Municipal bonds are complicated. Finding information about the muni market is even more complicated. Searching for a bond on EMMA, if you don't know the exact title of the issuer's homepage, can resemble a scavenger hunt.
These are some problems investors and borrowers alike suffer as a result of the industry's data practices and lack of standardization, analysts said. While an EMMA revamp on the way may help some, the underlying problems will continue.
And this situation should concern those in the profession. The more difficult it is to ascertain information about a bond, the less likely investors are to buy it, said Ken Hoffman, president of DPC Data.
Information about municipal bonds will always be complicated, said Lisa Washburn, managing director at Municipal Market Analytics.
Corporations issuing stocks and bonds have a strict disclosure regime from the Securities and Exchange Commission, a uniform set of accounting standards, and organizational structures that ensure their bonds and stocks are issued smoothly.
The municipal market has none of that, Washburn noted. The
Many municipal issuers devote most of their resources to their primary purpose, such as providing power or being a charter school. Reporting their information to the Municipal Securities Rulemaking Board's EMMA, or hiring a disclosure agent to do it for them, is not their specialty.
Submitting information to EMMA is a manual process, subject to input error, Washburn said. She sees those input errors when monitoring event notices.
EMMA has categories for notices of payment defaults, bankruptcies or draws on reserves, but Washburn sees many of those filed under "other."
"I've even had default notices in 'failure to file,'" Washburn said. "There isn't a process to check that the things that are going in, that are being filed, are being filed in the right place."
There are other kinks in the reporting system, said DPC's Hoffman. All bonds issued through conduit issuers are listed under that issuer, with the borrower's identity often buried deep in the offering statement.
That slows down the market and damages liquidity, said Triet Nguyen, DPC's vice president of strategic data operations.
"People should know within seconds who's the obligor behind a bond," said Nguyen. "Instead, now, the trader turns to the desk analyst and they say, 'Take a look at this. Who is this? What is this that I'm trading?' Three hours later, the analysts come back. That is unbelievable."
Institutional investors get around this issue, Hoffman said, for a price. Firms hire analysts and buy datasets from vendors like DPC Data, which has a database of conduit deals that includes obligors. Some firms, Hoffman said, will buy multiple datasets and create a matrix, measuring them against each other for accuracy.
"They probably have had to have a staff of 25 analysts, where they might only need 10 if they had better data," Nguyen said. "The analysts spend a lot of time just doing data work."
Even the data you pay for can cause problems, Nguyen said, because there's no standardization across the industry.
Providers like Bloomberg and LSEG use various sources to create their datasets, then sort that data into different categories. What counts as the education sector? Should bond anticipation notes count toward volume? What about privately placed bonds?
"Sectors get conflated with purpose all the time," Washburn said. "A GO school district isn't an education bond. It's a GO bond."
David Kaplan, contributor relations manager for LSEG, said the company uses a variety of sources for its data, including LSEG's product Workspace, contributions from various market participants, EMMA and final official statements. LSEG corrects data when information comes to market and reaches out directly to contributors when data is in question, Kaplan said.
"I think the inconsistencies [between LSEG and Bloomberg] may be attributed to different methodology and criteria, but without knowing the inner workings of Bloomberg's Municipal data I can't be specific," Kaplan said.
Particularly complicated issuers may pay for the struggle to learn about their credit.
While well-resourced investors are draining their money to access comprehensive information about the market, retail investors are left with EMMA.
The MSRB has "heard for a long time … that it's difficult to find information on EMMA," said MSRB's chief product officer Brian Anthony.
If someone wants to find Massachusetts GOs on EMMA, they might search "Massachusetts." That search doesn't yield the page with the Massachusetts GOs.
EMMA's
To find Massachusetts GOs, users would have to know to search
The Wisconsin Public Finance Authority has 64 different EMMA pages. "You almost have to be an expert in how to search on EMMA to get all the information that you want or need," Washburn said.
EMMA functions as "the industry's filing cabinet for documents," Washburn said. But that means it's full of the problems that develop in a filing cabinet.
Issuers will create a page for a single deal or a single revenue source. Many pages seem to have been created by accident, through a misspelling or while transferring data from pre-EMMA systems.
If users don't know the CUSIP number of the bond they're looking for, they have to sift through pages of bonds from the 1980s before they can find it, she noted.
"I can't imagine that this is an easy site to navigate for a retail person," Washburn said.
The MSRB is developing new features for EMMA which it hopes to launch by the end of the calendar year. Most of the changes are intended to make it easier to find information, Anthony said.
The team is developing a "hierarchical navigation structure" which will group all of an issuer's issues together, Anthony said. The revamped site will group continuing disclosure information by obligor and allow users to search for a conduit borrower.
There will also be new customization features, Anthony said.
"Each person sort of has their three to five things they use EMMA for on a pretty regular basis," Anthony said. "We will allow each user of EMMA to build their own landing page of the three to five things that they use most often."
Some features that market participants may be hoping for will not be included. Washburn, for instance, suggested a fix to the disclosure submission system.
"Just make it difficult to [file] things into 'other,'" Washburn said. "Make people have to click five times if they want to choose 'other.' Because that will be a deterrent. You'll spend the extra second to figure out where your document should go."
There are no plans to change or refine the submission process to prevent misfilings, Anthony said.
The update will add a disclosure search so users can search the contents of disclosure forms, Anthony said. This will help turn up event notices that are incorrectly filed.
"I would say our initial thought is, with the abundance of information out there, let's make it cleaner to find," Anthony said. "And then we can certainly talk about the submission pathways, and if there are ways that we can help issuers and other parties disclose information more cleanly."
Groups within the muni industry have been pushing for changes — updating EMMA, strengthening disclosure policies, and creating standards of categorization — for years, Washburn said. She envisions a "relational database," where users could search by issuer, borrower, size of deal, or sector.
Before there was EMMA, bond information was scattered across different
"The EMMA system was this single best creation at its time, for bringing information on the municipal market to a single place, a free resource," Washburn said. "I would never want to go back to a pre-EMMA state."
