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Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Municipal Securities Rulemaking Board Relating to Reports of Sales and Purchases, Pursuant to Rule G-14

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Start Preamble August 22, 2001.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 Start Printed Page 46046(“Act”) [1] and Rule 19b-4 thereunder,[2] notice is hereby given that on August 17, 2001, the Municipal Securities Rulemaking Board (“Board” or “MSRB”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) a proposed rule change (File No. SR-MSRB-2001-06). The proposed rule change is described in Items I, II, and III below, which Items have been prepared by the Board. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The MSRB has filed with the SEC a proposed rule change to institute an informational service (the “Service”) that would provide a Daily Comprehensive Report. The transaction information on the Daily Comprehensive Report would come from reports made to the Board by brokers, dealers and municipal securities dealers (“dealers”) under its rule G-14, which governs reports of sales or purchases. This rule currently requires dealers to report essentially all inter-dealer and customer transactions in municipal securities to the Board by midnight of trade date.

The proposed Daily Comprehensive Report (“Report”) would provide the details of municipal securities transactions effected during a single day. Each day's report would include the transactions effected two weeks previously. The proposed Report would be available by a subscription service. On each business day, the Report would be available electronically to subscribers by File Transfer Protocol (FTP) via the Internet. The subscription fee would be $2,000 per year.

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 Section 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

The Board has a long-standing policy to increase price transparency in the municipal securities market, with the ultimate goal of disseminating comprehensive and contemporaneous pricing data. Since 1995, the Board has expanded the scope of the public transparency reports in several steps. Each step has provided industry participants and the public successfully more information about the market.[3]

In May, 2001, the Board announced its plan to begin reporting trades in “real time” by mid-2003.[4] The implementation of real-time trade reporting is being coordinated with the industry's schedule for migration to an environment of same-day settlement of securities transactions. To attain real-time reporting the Board intends in the future to file an amendment to rule G-14 to require dealers to report their trades within 15 minutes of the time they are effected.

As its next step to increase transparency, the Board is now proposing to disseminate a Daily Comprehensive Report. The proposed Report, to be made available each day, would contain details of all municipal securities transactions that were effected during the day two weeks earlier. Data about each trade on the proposed Report would be similar to that on the current monthly Comprehensive Transaction Report. For each trade, the proposed Report would 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 would be categorized as: a sale by a dealer to a customer, a purchase from a customer, or an inter-dealer trade.

Description of Proposed Service

The proposed Service would make the Daily Comprehensive Report available each day to subscribers. Subscribers would access the Report via the Internet and would download copies from the Board's computer using a password-protected FTP account. The Board plans to make a single day's data available to prospective users without charge, so that they may determine whether they wish to subscribe.

The Board is establishing a fee for an annual subscription to the Service of $2,000. The proposed annual fee is structured approximately to defray the Board's costs for production of daily data sets, operation of telecommunications lines, and subscription maintenance.[5]

2. Basis

The Board believes the proposed rule change is consistent with section 15B(b)(2)(C) of the Act, which provides that the Board's rules shall:

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, clearing, settling, processing information with respect to, and facilitating 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 MSRB does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act since 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

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the MSRB consents, the Commission will:Start Printed Page 46047

(A) by order approve such proposed rule change, or

(B) institute proceedings to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing including whether the proposed rule 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. Copies of the submissions, 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-2001-06 and should be submitted by September 21, 2001.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[6]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  The MSRB's Report summarizing prices for issues that are frequently traded on the inter-dealer market began operation in 1995; in 1998, dealer-customer prices were added in a second summary report; in January 2000, a report with details of trades in frequently traded issues was added; and in October 2000, a comprehensive report, covering all transactions effected during the previous month, began operation. See Securities Exchange Act Release No. 43426 (October 10, 2000), 65 FR 61367 (October 27, 2000).

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4.  See “Real-Time Reporting of Municipal Securities Transactions,” MSRB Reports, Vol. 21, No. 2 (July 2001) at 31-36.

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5.  The subscription fee for the current monthly report is also $2,000 annually. Subscribers to the monthly report who prefer the fresher data of the proposed Daily Comprehensive Report will have the option to switch subscriptions to the latter.

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[FR Doc. 01-22016 Filed 8-30-01; 8:45 am]