The MSRB proposes to revise Rule G-34, so that brokers, dealers and municipal securities dealers are prohibited from using the term “not reoffered” or “NRO” in any written communication unless it also included the initial offering price or yield information about the applicable new issue of municipal securities.  The change is intended to to provide timely and full price discovery for all market participants - particularly state and local governments interested in ensuring that their bonds are offered at competitive prices or yields.

In connection with the underwriting and marketing of a new issue of municipal securities, underwriters frequently arrange for the purchase of one or more maturities (or portions thereof) of such issue by a single investor. Underwriters sometimes then designate such maturity or maturities as NRO, or not reoffered, thereby signaling to other members of the syndicate that such maturity or maturities are not available to be offered to other potential investors.

While underwriters are required to submit complete information about initial offering prices or yields (including maturities designated as NRO) pursuant to MSRB Rules G-32 and G-34, an underwriter is not currently required to include such information for maturities designated as NRO when disseminating information about a new issue to other parties, including 3rd-party information vendors.

As a result, information subsequently disseminated by dealers about a maturity designated as NRO through marketplace channels typically does not include the price or yield at which the maturity will be sold.

As proposed, underwriters would be prohibited from using the “not-reoffered” or “NRO” designation - which indicates that certain maturities of a new issue of municipal securities are not available to be offered to potential investors - in any written communication without also including the applicable price or yield information. While underwriters are obligated to make certain new disclosures, it's important to note that this information may not be readily available until the end of the first day of trading in the new issue.  Further, underwriters often use the NRO designation for certain maturities of new issues of municipal securities when communicating to other market participants, which results in inconsistent information in the market. The MSRB comment period ends 4/10/12. For further details, go to:   [MSRB News Release, 3/13/12] and [MSRB Regulatory Notice 12-14, 3/13/12].