MSRB seeks feedback on proposed best-execution rule for transactions

By Jennifer Chiou

New York, Feb. 19 - The Municipal Securities Rulemaking Board announced that it is requesting public comment on a proposal to establish explicit requirements for municipal securities dealers to seek the most favorable price possible when executing transactions for retail investors.

According to a board release, if approved, the proposed "best-execution" standard would provide benefits for investors, promote competition among dealers and enhance market efficiency.

"The MSRB's best-ex proposal is a significant step for protecting investors and improving the structure and efficiency of the municipal market," MSRB chair Daniel Heimowitz said in the release.

"This proposal complements dealers' existing fair-pricing obligations by creating standards for how they handle and execute customer orders for municipal securities."

The proposed rule is modeled on the Financial Industry Regulatory Authority's best-execution rule for the equity and corporate fixed-income markets.

Under the rule, dealers are required to use "reasonable diligence" to identify potential trading venues for a particular security and then execute transactions in the best venue to provide the customer with a price as favorable as possible, the MSRB noted.

At the same time, the board is seeking comment on an exception from the new rule for transactions with sophisticated municipal market professionals.

Comments should be submitted to the MSRB no later than March 21. A webinar on the main aspects of the proposed rule will take place at 3 p.m. ET on March 6.

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