[Federal Register Volume 86, Number 44 (Tuesday, March 9, 2021)]
[Notices]
[Pages 13593-13598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04793]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91247; File No. SR-MSRB-2021-02]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Reduce the Rates of Assessment for Certain Underwriting, 
Transaction, and Technology Fees Under MSRB Rule A-13

March 3, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on March 1, 2021 the Municipal Securities 
Rulemaking Board (``MSRB'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the MSRB. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change to amend 
MSRB Rule A-13, on underwriting and transaction assessments for 
brokers, dealers, and municipal securities dealers (collectively, 
``dealers''), to temporarily reduce the rate of assessment for certain 
underwriting, transaction, and technology fees (collectively, ``market 
activity fees'') on dealers with respect to assessable activity that 
occurs on April 1, 2021 through September 30, 2022 (the ``proposed rule 
change''). The MSRB has designated the proposed rule change as 
``establishing or changing a due, fee, or other charge'' under Section 
19(b)(3)(A)(ii) \3\ of the Act and Rule 19b-4(f)(2) \4\ thereunder, 
which renders the proposed rule change effective upon filing with the 
Commission. The

[[Page 13594]]

implementation date for the proposed rule change's temporary fee 
reduction is April 1, 2021.
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    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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    The text of the proposed rule change is available on the MSRB's 
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2021-Filings.aspx, at the MSRB's principal office, and at the Commission's 
Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the MSRB included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The MSRB has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to temporarily reduce 
the rate of assessment for the Board's underwriting, transaction, and 
technology fees under MSRB Rule A-13 with respect to assessable 
activity that occurs on April 1, 2021 through September 30, 2022.\5\ 
The proposed rule change is designed to promote the collection of 
reasonable fees and charges as are necessary or appropriate to defray 
the costs and expenses of operating and administering the Board. The 
Board believes that the proposed rule change achieves such reasonable 
fees and charges because it will rightsize the Board's reserves 
position, in conformance with a prudently established and reasonable 
target, by forgoing a portion of market activity fees over an 
eighteenth month period. In effect, the Board intends to utilize its 
excess reserves to offset the forgone revenue resulting from the 
temporary fee reduction and, thereby, reasonably reduce the fees of the 
class of MSRB regulated entities \6\ whose prior fee payments directly 
contributed to the MSRB being in excess of its reserves target.
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    \5\ For the reasons discussed herein, underwriting assessments 
charged pursuant to Rule A-13(c)(ii) to certain dealers acting as 
underwriters of municipal fund securities are not included in the 
temporary fee reduction.
    \6\ The term ``regulated entities'' is used here as defined 
below in the first full sentence of the following paragraph (i.e., 
dealers and municipal advisors).
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Background on MSRB Fee Structure
    The Board discharges its statutory mandate under the Exchange Act 
by establishing rules for dealers and municipal advisors (together with 
dealers, ``regulated entities''), collecting and disseminating market 
information, coordinating with other regulatory authorities, and 
conducting outreach to external stakeholders.\7\ The Board assesses 
fees on regulated entities to generate funds for these activities. The 
current fees assessed on regulated entities are the:
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    \7\ See Section 15B(b) of the Exchange Act (15 U.S.C. 78o-4(b)).
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    1. Municipal Advisor Professional Fee (MSRB Rule A-11): A fee of 
$1,000 for each person associated with the municipal advisor who is 
qualified as a municipal advisor representative in accordance with MSRB 
Rule G-3 and for whom the municipal advisor has on file with the SEC a 
Form MA-I as of January 31 of each year;
    2. Initial Registration Fee (MSRB Rule A-12): A $1,000 one-time 
registration fee to be paid by each dealer to register with the MSRB 
before engaging in municipal securities activities and by each 
municipal advisor to register with the MSRB before engaging in 
municipal advisory activities;
    3. Annual Registration Fee (MSRB Rule A-12): A $1,000 annual fee to 
be paid by each dealer and municipal advisor registered with the MSRB;
    4. Late Fee (MSRB Rule A-11 and MSRB Rule A-12): A $25 monthly late 
fee and a late fee on the overdue balance (computed according to the 
prime rate) until paid on balances not paid within 30 days of the 
invoice date by the dealer or municipal advisor;
    5. Underwriting Fee (MSRB Rule A-13): A fee amount of $.0275 per 
$1,000 of the par value paid by a dealer, on all municipal securities 
purchased from an issuer by or through such dealer, whether acting as 
principal or agent as part of a primary offering;
    6. Municipal Funds Underwriting Fee (MSRB Rule A-13): A fee amount 
of $.005 per $1,000 of the total aggregate assets for the reporting 
period (i.e., the 529 savings plan fee on underwriters), in the case of 
an underwriter (as defined in MSRB Rule G-45) of a primary offering of 
certain municipal fund securities; \8\
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    \8\ See note 5 supra (clarifying that such fees are not included 
in the temporary fee reduction).
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    7. Transaction Fee (MSRB Rule A-13): A fee amount of .001% ($.01 
per $1,000) of the total par value to be paid by a dealer, except in 
limited circumstances, for inter-dealer sales and customer sales 
reported to the MSRB pursuant to MSRB Rule G-14(b), on transaction 
reporting requirements;
    8. Technology Fee (MSRB Rule A-13): A fee of $1.00 paid per 
transaction by a dealer for each inter-dealer sale and for each sale to 
customers reported to the MSRB pursuant to MSRB Rule G-14(b); and
    9. Examination Fee (MSRB Rule A-16): A $150 test development fee 
assessed per candidate for each MSRB examination.
    The Board also receives revenues from certain other sources, such 
as regulatory fine-sharing \9\ and MSRB data subscription fees.\10\ 
These revenue sources contribute a smaller portion to the overall MSRB 
funding.\11\ Historically, the vast majority of the MSRB's revenue has 
been derived from fees on regulated entities, in particular dealers who 
pay market activity fees pursuant to MSRB Rule A-13(c)(i) and (d), as 
discussed in more detail below.\12\
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    \9\ Fine revenue became a new revenue source as first provided 
in 2010 under the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the ``Dodd-Frank Act''). See 15 U.S.C. 78o-4(c)(9).
    \10\ The MSRB charges data subscription service fees for 
subscribers, including dealers, municipal advisors, and non-
regulated entities, seeking direct electronic delivery of municipal 
trade data and disclosure documents associated with municipal bond 
issues. Notably, however, this information is available without 
direct electronic delivery on the EMMA website without charge.
    \11\ For example, fine-sharing revenue amounted to approximately 
3.3 percent of the MSRB's overall revenue in Fiscal Year 2020 (~$1.5 
million) and 0.4 percent in Fiscal Year 2019 (~$150,000). See MSRB 
2020 Annual Report, available at http://msrb.org/~/media/Files/
Resources/MSRB-2020-Annual-Report.ashx?la=en.
    \12\ With the extension of the MSRB's jurisdiction to regulate 
municipal advisors in the Dodd-Frank Act, this class of regulated 
entity began contributing to the cost of MSRB regulation in 2014. 
See Release No. 34-72019 (Apr. 25, 2014), 79 FR 24798 (May 1, 2014) 
(File No. SR-MSRB-2014-03). See also Release No. 34-81841 (Oct. 10, 
2017), 82 FR 48135, 48138 (Oct. 16, 2017) (File No. SR-MSRB-2017-07) 
(increasing the municipal advisor professional fee from $300 to 
$500) and Release No. 34-87075 (Sept. 24, 2019), 82 FR 51698 (Sept. 
30, 2019) (File No. SR-MSRB-2019-11) (increasing the municipal 
advisor professional fee from $500 to $1,000 over the course of two 
years).
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Overview of MSRB Budget and Reserves
    As a self-funded regulatory organization, MSRB revenue comes 
primarily from its regulated entities, and the MSRB does not receive 
any taxpayer dollars. The Board is responsible for independently 
managing and monitoring the MSRB's financial position on an ongoing 
basis and ensuring that the MSRB has sufficient reserves to maintain 
the MSRB's operations without interruption, even in

[[Page 13595]]

economic downturns and other unforeseen disruptions.\13\
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    \13\ See MSRB Funding Policy, available at http://msrb.org/About-MSRB/Financial-and-Other-Information/Financial-Policies/Funding%20Policy.aspx. The MSRB publishes its annual audited 
financial statements, annual fiscal year budgets, and key financial 
policies on its website. The Board believes that this transparency 
provides municipal market participants and other stakeholders 
insight into, and a clearer understanding of, how the Board utilizes 
its resources in fulfillment of the MSRB's statutory mandate.
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    Establishing the Reserves Target. The Board establishes a reserves 
target to ensure that the organization maintains a prudent level of 
liquid funds to fund operations and ensure the long-term financial 
sustainability of the organization, taking into consideration a range 
of reasonably foreseeable market conditions and expected expenditures 
over a three-year time horizon. The reserves target is determined after 
conducting a detailed and comprehensive analysis of the liquidity needs 
in four categories: (1) Working capital, (2) risk reserves, (3) 
strategic investment reserves, and (4) regulatory reserves.\14\ The 
Board refines the reserves target on an annual basis, being vigilant of 
the dynamic impact of market activity on the MSRB's financial position 
and cognizant of the variability of such future market activity.\15\
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    \14\ Id (these four categories are identified in the discussion 
under ``Reserves Considerations'').
    \15\ See MSRB Fiscal Year 2021 Budget for a further discussion 
of the MSRB's budget and reserves, available at http://msrb.org/~/
media/Files/Resources/MSRB-FY-2021-Budget-Summary.ashx?la=en.
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    Monitoring and Management of Reserves. The Board monitors the 
actual reserves balance on an ongoing basis, and MSRB staff actively 
manages the financial position of the organization in accordance with 
the Board-approved target. As necessary or appropriate, the Board is 
prepared to approve the use of reserves to mitigate unforeseen revenue 
fluctuations and otherwise maintain funding for services essential to 
the efficiency of the municipal market.\16\ Conversely, when actual 
revenue exceeds expenses, the MSRB generates additional reserves. In 
the circumstances of such an operating surplus, the Board balances the 
need to maintain sufficient reserves in relation to ongoing funding 
demands, while also examining the fair and equitable balance of its fee 
structure and opportunities for strategic organizational investments in 
furtherance of the MSRB's statutory mandate.\17\
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    \16\ For example, in 2010, after several years of heavy 
investment in the technological infrastructure needed to launch the 
MSRB's Electronic Municipal Market Access (EMMA[supreg]) website, 
the MSRB's financial reserves levels had dropped below the then 
reserves target that the MSRB had previously established. As a 
result, replenishing the MSRB's reserves became a priority. The 
following year, the MSRB increased the transaction fee under Rule A-
13 and began assessing a new technology fee for dealers under the 
same rule. See Release No. 34-63621 (Dec. 29, 2010), 76 FR 604 (Jan. 
5, 2011) (File No. SR-MSRB-2010-10).
    \17\ For example, the Board has designated excess reserves for 
one-time investments to fund major technological initiatives to 
benefit the market, including migrating all MSRB market transparency 
systems to the cloud, which was completed in Fiscal Year 2020. Also, 
in Fiscal Year 2020, the Board designated $10 million of reserves 
for a multi-year strategic investment to modernize its market 
transparency systems to leverage the power of the cloud. See, e.g., 
MSRB Holds Final Quarterly Board Meeting of FY 2019 (July 29, 2019), 
available at http://msrb.org/News-and-Events/Press-Releases/2019/MSRB-Holds-Final-Quarterly-Board-Meeting-of-FY-2019.aspx; and see 
also MSRB FY 2021 Budget Reflects Priorities of Modernizing 
EMMA[supreg] and Reducing Compliance Burdens (Oct. 1, 2020), 
available at http://msrb.org/News-and-Events/Press-Releases/2020/MSRB%20FY%202021%20Budget%20Priorities.aspx.
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Market Activity in Fiscal Year 2020 and Effects on Reserves
    The MSRB began Fiscal Year 2020 with reserves above target.\18\ The 
Board anticipated funding a budgeted operating deficit for Fiscal Year 
2020, an investment to migrate MSRB market transparency systems to the 
cloud, and projected deficits in out-year pro forma budgets using these 
excess reserves. However, the market activity occurring during MSRB 
Fiscal Year 2020 exceeded the budget established by the Board, due in 
large part to the COVID-19 pandemic driving increased market volatility 
and high levels of primary market issuance. While the Board intended 
its Fiscal Year 2020 budget to result in a deficit and thereby spend 
excess reserves, the market activity resulting from the pandemic drove 
unexpected revenues in the collection of market activity fees. All in 
all, market activity fees paid by dealers exceeded the MSRB's budget by 
$4.9 million in Fiscal Year 2020. Over the same period, the MSRB's 
financial results also benefited from expense savings, including 
savings associated with operating remotely during the pandemic, and, 
consequently, the MSRB's excess reserves continued to grow beyond their 
target instead of being reduced as planned.
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    \18\ See MSRB 2020 Annual Report (link at note 11 supra). See 
also discussion of the MSRB's ``Sources and Uses of Funding,'' 
available at http://msrb.org/About-MSRB/Financial-and-Other-Information/Sources-and-Uses-of-Funding.aspx (outlining 
organizational reserves as compared to the Board-approved target 
over multiple years).
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Board Determination on the Need to Rightsize Reserves
    The additional market activity fee revenue generated in Fiscal Year 
2020 built upon the Board's existing excess reserves position.\19\ As a 
result, the Board prioritized the evaluation of organizational reserves 
levels at the beginning of Fiscal Year 2021. Based on this evaluation, 
the Board has determined that it is necessary and appropriate to 
temporarily reduce certain fees with the objective of rightsizing its 
reserves to the target level over an eighteen-month period. The MSRB 
projects that the proposed rule change will result in approximately 
$18.8 million of forgone revenue and serve to reduce the MSRB's 
reserves to the target level over the eighteen-month period of the 
temporary fee reduction, which the Board has determined is appropriate 
and consistent with prudent fiscal management.\20\
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    \19\ Id.
    \20\ See MSRB Fiscal Year 2021 Budget for a further discussion 
of the MSRB's reserves (link at note 15 supra).
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    The Board desires to address its excess reserves by providing a 
temporary fee reduction to the class of regulated entities that 
directly contributed to the excess reserves position. During the 
eighteen-month temporary fee reduction period, the Board will evaluate 
the organization's fee structure with a view towards the MSRB's long-
term financial positioning in relation to its fee structure.\21\ For 
this reason, the Board believes it is reasonable and appropriate to 
utilize the temporary fee reduction mechanism already established and 
effectively used in Fiscal Year 2019 while it proceeds with a broader 
review of its fee structure.\22\
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    \21\ While it is premature to presume any particular outcome of 
the Board's review, the Board's objectives will include maintaining 
a fair and equitable balance of fees among regulated entities, 
evaluating whether the impact of market-based fees, and their 
inherent volatility, as a contributor to the growth of excess 
reserves can be mitigated, and ensuring funding is sufficient to 
address expected structural operating deficits projected in future 
years under the current fee structure. The Board is cognizant of the 
temporary fee reductions it has adopted as a mechanism to address 
excess reserves in recent years and has developed these objectives 
for its review considering the factors that led to the use of such 
temporary fee reductions.
    \22\ The Board filed a proposed rule change amending Rule A-13 
to temporarily reduce market activity fees for Fiscal Year 2019. See 
Release No. 34-83713 (July 26, 2018), 83 FR 37538 (Aug. 1, 2018) 
(File No. SR-MSRB-2018-06); see also Release No. 34-85400 (Mar. 22, 
2019), 84 FR 11841 (Mar. 28, 2019) (File No. SR-MSRB-2019-06) 
(providing for an additional temporary fee reduction in Fiscal Year 
2019).
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Board Determination to Temporarily Reduce Market Activity Fees
    While all regulated entities contribute to the MSRB's revenue base, 
market activity fees constitute the vast majority of budgeted revenue, 
a total of approximately 77 percent in Fiscal Year

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2021.\23\ Market activity fees are driven by market dynamics and are 
inherently unpredictable. Because of this unpredictability, the amount 
of market activity fees collected by the MSRB historically has exceeded 
the amount budgeted.\24\ Therefore, the Board has determined that 
market activity fees paid by dealers have uniquely and directly 
contributed to the MSRB's excess reserves position while other fees 
collected from regulated entities have not. Specifically, the other 
fees collected by the MSRB have provided a relatively smaller portion 
of the MSRB's actual revenue, in comparison to market activity fees, 
and, at the same time, the other fees have not exceeded their 
respective budgeted amounts as consistently and to the same degree as 
market activity fees, if at all.\25\ Thus, unlike market activity fees, 
the Board has determined that these other fees on regulated entities 
have not contributed to the MSRB's excess reserves position.\26\
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    \23\ See MSRB Fiscal Year 2021 Budget (link at note 15 supra). 
Notably, this amount is generally consistent with recent prior 
fiscal years.
    \24\ Although the organization's revenue sources have become 
modestly more diversified since the initial enactment of the Dodd-
Frank Act--when market activity fees accounted for 90 percent or 
more of the Board's annual revenue in certain fiscal years--market 
activity fees paid by dealers still accounted for approximately 80 
percent of actual revenue in Fiscal Year 2018 (~$33.5 million), 72 
percent in Fiscal Year 2019 (~$24.4 million), and 77 percent in 
Fiscal Year 2020 (~$36.6 million). The MSRB's Financial Statements 
for these years are available at http://msrb.org/About-MSRB/Financial-and-Other-Information/Annual-Reports.aspx.
    \25\ Id.
    \26\ Id.
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    As the Board has considered and revisited the reasonable fees and 
charges necessary or appropriate to defray the costs and expenses of 
operating and administering the MSRB, the Board has continually strived 
to have a fair and equitable balance of fees among regulated 
entities.\27\ Accordingly, the Board has determined that the market 
activity fees that directly contributed to the excess reserves position 
should be the fees that are targeted for a temporary reduction, and so 
market activity fees paid by dealers are the subject of the proposed 
rule change.
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    \27\ See, e.g., MSRB Regulatory Notice 2017-20 (Sept. 29, 2017) 
(``The MSRB will continue to review and evaluate its fees over time 
to ensure that fees are allocated fairly and equitably across all 
regulated entities.'')
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    The Board continually seeks to strike the right balance in fee 
assessments to maintain sufficient reserves to ensure fiscal 
sustainability, while providing relief to regulated entities that have 
contributed to the excess reserves position. The temporary eighteen-
month fee reduction for certain market activity fees assessed on 
dealers would continue these ongoing efforts, allowing the Board to 
take timely action to provide relief and reduce reserves to target 
levels while undertaking a longer-term effort to assess and potentially 
develop a revised fee structure to be implemented at the conclusion of 
the temporary fee reduction period.\28\
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    \28\ As noted, and for the reasons otherwise discussed herein, 
underwriting assessments charged pursuant to Rule A-13(c)(ii) to 
dealers acting as underwriters of municipal fund securities are not 
included in the temporary fee reduction.
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Proposed Rule Change
    The proposed rule change would enact a temporary fee reduction on 
market activity fees by amending section MSRB Rule A-13(h) to reduce by 
40 percent the fees for assessable activity that occurs on April 1, 
2021 through September 30, 2022.\29\
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    \29\ The 40 percent is relative to the existing market activity 
fees respectively specified in MSRB Rule A-13(c)(i) and MSRB Rule A-
13(d). Note, however, that the proposed rule change would amend the 
temporary fee reduction language of MSRB Rule A-13(h) and would not 
change the text of MSRB Rule A-13(c)(i) or MSRB Rule A-13(d).
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    <bullet> Amended MSRB Rule A-13(h)(i) would provide that the 
underwriting assessment for certain primary offerings during this 
period would be .00165% of the par value ($0.0165 per $1,000), a 
reduction of 40 percent from .00275% of the par value ($.0275 per 
$1,000) assessed under MSRB Rule A-13(c)(i).
    <bullet> Amended MSRB Rule A-13(h)(ii) would provide that the 
transaction assessment during this period would be .0006% of the par 
value ($0.006 per $1,000), a reduction of 40 percent from .001% ($.01 
per $1,000) assessed under MSRB Rule A-13(d)(i) and MSRB Rule A-
13(d)(ii).
    <bullet> Amended MSRB Rule A-13(h)(iii) would provide that the 
technology assessment during this period would be $0.60 per 
transaction, a reduction of 40 percent from $1.00 per transaction 
assessed under MSRB Rule A-13(d)(iv).
The temporarily reduced rates would be for assessable activity that 
occurs during this eighteen-month period, inclusive of activity 
occurring on the beginning date of April 1, 2021 and the end date of 
September 30, 2022.\30\ Effective October 1, 2022, the rates of 
assessment for these market activity fees would revert to current 
levels on assessable activity occurring on and after that date.
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    \30\ Dealers are typically billed for these fees after the 
relevant month end. Specifically, the underwriting fee is billed 
immediately after the respective month end, while the transaction 
and technology fees are billed thirty days in arrears.
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2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(J) of the Act,\31\ which states that the MSRB's rules 
shall:
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    \31\ 15 U.S.C. 78o-4(b)(2)(J).

    . . . provide that each municipal securities broker, municipal 
securities dealer, and municipal advisor shall pay to the Board such 
reasonable fees and charges as may be necessary or appropriate to 
defray the costs and expenses of operating and administering the 
Board. Such rules shall specify the amount of such fees and charges, 
which may include charges for failure to submit to the Board, or to 
any information system operated by the Board, within the prescribed 
timeframes, any items of information or documents required to be 
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submitted under any rule issued by the Board.

    The MSRB believes that its rules provide for reasonable dues, fees, 
and other charges among regulated entities. The MSRB believes that the 
proposed rule change is necessary and appropriate to fund the operation 
and administration of the Board and satisfies the requirements of 
Section 15B(b)(2)(J),\32\ achieving a more reasonable fee structure, a 
more equitable balance of fees among regulated entities, and a fairer 
allocation of the expenses of the MSRB.
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    \32\ Id.
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    As described above, the MSRB's reserves position currently exceeds 
its target. This surplus has continued despite prior efforts undertaken 
by the Board to address the MSRB's financial position, such as 
budgeting operating deficits, providing for prior fee reductions,\33\ 
and making strategically significant investments in market transparency 
systems.\34\ Accordingly, the Board has determined to seek this 
additional temporary fee reduction for market activity fees after 
considerable analysis and deliberation, particularly regarding the 
advantages, disadvantages, and outcomes of its prior activities. Both 
in light of the impact of the COVID-19 pandemic on the MSRB's Fiscal 
Year 2020 financial results and also when considered in conjunction 
with its planned broader examination of the MSRB's fee structure, the 
Board believes that the proposed rule change resulting in the temporary 
fee reductions is preferable at this time to address the excess 
reserves position instead of, for example, funding anticipated future 
operating deficits over a number of years until excess reserves are 
depleted.
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    \33\ See note 22 supra and related discussion regarding prior 
temporary fee reductions in Fiscal Year 2019. See also Release No. 
34-75751 (Aug. 24, 2015), 80 FR 52352 (Aug. 28, 2015) (File No. SR-
MSRB-2015-08) (amending the underwriting fee, among other 
amendments).
    \34\ See note 17 supra and related discussion (identifying 
examples of such investments).
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    In this way, the Board's determination to seek the proposed rule 
change's

[[Page 13597]]

temporary fee reduction is informed by the MSRB's prior experience in 
attempting to address its excess reserves position. For example, the 
Board continues to believe that a temporary reduction of market 
activity fees is a reasonable and appropriate mechanism for reducing 
its excess reserves position because, as a matter of fairness and 
equity among regulated entities who pay MSRB fees, it would temporarily 
decrease fees for those regulated entities that financially contributed 
to the excess reserves position.
    At the same time, the Board believes that the temporary fee 
reduction--which would be assessed over a relatively extended period of 
eighteenth months--is more prudent and equitable than other 
alternatives. Specifically, the Board believes that one of the 
advantages of extending the temporary fee reduction over the course of 
eighteen months, as opposed to a shorter period, is that the proposed 
rule change will capture a larger, and likely more representative, 
segment of market activity than if the fee reduction was for a shorter 
duration.\35\
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    \35\ As a general illustration of this point, the MSRB believes 
that a dealer firm that only occasionally engages in underwriting 
business is more likely to receive a benefit from a fee reduction 
occurring over an eighteenth-month period than, for example, a fee 
reduction occurring over a six-month period.
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    Additionally, stretching the duration of the fee reduction to 
eighteen months will allow the MSRB to progress toward its reserves 
target at a more measured pace of net-deficit spending than if, for 
example, the total percentage amount of the fee reduction was more 
aggressive. In addition, and as previously noted above, the Board 
believes that the eighteen-month duration of the temporary fee 
reduction is reasonable and appropriate because it will provide the 
Board requisite time to evaluate the organization's fee structure 
thoughtfully and thoroughly and arrive at longer term conclusions about 
the MSRB's financial positioning.\36\
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    \36\ See note 21 supra.
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    Lastly, the Board believes that the mechanism of a temporary fee 
reduction is preferable to a rebate or similar return mechanisms that 
would more directly reimburse the regulated entities who paid the 
market activity fees that contributed to the excess reserves position. 
The MSRB understands that such direct fee rebates based on past fee 
payments may pose operational challenges to dealer firms.\37\ In 
contrast, the proposed rule change's temporary fee reduction has the 
advantage of granting firms notice and time to operationalize the 
reduced fees into their business processes.
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    \37\ The MSRB also understands that dealer firms receiving 
``rebates'' and similar after-the-fact reimbursements for prior 
payments and historical activity may have difficulty in accurately 
calculating and appropriately redistributing money through or across 
organizations, particularly for underwriting syndicate participants.
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    For all the reasons discussed herein, the MSRB believes that the 
proposed rule change satisfies the applicable requirements of the Act 
and the Board has developed a reasonable and appropriate mechanism for 
addressing the excess reserves position generated by the MSRB's current 
fee structure.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Act \38\ requires that MSRB rules not 
be designed to impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The MSRB 
believes that the proposed rule change does not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the act because the proposed rule change proportionately applies to 
each dealer firm that may pay market activity fees and, thereby, 
equitably benefits this class of regulated entity. Consequently, the 
MSRB believes that the proposed rule change will not impact competition 
in this regard.
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    \38\ 15 U.S.C. 78o-4(b)(2)(C).
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    The Board's policy on the use of economic analysis is not 
applicable to those rules for which the Board seeks immediate 
effectiveness.\39\ However, an internal analysis may still be conducted 
to gauge the economic impact, with an emphasis on the burden on 
competition involving regulated entities. In this regard, the Board 
believes the proposed rule change is necessary and appropriate to 
achieve the goal of reducing the MSRB's reserves. Because the market 
activity fees that are the subject of the proposed rule change 
comprised a majority of MSRB's revenue and contributed to the excess 
reserves, the Board believes that it is reasonable and appropriate to 
temporarily reduce these fees for the designated period to achieve this 
objective. Additionally, the MSRB believes that the duration of the 
proposed rule change's temporary fee reduction is reasonable and 
appropriate in light of the MSRB's excess reserves position and the 
Board's ongoing review of the MSRB's overall fee structure and goal of 
arriving at longer-term conclusions about the MSRB's financial 
positioning.
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    \39\ The scope of the Board's policy on the use of economic 
analysis in rulemaking provides that:
     [t]his Policy addresses rulemaking activities of the MSRB that 
culminate, or are expected to culminate, in a filing of a proposed 
rule change with the SEC under Section 19(b) of the Exchange Act, 
other than a proposed rule change that the MSRB reasonably believes 
would qualify for immediate effectiveness under Section 19(b)(3)(A) 
of the Exchange Act if filed as such or as otherwise provided under 
the exception process of this Policy.
    Policy on the Use of Economic Analysis in MSRB Rulemaking, 
available at http://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx. For those rule changes which the MSRB seeks 
immediate effectiveness, the MSRB usually focuses exclusively its 
examination on the burden of competition on regulated entities.
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    The MSRB does not believe that the proposed rule change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as it would 
temporarily decrease the market activity fees by the same percentage 
for all dealers subject to these fees. Consequently, the equal 
application of the fee reduction will not result in an impact on market 
competition. The proposed fee reduction utilizes the temporary fee 
reduction mechanism already established and effectively used in Fiscal 
Year 2019 while the MSRB proceeds with a broader review of its fee 
structure. Notably, this time the length of the reduction time period 
is eighteen months versus nine months in Fiscal Year 2019 and the rate 
of reduction is now 40 percent versus 33 percent in Fiscal Year 2019. 
Based on the current level of MSRB's reserves and the Board's target 
level, the Fiscal Year 2021 budget and pro forma for Fiscal Year 2022 
(projected budget numbers between April 2021 and September 2022), a 40 
percent reduction of the fees assessed under Rule A-13(c)(i) and (d) 
would forgo revenue of, and thus reduce reserves by, an estimated $18.8 
million.\40\
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    \40\ In round numbers, the proposed fee reduction would reduce 
an estimated $6 million fee for underwriting, $9 million fee for 
transaction, and $4 million fee for technology.
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    The MSRB believes that the proposed rule change would not impose an 
unnecessary or inappropriate regulatory burden on dealers, as dealers 
with different levels of underwriting and trading activities would all 
benefit from the temporary fee reduction proportionately during the 
relevant period. For dealers engaging in primary market activity, a 
temporary 40 percent reduction in the underwriting assessment of the 
par value will benefit all dealers and the reduction amount will be 
proportionate to each dealer's total underwriting par amount. 
Additionally, all dealers engaging in secondary market activity will be 
impacted by a 40 percent reduction of the transaction assessment on the 
par

[[Page 13598]]

value traded by each dealer and a 40 percent reduction in the 
technology fee based on the number of trades conducted by each dealer. 
In summary, no firm would be unduly burdened as compared to another 
firm. Nor would a firm engaging in both underwriting and trading 
activities be unduly burdened as compared to singularly focused firms, 
as the proposed rule change would provide for a 40 percent reduction to 
each of the market activity fees.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Board did not solicit comment on the proposed rule change. 
Therefore, there are no comments on the proposed rule change received 
from members, participants or others.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \41\ and paragraph (f) of Rule 19b-4 \42\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \41\ 15 U.S.C. 78s(b)(3)(A).
    \42\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#c7b5b2aba2eaa4a8aaaaa2a9b3b487b4a2a4e9a0a8b1"><span class="__cf_email__" data-cfemail="582a2d343d753b3735353d362c2b182b3d3b763f372e">[email protected]</span></a>. Please include 
File Number SR-MSRB-2021-02 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-MSRB-2021-02. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the MSRB. All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MSRB-2021-02 and should be submitted on 
or before March 30, 2021.

    For the Commission, pursuant to delegated authority.\43\
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    \43\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04793 Filed 3-8-21; 8:45 am]
BILLING CODE 8011-01-P


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