MSRB Files Proposed Rule Change Relating to Subscription Services for Transaction Price Data

On September 30, 2010, the Municipal Securities Rulemaking Board (the “MSRB”) filed with the Securities and Exchange Commission (the “SEC”) a proposed rule change to: (1) raise the fee for the Real-Time Transaction Price Service from $5,000 to $10,000; (2) raise the fee for the Comprehensive Transaction Price Service from $2,000 to $5,000; (3) change the names of the services; (4) consolidate the T+1 Transaction Price Service into the Comprehensive Transaction Price Service; and (5) make other changes to the Facility for Real-Time Transaction Reporting and Price Dissemination described below.[1]

In January 2005, the MSRB commenced operation of its Real-Time Transaction Reporting System (“RTRS”) and its Real-Time Transaction Price Service providing a real-time stream of data representing municipal securities transaction reports made by brokers, dealers and municipal securities dealers (“dealers”) to RTRS, with an annual subscription fee of $5,000. The MSRB proposes to rename the Real-Time Transaction Price Service as the “MSRB Real-Time Transaction Data Subscription Service” (the “Real-Time Service”) and to increase the annual subscription fee for this service from $5,000 to $10,000 beginning on January 1, 2011.[2]

The Comprehensive Transaction Price Service currently consists of a T+5 Report of transaction data five business days after trade date and a T+20 Report of transaction data 20 business days after trade date. The MSRB proposes to rename the Comprehensive Transaction Price Service as the “MSRB Comprehensive Transaction Data Subscription Service” (the “Comprehensive Service”) and to increase the subscription fee for the Comprehensive Service from $2,000 annually to $5,000 annually commencing on January 1, 2011.[3] Additionally, the MSRB proposes to consolidate the free T+1 Transaction Price Service into the Comprehensive Service and to terminate the separate T+1 Transaction Price Service as of December 31, 2010. As amended and consolidated, the Comprehensive Service will continue to be made available through electronic file download over the internet, and it will include three reports: transaction data one business day after the trade (T+1), transaction data five business days after the trade (T+5), and transaction data twenty business days after the trade (T+20).

The MSRB continues to encourage information vendors -- and various other entities that make securities data available to members of the securities industry and the public -- to use the transaction data in their products and services and permits those parties to re-disseminate the data, either in its original form or with enhancements to address the specific needs of specific data users. To this end, subscribers may (i) use the data for their internal business purposes; (ii) re-disseminate the data to their customers, clients and system users; and/or (iii) re-disseminate the data in other products or services that they offer to their customers, clients and system users, subject to certain terms and limitations, including those relating to proprietary and intellectual property rights of third parties in information provided by such third parties that is made available through the subscription.

The purpose of the proposed rule change is to assess commercially reasonable fees for MSRB data services that will partially defray the costs and expenses of operating and administering MSRB market information programs. The MSRB has not increased the cost of the Real-Time Service since it was implemented approximately six years ago. Moreover, prior to January 2005, the MSRB offered, among other reports, two delayed transaction reports (the Inter-Dealer Report and the Combined Report) for $15,000 each. The proposed subscription fee for the Real-Time Service is less than either of these delayed transaction reports offered prior to January 2005. The MSRB has not increased the cost of the Comprehensive Service since November 2001, when it was introduced as the Daily Comprehensive Report.

The proposed rule change is needed to help bring the MSRB’s revenues more closely in line with expenditures and to help ensure that subscription fees and revenues are reasonable. Currently, the Real-Time Service generates revenue of approximately $220,000 annually, and the Comprehensive Service generates revenue of approximately $48,000 annually. No revenue is generated by the T+1 Transaction Price Service. Consequently, all three services generate less than $300,000 of revenue per year. The cost of operating MSRB market information programs has been increasing annually. Fee revenue obtained through these subscription services covers only a small portion of RTRS operating costs. Even with the proposed increases, the MSRB does not expect subscription fees to cover more than a relatively small percentage of program costs.

Questions about the amendments should be directed to Lawrence P. Sandor, Senior Associate General Counsel at (703) 797-6600.

September 30, 2010

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TEXT OF AMENDMENTS [4]

FACILITY FOR REAL-TIME TRANSACTION REPORTING AND PRICE DISSEMINATION (THE “REAL-TIME TRANSACTION REPORTING SYSTEM” OR “RTRS”)

[Proposed] RTRS Facility[5]

No change.

Price Dissemination by RTRS [6]

No change.

MSRB Real-Time Transaction Data Subscription [Price] Service [7]

[In January 2005, the] The MSRB [plans to begin operation of the Real-time Transaction Price Service to] disseminates municipal securities transaction prices in real-time through its Real-Time Transaction Data Subscription Service. The Real-Time Service [will be] is available by subscription for an annual fee of $10,000 [$5,000] and [will be] is a part of the MSRB’s Real-Time Transaction Reporting System (“RTRS”). [RTRS will bring real-time price transparency to the municipal securities market and will make other improvements in the transparency and market surveillance functions of the MSRB’s current transaction reporting program.]

Description

No change.

Hours of Operation

No change.

Transaction Data Disseminated

No change.

Subscription Fee. The Real-Time Service [will be] is available by subscription for an annual fee of $10,000 [$5,000].[11] The MSRB may, in its discretion, waive the subscription fee for not-for-profit organizations, academic institutions, or other entities or persons who desire the service for non-profit or research purposes. Subscribers will be allowed to re-disseminate transaction data to an unlimited number of their own customers or clients at no additional charge. [By not charging for or restricting re-distribution of the transaction data] Subscribers may (i) use the data for their internal business purposes; (ii) re-disseminate the data to their customers, clients and system users; and/or (iii) re-disseminate the data in other products or services that they offer to their customers, clients and system users, subject to certain limitations described in the subscription agreement.[, the] The MSRB wishes to encourage information vendors -- and various other entities that make securities data available to members of the securities industry and the public -- to use the transaction data in their products and services. The MSRB will also encourage those parties to re-disseminate the data, either in its original form or with enhancements to address the specific needs of specific data users.11 [12] [Through this approach, the MSRB anticipates that it will be possible for a typical individual investor to obtain the transaction data that is relevant to his or her investments for free or at a very modest cost.13 After its first year of operation, the MSRB will review the usage of the real-time data feed to ensure that this goal is being met and that the data is readily available to municipal market participants and others who need the data.]

MSRB Comprehensive Transaction Data Subscription Service [Other Transparency Reports Under RTRS]

In addition to offering the Real-Time Service, RTRS will [continue to] provide the Comprehensive Transaction Data Subscription Service, which will consist of (i) [primary transparency reports that have been developed within the current transaction reporting program. The data fields in these products will be modified for consistency with the real-time transaction data fields noted above and formatted to reflect that the data is being disseminated in files containing multiple transactions, rather than in real-time, “trade by trade,” messages.14]

[The existing “Trade Detail Report” (also known as the “T+1 Report”) contains the] trade reports for a specific trade date [and is] made available at approximately 6:00 a.m. on the business day following trade date (“T+1”), which display a notation that the par value is $1 million or over, in lieu of the exact par value, where applicable; [. It is provided in the form of an electronic file and is made available over the Internet. After RTRS is operational, the Trade Detail Report will be reformatted and renamed the “T+1 Transaction Price Service.” Subscriptions will remain free to any interested person.]

[The existing “Daily Comprehensive Report” also is used to disseminate] (ii) trade reports for a specific trade date[, but is] made available five business days after that trade date (“T+5”) showing exact par values for those transactions with a par value over $1 million, showing all late trade reports made after the specified trade date, up until the date of dissemination, and showing the effect of modifications or cancellations submitted by dealers after trade date; and (iii) trade reports for a specific trade date made available 20 days after that trade date (“T+20”) showing the effects of any trade modifications or cancellations received since the T+5 report was produced.[15] [In RTRS, this service will be renamed the “Comprehensive Transaction Price Service.”]

The Comprehensive Transaction Data Subscription S[s]ervice will be made available exclusively through electronic file download over the Internet. [in the same format and manner as the T+1 Transaction Price Service. As is the case for the Comprehensive Reports produced today, the] The trade records in the Comprehensive Transaction Data Subscription Service [new comprehensive service] will: (i) include exact par values for those transactions with a par value over $1 million; (ii) show all late trade reports made after the specified trade date, up until the date of dissemination: and (iii) show the effect of modifications or cancellations submitted by dealers after trade date. The annual fee for this service will be $5,000. [$2,000 – the same fee currently charged for the existing Comprehensive Reports.] The MSRB may, in its discretion, waive the subscription fee for not-for-profit organizations, academic institutions, or other entities or persons who desire the service for non-profit or research purposes. Under RTRS, subscribers to the Real-Time Transaction [Price Dissemination] Data Subscription Service will receive a subscription to the Comprehensive Transaction [Price] Data Subscription Service at no additional charge.

Implementation Plan [8]

No change.

____________________

[11] [The $5,000 subscription price will cover the administrative and technical costs associated with disseminating data and supporting subscription accounts. The MSRB is not attempting to levy revenues from the Service to cover all RTRS costs.]

11 [12] Athough the transaction data collected by the MSRB is not restricted with respect to redissemination by subscribers to their end user clients, there are certain restrictions on use of the proprietary “CUSIP numbers and CUSIP Securities Descriptions.” Subscribers would be subject to all of the terms of the subscription agreement to be entered into between the MSRB and each subscriber, including proprietary and intellectual property rights of third parties in information provided by such third parties that is made available through the subscription. [These are contained within the Subscription Agreement for the Service.]

[13] [The MSRB, for example, has received an indication from The Bond Market Association (“BMA”) that the real-time data will be made available in real-time on the BMA’s free web site (www.investinginbonds.com) which contains information on the fixed income markets.]

[14] [Approximately six months after RTRS becomes operational, the MSRB will retire certain redundant reports, and will combine the monthly and daily comprehensive reports into one service.]

[15] [Subscribers to the T+5 Report also have access to a T+20 Report that contains transactions showing the effects of any modifications received at RTRS since the T+5 Report was produced. Data formats in reports created before RTRS became operational may be those that were in use at the time they were created. Any interested party may contact the MSRB for technical information about these older reports.]

 

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