appropriate to cover the currently anticipated 
operating deficit for Fiscal Year 2023, which would have occurred even 
with the current fee structure, to ensure prudent funding for the 
operation and administration of the Board. Moreover, the Board's Rate 
Card Amendments apply equally to each MSRB regulated entity who may pay 
the Rate Card Fees and, thereby, equitably and non-discriminatorily 
distribute the fee burden across all MSRB regulated entities who 
participate in the municipal securities market. In this way, no firm 
would be unduly burdened as compared to another firm. In particular, 
smaller municipal advisory firms would continue to pay less Municipal 
Advisor Professional Fees than larger municipal advisory firms, and, 
therefore, the Rate Card Fees proposed by the Rate Card Amendments are 
not unduly burdensome, comparatively, between small municipal advisory 
firms and large municipal advisory firms. Because the Rate Card Fees 
proposed by the Rate Card Amendments would equitably and non-
discriminately distribute the fee burden across all MSRB regulated 
entities, the MSRB believes that the Rate Card Fees proposed by the 
Rate Card Amendments would not have an impact on competition and, 
consequently, would not impose any burden on competition, relieve a 
burden on competition, nor promote competition. Accordingly, the MSRB 
believes the Rate Card Fees proposed by the Rate Card Amendments would 
not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Exchange Act.
    The Board determined it was necessary and appropriate to conduct a 
comprehensive review of the MSRB's overall fee structure to devise a 
methodology that reasonably and appropriately defrays the costs and 
expenses associated with operating and administering the Board, with a 
goal of arriving at a longer-term solution for MSRB's revenue 
generation process that continues to ensure a sustainable financial 
position. The current fee structure has a semipermanent fixed rate of 
assessment for each of the above categories. Under the proposed Annual 
Rate Card Process, categories of fees assessed for regulated entities 
would remain the same. However, the Board proposes using an annual 
rate-setting method to recalculate fee rates every year for each 
category based on factors described herein.\104\
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    \104\ The SEC and FINRA use this approach for some fees. See SEC 
Section 31 rate fees: https://www.sec.gov/divisions/marketreg/sec31feesbasicinfo.htm; see also FINRA Trading Activity Fee (TAF) 
https://www.finra.org/rules-guidance/guidance/trading-activity-fee.
---------------------------------------------------------------------------

    With the proposed Annual Rate Card Process, the Board is adopting a 
programmatic methodology for assessing the fees in each category. While 
the current categories of fees divided amongst regulated entities would 
not change (i.e., the Underwriting Fee, Transaction Fee, Trade Count 
Fee, and Municipal Advisor Professional Fee) in the proposed Annual 
Rate Card Process, the proportional share of each category would vary 
less over the long term than under the current fee structure and would 
be consistent with the average shares paid by each category of fees in 
recent fiscal years.\105\ The proposed Annual Rate Card Process allows 
the Board to review a change in budgeted expenses compared to the prior 
year and compare it to the projected market activities for each 
category of fees in the upcoming year. Any over/under assessment in the 
prior year within each class of fee payer would be factored into any 
change in the fee rate for the subsequent year. Fee rates would be 
established prior to or in the fourth quarter of each calendar year to 
be effective on the following January 1 and would last until December 
31. However, for Fiscal Year 2023, the first year of adoption, the 
effective date would start from October 1, 2022 and end on December 31, 
2023 for a fifteen-month period. Following the inaugural fifteen-month 
Annual Rate Card proposed by the Rate Card Amendments, in subsequent 
years, the fee rates for each category would be adjusted on a calendar 
year basis starting in January to compensate for any over/under 
assessment in the prior fiscal year, in addition to accommodating any 
change in other considerations (e.g., change in annual expenses, change 
in projected market volume, prior year revenue variances as compared to 
budget, change in reserve target and certain limitations on fee 
increases).
---------------------------------------------------------------------------

    \105\ See Exhibit 3(a), ``Chart 3--Historical Actual Revenue for 
the Rate Card Fees as a Percentage of the Total Rate Card Fee 
Revenue,'' ``Chart 4--Rate Card Fees: Historical Activity Volume 
Variance Budget to Actual,'' ``Chart 5--Historical Effective Fee 
Rate Changes,'' and ``Chart 14--Distribution of Registrants by Range 
of Total Fees Assessed Under Current Fee Structure Compared to 
Projected Distribution Under the Rate Card Model (Exclusive of Late 
Fees and Examination Fees)'' (reflecting that the distribution of 
registrants by range of total fees assessed under the current fee 
structure are currently anticipated to be relatively stable if the 
proposed Rate Card Amendments are implemented). As to how the 
proportion was devised, in addition to the costs of regulatory 
activities, the cost of servicing each category of fees is also a 
consideration, as it costs the MSRB significantly more to collect 
and disseminate trading data for transparency purposes than 
municipal advisory firm professional data. It should be noted that 
all regulated entities benefit from this publicly available 
transparency information.
---------------------------------------------------------------------------

    For Fiscal Year 2023, the Board is also projecting a revenue/
expense imbalance (i.e., an operating deficit) without a change in the 
current fee structure.\106\ In the past, excess organizational reserves 
buffered budget deficits (though the budgeted deficits were typically 
not realized due to excess revenue collected versus budget or expense 
savings, unless intended deficits due to rebates or temporary fee 
reductions); however, now that the excess reserves are being eliminated 
because of the Fiscal Year 2021 Temporary Fee Reduction, any deficit 
would require a fee increase in Fiscal Year 2023 to cover the gap and 
maintain a balance between revenues and expenses, regardless of the fee 
structure used. Therefore, the proposed rule change also includes a 
rate increase for the Underwriting Fee, Transaction Fee, Trade Count 
Fee, and Municipal Advisor Professional Fee for the Annual Rate Card 
proposed by the Rate Card Amendments. It should be noted that the Board 
last raised the rate for the Transaction Fee and technology fee in 
Fiscal Year 2011 when the technology fee was first imposed, and last 
raised the rate for the Underwriting Fee more than 20 years ago.\107\
---------------------------------------------------------------------------

    \106\ See Exhibit 3(a), ``Chart 10--Historical and Projected 
Revenue without Rate Card Model Compared to Historical and Pro Forma 
Expenses.''
    \107\ The Municipal advisory firm professional fee was raised 
three times since inception in Fiscal Year 2014 (Fiscal Year 2018, 
Fiscal Year 2020, and Fiscal Year 2021).
---------------------------------------------------------------------------

Necessity of the Rate Card Amendments
    The Board believes Rate Card Amendments are necessary and 
appropriate to:
    (i) maintain a fair and equitable balance of reasonable fees and 
charges among regulated entities; \108\
---------------------------------------------------------------------------

    \108\ See discussion supra under ``Statutory Basis for the Rate 
Card Amendments'' near notes 87 and 88.
---------------------------------------------------------------------------

    (ii) better mitigate fee assessment volatility based on Market 
Activity

[[Page 48544]]

Fees,\109\ which has contributed to the growth of the MSRB's excess 
reserves; \110\ and
---------------------------------------------------------------------------

    \109\ See related discussions supra under sections entitled 
``Board Review of the Current Fee Structure--Mitigating the Impact 
of Market Volatility'' and ``Proposed Annual Rate Card Approach--
Limitations on Rate Changes to Promote Predictability and 
Stability.'' See also Exhibit 3(a), ``Chart 2--Historical Budget vs. 
Actual Revenue for the Rate Card Fees,'' ``Chart 4--Rate Card Fees: 
Historical Activity Volume Variance Budget to Actual,'' and ``Chart 
5--Historical Effective Fee Rate Changes.''
    \110\ Id.
---------------------------------------------------------------------------

    (iii) ensure a prudent long-term approach to organizational funding 
that addresses projected structural operating deficits under the 
current fee structure in near-term fiscal years.\111\
---------------------------------------------------------------------------

    \111\ See, Exhibit 3(a), ``Chart 8--Historical Actual Expenses'' 
(showing a ten-year historical compound annual growth rate of 
4.2%),''Chart 10--Historical and Projected Revenue without Rate Card 
Model Compared to Historical and Pro Forma Expenses,'' ``Chart 11--
Historical and Projected Revenue with Rate Card Model Compared to 
Historical and Pro Forma Expenses,'' ``Chart 12--Total Reserves vs. 
Target: Historical and Projected without Rate Card Model,'' and 
``Chart 13--Total Reserves vs. Target: Historical and Projected with 
Rate Card Model.''
---------------------------------------------------------------------------

    Because market events, when combined with the current fee 
structure, partially contributed to the excess reserves in recent 
years, the Board believes it is reasonable and appropriate to adopt a 
new approach to reduce the variability over time in fee assessments and 
mitigate the impact of market volatility over time by adjusting for 
budget surpluses or shortfalls annually, therefore providing a better 
mechanism for effectively managing fee rates and reserve levels.\112\ 
In the recent past, higher-than-expected new issue and secondary market 
volumes caused fees assessed from dealers to exceed budgets and, 
combined with lower-than-expected expenses, led to increases in 
reserves that necessitated rebates or temporary fee reductions to 
manage reserve levels. To reduce excess reserves, the Board instituted 
ad hoc rebates in Fiscal Year 2014 and Fiscal Year 2016 and temporary 
fee reductions via filings with the Commission for Fiscal Year 2019 and 
for Fiscal Year 2021 and Fiscal Year 2022 to reduce the excess 
reserves.\113\ As a result, there has been volatility in fee 
collections (since these are market-based fees) and MSRB's reserve 
levels in recent years.\114\ The same dynamics could also exist if 
actual new issue and secondary market activities fail to meet projected 
volumes, resulting in a revenue shortfall, which would prompt new 
filings to increase rate assessments to close the gap.
---------------------------------------------------------------------------

    \112\ See related discussion supra under section entitled 
``Board Review of the Current Fee Structure--Mitigating the Impact 
of Market Volatility.'' See also Exhibit 3(a), ``Chart 1--Historical 
Revenue Variances: Budget vs. Actual,'' ``Chart 2--Historical Budget 
vs. Actual Revenue for the Rate Card Fees,'' and ``Chart 4--Rate 
Card Fees: Historical Activity Volume Variance Budget to Actual.''
    \113\ The 2021 Temporary Fee Reduction is the MSRB's largest 
temporary fee reduction, which was initiated during Fiscal Year 2021 
and is expected to last until September 30, 2022. Link to the 2021 
Temporary Fee Reduction and related citations supra at note 12. The 
MSRB also filed for a separate temporary fee reduction during Fiscal 
Year 2019. See Exchange Act Release No. 85400 (Mar. 22, 2019), 84 FR 
11841 (Mar. 28, 2019) File No. SR-MSRB-2019-06.
    \114\ See Stakeholder Comments to the MSRB's Strategic 
Priorities (link at note 34 supra). Specifically, one commenter 
asked the MSRB to better address the volatility in revenues and the 
corresponding excess in MSRB organizational reserves. See, e.g., BDA 
Comment Letter, at p. 3-4 (link and citation at note 51).
---------------------------------------------------------------------------

    Without devising a new fee approach, it is likely the MSRB would 
again be forced to deal with large reserve excesses or shortfalls on an 
ad hoc basis in the future, which would not be a sustainable path going 
forward.\115\ Specifically, the proposed Annual Rate Card Process would 
(i) better mitigate the impact of market volatility on the MSRB's 
revenue structure (and, consequently, also better mitigate the impact 
of market volatility on the MSRB's organizational reserves), and (ii) 
maintain rates within a reasonably predictable range that, while 
subject to more incremental changes each year, would be comparably more 
stable over the long term than the MSRB's current fee structure.\116\ 
In this way, the Annual Rate Process is intended to establish a fee 
framework that is more transparent and predictable for the MSRB's 
stakeholders that would mitigate market volatility over time, while 
also retaining the Board's ability to flexibly react to changing 
circumstances year-to-year when establishing reasonable fees on 
regulated entities.\117\
---------------------------------------------------------------------------

    \115\ See related discussion supra under section entitled 
``Board Review of the Current Fee Structure--Mitigating the Impact 
of Market Volatility.'' See also Exhibit 3(a), ``Chart 1--Historical 
Revenue Variances: Budget vs. Actual,'' ``Chart 2--Historical Budget 
vs. Actual Revenue for the Rate Card Fees,'' and ``Chart 4--Rate 
Card Fees: Historical Activity Volume Variance Budget to Actual.''
    \116\ See related discussion supra under ``Proposed Annual Rate 
Card Approach--Limitations on Rate Changes to Promote Predictability 
and Stability'' (discussing various limitations on future increases 
of the Rate Card Fees). See also Exhibit 3(a), ``Chart 5--Historical 
Effective Fee Rate Changes.''
    \117\ See related discussion supra under ``Proposed Annual Rate 
Card Approach.''
---------------------------------------------------------------------------

Baseline and Reasonable Alternative Approaches
    The current fee assessment structure is used as a baseline to 
evaluate the benefits, the costs, and the burden on competition of the 
proposed Annual Rate Card Process. Furthermore, the proposed rate 
increase for Market Activity Fees and Municipal Advisor Professional 
Fee for the Fiscal Year 2023 Annual Rate Card would have occurred 
regardless of which fee structure is adopted since excess reserves are 
being eliminated through the 2021 Temporary Fee Reduction and the need 
to cure the Fiscal Year 2023 structural budget deficit; therefore, the 
Board's assessment in this section focuses on the comparison of the two 
fee structures setting aside the increases to the rates of assessment 
for the Rate Card Fees proposed by the Rate Card Amendments for Fiscal 
Year 2023 extending to December 2023.
    In addition to the proposed new fee rate setting approach, the MSRB 
also considered a few other fee assessment options but ultimately 
decided that the proposed Rate Card Fee structure is the best approach 
to ensure a stable revenue stream for the MSRB while reducing the 
volatility from Market Activity Fees assessed and the need for ad hoc 
fee filings with the Commission, without instituting a fundamental 
change in how the MSRB assesses fees that may disrupt regulated 
entities' financial expectations and operations.
    For example, one alternative the MSRB reviewed was to include other 
sources of revenue in the Annual Rate Card Process. The MSRB evaluated 
whether to include in the variable rate card pool approach the 
municipal funds underwriting fees, annual fees, and initial fees. 
However, the MSRB ultimately decided not to include those fees for a 
variety of reasons, including the fact that each of those fees 
constitutes a much smaller proportion than the four categories in the 
proposed Annual Rate Card Process.\118\
---------------------------------------------------------------------------

    \118\ See notes 14, 15, 18, and 22 supra and related discussion 
for explanations of why the Board to determined not to include 
certain fees in the Rate Card Fees and the Annual Rate Card Process.
---------------------------------------------------------------------------

    Additionally, the Board also considered a different way to 
apportion fees within each class of fee payer but decided that the 
proposed Annual Rate Card Process is the best way to achieve 
proportionate revenue based on the MSRB's available information, i.e., 
underwriters pay based on their volume underwritten, trading firms pay 
based on their trading activities (in par value and trade count), and 
municipal advisory firms pay based on the headcount of a firm.
    A fee assessment method based on a percentage of each municipal 
advisory firm's revenue, for example, would not be feasible at this 
time as it could require establishing a significantly more burdensome 
recordkeeping and reporting requirement. The MSRB does

[[Page 48545]]

not currently require municipal advisory firms to report such 
information under existing rules; and, more importantly, many municipal 
advisory firms would likely have business activities not solely related 
to municipal advisory services. In addition, it would increase the 
burden on municipal advisory firms as municipal advisory firms would 
have the responsibility to collect the relevant information to be used 
for MSRB's fee assessment and also would then be required to report it. 
The MSRB believes at this time that the costs and burdens associated 
with collecting and reporting such information are not justified, and 
the Municipal Advisor Annual Professional Fee for each person 
associated with the firm who is qualified is a reasonable proxy for the 
size of relevant business activities conducted by each municipal 
advisory firm.
Benefits, Costs, and Burden on Competition
    The proposed amendments to MSRB rules would result in a new fee 
approach intended to align revenues and expenses more closely and to 
reduce the year-to-year volatility in the amount of fees assessed (and, 
as a result, reduce the likelihood of accumulating excess reserves) by 
targeting each fee category to a pre-determined proportion of the total 
revenue based on respective projected volumes.\119\ The proposed Annual 
Rate Card Process would result in more frequent (annual), but smaller 
downward and upward, adjustments to keep revenues more closely aligned 
with budgeted expenses.
---------------------------------------------------------------------------

    \119\ See, e.g., related discussion supra under ``Proposed 
Annual Rate Card Approach--Objectives of the Annual Rate Card'' and 
``Proposed Annual Rate Card Approach--Process for Setting the Annual 
Rate Card.''
---------------------------------------------------------------------------

    The proposed Annual Rate Card Process addresses the following goals 
and issues the Board identified before initiating the Fee Review and 
would therefore achieve the intended benefits:
     Continue to maintain a fair and equitable balance of fees 
among all regulated entities, as the MSRB's new fee approach proposal 
does not change the division of fees amongst regulated entities;
     Design a durable fee structure for MSRB's long-term needs;
     Ensure that excess reserves would not likely be built up 
at a high level again by reviewing the actual reserves compared to the 
targeted reserves annually and incorporating any needed adjustments 
directly into the Annual Rate Card Process;
     Mitigate the need for an ad hoc ``rebate'' process, as any 
excess revenue would be used to reduce future years' fees; and
     Lower year-to-year variability in fee assessments, which 
would smooth out regulated entities' budget outlays.
    For the Annual Rate Card proposed by the Rate Card Amendments, the 
proposed rate increases for Market Activity Fees,\120\ which would be 
applicable to all dealers who conduct municipal market business, and 
for Municipal Advisor Professional Fee, which would be applicable to 
all municipal advisory firms, are intended to pay for the expenses of 
operating and administering the Board, including execution of the 
MSRB's Strategic Plan for ongoing technology and data investments, and 
would occur regardless of which fee structure the MSRB would adopt. 
Aside from the proposed rate increases for this Annual Rate Card, the 
Board does not believe the proposed Annual Rate Card Process would 
create any additional costs for regulated entities when compared to the 
current fee structure, as the aggregate fees assessed using the 
proposed Annual Rate Card Process over the course of multiple years 
would be equivalent to the aggregate fees assessed using the current 
fee structure, except with less year-to-year fluctuation since over or 
under revenue assessments related to market volatility would be 
operationalized through the Rate Card Process.
---------------------------------------------------------------------------

    \120\ These increases would be the first rate increases to any 
of the three Market Activity Fees since Fiscal Year 2011. As 
mentioned above, the Transaction Fee was last raised in Fiscal Year 
2011 and the Trade Count Fee was initiated in Fiscal Year 2011 as 
the technology fee. The Underwriting Fee was not changed in Fiscal 
Year 2011 but was last changed in Fiscal Year 2016, when it was 
reduced. In addition, the annual and initial fees paid by both 
dealers and municipal advisory firms were last raised in Fiscal Year 
2016.
---------------------------------------------------------------------------

    The proposed Annual Rate Card Process would introduce a new fee 
structure to reduce year-to-year fluctuation in the amount of market-
based fees paid by each regulated entity over time. The MSRB believes 
that the proposed Annual Rate Card Process would not have an impact on 
competition and, consequently, would not impose any burden on 
competition, relieve a burden on competition, nor promote competition. 
The MSRB believes the proposed rate increase for the Fiscal Year 2023 
Annual Rate Card (extending to December 2023) is necessary and 
appropriate to ensure prudent funding for the Board and that such fee 
increases are reasonably and fairly designed to be proportionately 
distributed across regulated entities in such a way that would not harm 
competition among regulated entities, nor otherwise harm the 
functioning of the municipal securities market. As a result, the Board 
does not believe that the proposed rate increase would result in any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as it would be applicable to 
all regulated entities. The Board also believes that no firm would be 
unduly burdened as compared to another firm in terms of the proposed 
rate increase. Dealers with different levels of underwriting and 
trading activities as well as municipal advisory firms with a range of 
headcounts would all be impacted proportionately by the proposed Annual 
Rate Card Process, including the proposed increases for the rates of 
assessment for the Fiscal Year 2023 Annual Rate Card.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Board did not solicit comment on the proposed rule change. 
Therefore, there are no comments on the proposed rule change received 
from members, participants, or others.\121\
---------------------------------------------------------------------------

    \121\ The Commission received five comment letters in response 
to the proposed rule change that the MSRB filed on June 2, 2022, 
which was subsequently withdrawn on July 21, 2022. This proposed 
rule change, while fundamentally consistent with the withdrawn 
filing, seeks to provide further clarification on the MSRB's annual 
rate card process in response to those comments. See Exhibit 3(b), 
``Comparison of Withdrawn Fee Filing to Current Fee Filing.''
---------------------------------------------------------------------------

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

    The foregoing rule change related to the Rate Card Amendments has 
become effective pursuant to Section 19(b)(3)(A) of the Act \122\ and 
paragraph (f) of Rule 19b-4 \123\ thereunder. Because the foregoing 
proposed rule change related to the Technical Amendments does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \124\ and Rule 
19b-4(f)(6) \125\ thereunder.
---------------------------------------------------------------------------

    \122\ 15 U.S.C. 78s(b)(3)(A).
    \123\ 17 CFR 240.19b-4(f).
    \124\ 15 U.S.C. 78s(b)(3)(A).
    \125\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may

[[Page 48546]]

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.

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 [email protected]. Please 
include File Number SR-MSRB-2022-06 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-2022-06. 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-2022-06 and should be submitted on 
or before August 30, 2022.
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    \126\ 17 CFR 200.30-3a(a)(2).

    For the Commission, by the Office of Municipal Securities, 
pursuant to delegated authority.\126\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-17002 Filed 8-8-22; 8:45 am]
BILLING CODE 8011-01-P


