MSRB wants to collect more data on municipal auction-rate securities, VRDOs, seeks SEC rule change

By Angela McDaniels

Tacoma, Wash., March 10 - The Municipal Securities Rulemaking Board has filed a proposed rule change with the Securities and Exchange Commission that would expand the information it collects and distributes on municipal auction-rate securities and variable-rate demand obligations, according to an MSRB notice.

Under the proposed rule change, brokers, dealers and municipal securities dealers would be required to submit additional documents to the MSRB that define auction procedures and interest-rate-setting mechanisms for auction-rate securities and liquidity facilities for VRDO, auction-rate securities bidding information and additional VRDO information.

The specific list of auction-rate securities bidding information that would have to be reported includes:

• The interest rate(s) and total par amount(s) of orders to sell at a specific interest rate and the total par amount of those orders that were executed;

• The total par amount of orders to sell at any interest rate and the total par amount of those orders that were executed;

• The interest rate(s) and total par amount(s) of orders to hold at a specific interest rate and the total par amount of those orders that were successfully held;

• The interest rate(s) and total par amount(s) of orders to buy and the total par amount of those orders that were executed;

• The interest rate(s), total par amount(s) and type of order - either buy, sell or hold - by a dealer for its own account and the total par amounts of those orders, by type, that were executed; and

• The interest rate(s), total par amount(s) and type of order - either buy, sell or hold - by an issuer or conduit borrower for that auction-rate security and the total par amounts of those orders, by type, that were executed.

The additional VRDO information that would have to be reported by a remarketing agent includes:

• The effective date that the interest rate reset is applicable;

• The identity of the tender agent;

• The identity of the liquidity provider(s), including a indication of those VRDOs for which an issuer provides "self liquidity" and the identity of the party providing that self liquidity;

• The information available to the VRDO remarketing agent as of the time of the interest rate reset of the par amount of the VRDO, if any, held as a bank bond; and

• The information available to the VRDO remarketing agent as of the time of the interest rate reset of the total par amount of the VRDO, if any, held by parties other than a liquidity provider, which includes the par amounts held by a VRDO remarketing agent and by investors.

MSRB also proposed amending the MSRB Short-term Obligation Rate Transparency System Facility to collect and disseminate the documents identified in the rule change proposal and to make these documents available on the Electronic Municipal Market Access web site.

If the rule change is approved by the SEC, the MSRB will seek to make it effective within nine months. It noted that the change might be implemented in phases.

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