MSRB wants to increase transaction assessments for certain muni securities transactions reported to MSRB and to institute a new technology fee on reported sales transactions, effective 1/1/11.  SIFMA urges the SEC to reject the proposal, saying it doesn't believe MSRB has provided sufficient justification to increase its fees.  As proposed, MSRB's amendments to MSRB Rule A-13 would impact assessments for brokers, dealers, and municipal securities dealers.  Specifically, it would:

• increase the existing transaction assessments for inter-dealer and customer sales from .0005% to .001% of the total par value of inter-dealer sales and sales to customers that are reported by dealers to the MSRB (the “transaction fee”), and 

• impose a technology fee of $1.00 per transaction for inter-dealer and customer sales reported to the Board (the “technology fee”).  This fee would be transitional in nature, and would be reviewed by the Board periodically to determine whether it should continue to be assessed.

The rule proposal was filed with the SEC on 10/10/10 and, as noted above, would go into effect on 1/1/11.

    SIFMA:  Key Problems With MSRB's Proposal.   The magnitude of the increased revenues that would result from the Proposal is excessive relative to the MSRB’s current budget, much larger than the increases that can be reasonably anticipated in the MSRB’s expenses.  In the 11/19 letter, the MSRB estimates that its expenses for fiscal year that ended on 9/30/10, increased by 8.5% over fiscal 2009, and asserts that its expenses will continue to rise “at significantly higher rates” in the coming 2 years.  However, MSRB provides no real information about its anticipated expenses that would justify a near doubling of its revenues. 

In SIFMA's previous comment letter on this matter, the Association pointed out that MSRB is proposing to increase its revenue by 84% compared to its average annual revenue of recent years.  The Board has not yet provided a detailed budget for its current fiscal year to justify such an inordinate increase.  Other than the generalizations contained in the November 19 letter, the MSRB’s plans and the related costs remain hidden.  SIFMA also notes that even some of the additional details on the need for the proposed new and increased assessments fail to justify the Proposal at this time.

e.g. - MSRB states the technology underlying its RTRS and public access portal for Rule G-37 filings “can be expected to need comprehensive re-engineering in the coming years.”  However, MSRB doesn't answer some key questions:  (i) when specifically will the re-engineering be undertaken?  (ii) what's the projected cost of that re-engineering?  (iii) why does MSRB need to raise funds now for initiatives that will be undertaken “in the coming years.”

In the same vein, according to the November 19 letter, “the Board undertakes long-range strategic planning” and has in place a process to ensure the long-term value and sustainability of its initiatives. In the interest of transparency, the MSRB should communicate more openly with its members and the public details of its future plans and how it sets priorities, including documentation associated with its “long-range strategic planning.”

For further details on MSRB's proposal and SIFMA's comments, click onto:   [SIFMA Comment Letter, 12/2] and   [MSRB Rule Filing 10-10, 10/13]