WASHINGTON – The Municipal Securities Rulemaking Board announced on Tuesday which registered brokers, dealers, and municipal advisors will be required to participate in testing business continuity and disaster recovery plans.
The testing must be done to comply with the Securities and Exchange Commission's Regulation Systems Compliance and Integrity (Reg SCI), which mandates that at least once a year certain self-regulatory organizations, alternative trading systems, and other firms operating in the capital markets test and review their own automated systems, as well as inform members and participants about system issues.
Reg SCI, which responds to a 2013 Nasdaq system failure that temporarily halted market activity, became effective on Feb. 3, 2015 and required the organizations and systems covered be in compliance by Nov. 3, 2015.
The MSRB complied with the regulation on Nov. 2 by filing MSRB Rule A-18 requiring mandatory participation in business continuity and disaster recovery testing. The rule was effective upon filing.
In its original filing, the MSRB said it would choose participants that, when taken as a whole, account for a meaningful percentage of the data submission volume required from entities registered with the MSRB.
The updated information released Tuesday equates a "meaningful percentage" to 30% of the relevant activity in each of four MSRB data collection systems over a predetermined period of time. The data collection processes the MSRB plans to test are its: Real-Time Transaction Reporting System (RTRS); Short-term Obligation Rate Transparency system (SHORT); primary market data and document submissions to EMMA; and 529 College Savings Plan information submitted in compliance with the MSRB's mutual fund securities reporting rule.
The meaningful percentage goal for the RTRS will be the top five registrants by number of reported municipal security trades during a defined calendar month before testing. For SHORT, it will be the top five registrants acting as program dealers for auction rate securities or marketing agents for variable rate demand obligations that participated in interest rate resets reported during a previous calendar month.
For primary market disclosure, the test will have to be taken by the top five registrants that engaged in underwriting activity as reported to the MSRB through EMMA during a prior month. For 529 plans, the test will be taken by the top five registrants that reported the terms of total asset plans associated with 529 plans to EMMA during a previous calendar quarter.
If the selected top five do not make up 30% of a system's data for the time period the MSRB chooses, the testing will expand to the top users that make up 30% of the total submissions.
The MSRB will notify all entities it is requiring to participate at least 45 calendar days before the testing takes place.
