WASHINGTON — Dealers will soon see temporarily reduced underwriting, transaction and technology fees as the Municipal Securities Rulemaking Board looks to draw down on its reserves.
Rates will be reduced by about a third during a six month time period from April 1 to Sept. 30, the MSRB announced Thursday. The move will cause the MSRB to forgo about $5.2 million in revenue. The board currently has about $63.8 million in its reserve balance, according to its 2018 annual financial report, and the decision to reduce the fees is part of a previously-announced effort to draw that level down.
“As a result of our rigorous review of our reserves, the board has determined to revise our reserve construct,” MSRB Chair Gary Hall said. “In fact, we’re going to lower the target for reserves and as a result of our lower target, we are in a position to provide a second temporary fee reduction to regulated entities that have contributed to the excess reserves that we’ve captured.”
After hearing concerns from regulated entities about the seemingly outsized reserve, the board
In 2008, during the financial crisis and when EMMA was launched, the MSRB’s reserves took a small hit.
“Because of the investment in EMMA and technology, we found that our reserves were eroding a bit, so we ended up right sizing that in about 2011 by having an increase in our transaction fee and adding the technology fee,” said Nanette Lawson, MSRB’s chief financial officer.
Since then the Board has been trying to balance its reserves and hired an external consultant to determine where its reserve levels should be.
“Then in the meantime, while we’re looking at that, we look at that target and see what our balances are and if there are any adjustments that need to be made, which is sort of what brings us to today,” Lawson said.
Part of the reserve will be used for information technology as well, which the board plans to discuss in April regarding its data assets and assessing benefits of migrating to the cloud.
“We’ve gotten a tremendous amount of feedback from market participants that there is a real interest in trying to optimize the MSRB’s data assets to contribute to a fair and efficient marketplace,” Hall said. “We’re just trying to be very purposeful and deliberate about what we can do in that regard, but we recognize that it’s going to require an investment.”
