WASHINGTON – The Municipal Securities Rulemaking Board filed a rule with the Securities and Exchange Commission on Tuesday that would require certain brokers, dealers and municipal advisors registered with the MSRB to participate in its business continuity and disaster recovery testing.
The MSRB's new Rule A-18 was effective upon filing and responds to the SEC's Regulation Systems Compliance and Integrity, which became effective Feb. 3 and had to be complied with beginning on Tuesday. The MSRB's internal testing will take place at least every 12 months.
The SEC pursued Regulation SCI to reduce the occurrence of systems issues and improve resiliency when system problems occur. Regulation SCI mandates that certain self-regulatory organizations, alternative trading systems, and other services operating in the capital markets meet SEC standards like informing members and participants about systems issues, conducting business continuity testing, and conducting annual reviews of their automated systems. It also provides a framework for the entities to take corrective action when issues occur and provide notifications and reports to the SEC regarding the systems problems and changes.
The rules were created in response to a 2013 Nasdaq system failure that temporarily halted market activity.
Following the instructions contained in Regulation SCI, the MSRB used Rule A-18 to designate the entities that will be required to participate in its Regulation SCI testing as those registrants whose submissions of data to the MSRB, taken as a whole, account for a meaningful percentage of the data submission volume required to be provided by the board's registrants. The submissions will be measured over a particular month or quarter the MSRB will refer to as the "measurement period."
Under Rule A-18, the MSRB will publish for its registrants the percentage of data submission volume and the minimum number of participants that it deems to be "meaningful," as well as its measurement period, in advance of the measurement period it chooses. It will also notify all entities required to participate in the test at least 45 calendar days before the tests on its business continuity and disaster relief plans take place.
The MSRB said it believes the proposed notice requirement "is necessary to provide sufficient advance notice to those MSRB registrants that are designated as participants in mandatory business continuity and disaster recovery testing under Rule A-18."
The self-regulator already maintains multiple backup sites to support recovery measures in the event of a significant disruption to its systems and services, which include EMMA, the Real-Time Transaction Reporting System, and various data and document subscription services.
