The Securities and Exchange Commission is seeking additional feedback on the Municipal Securities Rulemaking Board's one minute trade reporting proposal, beginning a process that often results in eventual disapproval.
The move begins formal "disapproval proceedings" related to the proposed amendments to Rule G-14 on time of trade reporting, the SEC's answer to the amendments
The amendments would shorten the window for reporting trades from the current fifteen minute window which has been in place for nearly 20 years. The SEC noted that "since the current 15-minute requirement went into effect in 2005, the fixed income markets have changed dramatically, including a significant increase in the use of electronic trading platforms or other electronic communication protocols to facilitate the execution of transactions."
The step taken by the SEC, while often resulting in eventual disapproval, leaves open the possibility of approving the proposal.
"The SEC's order provides further opportunity for the Commission to consider the MSRB's G-14 rule filing, while also providing the public with an extended period to comment," said Ernie Lanza, chief regulatory and policy officer at the MSRB. "We look forward to next steps in the process as we move towards final approval of this major rulemaking initiative, which will improve the transparency of the municipal securities market."
The SEC is asking those interested to provide written submissions of their data, views and arguments and invites written views on "whether the proposed rule change is inconsistent with the Exchange Act and the rules and regulations thereunder," the SEC said.
The proceedings open up the possibility for the MSRB to withdraw the proposal on their end, or for the SEC to eventually reject the proposal months down the line. A similar proceeding occurred at the end of January with the SEC's
"We are disappointed that the Commission has rejected the MSRB and FINRA proposals to shorten the time to report many trades to the RTRS and TRACE," said Michael Decker, senior vice president of federal policy and research at the Bond Dealers of America. "While we question the need to shorten the trade reporting time at all, we believe the proposals before the SEC struck a reasonable balance between enhancing transparency and providing a reasonable means of compliance. We are hopeful that if the MSRB and FINRA pursue alternative proposals that they produce workable regulations."
The board initially requested comment in August 2022 and since then the proposal has garnered significant backlash as many have noted the negative impact the proposal would have on small firms, and have called into question why such a change was necessary for the muni market to begin with.
Since then the MSRB added exemptions for de minimis market activity and for manually executed trades.
For some, this move gets at the complex nature of the problem.
"If this was a simple matter, the SEC would've approved it. By instituting proceedings, the SEC gave itself more time to really dig into these filings and make sure they have a solid record," said Leslie Norwood, managing director, associate general counsel and head of municipal securities at the Securities Industry and Financial Markets Association.
