16466 Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Transactions in securities without CUSIP 

numbers, in municipal fund securities, and certain 

inter-dealer securities movements not eligible for 

comparison through a clearing agency are the only 

transactions exempt from the reporting 

requirements of Rule G–14. 

4 In this respect, RTRS serves as an audit trail for 

municipal securities trading, with the exception of 

certain internal movements of securities within 

dealers that currently are not required to be 

reported, customer identifications, and other related 

specific items of information. Compare 

Consolidated Audit Trail, Release No. 34–67457 

(July 18, 2012), 77 FR 45722 (August 1, 2012), File 

No. S7–11–10. 

Executive Order 12333—United States 

intelligence activities. The discussion 

will allow the Board to refine its plan 

of action on this issue. 

Procedures for public observation: 

The meeting is open to the public. Preregistration is not required. Individuals 

who plan to attend and require special 

assistance should contact Executive 

Director Sharon Bradford Franklin at 

202–331–2986, at least 72 hours prior to 

the meeting date. 

CONTACT PERSON FOR MORE INFORMATION: 

Sharon Bradford Franklin, Executive 

Director, 202–331–1986. 

Dated: March 24, 2015. 

Lynn Parker Dupree, 

Acting General Counsel, Privacy and Civil 

Liberties Oversight Board. 

[FR Doc. 2015–07173 Filed 3–25–15; 4:15 pm] 

BILLING CODE 6820–B3–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74564; File No. SR–MSRB– 

2015–02] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Notice of Filing of a Proposed 

Rule Change Consisting of Proposed 

Amendments to the MSRB Rule G–14 

RTRS Procedures, and the Real-Time 

Transaction Reporting System and 

Subscription Service 

March 23, 2015. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on March 19, 

2015, the Municipal Securities 

Rulemaking Board (the ‘‘MSRB’’ or 

‘‘Board’’) filed with the Securities and 

Exchange Commission (the ‘‘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. 

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 consisting of 

proposed amendments to the MSRB 

Rule G–14 RTRS Procedures, and the 

Real-Time Transaction Reporting 

System and subscription service 

(collectively, the ‘‘proposed rule 

change’’). The MSRB is proposing that 

the effective date for the proposed rule 

change be no later than May 23, 2016 

and announced by the MSRB in a notice 

published on the MSRB Web site no 

later than sixty (60) days prior to the 

effective date. 

The text of the proposed rule change 

is available on the MSRB’s Web site at 

www.msrb.org/Rules-andInterpretations/SEC-Filings/2015- 

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 

MSRB Rule G–14, on reports of sales 

or purchases, requires brokers, dealers 

and municipal securities dealers 

(collectively ‘‘dealers’’) to report all 

executed transactions in municipal 

securities to RTRS within 15 minutes of 

the time of trade, with limited 

exceptions.3 RTRS serves the dual 

objectives of price transparency and 

market surveillance. Because a 

comprehensive database of transactions 

is needed for the surveillance function 

of RTRS, Rule G–14, with limited 

exceptions, requires dealers to report all 

of their purchase-sale transactions to 

RTRS, not only those that qualify for 

public dissemination to serve the 

transparency function of the system.4

The MSRB makes transaction data 

available to the general public through 

the Electronic Municipal Market Access 

(‘‘EMMA’’) Web site at no cost, and 

disseminates such data through paid 

subscription services to market data 

vendors, institutional market 

participants and others that subscribe to 

the data feed. 

As more fully described below, the 

proposed rule change would enhance 

the post-trade price transparency 

information provided through RTRS by: 

• Expanding the application of the 

existing list offering price and takedown 

indicator to cases involving distribution 

participant dealers and takedown 

transactions that are not at a discount 

from the list offering price; 

• eliminating the requirement for 

dealers to report yield on customer trade 

reports and, instead, enabling the MSRB 

to calculate and disseminate yield on 

customer trades; 

• establishing a new indicator for 

customer trades involving nontransaction-based compensation 

arrangements; and 

• establishing a new indicator for 

alternative trading system (‘‘ATS’’) 

transactions. 

Expanding the Application of Existing 

List Offering Price and RTRS Takedown 

Indicator 

Transaction reporting procedures 

require dealers that are part of the 

underwriting group for a new issuance 

of municipal securities to include an 

indicator on trade reports, which 

indicator is disseminated to the public, 

for transactions executed on the first 

day of trading in a new issue with prices 

set under an offering agreement for the 

new issue. These transactions include 

sales to customers by a sole underwriter, 

syndicate manager, syndicate member 

or selling group member at the 

published list offering price for the 

security (‘‘List Offering Price 

Transaction’’) or by a sole underwriter 

or syndicate manager to a syndicate or 

selling group member at a discount from 

the published list offering price for the 

security (‘‘RTRS Takedown 

Transaction’’). Such trade reports are 

provided an end-of-day exception from 

Rule G–14’s general 15-minute reporting 

requirement. 

Since the introduction of the List 

Offering Price Transaction indicator in 

2005 and RTRS Takedown Transaction 

indicator in 2007, certain market 

practices in this area have evolved. 

First, outside of traditional underwriting 

syndicates or selling groups, some 

dealers have entered into long-term 

marketing arrangements with other 

dealers that serve in the syndicate or 

selling group relating to purchases and 

re-sales of new issue securities 

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Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 16467 

5For inter-dealer transactions, dealers report the 

dollar price at which the transaction was effected 

and the MSRB calculates and includes in 

disseminated information the corresponding yield. 

6See ‘‘SEC Approves Amendments to MSRB Rule 

G–14, on Reports of Sales or Purchases, Including 

Rule G–14 RTRS Procedures, and Amendments to 

the Real-Time Transaction Reporting System,’’ 

MSRB Notice 2012–15 (March 21, 2012). 7This change is anticipated to also have the 

benefit of alleviating particular operational 

concerns cited by dealers in connection with 

reporting certain ‘‘away from market’’ trade reports. 

8Note that dealers would continue to be able to 

report that a when, as and if issued transaction was 

executed on the basis of yield in the event that the 

settlement date is not known at the time the trade 

is executed, which prevents an accurate calculation 

of the corresponding dollar price to be performed. 

9RTRS currently performs price/yield 

calculations, compares RTRS-computed values to 

dealer-reported values, and returns errors to dealers 

when discrepancies are found. This results in 

dealers researching and responding to such errors 

which, in many cases, are the results of differences 

in vendor-provided security descriptive information 

utilized by dealers and RTRS. By removing the 

requirement to include yield on customer trade 

reports, the proposed rule change would have the 

effect of eliminating these errors. In addition, in the 

case of transactions arising from customer 

repurchase agreements, the proposed rule change 

would eliminate the burden on dealers of 

calculating for trade reporting purposes a yield 

consistent with the requirements of Rule G–15(a), 

which the MSRB understands presents operational 

challenges given that this represents a different 

calculation from the calculation used to determine 

the yield resulting from the terms of the repurchase 

agreement. 

(‘‘distribution participant dealers’’). The 

MSRB understands that these 

distribution participant dealers agree to 

execute transactions with customers at 

the published list offering prices. 

Accordingly, the proposed rule change 

would expand the application of List 

Offering Price Transaction and RTRS 

Takedown Transaction indicators to sale 

transactions by distribution participant 

dealers to customers at the list offering 

price and sale transactions by a sole 

underwriter or syndicate manager to 

distribution participant dealers. 

A second evolution in market practice 

in this area relates to the prices at which 

takedown transactions occur. The RTRS 

Takedown Transaction indicator 

currently is limited to inter-dealer 

transactions occurring at a discount 

from the published list offering price. 

The MSRB understands that, in some 

new issues, transactions between a sole 

underwriter or syndicate manager to a 

syndicate member, selling group 

member or distribution participant 

dealer are not executed at a discount 

from the published list offering price or 

at the full takedown amount. This 

typically occurs in the case of group net 

or net designated order arrangements. 

The proposed rule change expands the 

application of the RTRS Takedown 

Transaction indicator to any sale 

transaction by a sole underwriter or 

syndicate manager to a syndicate 

member, selling group member or 

distribution participant dealer on the 

first day of trading in the new issue. 

Eliminating the Requirement for Dealers 

To Report Yield on Customer Trade 

Reports 

Transaction reporting procedures 

currently require dealers to include on 

most reports of customer transactions to 

RTRS both a dollar price and yield.5

The yield required to be reported to 

RTRS for customer trades is consistent 

with the yield required to be displayed 

on a customer confirmation under Rule 

G–15(a), which requires that yield be 

computed to the lower of an ‘‘in whole’’ 

call or maturity, subject to certain 

requirements set forth in the rule for 

specific special situations (generally 

referred to as the ‘‘yield to worst’’). Rule 

G–15(a) requires the confirmation to 

include the date to which yield is 

calculated if that date is other than the 

nominal maturity date, and also requires 

the confirmation for a transaction 

effected based on a yield other than 

yield to worst to include both yields. 

Since April 30, 2012, the MSRB has 

calculated and included in 

disseminated RTRS information the 

yield on inter-dealer trades computed in 

the same manner as required for 

customer trades.6

The proposed rule change would 

eliminate the requirement for dealers to 

include yield on customer trade 

reports.7 Consistent with the manner in 

which the MSRB calculates and 

includes in disseminated RTRS 

information yield on inter-dealer trades, 

the MSRB would calculate and 

disseminate yield on customer trade 

reports.8 This would remove one aspect 

of a dealer’s burden in reporting 

customer transactions to the MSRB in 

compliance with MSRB Rule G–14 9 and 

ensure that the calculation and 

dissemination of yields for both interdealer and customer transactions are 

consistent. 

Establishing a New Indicator for 

Customer Trades Involving NonTransaction-Based Compensation 

Arrangements 

For principal transactions by dealers, 

the trade price reported to and publicly 

disseminated by the MSRB includes all 

aspects of the price, including any 

mark-up or mark-down that 

compensates the dealer for executing 

the transaction. In agency transactions, 

dealers are required to report to the 

MSRB both the price of the security and 

the commission charged to the 

customer. The prices publicly 

disseminated for agency transactions 

incorporate the reported commission to 

provide for comparability with the 

prices for principal trades. However, 

dealers effecting transactions with 

customers as part of an arrangement that 

does not provide for dealer 

compensation to be paid on a 

transaction-based basis, such as in 

certain wrap fee arrangements, report to 

the MSRB transaction prices that do not 

include a compensation component. 

To distinguish in the transaction 

information disseminated publicly 

between customer transactions that do 

not include a dealer compensation 

component and those that include a 

mark-up or mark-down or a 

commission, the proposed rule change 

would require dealers to include a new 

indicator on their trade reports that 

would be disseminated publicly. This 

would improve the usefulness of the 

transaction information disseminated 

publicly by enabling users of the price 

transparency information to distinguish 

those customer transactions that do not 

include a dealer compensation 

component. 

Establishing a New Indicator for ATS 

Transactions 

Dealers may use a variety of means to 

transact in municipal securities, 

including broker’s brokers or ATSs as 

well as traditional direct transactions 

with a known counterparty. The MSRB 

currently identifies all transactions 

reported as having been executed by a 

broker’s broker in the transaction 

information disseminated publicly. This 

identifier is applied based on the 

broker’s broker informing the MSRB that 

it acts in such capacity. The MSRB does 

not currently identify trades as having 

been executed through an ATS. 

To better ascertain the extent to which 

ATSs are used in the municipal market 

and to indicate to market participants 

on disseminated transaction information 

that an ATS was used, the proposed rule 

change would establish an additional 

new indicator. For those ATSs that take 

a principal position between a buyer 

and seller, the ATS and the dealers that 

transact with the ATS would be 

required to include the ATS indicator 

on trade reports. In instances where an 

ATS connects a buyer and seller but 

does not take a principal or agency 

position between those parties and 

therefore does not have a transaction 

reporting requirement under MSRB 

rules, the dealers that transact with each 

other as a result of using the services of 

the ATS would be required to include 

the ATS indicator on their trade reports. 

In all cases, the ATS indicator would be 

included on transaction information 

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16468 Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 

10The MSRB notes that subscribers may be 

subject to proprietary rights of third parties in 

information provided by such third parties that is 

made available through the subscription. 

11See ‘‘Request for Comment on Enhancements to 

Post-Trade Transaction Data Disseminated Through 

a New Central Transparency Platform,’’ MSRB 

Notice 2014–14 (August 31, 2014). 

12See ‘‘MSRB Publishes Long-Range Market 

Transparency Plan,’’ MSRB Notice 2012–06 

(February 23, 2012). 

13See ‘‘Request for Comment on More 

Contemporaneous Trade Price Information Through 

a New Central Transparency Platform,’’ MSRB 

Notice 2013–02 (January 17, 2013). 

14See ‘‘Concept Release on Pre-Trade and PostTrade Pricing Data Dissemination Through a New 

Central Transparency Platform,’’ MSRB Notice 

2013–14 (July 31, 2013). 

15See ‘‘Request for Comment on Enhancements to 

Post-Trade Transaction Data Disseminated Through 

a New Central Transparency Platform,’’ MSRB 

Notice 2014–14 (August 13, 2014). 

16Comments were received on the January 

Release from Barclays Capital Inc.: Letter from Scott 

Coya, Director, Municipal Compliance, dated March 

15, 2013 (‘‘Barclays’’); Bond Dealers of America: 

Letter from Michael Nicholas, Chief Executive 

Officer, dated March 15, 2013 (‘‘BDA–1’’); Charles 

Schwab & Co. Inc.: Letter from Michael P. Moran, 

Vice President, Fixed Income Compliance, dated 

March 15, 2013 (‘‘Schwab’’); Eastern Bank: Email 

from James N. Fox, SVP and Managing Director, 

dated March 15, 2013 (‘‘Eastern’’); Financial 

Information Forum: Letter from Arsalan Shahid, 

Program Director, dated March 15, 2013 (‘‘FIF–1’’); 

Financial Services Institute: Letter from David T. 

Bellaire, Executive Vice President and General 

Counsel, dated March 15, 2013 (‘‘FSI’’); Frost Bank: 

Letter from Robert N. Jacobs, Assistant Vice 

President/Compliance Officer, dated March 11, 

2013 (‘‘Frost’’); Investment Company Institute: 

Letter from Dorothy Donohue, Deputy General 

Counsel-Securities Regulation, dated March 15, 

disseminated publicly. Identifying in 

disseminated transaction information 

that an ATS was employed should 

facilitate higher quality research and 

analysis of market structure by 

providing information about the extent 

to which ATSs are used and should 

complement the existing indicator 

disseminated for transactions involving 

a broker’s broker. 

Effective Date of the Proposed Rule 

Change 

To provide time for the MSRB to 

undertake the programming changes to 

implement the proposed rule change, as 

well as to provide an adequate testing 

period for dealers and subscribers that 

interface with RTRS, the MSRB is 

proposing an effective date for the 

proposed rule change to be announced 

by the MSRB in a notice published on 

the MSRB Web site, which date shall be 

no later than May 23, 2016 and shall be 

announced no later than sixty (60) days 

prior to the effective date. 

2. Statutory Basis 

The MSRB believes that the proposed 

rule change is consistent with Section 

15B(b)(2)(C) of the Act, which provides 

that the MSRB’s rules shall: 

be designed to prevent fraudulent and 

manipulative acts and practices, to promote 

just and equitable principles of trade, to 

foster cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with respect 

to, and facilitating transactions in municipal 

securities and municipal financial products, 

to remove impediments to and perfect the 

mechanism of a free and open market in 

municipal securities and municipal financial 

products, and, in general, to protect 

investors, municipal entities, obligated 

persons, and the public interest. 

The MSRB believes that the proposed 

rule change is consistent with the Act. 

The MSRB believes that the proposed 

rule change would remove impediments 

to and perfect the mechanism of a free 

and open market in municipal securities 

by increasing the quality and usefulness 

of the post-trade price transparency 

information provided through RTRS. 

The MSRB believes the expansion of the 

application of the existing list offering 

price and takedown indicator to cases 

involving distribution participant 

dealers and takedown transactions that 

are not at a discount from the list 

offering price, establishment of a new 

indicator for customer trades involving 

non-transaction-based compensation 

arrangements, and establishment of a 

new indicator for ATS transactions 

would enable users of the post-trade 

price transparency information 

provided through RTRS to better 

understand the pricing of certain 

transactions as well as how such 

transactions were executed. As 

previously noted, identifying in 

disseminated transaction information 

that an ATS was employed should 

facilitate higher quality research and 

analysis of market structure by 

providing information about the extent 

to which ATSs are used and should 

complement the existing indicator 

disseminated for transactions involving 

a broker’s broker. Accordingly, the 

proposed rule change would contribute 

to the MSRB’s continuing efforts to 

improve market transparency and to 

protect investors, municipal entities, 

obligated persons and the public 

interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The MSRB does not believe the 

proposed rule change would impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. Information 

disseminated by RTRS is available to all 

persons on an equal and nondiscriminatory basis. In addition to 

making the information available for 

free on the EMMA web portal to all 

members of the public, the MSRB makes 

the information collected by RTRS 

available by subscription on an equal 

and non-discriminatory basis without 

imposing restrictions on subscribers 

from, or imposing additional charges on 

subscribers for, re-disseminating such 

information or otherwise providing 

value-added services and products to 

third parties based on such information 

on terms determined by each 

subscriber.10

The MSRB recognizes that the 

proposed rule change would impose a 

burden on dealers and subscribers that 

interface with RTRS to comply with the 

reporting and dissemination of the new 

indicators that would be required by the 

proposed rule change. The MSRB 

solicited and received comment on 

several potential burdens of the 

proposed rule change and the specific 

comments and responses thereto are 

discussed below.11 The MSRB plans to 

provide a six month testing period in 

advance of the effective date. The MSRB 

believes that a six month testing period 

in advance of the effective date would 

provide dealers and subscribers with 

sufficient time to make any required 

changes in due course without causing 

adverse disruptions to their information 

technology plans or budgets. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

On January 17, 2013, the MSRB 

provided background information on 

the MSRB’s initiative under the LongRange Plan 12 to refresh the technology 

of RTRS and sought public comment on 

the appropriate standard for ‘‘real-time’’ 

reporting and dissemination of 

transaction price and related 

information, as well as on baseline 

technology, processing and data 

protocols for post-trade transaction 

information (‘‘January Release’’).13 On 

July 31, 2013, the MSRB sought public 

comment on enhancements to data 

elements disseminated publicly through 

RTRS (‘‘July Release’’).14 Based upon 

the comments received in response to 

the January and July Releases, the MSRB 

identified specific enhancements to 

RTRS and solicited on August 13, 2014 

public input on the specific components 

of the post-trade reporting and public 

dissemination enhancements as well as 

on the likely benefits and burdens 

associated with the potential 

enhancements (‘‘August Release’’).15

The MSRB received comments on the 

January Release from fifteen 

commenters,16 on the July Release from 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 16469 

2013 (‘‘ICI’’); J.W. Korth & Company LP: Email from 

James Korth dated March 14, 2013 (‘‘JWKorth’’); 

R.W. Smith & Associates, Inc.: Email from Paige 

Pierce dated March 20, 2013 (‘‘RWSmith–1’’); 

Securities Industry and Financial Markets 

Association: Letter from Leslie M. Norwood, 

Managing Director and Associate General Counsel, 

dated March 15, 2013 (‘‘SIFMA–1’’); Seidel & Shaw, 

LLC: Letter from Thomas W. Shaw, President, dated 

March 15, 2013 (‘‘Seidel’’); Standish Mellon Asset 

Management Company LLC: Email from Daniel 

Rabasco dated March 15, 2013 (‘‘Standish’’); TMC 

Bonds, L.L.C.: Letter from Thomas S. Vales, Chief 

Executive Officer, dated March 15, 2013 

(‘‘TMCBonds’’); and Tradition Asiel Securities, Inc.: 

Letter from Eric M. Earnhardt, Chief Compliance 

Officer, dated March 19, 2013 (‘‘TASI’’). 

17Comments were received on the July Release 

from Bond Dealers of America: Letter from Michael 

Nicholas, Chief Executive Officer, dated November 

1, 2013 (‘‘BDA–2’’); Corporate Treasury Investment 

Consulting LLC: Letter from Mark O. Conner, 

Principal, dated August 16, 2013 (‘‘CTIC’’); 

Financial Information Forum: Letter from Manisha 

Kimmel, Executive Director, dated November 1, 

2013 (‘‘FIF–2’’); Interactive Data Corporation: Letter 

from Mark Hepsworth, President, Interactive Data 

Pricing and Reference Data, dated November 1, 

2013 (‘‘IDC’’); Leonard, Jack: Letter dated August 1, 

2013 (‘‘Mr. Leonard’’); Long, Cate: Email dated 

November 1, 2013 (‘‘Ms. Long’’); Sayer, Steven: 

Email dated November 3, 2013 (‘‘Mr. Sayer’’); 

Securities Industry and Financial Markets 

Association: Letter from Leslie M. Norwood, 

Managing Director and Associate General Counsel, 

dated November 1, 2013 (‘‘SIFMA–2’’); and Wells 

Fargo Advisors, LLC: Letter from Robert J.McCarthy, 

Director of Regulatory Policy, dated November 1, 

2013 (‘‘Wells Fargo’’). 

18Comments were received on the August Release 

from Bond Dealers of America: Letter from Michael 

Nicholas, Chief Executive Officer, dated September 

26, 2014 (‘‘BDA–3’’); Financial Information Forum: 

Letter from Darren Wasney, Program Manager, 

dated September 19, 2014 (‘‘FIF–3’’); Income 

Securities Advisor Inc.: Email from Richard 

Lehmann dated August 26, 2014 (‘‘ISA’’); Murez, 

Herbert: Email dated August 13, 2014 (‘‘Mr. 

Murez’’); RW Smith & Associates, LLC: Email from 

Paige W. Pierce, President and Chief Executive 

Officer, dated September 26, 2014 (‘‘RWSmith–2’’); 

Securities Industry and Financial Markets 

Association: Letter from Leslie M. Norwood, 

Managing Director and Associate General Counsel, 

dated September 25, 2014 (‘‘SIFMA–3’’); and Trigo, 

Loren: Email dated August 13, 2014 (‘‘Trigo’’). 

19The January, July and August Releases 

contemplated additional enhancements to RTRS as 

well as the establishment of a new program for pretrade transparency. Comments in response to those 

items are not addressed in this proposed rule 

change but would be addressed in any future 

rulemaking on those items that the MSRB 

determines to undertake. 

nine commenters,17 and on the August 

Release from seven commenters.18 The 

portions of these notices relating to the 

proposed rule change, the comments 

received in response to such portions, 

and the MSRB’s responses are discussed 

below.19

Expanding the Application of Existing 

List Offering Price and RTRS Takedown 

Indicators 

The July Release solicited input on 

whether changes to the List Offering 

Price Transaction and RTRS Takedown 

Transaction indicators would be 

warranted given evolutions in market 

practices and the information publicly 

available through the EMMA Web site. 

The August Release proposed 

expanding the application of the List 

Offering Price Transaction and RTRS 

Takedown Transaction indicators to 

include scenarios where: (i) Dealers 

have entered into long-term marketing 

arrangements with other dealers that 

serve in the syndicate or selling group 

for purchasing and re-selling new issue 

securities (‘‘distribution participant 

dealers’’); (ii) takedown transactions are 

not at a discount from the list offering 

price; and (iii) offerings that occur over 

a number of days with different list 

offering prices set each day. 

FIF–3 and SIFMA–3 stated support 

for expanding the application of the List 

Offering Price Transaction and RTRS 

Takedown Transaction indicators. With 

respect to including distribution 

participant dealers in the definition of 

which dealers must use the indicator, 

SIFMA–3 noted that these dealers 

perform ‘‘a similar function to a selling 

group member.’’ Further, in response to 

whether takedown transactions that are 

not at a discount from the list offering 

price, which would occur in the case of 

a group net or net designated order 

arrangement, should be included in the 

definition of an RTRS Takedown 

Transaction, FIF–3 and SIFMA–3 

indicated support and SIFMA–3 stated 

that this change ‘‘will conform the rule 

to widespread industry practice’’ 

although FIF–3 noted that they ‘‘see this 

happening frequently in the corporate 

bond market but infrequently in the 

municipal bond market.’’ 

Comments were mixed in response to 

whether offerings that occur over a 

number of days with different list 

offering prices set each day should be 

included in the List Offering Price 

Transaction and RTRS Takedown 

Transaction indicators. FIF–3 offered 

support for this change and stated that 

it ‘‘agree[s] that if the distribution 

occurs on days that are not the first day 

of trading of a new issue, the 

distribution should still be reported as 

the list price.’’ SIFMA–3 did not 

support this change and stated that this 

‘‘change would be confusing for 

investors.’’ 

After careful consideration of the 

comments received, and given the 

absence of evidence of widespread use 

of offerings occurring over a number of 

days with different list offering prices 

set each day, the MSRB has determined 

not to propose to expand the application 

of the indicator to address this scenario 

at this time, although the MSRB may 

revisit this issue if these types of 

offerings become more frequent. 

Eliminating the Requirement for Dealers 

To Report Yield on Customer Trade 

Reports 

The July and August Releases 

proposed to eliminate the requirement 

for dealers to include yield on customer 

trade reports and, instead, enable the 

MSRB to calculate and disseminate 

yield on customer trades. The August 

Release solicited input on whether this 

change would alleviate operational 

concerns cited by dealers in connection 

with reporting certain ‘‘away from 

market’’ trade reports. 

BDA–3, FIF–2, FIF–3, IDC, SIFMA–2 

and SIFMA–3 supported eliminating the 

requirement to include yield on 

customer trade reports. Eliminating this 

requirement would make the MSRB’s 

RTRS yield reporting requirements 

consistent with those established by 

Financial Industry Regulatory Authority 

(‘‘FINRA’’) for corporate bond 

transactions and reduce the amount of 

error feedback returned to dealers when 

minor discrepancies arise. BDA–3 stated 

that ‘‘MSRB’s calculation of yields 

would avoid differences in yield 

calculations across dealers due to 

security master differences’’ and 

‘‘[c]ustomers and dealers would also 

benefit from the improved consistency 

in the calculation of yield to worst.’’ 

SIFMA–3 noted that the ‘‘elimination of 

the broker-dealer requirement to report 

yield on customer trade reports does 

also alleviate some operational concerns 

in connection with reporting certain 

‘away from market’ trade reports, such 

as transactions arising from customer 

repurchase agreements.’’ 

FIF–3, SIFMA–2 and SIFMA–3 cited 

a concern related to potential 

differences in the yield calculated by 

MSRB and displayed on EMMA and the 

yield calculated by dealers and 

displayed on customer confirmations. 

FIF–3 stated that the MSRB should 

‘‘consider the impact of discrepancies 

between the MSRB’s calculations and 

dealer-calculated yield to worst which 

will appear on a customer’s confirm’’ 

and recommends that the MSRB 

‘‘[provide] guidance for cases where 

there are discrepancies between the 

MSRB’s calculations and dealercalculated yield to worst on a 

customer’s confirm.’’ SIFMA–2 

observed that dealers have the 

responsibility to report yield to 

customers on trade confirmations and 

that, due to the complicated nature of 

some redemption provisions, the dealercalculated yield and the MSRBcalculated yield may not always match 

precisely. FIF–2 and IDC suggested that 

the display of the date to which this 

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yield-to-worst calculation is determined 

would be helpful. 

After carefully considering 

commenters’ concerns, the MSRB 

believes potential confusion would be 

addressed by additionally displaying on 

EMMA the calculation method (yield to 

call or maturity) and, for yield to call, 

the call date and price used. Under this 

approach, any differences between 

dealer and MSRB calculations could be 

understood by viewing the inputs the 

MSRB used in its calculation. 

Establishing a New Indicator for 

Customer Trades Involving NonTransaction-Based Compensation 

Arrangements 

The July and August Releases 

proposed the establishment of a new 

indicator to distinguish in the price 

transparency data between customer 

transactions that do not include a dealer 

compensation component and those that 

include a mark-up or mark-down or a 

commission. 

BDA–3, FIF–2, FIF–3, Ms. Long, 

SIFMA–2, SIFMA–3, and Wells Fargo 

favored the addition of an indicator for 

identifying transactions that are not 

inclusive of a compensation component. 

SIFMA–2, however, opposed requiring 

the reporting of the details of the nontransaction based compensation 

arrangement. BDA–3 stated that a new 

indicator ‘‘would provide the users of 

trade transparency products with 

information that could explain certain 

variations in trade prices and assist in 

best execution determinations.’’ 

SIFMA–3 suggested that, if the MSRB 

publicly disseminates the existing 

agency or principal trade indicator 

currently collected, this would 

accomplish the same benefit and also 

stated that the MSRB should not 

consider collecting information on the 

nature of alternative compensation 

beyond an indicator as such information 

would be burdensome to report. 

The MSRB does not believe that 

SIFMA–3’s suggestion that 

disseminating the existing agency or 

principal trade indicator currently 

collected would help distinguish in the 

price transparency data customer 

transactions that do not include a dealer 

compensation component, particularly 

because the MSRB understands that 

both agency and principal transactions 

can occur under current market 

practices without a dealer compensation 

component. With respect to SIFMA–2’s 

view that the MSRB should not consider 

collecting information on the nature of 

alternative compensation, the MSRB 

notes that this was not contemplated in 

the July or August Release and is not 

part of the proposed rule change. 

Establishing a New Indicator for ATS 

Transactions 

The July and August Releases 

proposed adding an indicator to identify 

transactions executed using the services 

of an ATS, which indicator would be 

included in the information 

disseminated publicly. The August 

Release also proposed that, in instances 

where an ATS does not take a principal 

position between two dealers, each 

dealer would be required to report the 

identity of the ATS employed. 

In response to the July Release, Ms. 

Long supported the addition of an ATS 

indicator on trades, and stated that the 

specific ATS used should be identified, 

initially for surveillance purposes and 

potentially for future public 

dissemination. FIF–2 noted operational 

burdens associated with identifying 

trades executed using the services of an 

ATS, particularly in instances where the 

ATS does not act as the counter-party to 

the trade. SIFMA–2 questioned the 

‘‘tangible transparency benefits to the 

market’’ of including an ATS indicator. 

In response to the August Release, 

SIFMA–3 and FIF–3 noted that this 

indicator would result in a cost to 

dealers to implement. SIFMA–3 stated 

that it ‘‘recognizes that the MSRB has a 

legitimate interest in determining ATS 

participation in the market, and likely 

has no other way to get this information 

on a real-time basis.’’ FIF–3 noted that 

FINRA is pursuing the establishment of 

a similar ATS indicator for corporate 

bond trade reports. 

In response to a potential requirement 

that dealers also would need to identify 

in some cases the ATS employed, 

SIFMA–3 and FIF–3 suggested that this 

component would add operational 

complexity and compliance costs to the 

requirement. SIFMA–3 stated that 

‘‘[a]lthough flagging these trades would 

be a significant operational and 

administrative burden, the burden 

would be minimized for the brokerdealer community if the result was a 

mere change in an ‘M code’ ’’ (which is 

the change that would be made to 

simply identify that an ATS was 

employed, exclusive of the ATS’s 

identity). FIF–3 stated in response to the 

proposed requirement to identify the 

ATS employed that they ‘‘believe this 

would be challenging to implement.’’ 

From a market structure perspective, 

the MSRB believes that it is important 

to know the extent to which ATSs are 

employed for inter-dealer transactions 

as such information could inform future 

system development, research and 

rulemaking initiatives. While also 

having the identity of the ATS in 

instances where the ATS does not take 

a principal position between two 

dealers would increase the usefulness of 

the ATS indicator, the MSRB is 

sensitive to the burden such a 

requirement would impose, particularly 

given the future potential establishment 

by the MSRB of a pre-trade transparency 

system. The MSRB notes that under a 

comprehensive pre-trade transparency 

system, it is anticipated that the identity 

of each ATS would be known and the 

extent to which each is used in the 

municipal market would therefore be 

quantifiable. Accordingly, the MSRB 

believes that proceeding with the 

establishment of an ATS indicator, 

which the MSRB plans to implement 

utilizing the existing special condition 

indicator (the ‘‘M code’’) field in RTRS, 

is appropriate. The MSRB, however, in 

acknowledgement of the burdens 

identified by commenters, has not 

included in this proposed rule change a 

requirement to report the identity of the 

ATS that was used. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period of 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

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 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

MSRB–2015–02 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–MSRB–2015–02. This file 

number should be included on the 

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Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 16471 

20 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 ICC notes that to date, physical settlement has 

not been necessary for any of the CDS Contracts 

cleared by ICC. 

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 Web site (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 Web site 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; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–MSRB– 

2015–02 and should be submitted on or 

before April 17, 2015. 

For the Commission, pursuant to delegated 

authority.20

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–06993 Filed 3–26–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74563; File No. SR–ICC– 

2015–004] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Notice of Filing of 

Proposed Rule Change Relating to 

Physical Settlement of CDS Contracts 

March 23, 2015. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on March 11, 

2015, ICE Clear Credit LLC (‘‘ICC’’ or the 

‘‘clearinghouse’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been prepared 

primarily by ICC. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The purpose of the proposed rule 

change is to amend ICC rules to modify 

the terms and conditions for physical 

settlement of cleared CDS Contracts, 

and to adopt certain new delivery 

procedures relating to physical 

settlement. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, ICC 

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. ICC has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of these statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

ICC submits proposed amendments to 

the ICC Clearing Rules (‘‘ICC Rules’’) 

relating to physical settlement of CDS 

Contracts. Upon the occurrence of a 

credit event under a cleared CDS 

Contract, the contract is typically settled 

in cash in accordance with the terms of 

the ICC Rules, which incorporate the 

applicable ISDA Credit Derivatives 

Definitions (the ‘‘ISDA Definitions’’) 

and the market-standard credit default 

swap auction methodology for 

determining the cash settlement price. 

However, in certain circumstances, such 

as where the Credit Derivatives 

Determinations Committee decides not 

to hold a cash settlement auction for a 

particular credit event, or such an 

auction is cancelled under the terms of 

the auction methodology (including 

because of a failure to determine the 

auction settlement price), the CDS 

Contracts provide for a fallback 

settlement method of physical 

settlement. Under physical settlement of 

a CDS contract generally, the protection 

buyer will be entitled to deliver one or 

more qualifying deliverable obligations 

to the protection seller, in which case 

the protection seller will be required to 

pay the protection buyer a defined 

physical settlement amount. Under the 

current ICC Rules, if physical settlement 

applies,3 the clearinghouse will match 

clearing participants (‘‘Participants’’) 

that are protection buyers with 

Participants that are protection sellers in 

the relevant contract, and the two 

Participants will be responsible for 

effecting physical settlement between 

them. ICC does not itself perform or 

guarantee performance of physical 

settlement between the matched 

Participants. Once matching occurs, the 

contract is purely a bilateral contract 

between the matched Participants, and 

the clearinghouse has no further rights 

or obligations with respect to the 

contract. ICC does, however, collect and 

hold physical settlement margin as 

collateral agent on behalf of the 

protection buyer to secure the 

protection seller’s obligations to the 

protection buyer under physical 

settlement. 

At the request of its Participants, and 

following extensive consultation with 

them, ICC proposes to amend the ICC 

Rules relating to physical settlement 

such that the clearinghouse will be 

responsible for financial performance of 

physical settlement. ICC understands 

that Participants and other market 

participants view the current approach, 

in which cash settlement of credit 

events is guaranteed by the 

clearinghouse but physical settlement is 

not, as creating a potentially anomalous 

result in the unlikely case that physical 

settlement may apply. The application 

of physical settlement would be a 

circumstance that is generally not 

within any Participant’s control, and 

under the current rules may expose 

Participants to a significantly different 

credit risk profile than under cash 

settlement (where the Participant is 

exposed to the credit of the 

clearinghouse). In light of these 

discussions, ICC has determined that it 

is appropriate to extend the clearing 

guarantee to the financial performance 

of physical settlement. ICC notes that 

under the amended approach, it would 

still require payments and deliveries in 

the ordinary course under physical 

settlement to be made directly between 

the matched buying Participant and 

selling Participant, with the 

clearinghouse only being obligated to 

make direct payments in the case of 

certain defined settlement failure 

scenarios. ICC believes that this 

proposed rule change will further the 

general policy goals of central clearing 

for CDS transactions, and is consistent 

with the clearinghouse’s financial 

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