83_FR_37686 83 FR 37538 - Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MSRB Rule A-13 to Temporarily Reduce the Rate of Assessment for the MSRB's Underwriting, Transaction and Technology Fees on Brokers, Dealers and Municipal Securities Dealers

83 FR 37538 - Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MSRB Rule A-13 to Temporarily Reduce the Rate of Assessment for the MSRB's Underwriting, Transaction and Technology Fees on Brokers, Dealers and Municipal Securities Dealers

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 148 (August 1, 2018)

Page Range37538-37541
FR Document2018-16419

Federal Register, Volume 83 Issue 148 (Wednesday, August 1, 2018) 
[Federal Register Volume 83, Number 148 (Wednesday, August 1, 2018)]
[Notices]
[Pages 37538-37541]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-16419]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83713; File No. SR-MSRB-2018-06]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Amend MSRB Rule A-13 to Temporarily Reduce the Rate of 
Assessment for the MSRB's Underwriting, Transaction and Technology Fees 
on Brokers, Dealers and Municipal Securities Dealers

July 26, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on July 23, 2018 the Municipal Securities 
Rulemaking Board (the ``MSRB'' or ``Board'') filed with the Securities 
and Exchange Commission (``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 
MSRB Rule A-13 to temporarily reduce the rate of assessment for the 
MSRB's underwriting, transaction and technology fees on brokers, 
dealers and municipal securities dealers (``dealers'') with respect to 
assessible activity that occurs during the months of October, November 
and December 2018 (the ``proposed rule change''). The MSRB has 
designated the proposed rule change for immediate effectiveness.
    The text of the proposed rule change is available on the MSRB's 
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2018-Filings.aspx, at the MSRB's principal office, and at the Commission's 
Public Reference Room.

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

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

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

1. Purpose
    The purpose of the proposed rule change is to temporarily reduce 
the rate of assessment for the MSRB's underwriting, transaction and 
technology fees for dealers under Rule A-13, with respect to assessible 
activity that occurs during the months of October, November and 
December 2018. The proposed rule change is designed to reduce, in a 
carefully considered and strategic manner, excess MSRB reserves in a 
way that achieves a fair and equitable balance of fees across regulated 
entities.
    The MSRB discharges its statutory mandate under the Exchange Act 
through the establishment of rules for dealers and municipal advisors 
(together with dealers, ``regulated entities''); the collection and 
dissemination of market information; and market leadership, outreach 
and education. As a self-regulatory organization, the MSRB must 
maintain sufficient reserves to discharge its responsibilities and 
operate without interruption, even in an economic downturn. Reserves 
are necessary to mitigate fluctuations in the MSRB's revenue stream, 
which is primarily market-driven, and provide a backstop for funding 
services essential to the efficiency of the market. However, as current 
reserves exceed the target thresholds that have been established by its 
Board of Directors, the MSRB is now seeking to temporarily reduce its 
three largest sources of revenue, which collectively, make up 
approximately 80% of the MSRB's FY 2018 budgeted revenue. The proposed 
rule change is projected to reduce the MSRB's excess reserves by 
approximately $2.6 million and will help align reserve levels with 
target levels.
    Pursuant to Rule A-13, each dealer must pay to the Board 
underwriting, transaction and technology fees based upon the rates 
specified in that rule. The proposed rule change would add a new 
section (h) setting forth revised temporary assessment rates for these 
three types of assessments, generally reducing by one-third the fees 
for activity that occurs during the months of October, November and 
December 2018. New Rule A-13(h)(i) would provide that the underwriting 
assessment for certain primary offerings for this time period would be 
.00185% of the par value ($0.0185 per $1,000), a reduction from .00275% 
of the par value ($.0275 per $1,000). New Rule A-13(h)(ii) would 
provide that the transaction assessment would be .00067% of the par 
value ($0.0067 per $1,000), a reduction from .001% ($.01 per $1,000). 
And, new Rule A-13(h)(iii) would provide that the technology assessment 
would be $0.67 per transaction (a reduction from $1.00 per 
transaction). Rates of assessment would revert to current levels 
effective January 1, 2019.
    Importantly, the temporary reduced rates are for activity that 
occurs during this three-month period. Dealers are typically billed for 
these fees after the relevant month end. Specifically, the underwriting 
fee is billed immediately after the respective month end, while the 
transaction and technology fees are billed thirty days in arrears.
Financial Reserves and the Board's Holistic Review of MSRB Fees
    In 2010, after several years of heavy investment in the 
technological infrastructure needed to launch the MSRB's Electronic 
Municipal Market Access (EMMA[supreg]) website, the MSRB's financial 
reserve levels had dropped below the target of 12 months of operating 
expenses excluding depreciation expense, plus three-times annual 
capital needs. As a result, replenishing the MSRB's reserves became a 
priority. The following year, the MSRB increased the transaction fee 
under Rule A-13 and began assessing a new technology fee for dealers 
under the same rule.\3\ By 2014, revenue from the technology fee had 
generated sufficient resources to stabilize the technology reserve and 
allowed the MSRB to rebate $3.6 million in technology fees to eligible 
dealers. The Board's technology fee rebate decision

[[Page 37539]]

and analysis of reserve levels prompted it in 2015 to conduct a 
holistic review of fees from dealer assessments, municipal advisors and 
other sources to determine whether further changes to the funding 
structure were warranted.
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    \3\ See Release No. 34-63621 (Dec. 29, 2010), 76 FR 604 (Jan. 5, 
2011) (File No. SR-MSRB-2010-10).
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    The Board evaluated the assessment of MSRB fees on regulated 
entities with the goal of better aligning revenue sources with 
operating expenses and all capital needs. The Board strives to 
diversify funding sources among regulated entities and other entities 
that fund MSRB services in a manner that ensures long-term 
sustainability, while continuing to strike an equitable balance in fees 
among regulated entities and a fair allocation of the cost of operating 
and administering the MSRB, including regulatory activities, systems 
development and operational activities. The Board, as it has 
historically, strives to continually refine its fee structure to ensure 
it is balanced and fair and provides for reasonable cost allocation.
    The first outcome of the holistic review was to substantially 
reduce (by 8.3%) the fee assessed on municipal securities underwriters. 
At the same time, the MSRB raised initial registration fees (which had 
not been adjusted since 1975) and annual fees (which had not been 
adjusted since 2009)--fees that are paid by all regulated entities--to 
better align with the cost of administering registrants and ensure that 
all registrants more fairly contributed to defraying the costs and 
expenses of operating and administering the MSRB. With the extension of 
the MSRB's jurisdiction to regulate municipal advisors, this class of 
regulated entity began contributing to the cost of MSRB regulation in 
2014.\4\ To further the objective of appropriately and equitably 
assessing fees across all regulated activities, in 2018, the MSRB 
introduced a new fee on underwriters of 529 plans, as underwriters to 
529 plans had not previously paid a fee in this capacity.\5\
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    \4\ See Release No. 34-72019 (Apr. 25, 2014), 79 FR 24798 (May 
1, 2014) (File No. SR-MSRB-2014-03).
    \5\ See Release No. 34-81264 (Jul 31, 2017), 82 FR 36472 (Aug. 
4, 2017) (File No. SR-MSRB-2017-05).
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    The current fees assessed on regulated entities are:
    1. Municipal advisor professional fee (Rule A-11). $500 for each 
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 SEC a Form MA-I as of 
January 31 of each year;
    2. Initial registration fee (Rule A-12). $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;
    3. Annual registration fee (Rule A-12). $1,000 annual fee to be 
paid by each dealer and municipal advisor registered with the MSRB;
    4. Late fee (Rule A-11 and Rule A-12). $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;
    5. Underwriting fee (Rule A-13). $.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; and in the case of an underwriter (as defined in 
Rule G-45) of a primary offering of certain municipal fund securities, 
$.005 per $1,000 of the total aggregate assets for the reporting 
period;
    6. Transaction fee (Rule A-13). .001% ($.01 per $1,000) of the 
total par value to be paid by a dealer, except in limited 
circumstances, for inter-dealer sales and customer sales reported to 
the MSRB pursuant to Rule G-14(b), on transaction reporting 
requirements;
    7. Technology fee (Rule A-13). $1.00 paid by a dealer per 
transaction for each inter-dealer sale and for each sale to customers 
reported to the MSRB pursuant to Rule G-14(b); and
    8. Examination fee (Rule A-16). $150 test development fee assessed 
per candidate for each MSRB examination.\6\
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    \6\ In addition, the MSRB charges data subscription service fees 
for subscribers, including dealers and municipal advisors, seeking 
direct electronic delivery of municipal trade data and disclosure 
documents associated with municipal bond issues. However, this 
information is available without direct electronic delivery on the 
EMMA website without charge.
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    Notably, while all regulated entities contribute to the MSRB's 
revenue base, the three fees that are the subject of the proposed rule 
change (underwriting, transaction and technology fees) constitute 
approximately 80% of the MSRB's FY 2018 budgeted revenue. As the most 
significant contributors to MSRB funding, as well as being market based 
and historically contributing more than budgeted, these three fees are 
the primary drivers for the excess reserves.\7\ While the fees 
generated from municipal advisors contribute to the MSRB's budget, the 
fees charged for this newly regulated category of professionals remain 
relatively modest and do not yet meet target revenues.\8\ Accordingly, 
the Board determined that these three fees exclusively should be 
temporarily reduced for the designated period.
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    \7\ Reserves also grew due to fine revenue, a new revenue source 
first provided in 2010 under the Dodd-Frank Wall Street Reform and 
Consumer Protection Act. See 15 U.S.C. 78o-4(c)(9).
    \8\ See Release No. 34-81841 (Oct. 10, 2017), 82 FR 48135, 48138 
(Oct. 16, 2017) (File No. SR-MSRB-2017-07) (noting that the target 
revenue to be generated from the municipal advisor fee under Rule A-
11 was approximately $2 million, or approximately 5% of the total 
MSRB revenues). At present, the municipal advisor professional fee 
generates approximately $1.5 million, or 4% of the MSRB's Fiscal 
Year 2018 budgeted revenues.
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    Since the initiation of the Board's holistic review of fees, MSRB 
reserves continued to grow due to strong revenue results compared to 
budget, as well as expense savings, and bolstered reserve levels to the 
point where another rebate was warranted in 2016. That year, the MSRB 
rebated $5.5 million of excess reserves to dealers who were assessed 
underwriting, transaction and technology fees during the first nine 
months of the fiscal year. In total, $9.1 million was returned to 
dealers in fee rebates since 2014. However, the fee rebates were not 
without their operational challenges. Industry feedback suggested that 
underwriting fee rebates can be problematic due to inherent 
complications of processing and potentially redistributing pro rata 
shares to syndicate members. Moreover, the MSRB believes that the 
approach taken in the proposed rule change (i.e., a temporary reduction 
in dealer fees) would be fairer than another alternative approach, such 
as a fee holiday. For a fee holiday, the MSRB would forego charging 
fees for one month--but, because of the difficulties in selecting a 
single month that is representative of dealer activity for all dealers 
subject to the relevant fees, the MSRB believes that a temporary fee 
reduction that occurs over the course of several months is more likely 
to lead to a fair and equitable fee reduction across dealers. 
Accordingly, the Board has determined that a temporary three-month fee 
reduction, rather than a fee rebate or fee holiday, is a preferable 
mode of reducing its reserves.
    The Board strives to be fiscally responsible. Since approximately 
80% of the Board's revenue sources are market based, which is 
inherently unpredictable and largely has exceeded budget, and the Board 
has a historical track record of managing expenses to below budget, 
reserves continue to grow. The Board seeks to strike the right balance 
in fee assessments to maintain sufficient reserves to ensure fiscal 
sustainability, while providing relief to regulated entities that have 
contributed

[[Page 37540]]

to the excess reserves position. The temporary three-month fee 
reduction continues these ongoing efforts.

2. Statutory Basis

    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(J) of the Act \9\ which states that the MSRB's rules 
shall:
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    \9\ 15 U.S.C. 78o-4(b)(2)(J).

provide that each municipal securities broker, municipal securities 
dealer, and municipal advisor shall pay to the Board such reasonable 
fees and charges as may be necessary or appropriate to defray the 
costs and expenses of operating and administering the Board. Such 
rules shall 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 
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submitted under any rule issued by the Board.

    The MSRB believes that its rules provide for reasonable dues, fees, 
and other charges among regulated entities. The MSRB believes that the 
proposed rule change is necessary and appropriate to fund the operation 
and administration of the Board and satisfies the requirements of 
Section 15B(b)(2)(J),\10\ achieving a more equitable balance of fees 
among regulated entities and a fairer allocation of the expenses of the 
regulatory activities, system development, and operational activities 
undertaken by the MSRB because it temporarily decreases fees for the 
regulated entities that financially contribute the greatest to the cost 
of MSRB activities.
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    \10\ Id.
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    As described above, current reserve levels exceed targets, but 
looking forward to FY 2020, the MSRB's pro formas project reserves to 
fall modestly below targeted levels with the temporary fee reduction. 
As a result, the MSRB believes that it is preferable to temporarily 
reduce fees rather than take an alternative approach, such as a 
permanent fee reduction. Also, the MSRB believes a temporary fee 
reduction is preferable to a fee rebate because it would be 
operationally easier for dealers as dealers would be able to 
incorporate temporarily reduced fee rates into their business processes 
in advance rather than receive a rebate associated with past activity 
that may need to be redistributed through or across organizations. 
Finally, the MSRB believes that the proposed rule change would achieve 
a more equitable balance among regulated entities and a fairer 
allocation of the MSRB's expenses because the three fees that are the 
subject of the proposed rule change, representing approximately 80% of 
the MSRB's FY 2018 revenue budget, have contributed most to funding 
operations of the MSRB and concurrently contributed the most to the 
current reserve levels.
    While the MSRB has progressively budgeted for municipal advisor 
fees to defray a greater portion of the cost of the MSRB's municipal 
advisor-related activity,\11\ municipal advisor fees have comprised a 
very small portion of the MSRB's revenues and have not contributed to 
the MSRB's excess reserves position. For these same reasons, the 
beneficiaries of the proposed rule change are generally the same group 
of regulated entities that received the fee rebates in 2014 and 2016, 
as described above.
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    \11\ See supra n. 8.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Act \12\ requires that MSRB rules not 
be designed to impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.
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    \12\ 15 U.S.C. 78o-4(b)(2)(C).
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    The Board's policy on the use of economic analysis limits its 
applications regarding those rules for which the Board seeks immediate 
effectiveness.\13\ However, an internal analysis is still conducted to 
gauge the economic impact, with an emphasis on the burden on 
competition involving regulated entities.
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    \13\ The scope of the Board's policy on the use of economic 
analysis in rulemaking provides that:
     [t]his Policy addresses rulemaking activities of the MSRB that 
culminate, or are expected to culminate, in a filing of a proposed 
rule change with the SEC under Section 19(b) of the Exchange Act, 
other than a proposed rule change that the MSRB reasonably believes 
would qualify for immediate effectiveness under Section 19(b)(3)(A) 
of the Exchange Act if filed as such or as otherwise provided under 
the exception process of this Policy.
    Policy on the Use of Economic Analysis in MSRB Rulemaking, 
available at http://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx. For those rule changes which the MSRB seeks 
immediate effectiveness, the MSRB usually focuses exclusively its 
examination on the burden of competition on regulated entities.
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    In this regard, the Board believes the proposed rule change is 
necessary and appropriate to promote fairness in funding the operation 
and administration of the Board and would achieve a more equitable 
balance among regulated entities and a more balanced allocation of the 
expenses of the regulatory activities, system development, and 
operational activities undertaken by the MSRB. Because the three fees 
that are the subject of the proposed rule change (underwriting, 
transaction and technology fees) are the primary drivers for the MSRB's 
excess reserves, the Board believes that it is appropriate to 
temporarily reduce these fees for the designated period.
    The MSRB does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as it would temporarily 
decrease by the same percentage the underwriting, transaction and 
technology fees for all dealers subject to these fees.
    The MSRB believes that the proposed rule change would not impose an 
unnecessary or inappropriate regulatory burden on small regulated 
entities, as smaller dealers would benefit from the temporary fee 
reduction in the same proportion as larger dealers in relation to the 
assessible activity during the relevant three-month period.

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

    Written comments were neither solicited nor received.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act \14\ and Rule 19b-4(f)(2)\15\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please 
include File Number SR-MSRB-2018-06 on the subject line.

[[Page 37541]]

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-2018-06. 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-2018-06 and should be submitted on 
or before August 22, 2018.

    For the Commission, pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-16419 Filed 7-31-18; 8:45 am]
 BILLING CODE 8011-01-P

37538 Federal Register / Vol. 83, No. 148 / Wednesday, August 1, 2018 / Notices be minimized, including the use of Interpretations/SEC-Filings/2018- reserves by approximately $2.6 million automated collection techniques or Filings.aspx, at the MSRB’s principal and will help align reserve levels with other forms of information technology? office, and at the Commission’s Public target levels. Dated at Rockville, Maryland, this 27th day Reference Room. Pursuant to Rule A–13, each dealer of July 2018. must pay to the Board underwriting, II. Self-Regulatory Organization’s transaction and technology fees based For the Nuclear Regulatory Commission. Statement of the Purpose of, and upon the rates specified in that rule. David Cullison, Statutory Basis for, the Proposed Rule The proposed rule change would add a NRC Clearance Officer, Office of the Chief Change new section (h) setting forth revised Information Officer. In its filing with the Commission, the temporary assessment rates for these [FR Doc. 2018–16428 Filed 7–31–18; 8:45 am] MSRB included statements concerning three types of assessments, generally BILLING CODE 7590–01–P the purpose of and basis for the reducing by one-third the fees for proposed rule change and discussed any activity that occurs during the months comments it received on the proposed of October, November and December SECURITIES AND EXCHANGE rule change. The text of these statements 2018. New Rule A–13(h)(i) would COMMISSION may be examined at the places specified provide that the underwriting in Item IV below. The MSRB has assessment for certain primary offerings [Release No. 34–83713; File No. SR–MSRB– 2018–06] prepared summaries, set forth in for this time period would be .00185% Sections A, B, and C below, of the most of the par value ($0.0185 per $1,000), a Self-Regulatory Organizations; significant aspects of such statements. reduction from .00275% of the par value Municipal Securities Rulemaking ($.0275 per $1,000). New Rule A– A. Self-Regulatory Organization’s 13(h)(ii) would provide that the Board; Notice of Filing and Immediate Statement of the Purpose of, and Effectiveness of a Proposed Rule transaction assessment would be Statutory Basis for, the Proposed Rule .00067% of the par value ($0.0067 per Change To Amend MSRB Rule A–13 to Change Temporarily Reduce the Rate of $1,000), a reduction from .001% ($.01 Assessment for the MSRB’s 1. Purpose per $1,000). And, new Rule A–13(h)(iii) Underwriting, Transaction and would provide that the technology The purpose of the proposed rule Technology Fees on Brokers, Dealers assessment would be $0.67 per change is to temporarily reduce the rate and Municipal Securities Dealers transaction (a reduction from $1.00 per of assessment for the MSRB’s transaction). Rates of assessment would July 26, 2018. underwriting, transaction and revert to current levels effective January Pursuant to Section 19(b)(1) of the technology fees for dealers under Rule 1, 2019. Securities Exchange Act of 1934 (the A–13, with respect to assessible activity Importantly, the temporary reduced ‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule that occurs during the months of rates are for activity that occurs during 19b–4 thereunder,2 notice is hereby October, November and December 2018. this three-month period. Dealers are given that on July 23, 2018 the The proposed rule change is designed to typically billed for these fees after the Municipal Securities Rulemaking Board reduce, in a carefully considered and relevant month end. Specifically, the (the ‘‘MSRB’’ or ‘‘Board’’) filed with the strategic manner, excess MSRB reserves underwriting fee is billed immediately Securities and Exchange Commission in a way that achieves a fair and after the respective month end, while (‘‘Commission’’) the proposed rule equitable balance of fees across the transaction and technology fees are change as described in Items I, II, and regulated entities. billed thirty days in arrears. III below, which Items have been The MSRB discharges its statutory mandate under the Exchange Act Financial Reserves and the Board’s prepared by the MSRB. The through the establishment of rules for Holistic Review of MSRB Fees Commission is publishing this notice to solicit comments on the proposed rule dealers and municipal advisors In 2010, after several years of heavy change from interested persons. (together with dealers, ‘‘regulated investment in the technological entities’’); the collection and infrastructure needed to launch the I. Self-Regulatory Organization’s dissemination of market information; MSRB’s Electronic Municipal Market Statement of the Terms of Substance of and market leadership, outreach and Access (EMMA®) website, the MSRB’s the Proposed Rule Change education. As a self-regulatory financial reserve levels had dropped The MSRB filed with the Commission organization, the MSRB must maintain below the target of 12 months of a proposed rule change to amend MSRB sufficient reserves to discharge its operating expenses excluding Rule A–13 to temporarily reduce the responsibilities and operate without depreciation expense, plus three-times rate of assessment for the MSRB’s interruption, even in an economic annual capital needs. As a result, underwriting, transaction and downturn. Reserves are necessary to replenishing the MSRB’s reserves technology fees on brokers, dealers and mitigate fluctuations in the MSRB’s became a priority. The following year, municipal securities dealers (‘‘dealers’’) revenue stream, which is primarily the MSRB increased the transaction fee with respect to assessible activity that market-driven, and provide a backstop under Rule A–13 and began assessing a occurs during the months of October, for funding services essential to the new technology fee for dealers under November and December 2018 (the efficiency of the market. However, as the same rule.3 By 2014, revenue from ‘‘proposed rule change’’). The MSRB has current reserves exceed the target the technology fee had generated thresholds that have been established by sradovich on DSK3GMQ082PROD with NOTICES designated the proposed rule change for sufficient resources to stabilize the immediate effectiveness. its Board of Directors, the MSRB is now technology reserve and allowed the The text of the proposed rule change seeking to temporarily reduce its three MSRB to rebate $3.6 million in is available on the MSRB’s website at largest sources of revenue, which technology fees to eligible dealers. The www.msrb.org/Rules-and- collectively, make up approximately Board’s technology fee rebate decision 80% of the MSRB’s FY 2018 budgeted 1 15 U.S.C. 78s(b)(1). revenue. The proposed rule change is 3 See Release No. 34–63621 (Dec. 29, 2010), 76 FR 2 17 CFR 240.19b–4. projected to reduce the MSRB’s excess 604 (Jan. 5, 2011) (File No. SR–MSRB–2010–10). 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Federal Register / Vol. 83, No. 148 / Wednesday, August 1, 2018 / Notices 37539 and analysis of reserve levels prompted MSRB before engaging in municipal professionals remain relatively modest it in 2015 to conduct a holistic review securities activities and by each and do not yet meet target revenues.8 of fees from dealer assessments, municipal advisor to register with the Accordingly, the Board determined that municipal advisors and other sources to MSRB before engaging in municipal these three fees exclusively should be determine whether further changes to advisory activities; temporarily reduced for the designated the funding structure were warranted. 3. Annual registration fee (Rule A– period. The Board evaluated the assessment 12). $1,000 annual fee to be paid by Since the initiation of the Board’s of MSRB fees on regulated entities with each dealer and municipal advisor holistic review of fees, MSRB reserves the goal of better aligning revenue registered with the MSRB; continued to grow due to strong revenue sources with operating expenses and all 4. Late fee (Rule A–11 and Rule A– results compared to budget, as well as capital needs. The Board strives to 12). $25 monthly late fee and a late fee expense savings, and bolstered reserve diversify funding sources among on the overdue balance (computed levels to the point where another rebate regulated entities and other entities that according to the prime rate) until paid was warranted in 2016. That year, the fund MSRB services in a manner that on balances not paid within 30 days of MSRB rebated $5.5 million of excess ensures long-term sustainability, while the invoice date by the dealer or reserves to dealers who were assessed continuing to strike an equitable balance municipal advisor; underwriting, transaction and in fees among regulated entities and a 5. Underwriting fee (Rule A–13). technology fees during the first nine fair allocation of the cost of operating $.0275 per $1,000 of the par value paid months of the fiscal year. In total, $9.1 and administering the MSRB, including by a dealer, on all municipal securities million was returned to dealers in fee regulatory activities, systems purchased from an issuer by or through rebates since 2014. However, the fee development and operational activities. such dealer, whether acting as principal rebates were not without their The Board, as it has historically, strives or agent as part of a primary offering; operational challenges. Industry to continually refine its fee structure to and in the case of an underwriter (as feedback suggested that underwriting ensure it is balanced and fair and defined in Rule G–45) of a primary fee rebates can be problematic due to provides for reasonable cost allocation. offering of certain municipal fund inherent complications of processing The first outcome of the holistic securities, $.005 per $1,000 of the total and potentially redistributing pro rata review was to substantially reduce (by aggregate assets for the reporting period; shares to syndicate members. Moreover, 8.3%) the fee assessed on municipal 6. Transaction fee (Rule A–13). .001% the MSRB believes that the approach securities underwriters. At the same ($.01 per $1,000) of the total par value taken in the proposed rule change (i.e., time, the MSRB raised initial to be paid by a dealer, except in limited a temporary reduction in dealer fees) registration fees (which had not been circumstances, for inter-dealer sales and would be fairer than another alternative adjusted since 1975) and annual fees customer sales reported to the MSRB approach, such as a fee holiday. For a (which had not been adjusted since pursuant to Rule G–14(b), on transaction fee holiday, the MSRB would forego 2009)—fees that are paid by all reporting requirements; charging fees for one month—but, regulated entities—to better align with 7. Technology fee (Rule A–13). $1.00 because of the difficulties in selecting a the cost of administering registrants and paid by a dealer per transaction for each single month that is representative of ensure that all registrants more fairly inter-dealer sale and for each sale to dealer activity for all dealers subject to contributed to defraying the costs and customers reported to the MSRB the relevant fees, the MSRB believes expenses of operating and administering pursuant to Rule G–14(b); and that a temporary fee reduction that 8. Examination fee (Rule A–16). $150 the MSRB. With the extension of the occurs over the course of several months test development fee assessed per MSRB’s jurisdiction to regulate is more likely to lead to a fair and candidate for each MSRB examination.6 municipal advisors, this class of equitable fee reduction across dealers. Notably, while all regulated entities regulated entity began contributing to Accordingly, the Board has determined contribute to the MSRB’s revenue base, the cost of MSRB regulation in 2014.4 that a temporary three-month fee the three fees that are the subject of the To further the objective of appropriately proposed rule change (underwriting, reduction, rather than a fee rebate or fee and equitably assessing fees across all transaction and technology fees) holiday, is a preferable mode of regulated activities, in 2018, the MSRB constitute approximately 80% of the reducing its reserves. introduced a new fee on underwriters of The Board strives to be fiscally MSRB’s FY 2018 budgeted revenue. As 529 plans, as underwriters to 529 plans responsible. Since approximately 80% the most significant contributors to had not previously paid a fee in this of the Board’s revenue sources are MSRB funding, as well as being market capacity.5 market based, which is inherently based and historically contributing more The current fees assessed on regulated unpredictable and largely has exceeded than budgeted, these three fees are the entities are: budget, and the Board has a historical primary drivers for the excess reserves.7 1. Municipal advisor professional fee track record of managing expenses to While the fees generated from (Rule A–11). $500 for each person below budget, reserves continue to municipal advisors contribute to the associated with the municipal advisor grow. The Board seeks to strike the right MSRB’s budget, the fees charged for this who is qualified as a municipal advisor balance in fee assessments to maintain newly regulated category of representative in accordance with Rule sufficient reserves to ensure fiscal G–3 and for whom the municipal 6 In addition, the MSRB charges data subscription sustainability, while providing relief to advisor has on file with the SEC a Form service fees for subscribers, including dealers and regulated entities that have contributed MA–I as of January 31 of each year; municipal advisors, seeking direct electronic sradovich on DSK3GMQ082PROD with NOTICES 2. Initial registration fee (Rule A–12). delivery of municipal trade data and disclosure 8 See Release No. 34–81841 (Oct. 10, 2017), 82 FR $1,000 one-time registration fee to be documents associated with municipal bond issues. 48135, 48138 (Oct. 16, 2017) (File No. SR–MSRB– However, this information is available without 2017–07) (noting that the target revenue to be paid by each dealer to register with the direct electronic delivery on the EMMA website generated from the municipal advisor fee under without charge. Rule A–11 was approximately $2 million, or 4 See Release No. 34–72019 (Apr. 25, 2014), 79 FR 7 Reserves also grew due to fine revenue, a new approximately 5% of the total MSRB revenues). At 24798 (May 1, 2014) (File No. SR–MSRB–2014–03). revenue source first provided in 2010 under the present, the municipal advisor professional fee 5 See Release No. 34–81264 (Jul 31, 2017), 82 FR Dodd-Frank Wall Street Reform and Consumer generates approximately $1.5 million, or 4% of the 36472 (Aug. 4, 2017) (File No. SR–MSRB–2017–05). Protection Act. See 15 U.S.C. 78o-4(c)(9). MSRB’s Fiscal Year 2018 budgeted revenues. VerDate Sep<11>2014 20:07 Jul 31, 2018 Jkt 244001 PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 E:\FR\FM\01AUN1.SGM 01AUN1

37540 Federal Register / Vol. 83, No. 148 / Wednesday, August 1, 2018 / Notices to the excess reserves position. The representing approximately 80% of the transaction and technology fees) are the temporary three-month fee reduction MSRB’s FY 2018 revenue budget, have primary drivers for the MSRB’s excess continues these ongoing efforts. contributed most to funding operations reserves, the Board believes that it is of the MSRB and concurrently appropriate to temporarily reduce these 2. Statutory Basis contributed the most to the current fees for the designated period. The MSRB believes that the proposed reserve levels. The MSRB does not believe that the rule change is consistent with Section While the MSRB has progressively proposed rule change will result in any 15B(b)(2)(J) of the Act 9 which states that budgeted for municipal advisor fees to burden on competition that is not the MSRB’s rules shall: defray a greater portion of the cost of the necessary or appropriate in furtherance provide that each municipal securities MSRB’s municipal advisor-related of the purposes of the Act, as it would broker, municipal securities dealer, and activity,11 municipal advisor fees have temporarily decrease by the same municipal advisor shall pay to the Board comprised a very small portion of the such reasonable fees and charges as may be percentage the underwriting, transaction MSRB’s revenues and have not and technology fees for all dealers necessary or appropriate to defray the costs contributed to the MSRB’s excess and expenses of operating and administering subject to these fees. the Board. Such rules shall specify the reserves position. For these same The MSRB believes that the proposed amount of such fees and charges, which may reasons, the beneficiaries of the rule change would not impose an include charges for failure to submit to the proposed rule change are generally the unnecessary or inappropriate regulatory Board, or to any information system operated same group of regulated entities that by the Board, within the prescribed burden on small regulated entities, as received the fee rebates in 2014 and timeframes, any items of information or smaller dealers would benefit from the 2016, as described above. documents required to be submitted under temporary fee reduction in the same any rule issued by the Board. B. Self-Regulatory Organization’s proportion as larger dealers in relation The MSRB believes that its rules Statement on Burden on Competition to the assessible activity during the provide for reasonable dues, fees, and Section 15B(b)(2)(C) of the Act 12 relevant three-month period. other charges among regulated entities. requires that MSRB rules not be C. Self-Regulatory Organization’s The MSRB believes that the proposed designed to impose any burden on Statement on Comments on the rule change is necessary and competition not necessary or Proposed Rule Change Received From appropriate to fund the operation and appropriate in furtherance of the Members, Participants, or Others administration of the Board and satisfies purposes of the Act. the requirements of Section The Board’s policy on the use of Written comments were neither 15B(b)(2)(J),10 achieving a more economic analysis limits its solicited nor received. equitable balance of fees among applications regarding those rules for III. Date of Effectiveness of the regulated entities and a fairer allocation which the Board seeks immediate Proposed Rule Change and Timing for of the expenses of the regulatory effectiveness.13 However, an internal Commission Action activities, system development, and analysis is still conducted to gauge the operational activities undertaken by the economic impact, with an emphasis on The foregoing proposed rule change MSRB because it temporarily decreases the burden on competition involving has become effective pursuant to fees for the regulated entities that regulated entities. Section 19(b)(3)(A)(ii) of the Act 14 and financially contribute the greatest to the In this regard, the Board believes the Rule 19b–4(f)(2)15 thereunder. At any cost of MSRB activities. proposed rule change is necessary and time within 60 days of the filing of the As described above, current reserve appropriate to promote fairness in proposed rule change, the Commission levels exceed targets, but looking funding the operation and summarily may temporarily suspend forward to FY 2020, the MSRB’s pro administration of the Board and would such rule change if it appears to the formas project reserves to fall modestly achieve a more equitable balance among Commission that such action is below targeted levels with the regulated entities and a more balanced necessary or appropriate in the public temporary fee reduction. As a result, the allocation of the expenses of the interest, for the protection of investors, MSRB believes that it is preferable to regulatory activities, system or otherwise in furtherance of the temporarily reduce fees rather than take development, and operational activities purposes of the Act. an alternative approach, such as a undertaken by the MSRB. Because the permanent fee reduction. Also, the three fees that are the subject of the IV. Solicitation of Comments MSRB believes a temporary fee proposed rule change (underwriting, Interested persons are invited to reduction is preferable to a fee rebate submit written data, views, and because it would be operationally easier 11 See supra n. 8. arguments concerning the foregoing, for dealers as dealers would be able to 12 15 U.S.C. 78o–4(b)(2)(C). including whether the proposed rule incorporate temporarily reduced fee 13 The scope of the Board’s policy on the use of change is consistent with the Act. rates into their business processes in economic analysis in rulemaking provides that: [t]his Policy addresses rulemaking activities of Comments may be submitted by any of advance rather than receive a rebate the MSRB that culminate, or are expected to the following methods: associated with past activity that may culminate, in a filing of a proposed rule change need to be redistributed through or with the SEC under Section 19(b) of the Exchange Electronic Comments across organizations. Finally, the MSRB Act, other than a proposed rule change that the believes that the proposed rule change MSRB reasonably believes would qualify for • Use the Commission’s internet immediate effectiveness under Section 19(b)(3)(A) comment form (http://www.sec.gov/ sradovich on DSK3GMQ082PROD with NOTICES would achieve a more equitable balance of the Exchange Act if filed as such or as otherwise among regulated entities and a fairer rules/sro.shtml); or provided under the exception process of this Policy. allocation of the MSRB’s expenses Policy on the Use of Economic Analysis in MSRB • Send an email to rule-comments@ because the three fees that are the Rulemaking, available at http://msrb.org/Rules-and- sec.gov. Please include File Number Interpretations/Economic-Analysis-Policy.aspx. For SR–MSRB-2018–06 on the subject line. subject of the proposed rule change, those rule changes which the MSRB seeks immediate effectiveness, the MSRB usually focuses 9 15 U.S.C. 78o–4(b)(2)(J). 14 15 U.S.C. 78s(b)(3)(A)(ii). exclusively its examination on the burden of 10 Id. competition on regulated entities. 15 17 CFR 240.19b–4(f)(2). VerDate Sep<11>2014 20:07 Jul 31, 2018 Jkt 244001 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 E:\FR\FM\01AUN1.SGM 01AUN1

Federal Register / Vol. 83, No. 148 / Wednesday, August 1, 2018 / Notices 37541 Paper Comments SECURITIES AND EXCHANGE consistency with respect to processes COMMISSION and requirements described in other • Send paper comments in triplicate Procedures that are related to those set to Secretary, Securities and Exchange [Release No. 34–83712; File No. SR–DTC– 2018–004] forth in the Underwriting Guide, (ii) Commission, 100 F Street NE, make clarifying and technical changes Washington, DC 20549. Self-Regulatory Organizations; The and (iii) provide enhanced readability All submissions should refer to File Depository Trust Company; Notice of and transparency for users of DTC’s Number SR–MSRB–2018–06. This file Filing and Immediate Effectiveness of underwriting service (‘‘Underwriting number should be included on the Proposed Rule Change To Make Service’’), as described below. subject line if email is used. To help the Clarifying Changes and Updates to the II. Clearing Agency’s Statement of the Commission process and review your DTC Underwriting Service Guide Purpose of, and Statutory Basis for, the comments more efficiently, please use July 26, 2018. Proposed Rule Change only one method. The Commission will Pursuant to Section 19(b)(1) of the In its filing with the Commission, the post all comments on the Commission’s Securities Exchange Act of 1934 clearing agency included statements internet website (http://www.sec.gov/ (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 concerning the purpose of and basis for rules/sro.shtml). Copies of the notice is hereby given that on July 20, the proposed rule change and discussed submission, all subsequent 2018, The Depository Trust Company any comments it received on the amendments, all written statements (‘‘DTC’’) filed with the Securities and proposed rule change. The text of these with respect to the proposed rule Exchange Commission (‘‘Commission’’) statements may be examined at the change that are filed with the the proposed rule change as described places specified in Item IV below. The Commission, and all written in Items I, II and III below, which Items clearing agency has prepared communications relating to the have been prepared by the clearing summaries, set forth in sections A, B, proposed rule change between the agency. DTC filed the proposed rule and C below, of the most significant Commission and any person, other than change pursuant to Section 19(b)(3)(A) aspects of such statements. those that may be withheld from the of the Act 3 and Rule 19b–4(f)(4) thereunder.4 The Commission is (A) Clearing Agency’s Statement of the public in accordance with the publishing this notice to solicit Purpose of, and Statutory Basis for, the provisions of 5 U.S.C. 552, will be comments on the proposed rule change Proposed Rule Change available for website viewing and printing in the Commission’s Public from interested persons. 1. Purpose Reference Room, 100 F Street NE, I. Clearing Agency’s Statement of the The proposed rule change consists of Washington, DC 20549 on official Terms of Substance of the Proposed proposed modifications to the business days between the hours of Rule Change Underwriting Guide to (i) promote 10:00 a.m. and 3:00 p.m. Copies of the The proposed rule change of DTC 5 consistency with respect to processes filing also will be available for consists of modifications to the DTC and requirements described in other inspection and copying at the principal Underwriting Service Guide Procedures that are related to those set office of the MSRB. All comments (‘‘Underwriting Guide’’) 6 to (i) promote forth in the Underwriting Guide, (ii) received will be posted without change. make clarifying and technical changes Persons submitting comments are 1 15 U.S.C. 78s(b)(1). and (iii) provide enhanced readability cautioned that we do not redact or edit 2 17 CFR 240.19b–4. and transparency for users of DTC’s 3 15 U.S.C. 78s(b)(3)(A). personal identifying information from Underwriting Service, as described 4 17 CFR 240.19b–4(f)(4). comment submissions. You should 5 Capitalized terms not defined herein are defined below. submit only information that you wish in the Rules, By-Laws and Organization Certificate Background to make available publicly. All of DTC (the ‘‘Rules’’), available at www.dtcc.com/ submissions should refer to File ∼/media/Files/Downloads/legal/rules/dtc_rules.pdf, Eligible Securities 7 may be and the DTC Operational Arrangements for Number SR–MSRB–2018–06 and should Securities to Become and Remain Eligible for DTC introduced into DTC as new issuances be submitted on or before August 22, Services (‘‘OA’’), available at http://www.dtcc.com/ (‘‘New Issues’’) through the 2018. ∼/media/Files/Downloads/legal/issue-eligibility/ Underwriting Service, in connection eligibility/operational-arrangements.pdf. with a Participant, or a correspondent For the Commission, pursuant to delegated 6 Available at http://www.dtcc.com/∼/media/ authority.16 working though a Participant’s Account, Files/Downloads/legal/service-guides/Underwriting- Service-Guide.pdf. The Underwriting Guide and the submitting an eligibility request.8 In Robert W. Errett, addition to the process for New Issues, OA constitute Procedures of DTC. Pursuant to the Deputy Secretary. Rules, the term ‘‘Procedures’’ means the there are separate eligibility processes [FR Doc. 2018–16419 Filed 7–31–18; 8:45 am] Procedures, service guides, and regulations of DTC for (i) older issues (‘‘Older Issues’’), i.e., adopted pursuant to Rule 27, as amended from time BILLING CODE 8011–01–P to time. See Rule 1, Section 1, supra note 5. DTC’s those already available in the market but Procedures are filed with the Commission. They are not previously made eligible for deposit binding on DTC and each Participant in the same at DTC 9 and (ii) Eligible Securities in manner as they are bound by the Rules. See Rule 27, supra note 5. The OA is also binding on each 7 Generally, Eligible Securities must have been Issuer and Agent of an Eligible Security. See OA at 5, supra note 5. DTC also maintains service guides issued in a transaction: (i) Registered with the sradovich on DSK3GMQ082PROD with NOTICES that constitute Procedures relating to other services Commission pursuant to the Securities Act; (ii) it offers, including the ‘‘Canadian-Link Service exempt from registration pursuant to a Securities Guide,’’ ‘‘Custody Service Guide’’ (defined below as Act exemption without transfer or ownership ‘‘Custody Guide’’), ‘‘Deposits Service Guide,’’ restrictions; or (iii) pursuant to Rule 144A, 17 CFR ‘‘Distributions Service Guide,’’ ‘‘Redemptions 230.144A, or Regulation S, 17 CFR 230.901– Service Guide,’’ ‘‘Reorganizations Service Guide’’ 230.905, under the Securities Act. See OA, supra and ‘‘Settlement Service Guide.’’ Available at note 5 at 2–3. 8 See OA, supra note 5 at 1–2. http://www.dtcc.com/legal/rules-and- 16 17 CFR 200.30–3(a)(12). procedures?subsidiary=DTC&pgs=1. 9 Id. 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Document Created: 2018-08-01 01:23:27
Document Modified: 2018-08-01 01:23:27
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation83 FR 37538 
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