80 FR 16466 - Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change Consisting of Proposed Amendments to the MSRB Rule G-14 RTRS Procedures, and the Real-Time Transaction Reporting System and Subscription Service

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 59 (March 27, 2015)

Page Range		16466-16471
FR Document		2015-06993
Federal Register, Volume 80 Issue 59 (Friday, March 27, 2015)
[Federal Register Volume 80, Number 59 (Friday, March 27, 2015)]
[Notices]
[Pages 16466-16471]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-06993]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74564; File No. SR-MSRB-2015-02]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of a Proposed Rule Change Consisting of 
Proposed Amendments to the MSRB Rule G-14 RTRS Procedures, and the 
Real-Time Transaction Reporting System and Subscription Service

March 23, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 19, 2015, the Municipal Securities Rulemaking Board (the 
``MSRB'' or ``Board'') filed with the Securities and Exchange 
Commission (the ``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change 
consisting of proposed amendments to the MSRB Rule G-14 RTRS 
Procedures, and the Real-Time Transaction Reporting System and 
subscription service (collectively, the ``proposed rule change''). The 
MSRB is proposing that the effective date for the proposed rule change 
be no later than May 23, 2016 and announced by the MSRB in a notice 
published on the MSRB Web site no later than sixty (60) days prior to 
the effective date.
    The text of the proposed rule change is available on the MSRB's Web 
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2015-Filings.aspx, at the MSRB's principal office, and at the Commission's 
Public Reference Room.

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

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

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

1. Purpose
    MSRB Rule G-14, on reports of sales or purchases, requires brokers, 
dealers and municipal securities dealers (collectively ``dealers'') to 
report all executed transactions in municipal securities to RTRS within 
15 minutes of the time of trade, with limited exceptions.\3\ RTRS 
serves the dual objectives of price transparency and market 
surveillance. Because a comprehensive database of transactions is 
needed for the surveillance function of RTRS, Rule G-14, with limited 
exceptions, requires dealers to report all of their purchase-sale 
transactions to RTRS, not only those that qualify for public 
dissemination to serve the transparency function of the system.\4\ The 
MSRB makes transaction data available to the general public through the 
Electronic Municipal Market Access (``EMMA'') Web site at no cost, and 
disseminates such data through paid subscription services to market 
data vendors, institutional market participants and others that 
subscribe to the data feed.
---------------------------------------------------------------------------

    \3\ Transactions in securities without CUSIP numbers, in 
municipal fund securities, and certain inter-dealer securities 
movements not eligible for comparison through a clearing agency are 
the only transactions exempt from the reporting requirements of Rule 
G-14.
    \4\ In this respect, RTRS serves as an audit trail for municipal 
securities trading, with the exception of certain internal movements 
of securities within dealers that currently are not required to be 
reported, customer identifications, and other related specific items 
of information. Compare Consolidated Audit Trail, Release No. 34-
67457 (July 18, 2012), 77 FR 45722 (August 1, 2012), File No. S7-11-
10.
---------------------------------------------------------------------------

    As more fully described below, the proposed rule change would 
enhance the post-trade price transparency information provided through 
RTRS by:
     Expanding the application of the existing list offering 
price and takedown indicator to cases involving distribution 
participant dealers and takedown transactions that are not at a 
discount from the list offering price;
     eliminating the requirement for dealers to report yield on 
customer trade reports and, instead, enabling the MSRB to calculate and 
disseminate yield on customer trades;
     establishing a new indicator for customer trades involving 
non-transaction-based compensation arrangements; and
     establishing a new indicator for alternative trading 
system (``ATS'') transactions.
Expanding the Application of Existing List Offering Price and RTRS 
Takedown Indicator
    Transaction reporting procedures require dealers that are part of 
the underwriting group for a new issuance of municipal securities to 
include an indicator on trade reports, which indicator is disseminated 
to the public, for transactions executed on the first day of trading in 
a new issue with prices set under an offering agreement for the new 
issue. These transactions include sales to customers by a sole 
underwriter, syndicate manager, syndicate member or selling group 
member at the published list offering price for the security (``List 
Offering Price Transaction'') or by a sole underwriter or syndicate 
manager to a syndicate or selling group member at a discount from the 
published list offering price for the security (``RTRS Takedown 
Transaction''). Such trade reports are provided an end-of-day exception 
from Rule G-14's general 15-minute reporting requirement.
    Since the introduction of the List Offering Price Transaction 
indicator in 2005 and RTRS Takedown Transaction indicator in 2007, 
certain market practices in this area have evolved. First, outside of 
traditional underwriting syndicates or selling groups, some dealers 
have entered into long-term marketing arrangements with other dealers 
that serve in the syndicate or selling group relating to purchases and 
re-sales of new issue securities

[[Page 16467]]

(``distribution participant dealers''). The MSRB understands that these 
distribution participant dealers agree to execute transactions with 
customers at the published list offering prices. Accordingly, the 
proposed rule change would expand the application of List Offering 
Price Transaction and RTRS Takedown Transaction indicators to sale 
transactions by distribution participant dealers to customers at the 
list offering price and sale transactions by a sole underwriter or 
syndicate manager to distribution participant dealers.
    A second evolution in market practice in this area relates to the 
prices at which takedown transactions occur. The RTRS Takedown 
Transaction indicator currently is limited to inter-dealer transactions 
occurring at a discount from the published list offering price. The 
MSRB understands that, in some new issues, transactions between a sole 
underwriter or syndicate manager to a syndicate member, selling group 
member or distribution participant dealer are not executed at a 
discount from the published list offering price or at the full takedown 
amount. This typically occurs in the case of group net or net 
designated order arrangements. The proposed rule change expands the 
application of the RTRS Takedown Transaction indicator to any sale 
transaction by a sole underwriter or syndicate manager to a syndicate 
member, selling group member or distribution participant dealer on the 
first day of trading in the new issue.
Eliminating the Requirement for Dealers To Report Yield on Customer 
Trade Reports
    Transaction reporting procedures currently require dealers to 
include on most reports of customer transactions to RTRS both a dollar 
price and yield.\5\ The yield required to be reported to RTRS for 
customer trades is consistent with the yield required to be displayed 
on a customer confirmation under Rule G-15(a), which requires that 
yield be computed to the lower of an ``in whole'' call or maturity, 
subject to certain requirements set forth in the rule for specific 
special situations (generally referred to as the ``yield to worst''). 
Rule G-15(a) requires the confirmation to include the date to which 
yield is calculated if that date is other than the nominal maturity 
date, and also requires the confirmation for a transaction effected 
based on a yield other than yield to worst to include both yields. 
Since April 30, 2012, the MSRB has calculated and included in 
disseminated RTRS information the yield on inter-dealer trades computed 
in the same manner as required for customer trades.\6\
---------------------------------------------------------------------------

    \5\ For inter-dealer transactions, dealers report the dollar 
price at which the transaction was effected and the MSRB calculates 
and includes in disseminated information the corresponding yield.
    \6\ See ``SEC Approves Amendments to MSRB Rule G-14, on Reports 
of Sales or Purchases, Including Rule G-14 RTRS Procedures, and 
Amendments to the Real-Time Transaction Reporting System,'' MSRB 
Notice 2012-15 (March 21, 2012).
---------------------------------------------------------------------------

    The proposed rule change would eliminate the requirement for 
dealers to include yield on customer trade reports.\7\ Consistent with 
the manner in which the MSRB calculates and includes in disseminated 
RTRS information yield on inter-dealer trades, the MSRB would calculate 
and disseminate yield on customer trade reports.\8\ This would remove 
one aspect of a dealer's burden in reporting customer transactions to 
the MSRB in compliance with MSRB Rule G-14 \9\ and ensure that the 
calculation and dissemination of yields for both inter-dealer and 
customer transactions are consistent.
---------------------------------------------------------------------------

    \7\ This change is anticipated to also have the benefit of 
alleviating particular operational concerns cited by dealers in 
connection with reporting certain ``away from market'' trade 
reports.
    \8\ Note that dealers would continue to be able to report that a 
when, as and if issued transaction was executed on the basis of 
yield in the event that the settlement date is not known at the time 
the trade is executed, which prevents an accurate calculation of the 
corresponding dollar price to be performed.
    \9\ RTRS currently performs price/yield calculations, compares 
RTRS-computed values to dealer-reported values, and returns errors 
to dealers when discrepancies are found. This results in dealers 
researching and responding to such errors which, in many cases, are 
the results of differences in vendor-provided security descriptive 
information utilized by dealers and RTRS. By removing the 
requirement to include yield on customer trade reports, the proposed 
rule change would have the effect of eliminating these errors. In 
addition, in the case of transactions arising from customer 
repurchase agreements, the proposed rule change would eliminate the 
burden on dealers of calculating for trade reporting purposes a 
yield consistent with the requirements of Rule G-15(a), which the 
MSRB understands presents operational challenges given that this 
represents a different calculation from the calculation used to 
determine the yield resulting from the terms of the repurchase 
agreement.
---------------------------------------------------------------------------

Establishing a New Indicator for Customer Trades Involving Non-
Transaction-Based Compensation Arrangements
    For principal transactions by dealers, the trade price reported to 
and publicly disseminated by the MSRB includes all aspects of the 
price, including any mark-up or mark-down that compensates the dealer 
for executing the transaction. In agency transactions, dealers are 
required to report to the MSRB both the price of the security and the 
commission charged to the customer. The prices publicly disseminated 
for agency transactions incorporate the reported commission to provide 
for comparability with the prices for principal trades. However, 
dealers effecting transactions with customers as part of an arrangement 
that does not provide for dealer compensation to be paid on a 
transaction-based basis, such as in certain wrap fee arrangements, 
report to the MSRB transaction prices that do not include a 
compensation component.
    To distinguish in the transaction information disseminated publicly 
between customer transactions that do not include a dealer compensation 
component and those that include a mark-up or mark-down or a 
commission, the proposed rule change would require dealers to include a 
new indicator on their trade reports that would be disseminated 
publicly. This would improve the usefulness of the transaction 
information disseminated publicly by enabling users of the price 
transparency information to distinguish those customer transactions 
that do not include a dealer compensation component.
Establishing a New Indicator for ATS Transactions
    Dealers may use a variety of means to transact in municipal 
securities, including broker's brokers or ATSs as well as traditional 
direct transactions with a known counterparty. The MSRB currently 
identifies all transactions reported as having been executed by a 
broker's broker in the transaction information disseminated publicly. 
This identifier is applied based on the broker's broker informing the 
MSRB that it acts in such capacity. The MSRB does not currently 
identify trades as having been executed through an ATS.
    To better ascertain the extent to which ATSs are used in the 
municipal market and to indicate to market participants on disseminated 
transaction information that an ATS was used, the proposed rule change 
would establish an additional new indicator. For those ATSs that take a 
principal position between a buyer and seller, the ATS and the dealers 
that transact with the ATS would be required to include the ATS 
indicator on trade reports. In instances where an ATS connects a buyer 
and seller but does not take a principal or agency position between 
those parties and therefore does not have a transaction reporting 
requirement under MSRB rules, the dealers that transact with each other 
as a result of using the services of the ATS would be required to 
include the ATS indicator on their trade reports. In all cases, the ATS 
indicator would be included on transaction information

[[Page 16468]]

disseminated publicly. Identifying in disseminated transaction 
information that an ATS was employed should facilitate higher quality 
research and analysis of market structure by providing information 
about the extent to which ATSs are used and should complement the 
existing indicator disseminated for transactions involving a broker's 
broker.
Effective Date of the Proposed Rule Change
    To provide time for the MSRB to undertake the programming changes 
to implement the proposed rule change, as well as to provide an 
adequate testing period for dealers and subscribers that interface with 
RTRS, the MSRB is proposing an effective date for the proposed rule 
change to be announced by the MSRB in a notice published on the MSRB 
Web site, which date shall be no later than May 23, 2016 and shall be 
announced no later than sixty (60) days prior to the effective date.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Act, which provides that the MSRB's rules 
shall:

be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect 
to, and facilitating transactions in municipal securities and 
municipal financial products, to remove impediments to and perfect 
the mechanism of a free and open market in municipal securities and 
municipal financial products, and, in general, to protect investors, 
municipal entities, obligated persons, and the public interest.

    The MSRB believes that the proposed rule change is consistent with 
the Act. The MSRB believes that the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market in 
municipal securities by increasing the quality and usefulness of the 
post-trade price transparency information provided through RTRS. The 
MSRB believes the expansion of the application of the existing list 
offering price and takedown indicator to cases involving distribution 
participant dealers and takedown transactions that are not at a 
discount from the list offering price, establishment of a new indicator 
for customer trades involving non-transaction-based compensation 
arrangements, and establishment of a new indicator for ATS transactions 
would enable users of the post-trade price transparency information 
provided through RTRS to better understand the pricing of certain 
transactions as well as how such transactions were executed. As 
previously noted, identifying in disseminated transaction information 
that an ATS was employed should facilitate higher quality research and 
analysis of market structure by providing information about the extent 
to which ATSs are used and should complement the existing indicator 
disseminated for transactions involving a broker's broker. Accordingly, 
the proposed rule change would contribute to the MSRB's continuing 
efforts to improve market transparency and to protect investors, 
municipal entities, obligated persons and the public interest.

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

    The MSRB does not believe the proposed rule change would impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act. Information disseminated by RTRS is available 
to all persons on an equal and non-discriminatory basis. In addition to 
making the information available for free on the EMMA web portal to all 
members of the public, the MSRB makes the information collected by RTRS 
available by subscription on an equal and non-discriminatory basis 
without imposing restrictions on subscribers from, or imposing 
additional charges on subscribers for, re-disseminating such 
information or otherwise providing value-added services and products to 
third parties based on such information on terms determined by each 
subscriber.\10\
---------------------------------------------------------------------------

    \10\ The MSRB notes that subscribers may be subject to 
proprietary rights of third parties in information provided by such 
third parties that is made available through the subscription.
---------------------------------------------------------------------------

    The MSRB recognizes that the proposed rule change would impose a 
burden on dealers and subscribers that interface with RTRS to comply 
with the reporting and dissemination of the new indicators that would 
be required by the proposed rule change. The MSRB solicited and 
received comment on several potential burdens of the proposed rule 
change and the specific comments and responses thereto are discussed 
below.\11\ The MSRB plans to provide a six month testing period in 
advance of the effective date. The MSRB believes that a six month 
testing period in advance of the effective date would provide dealers 
and subscribers with sufficient time to make any required changes in 
due course without causing adverse disruptions to their information 
technology plans or budgets.
---------------------------------------------------------------------------

    \11\ See ``Request for Comment on Enhancements to Post-Trade 
Transaction Data Disseminated Through a New Central Transparency 
Platform,'' MSRB Notice 2014-14 (August 31, 2014).
---------------------------------------------------------------------------

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

    On January 17, 2013, the MSRB provided background information on 
the MSRB's initiative under the Long-Range Plan \12\ to refresh the 
technology of RTRS and sought public comment on the appropriate 
standard for ``real-time'' reporting and dissemination of transaction 
price and related information, as well as on baseline technology, 
processing and data protocols for post-trade transaction information 
(``January Release'').\13\ On July 31, 2013, the MSRB sought public 
comment on enhancements to data elements disseminated publicly through 
RTRS (``July Release'').\14\ Based upon the comments received in 
response to the January and July Releases, the MSRB identified specific 
enhancements to RTRS and solicited on August 13, 2014 public input on 
the specific components of the post-trade reporting and public 
dissemination enhancements as well as on the likely benefits and 
burdens associated with the potential enhancements (``August 
Release'').\15\ The MSRB received comments on the January Release from 
fifteen commenters,\16\ on the July Release from

[[Page 16469]]

nine commenters,\17\ and on the August Release from seven 
commenters.\18\ The portions of these notices relating to the proposed 
rule change, the comments received in response to such portions, and 
the MSRB's responses are discussed below.\19\
---------------------------------------------------------------------------

    \12\ See ``MSRB Publishes Long-Range Market Transparency Plan,'' 
MSRB Notice 2012-06 (February 23, 2012).
    \13\ See ``Request for Comment on More Contemporaneous Trade 
Price Information Through a New Central Transparency Platform,'' 
MSRB Notice 2013-02 (January 17, 2013).
    \14\ See ``Concept Release on Pre-Trade and Post-Trade Pricing 
Data Dissemination Through a New Central Transparency Platform,'' 
MSRB Notice 2013-14 (July 31, 2013).
    \15\ See ``Request for Comment on Enhancements to Post-Trade 
Transaction Data Disseminated Through a New Central Transparency 
Platform,'' MSRB Notice 2014-14 (August 13, 2014).
    \16\ Comments were received on the January Release from Barclays 
Capital Inc.: Letter from Scott Coya, Director, Municipal 
Compliance, dated March 15, 2013 (``Barclays''); Bond Dealers of 
America: Letter from Michael Nicholas, Chief Executive Officer, 
dated March 15, 2013 (``BDA-1''); Charles Schwab & Co. Inc.: Letter 
from Michael P. Moran, Vice President, Fixed Income Compliance, 
dated March 15, 2013 (``Schwab''); Eastern Bank: Email from James N. 
Fox, SVP and Managing Director, dated March 15, 2013 (``Eastern''); 
Financial Information Forum: Letter from Arsalan Shahid, Program 
Director, dated March 15, 2013 (``FIF-1''); Financial Services 
Institute: Letter from David T. Bellaire, Executive Vice President 
and General Counsel, dated March 15, 2013 (``FSI''); Frost Bank: 
Letter from Robert N. Jacobs, Assistant Vice President/Compliance 
Officer, dated March 11, 2013 (``Frost''); Investment Company 
Institute: Letter from Dorothy Donohue, Deputy General Counsel-
Securities Regulation, dated March 15, 2013 (``ICI''); J.W. Korth & 
Company LP: Email from James Korth dated March 14, 2013 
(``JWKorth''); R.W. Smith & Associates, Inc.: Email from Paige 
Pierce dated March 20, 2013 (``RWSmith-1''); Securities Industry and 
Financial Markets Association: Letter from Leslie M. Norwood, 
Managing Director and Associate General Counsel, dated March 15, 
2013 (``SIFMA-1''); Seidel & Shaw, LLC: Letter from Thomas W. Shaw, 
President, dated March 15, 2013 (``Seidel''); Standish Mellon Asset 
Management Company LLC: Email from Daniel Rabasco dated March 15, 
2013 (``Standish''); TMC Bonds, L.L.C.: Letter from Thomas S. Vales, 
Chief Executive Officer, dated March 15, 2013 (``TMCBonds''); and 
Tradition Asiel Securities, Inc.: Letter from Eric M. Earnhardt, 
Chief Compliance Officer, dated March 19, 2013 (``TASI'').
    \17\ Comments were received on the July Release from Bond 
Dealers of America: Letter from Michael Nicholas, Chief Executive 
Officer, dated November 1, 2013 (``BDA-2''); Corporate Treasury 
Investment Consulting LLC: Letter from Mark O. Conner, Principal, 
dated August 16, 2013 (``CTIC''); Financial Information Forum: 
Letter from Manisha Kimmel, Executive Director, dated November 1, 
2013 (``FIF-2''); Interactive Data Corporation: Letter from Mark 
Hepsworth, President, Interactive Data Pricing and Reference Data, 
dated November 1, 2013 (``IDC''); Leonard, Jack: Letter dated August 
1, 2013 (``Mr. Leonard''); Long, Cate: Email dated November 1, 2013 
(``Ms. Long''); Sayer, Steven: Email dated November 3, 2013 (``Mr. 
Sayer''); Securities Industry and Financial Markets Association: 
Letter from Leslie M. Norwood, Managing Director and Associate 
General Counsel, dated November 1, 2013 (``SIFMA-2''); and Wells 
Fargo Advisors, LLC: Letter from Robert J.McCarthy, Director of 
Regulatory Policy, dated November 1, 2013 (``Wells Fargo'').
    \18\ Comments were received on the August Release from Bond 
Dealers of America: Letter from Michael Nicholas, Chief Executive 
Officer, dated September 26, 2014 (``BDA-3''); Financial Information 
Forum: Letter from Darren Wasney, Program Manager, dated September 
19, 2014 (``FIF-3''); Income Securities Advisor Inc.: Email from 
Richard Lehmann dated August 26, 2014 (``ISA''); Murez, Herbert: 
Email dated August 13, 2014 (``Mr. Murez''); RW Smith & Associates, 
LLC: Email from Paige W. Pierce, President and Chief Executive 
Officer, dated September 26, 2014 (``RWSmith-2''); Securities 
Industry and Financial Markets Association: Letter from Leslie M. 
Norwood, Managing Director and Associate General Counsel, dated 
September 25, 2014 (``SIFMA-3''); and Trigo, Loren: Email dated 
August 13, 2014 (``Trigo'').
    \19\ The January, July and August Releases contemplated 
additional enhancements to RTRS as well as the establishment of a 
new program for pre-trade transparency. Comments in response to 
those items are not addressed in this proposed rule change but would 
be addressed in any future rulemaking on those items that the MSRB 
determines to undertake.
---------------------------------------------------------------------------

Expanding the Application of Existing List Offering Price and RTRS 
Takedown Indicators
    The July Release solicited input on whether changes to the List 
Offering Price Transaction and RTRS Takedown Transaction indicators 
would be warranted given evolutions in market practices and the 
information publicly available through the EMMA Web site. The August 
Release proposed expanding the application of the List Offering Price 
Transaction and RTRS Takedown Transaction indicators to include 
scenarios where: (i) Dealers have entered into long-term marketing 
arrangements with other dealers that serve in the syndicate or selling 
group for purchasing and re-selling new issue securities 
(``distribution participant dealers''); (ii) takedown transactions are 
not at a discount from the list offering price; and (iii) offerings 
that occur over a number of days with different list offering prices 
set each day.
    FIF-3 and SIFMA-3 stated support for expanding the application of 
the List Offering Price Transaction and RTRS Takedown Transaction 
indicators. With respect to including distribution participant dealers 
in the definition of which dealers must use the indicator, SIFMA-3 
noted that these dealers perform ``a similar function to a selling 
group member.'' Further, in response to whether takedown transactions 
that are not at a discount from the list offering price, which would 
occur in the case of a group net or net designated order arrangement, 
should be included in the definition of an RTRS Takedown Transaction, 
FIF-3 and SIFMA-3 indicated support and SIFMA-3 stated that this change 
``will conform the rule to widespread industry practice'' although FIF-
3 noted that they ``see this happening frequently in the corporate bond 
market but infrequently in the municipal bond market.''
    Comments were mixed in response to whether offerings that occur 
over a number of days with different list offering prices set each day 
should be included in the List Offering Price Transaction and RTRS 
Takedown Transaction indicators. FIF-3 offered support for this change 
and stated that it ``agree[s] that if the distribution occurs on days 
that are not the first day of trading of a new issue, the distribution 
should still be reported as the list price.'' SIFMA-3 did not support 
this change and stated that this ``change would be confusing for 
investors.''
    After careful consideration of the comments received, and given the 
absence of evidence of widespread use of offerings occurring over a 
number of days with different list offering prices set each day, the 
MSRB has determined not to propose to expand the application of the 
indicator to address this scenario at this time, although the MSRB may 
revisit this issue if these types of offerings become more frequent.
Eliminating the Requirement for Dealers To Report Yield on Customer 
Trade Reports
    The July and August Releases proposed to eliminate the requirement 
for dealers to include yield on customer trade reports and, instead, 
enable the MSRB to calculate and disseminate yield on customer trades. 
The August Release solicited input on whether this change would 
alleviate operational concerns cited by dealers in connection with 
reporting certain ``away from market'' trade reports.
    BDA-3, FIF-2, FIF-3, IDC, SIFMA-2 and SIFMA-3 supported eliminating 
the requirement to include yield on customer trade reports. Eliminating 
this requirement would make the MSRB's RTRS yield reporting 
requirements consistent with those established by Financial Industry 
Regulatory Authority (``FINRA'') for corporate bond transactions and 
reduce the amount of error feedback returned to dealers when minor 
discrepancies arise. BDA-3 stated that ``MSRB's calculation of yields 
would avoid differences in yield calculations across dealers due to 
security master differences'' and ``[c]ustomers and dealers would also 
benefit from the improved consistency in the calculation of yield to 
worst.'' SIFMA-3 noted that the ``elimination of the broker-dealer 
requirement to report yield on customer trade reports does also 
alleviate some operational concerns in connection with reporting 
certain `away from market' trade reports, such as transactions arising 
from customer repurchase agreements.''
    FIF-3, SIFMA-2 and SIFMA-3 cited a concern related to potential 
differences in the yield calculated by MSRB and displayed on EMMA and 
the yield calculated by dealers and displayed on customer 
confirmations. FIF-3 stated that the MSRB should ``consider the impact 
of discrepancies between the MSRB's calculations and dealer-calculated 
yield to worst which will appear on a customer's confirm'' and 
recommends that the MSRB ``[provide] guidance for cases where there are 
discrepancies between the MSRB's calculations and dealer-calculated 
yield to worst on a customer's confirm.'' SIFMA-2 observed that dealers 
have the responsibility to report yield to customers on trade 
confirmations and that, due to the complicated nature of some 
redemption provisions, the dealer-calculated yield and the MSRB-
calculated yield may not always match precisely. FIF-2 and IDC 
suggested that the display of the date to which this

[[Page 16470]]

yield-to-worst calculation is determined would be helpful.
    After carefully considering commenters' concerns, the MSRB believes 
potential confusion would be addressed by additionally displaying on 
EMMA the calculation method (yield to call or maturity) and, for yield 
to call, the call date and price used. Under this approach, any 
differences between dealer and MSRB calculations could be understood by 
viewing the inputs the MSRB used in its calculation.
Establishing a New Indicator for Customer Trades Involving Non-
Transaction-Based Compensation Arrangements
    The July and August Releases proposed the establishment of a new 
indicator to distinguish in the price transparency data between 
customer transactions that do not include a dealer compensation 
component and those that include a mark-up or mark-down or a 
commission.
    BDA-3, FIF-2, FIF-3, Ms. Long, SIFMA-2, SIFMA-3, and Wells Fargo 
favored the addition of an indicator for identifying transactions that 
are not inclusive of a compensation component. SIFMA-2, however, 
opposed requiring the reporting of the details of the non-transaction 
based compensation arrangement. BDA-3 stated that a new indicator 
``would provide the users of trade transparency products with 
information that could explain certain variations in trade prices and 
assist in best execution determinations.'' SIFMA-3 suggested that, if 
the MSRB publicly disseminates the existing agency or principal trade 
indicator currently collected, this would accomplish the same benefit 
and also stated that the MSRB should not consider collecting 
information on the nature of alternative compensation beyond an 
indicator as such information would be burdensome to report.
    The MSRB does not believe that SIFMA-3's suggestion that 
disseminating the existing agency or principal trade indicator 
currently collected would help distinguish in the price transparency 
data customer transactions that do not include a dealer compensation 
component, particularly because the MSRB understands that both agency 
and principal transactions can occur under current market practices 
without a dealer compensation component. With respect to SIFMA-2's view 
that the MSRB should not consider collecting information on the nature 
of alternative compensation, the MSRB notes that this was not 
contemplated in the July or August Release and is not part of the 
proposed rule change.
Establishing a New Indicator for ATS Transactions
    The July and August Releases proposed adding an indicator to 
identify transactions executed using the services of an ATS, which 
indicator would be included in the information disseminated publicly. 
The August Release also proposed that, in instances where an ATS does 
not take a principal position between two dealers, each dealer would be 
required to report the identity of the ATS employed.
    In response to the July Release, Ms. Long supported the addition of 
an ATS indicator on trades, and stated that the specific ATS used 
should be identified, initially for surveillance purposes and 
potentially for future public dissemination. FIF-2 noted operational 
burdens associated with identifying trades executed using the services 
of an ATS, particularly in instances where the ATS does not act as the 
counter-party to the trade. SIFMA-2 questioned the ``tangible 
transparency benefits to the market'' of including an ATS indicator. In 
response to the August Release, SIFMA-3 and FIF-3 noted that this 
indicator would result in a cost to dealers to implement. SIFMA-3 
stated that it ``recognizes that the MSRB has a legitimate interest in 
determining ATS participation in the market, and likely has no other 
way to get this information on a real-time basis.'' FIF-3 noted that 
FINRA is pursuing the establishment of a similar ATS indicator for 
corporate bond trade reports.
    In response to a potential requirement that dealers also would need 
to identify in some cases the ATS employed, SIFMA-3 and FIF-3 suggested 
that this component would add operational complexity and compliance 
costs to the requirement. SIFMA-3 stated that ``[a]lthough flagging 
these trades would be a significant operational and administrative 
burden, the burden would be minimized for the broker-dealer community 
if the result was a mere change in an `M code' '' (which is the change 
that would be made to simply identify that an ATS was employed, 
exclusive of the ATS's identity). FIF-3 stated in response to the 
proposed requirement to identify the ATS employed that they ``believe 
this would be challenging to implement.''
    From a market structure perspective, the MSRB believes that it is 
important to know the extent to which ATSs are employed for inter-
dealer transactions as such information could inform future system 
development, research and rulemaking initiatives. While also having the 
identity of the ATS in instances where the ATS does not take a 
principal position between two dealers would increase the usefulness of 
the ATS indicator, the MSRB is sensitive to the burden such a 
requirement would impose, particularly given the future potential 
establishment by the MSRB of a pre-trade transparency system. The MSRB 
notes that under a comprehensive pre-trade transparency system, it is 
anticipated that the identity of each ATS would be known and the extent 
to which each is used in the municipal market would therefore be 
quantifiable. Accordingly, the MSRB believes that proceeding with the 
establishment of an ATS indicator, which the MSRB plans to implement 
utilizing the existing special condition indicator (the ``M code'') 
field in RTRS, is appropriate. The MSRB, however, in acknowledgement of 
the burdens identified by commenters, has not included in this proposed 
rule change a requirement to report the identity of the ATS that was 
used.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period of up to 90 days (i) as 
the Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MSRB-2015-02 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-2015-02. This file 
number should be included on the

[[Page 16471]]

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 Web site 
(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 Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549 on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the MSRB. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-MSRB-2015-02 and should be submitted on or before April 
17, 2015.

    For the Commission, pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-06993 Filed 3-26-15; 8:45 am]
 BILLING CODE 8011-01-P
16468 Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices

disseminated publicly. Identifying in understand the pricing of certain sufficient time to make any required
disseminated transaction information transactions as well as how such changes in due course without causing
that an ATS was employed should transactions were executed. As adverse disruptions to their information
facilitate higher quality research and previously noted, identifying in technology plans or budgets.
analysis of market structure by disseminated transaction information
that an ATS was employed should C. Self-Regulatory Organization’s
providing information about the extent
facilitate higher quality research and Statement on Comments on the
to which ATSs are used and should
analysis of market structure by Proposed Rule Change Received From
complement the existing indicator
providing information about the extent Members, Participants, or Others
disseminated for transactions involving
a broker’s broker. to which ATSs are used and should On January 17, 2013, the MSRB
complement the existing indicator provided background information on
Effective Date of the Proposed Rule disseminated for transactions involving the MSRB’s initiative under the Long-
Change a broker’s broker. Accordingly, the Range Plan 12 to refresh the technology
To provide time for the MSRB to proposed rule change would contribute of RTRS and sought public comment on
undertake the programming changes to to the MSRB’s continuing efforts to the appropriate standard for ‘‘real-time’’
implement the proposed rule change, as improve market transparency and to reporting and dissemination of
well as to provide an adequate testing protect investors, municipal entities, transaction price and related
period for dealers and subscribers that obligated persons and the public information, as well as on baseline
interface with RTRS, the MSRB is interest. technology, processing and data
proposing an effective date for the B. Self-Regulatory Organization’s protocols for post-trade transaction
proposed rule change to be announced Statement on Burden on Competition information (‘‘January Release’’).13 On
by the MSRB in a notice published on July 31, 2013, the MSRB sought public
the MSRB Web site, which date shall be The MSRB does not believe the comment on enhancements to data
no later than May 23, 2016 and shall be proposed rule change would impose any elements disseminated publicly through
announced no later than sixty (60) days burden on competition not necessary or RTRS (‘‘July Release’’).14 Based upon
prior to the effective date. appropriate in furtherance of the the comments received in response to
purposes of the Act. Information the January and July Releases, the MSRB
2. Statutory Basis disseminated by RTRS is available to all identified specific enhancements to
The MSRB believes that the proposed persons on an equal and non- RTRS and solicited on August 13, 2014
rule change is consistent with Section discriminatory basis. In addition to public input on the specific components
15B(b)(2)(C) of the Act, which provides making the information available for of the post-trade reporting and public
that the MSRB’s rules shall: free on the EMMA web portal to all dissemination enhancements as well as
members of the public, the MSRB makes on the likely benefits and burdens
be designed to prevent fraudulent and
manipulative acts and practices, to promote the information collected by RTRS associated with the potential
just and equitable principles of trade, to available by subscription on an equal enhancements (‘‘August Release’’).15
foster cooperation and coordination with and non-discriminatory basis without The MSRB received comments on the
persons engaged in regulating, clearing, imposing restrictions on subscribers January Release from fifteen
settling, processing information with respect from, or imposing additional charges on commenters,16 on the July Release from
to, and facilitating transactions in municipal subscribers for, re-disseminating such
securities and municipal financial products, information or otherwise providing 12 See ‘‘MSRB Publishes Long-Range Market
to remove impediments to and perfect the value-added services and products to Transparency Plan,’’ MSRB Notice 2012–06
mechanism of a free and open market in (February 23, 2012).
third parties based on such information
municipal securities and municipal financial 13 See ‘‘Request for Comment on More
products, and, in general, to protect on terms determined by each
Contemporaneous Trade Price Information Through
investors, municipal entities, obligated subscriber.10 a New Central Transparency Platform,’’ MSRB
persons, and the public interest. The MSRB recognizes that the Notice 2013–02 (January 17, 2013).
proposed rule change would impose a 14 See ‘‘Concept Release on Pre-Trade and Post-
The MSRB believes that the proposed burden on dealers and subscribers that Trade Pricing Data Dissemination Through a New
rule change is consistent with the Act. interface with RTRS to comply with the Central Transparency Platform,’’ MSRB Notice
The MSRB believes that the proposed 2013–14 (July 31, 2013).
reporting and dissemination of the new 15 See ‘‘Request for Comment on Enhancements to
rule change would remove impediments indicators that would be required by the Post-Trade Transaction Data Disseminated Through
to and perfect the mechanism of a free proposed rule change. The MSRB a New Central Transparency Platform,’’ MSRB
and open market in municipal securities solicited and received comment on Notice 2014–14 (August 13, 2014).
by increasing the quality and usefulness several potential burdens of the
16 Comments were received on the January

of the post-trade price transparency Release from Barclays Capital Inc.: Letter from Scott
proposed rule change and the specific Coya, Director, Municipal Compliance, dated March
information provided through RTRS. comments and responses thereto are 15, 2013 (‘‘Barclays’’); Bond Dealers of America:
The MSRB believes the expansion of the discussed below.11 The MSRB plans to Letter from Michael Nicholas, Chief Executive
application of the existing list offering provide a six month testing period in Officer, dated March 15, 2013 (‘‘BDA–1’’); Charles
price and takedown indicator to cases Schwab & Co. Inc.: Letter from Michael P. Moran,
advance of the effective date. The MSRB Vice President, Fixed Income Compliance, dated
involving distribution participant believes that a six month testing period March 15, 2013 (‘‘Schwab’’); Eastern Bank: Email
dealers and takedown transactions that in advance of the effective date would from James N. Fox, SVP and Managing Director,
are not at a discount from the list provide dealers and subscribers with dated March 15, 2013 (‘‘Eastern’’); Financial
Information Forum: Letter from Arsalan Shahid,
mstockstill on DSK4VPTVN1PROD with NOTICES

offering price, establishment of a new
Program Director, dated March 15, 2013 (‘‘FIF–1’’);
indicator for customer trades involving 10 The MSRB notes that subscribers may be
Financial Services Institute: Letter from David T.
non-transaction-based compensation subject to proprietary rights of third parties in Bellaire, Executive Vice President and General
arrangements, and establishment of a information provided by such third parties that is Counsel, dated March 15, 2013 (‘‘FSI’’); Frost Bank:
new indicator for ATS transactions made available through the subscription. Letter from Robert N. Jacobs, Assistant Vice
11 See ‘‘Request for Comment on Enhancements to President/Compliance Officer, dated March 11,
would enable users of the post-trade Post-Trade Transaction Data Disseminated Through 2013 (‘‘Frost’’); Investment Company Institute:
price transparency information a New Central Transparency Platform,’’ MSRB Letter from Dorothy Donohue, Deputy General
provided through RTRS to better Notice 2014–14 (August 31, 2014). Counsel-Securities Regulation, dated March 15,

VerDate Sep<11>2014 20:59 Mar 26, 2015 Jkt 235001 PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 E:\FR\FM\27MRN1.SGM 27MRN1
16470 Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices

yield-to-worst calculation is determined Establishing a New Indicator for ATS a principal position between two
would be helpful. Transactions dealers would increase the usefulness of
After carefully considering The July and August Releases the ATS indicator, the MSRB is
commenters’ concerns, the MSRB proposed adding an indicator to identify sensitive to the burden such a
believes potential confusion would be requirement would impose, particularly
transactions executed using the services
addressed by additionally displaying on given the future potential establishment
of an ATS, which indicator would be
EMMA the calculation method (yield to by the MSRB of a pre-trade transparency
included in the information
call or maturity) and, for yield to call, system. The MSRB notes that under a
disseminated publicly. The August
the call date and price used. Under this comprehensive pre-trade transparency
Release also proposed that, in instances
approach, any differences between system, it is anticipated that the identity
where an ATS does not take a principal
dealer and MSRB calculations could be of each ATS would be known and the
position between two dealers, each
understood by viewing the inputs the extent to which each is used in the
dealer would be required to report the
MSRB used in its calculation. municipal market would therefore be
identity of the ATS employed.
Establishing a New Indicator for In response to the July Release, Ms. quantifiable. Accordingly, the MSRB
Customer Trades Involving Non- Long supported the addition of an ATS believes that proceeding with the
Transaction-Based Compensation indicator on trades, and stated that the establishment of an ATS indicator,
Arrangements specific ATS used should be identified, which the MSRB plans to implement
initially for surveillance purposes and utilizing the existing special condition
The July and August Releases indicator (the ‘‘M code’’) field in RTRS,
proposed the establishment of a new potentially for future public
dissemination. FIF–2 noted operational is appropriate. The MSRB, however, in
indicator to distinguish in the price acknowledgement of the burdens
transparency data between customer burdens associated with identifying
trades executed using the services of an identified by commenters, has not
transactions that do not include a dealer included in this proposed rule change a
compensation component and those that ATS, particularly in instances where the
ATS does not act as the counter-party to requirement to report the identity of the
include a mark-up or mark-down or a
the trade. SIFMA–2 questioned the ATS that was used.
commission.
BDA–3, FIF–2, FIF–3, Ms. Long, ‘‘tangible transparency benefits to the III. Date of Effectiveness of the
SIFMA–2, SIFMA–3, and Wells Fargo market’’ of including an ATS indicator. Proposed Rule Change and Timing for
favored the addition of an indicator for In response to the August Release, Commission Action
identifying transactions that are not SIFMA–3 and FIF–3 noted that this
Within 45 days of the date of
inclusive of a compensation component. indicator would result in a cost to
publication of this notice in the Federal
SIFMA–2, however, opposed requiring dealers to implement. SIFMA–3 stated
Register or within such longer period of
the reporting of the details of the non- that it ‘‘recognizes that the MSRB has a
up to 90 days (i) as the Commission may
transaction based compensation legitimate interest in determining ATS
designate if it finds such longer period
arrangement. BDA–3 stated that a new participation in the market, and likely
to be appropriate and publishes its
indicator ‘‘would provide the users of has no other way to get this information
reasons for so finding or (ii) as to which
trade transparency products with on a real-time basis.’’ FIF–3 noted that
the self-regulatory organization
information that could explain certain FINRA is pursuing the establishment of
consents, the Commission will:
variations in trade prices and assist in a similar ATS indicator for corporate (A) By order approve or disapprove
best execution determinations.’’ bond trade reports. such proposed rule change, or
SIFMA–3 suggested that, if the MSRB In response to a potential requirement (B) institute proceedings to determine
publicly disseminates the existing that dealers also would need to identify whether the proposed rule change
agency or principal trade indicator in some cases the ATS employed, should be disapproved.
currently collected, this would SIFMA–3 and FIF–3 suggested that this
accomplish the same benefit and also component would add operational IV. Solicitation of Comments
stated that the MSRB should not complexity and compliance costs to the Interested persons are invited to
consider collecting information on the requirement. SIFMA–3 stated that submit written data, views, and
nature of alternative compensation ‘‘[a]lthough flagging these trades would arguments concerning the foregoing,
beyond an indicator as such information be a significant operational and including whether the proposed rule
would be burdensome to report. administrative burden, the burden change is consistent with the Act.
The MSRB does not believe that would be minimized for the broker- Comments may be submitted by any of
SIFMA–3’s suggestion that dealer community if the result was a the following methods:
disseminating the existing agency or mere change in an ‘M code’ ’’ (which is
principal trade indicator currently the change that would be made to Electronic Comments
collected would help distinguish in the simply identify that an ATS was • Use the Commission’s Internet
price transparency data customer employed, exclusive of the ATS’s comment form (http://www.sec.gov/
transactions that do not include a dealer identity). FIF–3 stated in response to the rules/sro.shtml); or
compensation component, particularly proposed requirement to identify the • Send an email to rule-comments@
because the MSRB understands that ATS employed that they ‘‘believe this sec.gov. Please include File Number SR–
both agency and principal transactions would be challenging to implement.’’ MSRB–2015–02 on the subject line.
can occur under current market From a market structure perspective,
Paper Comments
mstockstill on DSK4VPTVN1PROD with NOTICES

practices without a dealer compensation the MSRB believes that it is important
component. With respect to SIFMA–2’s to know the extent to which ATSs are • Send paper comments in triplicate
view that the MSRB should not consider employed for inter-dealer transactions to Secretary, Securities and Exchange
collecting information on the nature of as such information could inform future Commission, 100 F Street NE.,
alternative compensation, the MSRB system development, research and Washington, DC 20549.
notes that this was not contemplated in rulemaking initiatives. While also All submissions should refer to File
the July or August Release and is not having the identity of the ATS in Number SR–MSRB–2015–02. This file
part of the proposed rule change. instances where the ATS does not take number should be included on the

VerDate Sep<11>2014 20:59 Mar 26, 2015 Jkt 235001 PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 E:\FR\FM\27MRN1.SGM 27MRN1
Document Created: 2015-12-18 11:35:50
Document Modified: 2015-12-18 11:35:50
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 16466