MSRB enhances bid-to-cover calculations on auction-rate securities

By Tali David

Minneapolis, Dec. 10 - The Municipal Securities Rulemaking Board said it improved its calculation of bid-to-cover ratios for auction-rate securities (ARS) to provide a ratio that is more consistent with bid-to-cover ratios calculated for Treasury auction results, according to a press release.

Since 2011, the MSRB's Electronic Municipal Market Access website has displayed bid-to-cover ratios, which provide an indication of demand for ARS in auction-rate security auctions.

The ratio initially reflected the aggregate par amount of securities bid relative to the aggregate par amount of securities offered for sale in an auction, the board said in the release. The calculation did not take into account the par amount of securities held that were not tendered for sale.

The MSRB said it recently obtained additional data, allowing it to complete its planned development of an improved bid-to-cover calculation.

The new changes also include the removal of orders from program dealers from the MSRB's calculation to more closely reflect investor activity in auction rate securities.

The MSRB said that although the calculation of bid-to-cover ratios will no longer factor in such program dealer orders, the EMMA website continues to display data on all orders placed in connection with ARS auctions, including orders placed by program dealers.

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