Public Reporting of Historical Information on Transactions in Municipal Securities: Rule G-14

Service Approved

The Commission has approved a service to offer a Comprehensive Transaction Report, containing historical transaction information on all transactions in municipal securities reported to the MSRB by dealers under MSRB rule G-14.  The Report will be available on a delayed basis, once a month, covering the previous month’s trading.  There will be a fee of $2,000 for annual subscriptions.

Questions about rule G-14 and the Comprehensive Transaction Report may be directed to Larry M. Lawrence, Policy and Technology Advisor.  Questions about subscriptions to the service may be directed to Thomas A. Hutton, Director, Municipal Securities Information Library.

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On October 10, 2000, the Securities and Exchange Commission (“Commission”) approved a change to rule G-14 that will institute a service to provide historical information on all transactions in municipal securities.[1] Transaction information on the service’s Comprehensive Transaction Report will come from reports made to the MSRB by brokers, dealers and municipal securities dealers (“dealers”) under rule G-14, which currently requires dealers to report inter-dealer and customer transactions in municipal securities to the MSRB by midnight of trade date. 

Description of Report

The new Report will be the fourth product offered by the MSRB to increase the amount of price transparency in the municipal securities market.  The three existing products all provide information on “frequently traded” issues – issues on which the MSRB receives at least four transaction reports for a given trade date.  The existing products are produced and made available electronically by approximately 7:00 a.m. each business day and cover the previous day’s trading.  In contrast, the Comprehensive Transaction Report will provide information on every municipal security transaction, including transactions in issues that are traded less than four times during a day.  The Comprehensive Transaction Report will be made available on a delayed (historical) basis, once a month, covering the previous month’s trading.

Data about each trade on the new Report will be similar to that on the current Daily Transaction Report.  For each trade, the new Report will show the trade date, the CUSIP number of the issue traded, a short issue description, the par value traded, the time of trade reported by the dealer, the price of the transaction, and the dealer-reported yield of the transaction, if any.  Each transaction will  be categorized as a sale by a dealer to a customer, a purchase from a customer, or an inter-dealer trade.

Description of Service

The new service will make the Comprehensive Transaction Report available once a month to subscribers.  The MSRB will send subscribers each month a compact disk containing all trades effected during the previous calendar month.  Sample disks with a single month’s data are available to prospective users without charge, so that they may determine whether they wish to subscribe.  Sample disks may be requested from the MSRB’s web site, www.msrb.org/MSRB1/send_cd.htm.  The MSRB is establishing a fee of $2,000 for an annual subscription to the service.

Comments Received on Comprehensive Transaction Report

The Commission received one letter commenting on the MSRB’s filing of the proposed rule change to institute the Report.[2]  The commenter generally supported the MSRB’s goal of providing comprehensive and contemporaneous transaction reports but provided several suggestions that it believed would increase the utility of the proposed Report.  First, the commenter suggested that the MSRB make a daily release of transaction data for trades occurring 30 days prior, rather than once a month in a report covering the previous month’s trading.  The MSRB has determined, however, that releasing historical data once a month is the technically most efficient method of producing the Comprehensive Transaction Report, taking into account the current design and operating cycle of the Transaction Reporting System.  The commenter’s preference for daily release of historical transaction data will be one of the alternatives strongly considered by the MSRB for the next version of the Report.

The commenter’s second suggestion was that the MSRB make the Report available over the Internet on secure, password protected sites, rather than solely in compact disk format.  The MSRB notes that a Comprehensive Transaction Report with one month’s data comprises an extremely large file which would take a prohibitively long time to download to a subscriber’s computer.  While it may be possible to move to Internet transmission of files of this size, doing so in the near term could create technical and technical-support issues for the MSRB.  On this question also, however, the MSRB will continue to consider alternative methods once the proposed Report goes into operation.

Finally, the commenter sought confirmation that the annual subscription fee will not be so high that the Report service would become a profit center, nor so low that it would require a subsidy from dealer assessments.  As noted in its filing with the Commission, by setting the annual subscription fee for the Report at $2,000, the MSRB is attempting to defray the approximate cost of disseminating the data and of establishing and maintaining subscriber accounts. The MSRB does not intend to create a profit center, nor does it plan to increase fee assessments to subsidize the Report.  The MSRB periodically reviews fees for all Municipal Securities Information Library^® products, which will include the Report service, to ensure that they remain consistent with its fee policies.

Impact on Transparency

The Comprehensive Transaction Report represents a substantial increase in the number of trades on which information is made available.  An average of about 29,000 transactions per day will be included, which is more than three times as many as are included in the current T+1 daily reports.  The number of issues reported for a typical day will increase from about 1,600 to about 14,000.[3]

In addition to information on infrequently traded issues, the Report also will provide information on two other types of trades not in the current Daily Transaction Reports:  trades reported late (after trade date), and corrected trades (trades reported incorrectly on trade date that subsequently are corrected by the dealer).  These will  improve the accuracy of the reported information as well as make it more complete.[4]

Possible Next Steps to Expand Transparency

As experience is gained with reporting of all transactions on a delayed basis, the MSRB will evaluate how best to expand price reporting in subsequent steps, for example, by including information on infrequently traded issues on a T+1 basis, by shortening the delay for publication of the Comprehensive Transaction Report, or by other collection and dissemination methods.  As the MSRB previously has noted, its goal is ultimately to provide comprehensive and contemporaneous transaction reports to the market.[5]

October 12, 2000