MSRB discusses transparency proposals at quarterly meeting

The Municipal Securities Rulemaking Board wrapped up its quarterly meeting last week discussing several important topics, but ended without taking or announcing any concrete actions.

The meeting was the first of calendar year 2023, but the second of the MSRB's fiscal year, which began Oct. 1 2022. The agenda for the meeting, which ended Thursday, was heavy on discussion of market transparency initiatives.

"The MSRB continues to focus on regulatory initiatives to make meaningful improvements in the transparency in our market throughout the lifecycle of a bond transaction," said MSRB Chair Meredith Hathorn in a statement. "The Board's discussions are deeply informed by dialogue with market stakeholders and data analysis."

The data includes comments attached to over 50 stakeholder letters that flooded in regarding MSRB Rule G-14.  The current version of the rule requires that trades be reported within 15 minutes, but the MSRB late last year requested comment on a proposal that contains a contentious amendment that would reduce the time of trade reporting requirement to one minute. Many traders on the front line doubt the effectiveness of proposed adjustment and the MRSB is currently weighing the promised transparent benefits against the costs. 

The board also discussed the Financial Data Transparency Act, which requires issuers to adopt a machine-readable format for disclosures. MSRB is working to modernize EMMA, the current disclosure workhorse which runs on PDF's which are not machine-readable. MSRB has signaled a sigh of relief that sifting out the details of the FDTA has come under the purview of the SEC.

The board discussed a pending request for comment that the board previously approved regarding Rule G-47. This request for comment also seeks stakeholder input on proposed amendments to Rule D-15, defining the term "sophisticated municipal market professional." Who qualifies as an SMMP is important because a customer who meets the requirements and affirms it is an SMMP is assumed to be capable of independently evaluating investment risks. This reduces the suitability burden on dealers.

The Board indicated that all the proposals being considered are interrelated. The MSRB indicated it is working to align all of its potential actions with those of other regulators, including the Financial Industry Regulatory Authority.

At the meeting the Board also met with Securities and Exchange Commission Chair Gary Gensler and FINRA President and CEO Robert Cook.

The Board said in a release that it received an update on the final roundtable in a series of roundtable discussions with minority-, women- and veteran-owned firms that the MSRB hosted in collaboration with FINRA to "identify opportunities to foster greater diversity, equity and inclusion in the municipal securities market." This is part of a broad MSRB mission to uphold the public trust, according to the regulator.

"Through these roundtables, the MSRB and FINRA have gained greater insight into the particular business models, challenges and pain points of diverse firms operating in the municipal market," said MSRB CEO Mark Kim. "We are very grateful for the industry's engagement to date, and we look forward to continuing to broaden and deepen our touchpoints with stakeholders."

The MSRB is next scheduled to meet April 26-27.