[Federal Register Volume 64, Number 191 (Monday, October 4, 1999)]
[Notices]
[Pages 53759-53760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25668]
[[Page 53759]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41916; File No. SR-MSRB-99-9]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Municipal Securities
Rulemaking Board Relating to Reports of Sales and Purchases, Pursuant
to Rule G-14
September 27, 1999.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and rule 19b-4 thereunder,\2\ notice is hereby given that
on September 7, 1999, the Municipal Securities Rulemaking Board
(``Board'' or ``MSRB'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') a proposed rule change. The
proposed rule change is described in Items, I, II, and III below, which
Items have been prepared by the Board. The MSRB has designated this
proposal as one constituting a stated policy, practice or
interpretation with respect to the enforcement of an existing rule
under Section 19(b)(3)(A) \3\ of the Act, which renders the proposal
effective upon receipt of the filing by the Commission. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\15\ U.S.C. 78s(b)(3)(A).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Board is filing a proposed rule change describing its plan to
use transaction information collected under the Board's current
Transaction Reporting System \4\ to demonstrate a possible method for
disseminating ``real-time'' transaction reports in the municipal
securities market. The Demonstration System can be accessed from the
Board's web site, www.msrb.org. The Board is requesting comment on this
Demonstration System to assist it in designing its next major phase of
the Transaction Reporting Program.
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\4\ See, e.g., Securities Exchange Act Release No. 37998
(November 29, 1996), 61 FR 64782 (December 6, 1996), in which the
Commission approved the current system for collecting transaction
information.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Board included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Board has prepared summaries, set forth in sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Since 1995, the Board's Transaction Reporting Program has provided
increasing levels of transaction price information using transaction
data that is reported to the Board each day by brokers, dealers and
municipal securities dealers (``dealers'') pursuant to Board Rule G-14
on Transaction Reporting The Board is reviewing ways too make the
transaction price information now available to the public more
comprehensive and more contemporaneous with the execution of trades in
the market. The Board is now making available a Demonstration System,
designed to show a possible means of publicly disseminating transaction
information that, in the future, the Board expects to collect from
dealers on a ``real-time'' basis. The Demonstration System can be
accessed from the Board's web site, www.msrb.org. The Board is
requesting comments on the content and format of information in the
planned demonstration.
Background: Current Daily Reports of Transaction Prices. The
Transaction Reporting Program now produces two Daily Reports that
summarize the municipal securities market by providing high, low and
average prices for the ``frequently traded'' issues, i.e., issues
trading four or more times on a given day. The Inter-Dealer Daily
Report gives a view of the inter-dealer market, and the Combined Daily
Report covers both inter-dealer transactions and transactions between
dealers and customers. Before the end of the year, the Board expects to
produce a new ``Daily Transaction Report'' that will cover the same
transactions as the Combined Daily Report, but that will list
individual prices and quantities for each transaction, instead of
giving the high, low and average prices for the issue.\5\
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\5\ See ``Public Reporting of Individual Transactions in
Frequently Traded Municipal Securities: Rule G-14,'' MSRB Reports,
Vol. 19, No. 3 (September 1999), and File No. SR-99-8 (September 7,
1999).
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Goal: ``Real-Time'' Transaction Reports. Both the current Daily
Reports and the planned Daily Transaction Report make prices available
early on the morning of the day after the trade date, and the prices
given on the reports are only for ``frequently traded'' issues. The
MSRB, however, is looking at ways to make available transaction price
information in a more comprehensive and contemporaneous manner and is
in the early stages of designing a system for that purpose.
There are a number of issues that must be addressed before a system
can be designed to make municipal securities transaction prices
available to all interested parties on a ``real-time'' basis or a near
``real-time'' basis. For example, many dealers have automated trade
processing systems that are set up to process and transmit trade data
using an ``overnight batch'' method. Time will be needed to work
through the steps necessary for the industry to convert from overnight
trade processing to data processing environment that approaches real-
time. The MSRB will be working with dealers, their clearing brokers,
service bureaus, and industry utilities to find the most efficient and
cost-effective manner to complete this transition.
Separate from the issue of how data is to be collected from dealers
is the issue of how trade data will be made available to investors,
dealers and others interested in following prices in the market. The
Demonstration System is intended to generate comment on this issue. It
simulates one way in which transaction prices might be formatted and
disseminated to investors, dealers and others through the world wide
web. Comments on the Demonstration System from potential users of the
system will not only assist the Board in arriving at the best possible
system for disseminating trade data, but also may help the MSRB to
arrive at the procedures and systems necessary for collecting this data
from dealers.
Description of Demonstration System. Like the existing Daily
Reports, the Demonstration System is structured to take into account
the unique nature of the municipal securities markets. In contrast to
the approximately 10,000 issues of stock traded in the equity markets,
there are over 13 million different issues of municipal securities.
Because of this large number of issues and the infrequent trading of
most
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issues, it is not practical to list each issue. Therefore, the
Demonstration System allows the user to view simulated transaction
activity during the day, regarding either a specific security or the
most frequently traded issues.
The Demonstration System uses actual transaction prices reported to
the Board for trade date November 4, 1998. On that day, 22,606
transactions were reported as having occurred in 9,660 separate issues
of municipal securities. Most of these trade records were reported to
the Board, as required by the current Rule G-14, on the night of trade
date. The Demonstration System uses the ``time of trade'' reported on
each trade to simulate how a ``real-time'' transaction reporting system
might look if the transactions were being reported simultaneously with
execution. In a real system, of course, some time would be necessary
for the dealer to create the trade record and enter it into its own
system and for that record to be received, processed and disseminated
by the Board's system. Nevertheless, the use of actual transaction data
should give potential users a sense of what a ``real-time'' system
would be like.
For each transaction reported, the Demonstration System shows the
CUSIP number, a short description of the issue, the par value traded,
the time of trade reported by the dealer, and the individual price of
the transaction. Yield is included if it was submitted by the dealer
with the transaction report. Transaction reports are categorized as one
of three transaction types: (i) sales by dealers to customers, (ii)
purchases by dealers from customers, and (iii) inter-dealer trades.
These three categories of transactions are meant to provide additional
useful information to system users, beyond the mere fact that a
transaction was effected at a specific price. These categories of
transactions are similar to the categories the Board has proposed in
the Daily Transaction Report, mentioned above. The Demonstration System
by default will use the time of the user's computer to simulate a time
of day on November 4. However, the user may change the default time to
simulate any time of day desired.
Comments Requested. The Board is requesting comment on the content
and format of information in the Demonstration System. Comments can be
sent to the Board by letter or by e-mail to webdemo@msrb.org.\6\ All
comments, whether by letter or e-mail, should refer to ``Web
Demonstration System,'' should contain the name and address of the
commentator, and should indicate whether the comments offered are on
behalf of a specific organization or company.
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\6\ The Demonstration System includes an option for sending e-
mail comments directly to this address.
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2. Basis
The Board believes the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Act,\7\ which provides that the Board's
rules shall:
\7\ 15 U.S.C. 78o-4(b)(2)(C).
* * * be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in
regulating * * * transactions in municipal securities, to remove
impediments to and perfect the mechanism of a free and open market
in municipal securities, and, in general, to protect investors and
the public interest * * *
B. Self-Regulatory Organization's Statement on Burden on Competition
The Board does not believe that the proposed rule change will
impose any burden on competition because it applies equally to all
dealers in municipal securities.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Comments on the production of the Demonstration System have neither
been solicited nor received. The Demonstration System itself, however,
has been produced specifically to obtain comment on the Board's view of
``real-time'' transaction reporting for municipal securities. The Board
expects to make one or more filings with the Commission in the future
on ``real-time'' transaction reporting and will discuss comments that
have been made on the Demonstration System at that time.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The Board has designated this proposed rule change as constituting
a stated policy, practice, or interpretation with respect to the
meaning, administration, or enforcement of an existing Board rule under
Section 19(b)(3)(A) \8\ of the Act, and Rule 19b-4(f)(1) thereunder,\9\
which renders the proposed rule change effective upon receipt of this
filing by the Commission. The data used in the Demonstration System was
collected by the Board under Rule G-14 and the Board's Transaction
Reporting System, a rule and facility that previously have been
approved by the Commission.\10\ The proposed rule change describes a
demonstration designed to obtain comment on a dissemination system for
``real-time'' transaction reporting so that the Board may move
expeditiously forward with its previously announced plan to make public
transaction data more contemporaneous and comprehensive.\11\ At any
time within sixty days of the filing of the proposed rule change, the
Commission may summarily abrogate such rule change if it appears to the
Commission that such action is necessary or appropriate in the public
interest, for the protection of investors, or otherwise in furtherance
of the purposes of the Act.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(1).
\10\ See supra note 4.
\11\ See letter from Robert Drysdale, Chairman, MSRB, to Arthur
Levitt, Chairman, SEC, dated November 3, 1994.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of the filing will also be
available for inspection and copying at the Board's principal offices.
All submissions should refer to File No. SR-MSRB-99-9 and should be
submitted by October 25, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-25668 Filed 10-1-99; 8:45 am]
BILLING CODE 8010-01-M
