Reminder Notice on "List Offering Price" AND THREE-HOUR EXCEPTION for Real-time Transaction Reporting: Rule G-14
The MSRB has received questions concerning the meaning of “list offering price” in Rule G-14 Real-Time Transaction Reporting Procedures. As used in this context, the term means the publicly announced “initial offering price” at which a new issue of municipal securities is to be offered to the public.
Real-time transaction reporting requires dealers to report most transactions within fifteen minutes of the time of trade execution.[1] Transactions effected at the “list offering price” by syndicate or selling group members[2] on the first day of trading in a new issue are eligible for an exception found in Rule G-14 RTRS Procedures section (a)(ii)(A). Such transactions instead are required to be reported by the end of the day. Note that syndicate and selling group members are not required to wait to report such transactions at the end of the day and may choose to report prior to the end of the day.
The exception from fifteen-minute transaction reporting for list-price syndicate trades is based on operational difficulties that otherwise might be presented for dealers when large numbers of transactions at the initial offering price must be reported by a dealer at one time. The MSRB viewed these operational considerations as sufficiently important to allow trades to be reported at the end of the day given that the price of such trades (the “list offering price”) is public. Note that transactions by syndicate or selling group members at prices other than the “list offering price” on the first day of trading in a new issue are required to be reported within fifteen minutes of the time of trade execution. For example, transactions between the syndicate manager and syndicate members (“takedown” transactions) that are at prices other than the “list offering price” must be reported within fifteen minutes of the time of execution. Similarly, transactions done at offering prices that have not been publicly announced, e.g. “not reoffered” prices, also must be reported within fifteen minutes of the time of execution since these prices are not public.
Questions also have been asked about the availability of the three-hour trade reporting exception found in Rule G-14 RTRS Procedures section (a)(ii)(C). When a dealer effects a trade in an issue it has not traded in the past year and does not have CUSIP numbers and indicative data for the issue in its securities master file used to process trades for confirmations, clearance and settlement, it is allowed three hours to report.[3] This exception is designed to allow a dealer time to set-up a security it has not traded and is available for transactions on the first day of trading in a new issue. Note this exception is not available for syndicate and selling group members.
Questions about this notice may be directed to Justin Pica, Uniform Practice Specialist.
December 10, 2004
[1] Rule changes to MSRB Rules G-14, on transaction reporting, and G-12(f), on automated comparison of inter-dealer transactions, that will require dealers to report transactions in real-time become effective January 31, 2005. See MSRB Notice 2004-36 (November 17, 2004) on www.msrb.org.
[2] References to “syndicate and selling group members” in this context are meant to include managers of syndicates as well as sole underwriters or placement agents in non-syndicated offerings.
[3] The three-hour exception sunsets one year after real-time transaction reporting is implemented.
