Document ID: SEC-2022-0806-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2022-06-15T04:00Z

[Federal Register Volume 87, Number 115 (Wednesday, June 15, 2022)]
[Notices]
[Pages 36164-36179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-12839]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95075; File No. SR-MSRB-2022-03]

Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of a Proposed Rule Change To Amend Certain 
Rates of Assessment for Rate Card Fees Under MSRB Rules A-11 and A-13, 
Institute an Annual Rate Card Process for Future Rate Amendments, and 
Provide for Certain Technical Amendments to MSRB Rules A-11, A-12, and 
A-13

June 9, 2022.
    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 June 2, 2022 the Municipal Securities 
Rulemaking Board (``MSRB'' or ``Board'') 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:
    (i) Rule A-11, on assessments for municipal advisor professionals, 
to modify the rate of assessment for the annual professional fee for 
each person associated with a municipal advisory firm who is qualified 
as a municipal advisor representative in accordance with Rule G-3, on 
professional qualification requirements, and for whom the municipal 
advisory firm has an active Form MA-I on file with the Commission as of 
January 31st of each year (each individual being a ``covered 
professional'' and such fee amount on each covered professional the 
``Municipal Advisor Professional Fee''); \3\
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    \3\ ``Form MA-I: Information Regarding Natural Persons Who 
Engage in Municipal Advisory Activities,'' is an SEC form that must 
be completed and filed by a municipal advisory firm with respect to 
each natural person associated with the firm and engaged in 
municipal advisory activities on the firm's behalf, including 
employees of the firm. Independent contractors are included in the 
definition of ``employee'' for these purposes. A natural person 
doing business as a sole proprietor must complete and file Form MA-I 
in addition to Form MA. Form MA-I is also used to amend a previously 
submitted form, including in such cases where an individual is no 
longer an associated person of the municipal advisory firm or no 
longer engages in municipal advisory activities on the firm's 
behalf. See ``Instructions for the Form MA Series,'' available at 
https://www.sec.gov/about/forms/formmadata.pdf. For purposes of Rule 
A-11 and the calculation of the Municipal Advisor Professional Fee, 
if a firm has filed an amendment to indicate that an individual is 
no longer an associated person of the municipal advisory firm or no 
longer engages in municipal advisory activities on its behalf, then 
that individual's Form MA-I would not be deemed as active for 
purposes of the Municipal Advisor Professional Fee and would not be 
counted in the January 31st calculation regarding the assessment of 
the Municipal Advisor Professional Fee.
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    (ii) Rule A-13, on underwriting and transaction assessments for 
brokers, dealers, and municipal securities dealers (collectively, 
``dealers''), to modify the rate of assessments on

[[Page 36165]]

dealers for certain underwriting, transaction, and trade count fees \4\ 
(collectively, the ``Market Activity Fees'' and, such Market Activity 
Fees together with the Municipal Advisor Professional Fee, the ``Rate 
Card Fees''); \5\ and
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    \4\ As further described herein, the proposed rule change would 
provide a technical amendment to Rule A-13 to change the terminology 
for this fee from ``technology fee'' to ``trade count fee.'' To 
avoid confusion, the proposed rule change utilizes the amended name 
except as context requires for clarity, such as describing this 
specific technical amendment and providing certain historical 
revenue data in Exhibit 3. See discussion infra entitled ``Technical 
Amendments to Rule A-13 and Related Cross-References.''
    \5\ 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 Market Activity Fees that 
would be amended by this proposed rule change.
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    (iii) Rule A-11, Rule A-12, on registration, and Rule A-13 to 
provide greater regulatory clarity for the assessment of fees on 
municipal securities brokers, municipal securities dealers, and 
municipal advisors (collectively, ``MSRB regulated entities'') under 
these rules.
    The proposed amendments to the rates of assessment of the Rate Card 
Fees are referred to as the ``Rate Card Amendments.'' The Rate Card 
Amendments would effectuate the Rate Card Fees in accordance with the 
following table.

------------------------------------------------------------------------
                                          Basis           Proposed rate
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Underwriting Fee...............  Per $1,000 Par                  $0.0297
                                  Underwritten.
Transaction Fee................  Per $1,000 Par                   0.0107
                                  Transacted.
Trade Count Fee................  Per Trade.............             1.10
Municipal Advisor Professional   Per Covered                       1,060
 Fee.                             Professional.
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The proposed technical amendments to Rule A-11, Rule A-12, and Rule A-
13 are referred to as the ``Technical Amendments.'' The Rate Card 
Amendments and the Technical Amendments together are referred to as the 
``proposed rule change.''
    The MSRB has designated the proposed rule change for immediate 
effectiveness.\6\ The Rate Card Amendments and the Technical Amendments 
are designated to have an operative date of October 1, 2022. The Board 
currently anticipates the amended Rate Card Fees proposed by the Rate 
Card Amendments to be operative for a period of fifteen months from 
October 1, 2022 to December 31, 2023 and an amended set of Rate Card 
Fees to become operative on January 1, 2024 in accordance with a 
subsequent proposed rule change and the internal rate setting process 
described herein.\7\
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    \6\ The MSRB has designated the Rate Card Amendments as 
establishing or changing a due, fee, or other change under Section 
19(b)(3)(A)(ii) of the Act (15 U.S.C. 78s(b)(3)(A)(ii)) and Rule 
19b-4(f)(2) (17 CFR 240.19b-4(f)(2)) thereunder. The MSRB has 
designated the Technical Amendments as being immediately effective 
upon filing pursuant to Section 19(b)(3)(A)(iii) of the Exchange Act 
(15 U.S.C. 78s(b)(3)(A)(iii)) and Rule 19b-(f)(6) (17 CFR 240.19b-
4(f)(6)) thereunder.
    \7\ See discussion infra under ``Proposed Annual Rate Card 
Approach.'' As further described therein, the Board presently 
anticipates filing proposed rule changes with the Commission to 
amend the rates of assessment of the Rate Card Fees on an annual 
basis going forward, as applicable, with the first set of such 
amendments filed with the Commission prior to or in the last quarter 
of calendar year 2023 to become operative on January 1, 2024.
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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/2022-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 Rate Card Amendments is to amend the rate of 
assessment for the Board's Rate Card Fees effective on October 1, 2022. 
The description of the Rate Card Amendments also provides transparency 
regarding the internal process for how the Board intends to amend such 
fees on an annual basis going forward. Specifically, subsequent to this 
proposed rule change, and commencing with the filing of a proposed rule 
change prior to or in the last quarter of calendar year 2023, the Board 
anticipates filing a proposed rule change with the Commission each year 
to effectuate an ``Annual Rate Card'' that would revise the Rate Card 
Fees as necessary or appropriate to defray the costs and expenses of 
operating and administering the Board.\8\ The MSRB anticipates filing 
such proposed rule changes to be effective as of January 1 each 
calendar year and operative until December 31 for that year.\9\ In 
addition to the proposed Rate Card Amendments, the proposed rule change 
also proposes the Technical Amendments to Rule A-11, Rule A-12, and 
Rule A-13 to provide greater regulatory clarity for the assessment of 
fees on MSRB regulated entities under these rules.
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    \8\ See Section 15B(b)(2)(J) of the Act (15 U.S.C. 78o-
4(b)(2)(J)).
    \9\ Unlike these anticipated future amendments, the Rate Card 
Amendments for Fiscal Year 2023 are expected to be effective for a 
15-month period from October 1, 2022 to December 31, 2023.
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Purpose and Description of the Rate Card Amendments
    As a self-regulatory organization, the Board discharges its 
statutory mandate under the Exchange Act by establishing rules for 
regulated entities, enhancing the transparency of the municipal 
securities market through technology systems, and publicly 
disseminating data about the municipal securities market. The Board 
funds its activities primarily through the assessment of fees and 
charges on regulated entities as is necessary or appropriate to defray 
the costs and expenses of operating and administering the Board.\10\ 
The Board independently manages and monitors its financial position on 
an ongoing basis to ensure that the organization has sufficient revenue 
and organizational reserves to maintain its operations in accordance 
with the Act,\11\ without interruption, even in economic downturns and 
other unforeseen circumstances.
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    \10\ See Section 15B(b)(2)(J) of the Act (15 U.S.C. 78o-
4(b)(2)(J)).
    \11\ Id.
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Current Fee Structure
    The Board has previously established, and currently applies, the 
following fee

[[Page 36166]]

assessments on regulated entities to ensure the MSRB's ongoing 
operations (the ``current fee structure''): \12\
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    \12\ The Market Activity Fees listed do not indicate the current 
temporary fee reductions that expire on September 30, 2022. See Rule 
A-13(h) (specifying a temporary underwriting assessment of .00165% 
($0.0165 per $1,000) of the par value; a temporary transaction 
assessment of .0006% ($0.006 per $1,000) of the par value; and a 
temporary technology assessment of $0.60 per transaction); see also 
Exchange Act Release No. 91247 (Mar. 3, 2021), 86 FR 13593 (Mar. 9, 
2021) File No. SR-MSRB-2021-02 (hereinafter, ``2021 Temporary Fee 
Reduction''). Consistent with the language of the 2021 Temporary Fee 
Reduction, these reduced fee rates will expire on September 30, 
2022; and the related rule text would be deleted effective as of 
October 1, 2022 by operation of the Technical Amendments proposed 
herein.
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    (i) Municipal Advisor Professional Fee: A fee of $1,000 for each 
covered professional as of January 31 of each year; \13\
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    \13\ Current Rule A-11(a)(i).
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    (ii) Initial Registration Fee: 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; \14\
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    \14\ Rule A-12(b). Initial registration assessments charged 
pursuant to Rule A-12(b) are not included in the Rate Card Fees that 
would be amended by this proposed rule change. Given that the amount 
of the initial registration fee historically has been set with the 
intention of defraying a significant portion of the administrative 
and operational costs associated with the processing of a regulated 
entity's initial registration, the Board determined that, at this 
time, it was not beneficial or necessary to incrementally adjust 
such fees each year through an annual rate setting process. See 
Exchange Act Release No. 75751 (Aug. 24, 2015), 80 FR 52352 (Aug. 
28, 2015) File No. SR-MSRB-2015-08 (stating the initial registration 
fee is to help defray a significant portion of the administrative 
and operational costs associated with processing an initial 
registration). See also discussion infra under ``Board Review of the 
Current Fee Structure'' and ``Proposed Annual Rate Card Approach.''
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    (iii) Annual Registration Fee: A $1,000 annual fee to be paid by 
each dealer and municipal advisor registered with the MSRB; \15\
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    \15\ Rule A-12(c). Annual registration assessments charged 
pursuant to Rule A-12(c) are not included in the Rate Card Fees that 
would be amended by this proposed rule change. Given that the rate 
of assessment for the annual registration fee is intended to serve 
as a fixed, baseline contribution from all registered regulated 
entities, irrespective of a regulated entity's actual total market 
activities, the Board determined that, at this time, it was not 
beneficial or appropriate to incrementally adjust such fees each 
year through an annual rate setting process. See also discussion 
infra under ``Board Review of the Current Fee Structure'' and 
``Proposed Annual Rate Card Approach.''
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    (iv) Late Fee: 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; \16\
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    \16\ Rule A-11(b) and Rule A-12(d). As discussed herein, the 
Technical Amendments would remove the current reference in Rule A-
12(d) to late fees for payments due pursuant to Rule A-13 and 
incorporate this concept into Rule A-13. See Rule A-12(d) (``Any 
broker, dealer, municipal securities dealer or municipal advisor 
that fails to pay any fee assessed under this rule or Rule A-13 
within 30 days of the invoice date shall pay a monthly late fee of 
$25 and a late fee on the overdue balance, computed according to the 
Prime Rate, as provided for in the MSRB Registration Manual, until 
paid.'' (emphasis added)).
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    (v) Underwriting Fee: 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 (the ``Underwriting Fee''); \17\
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    \17\ Current Rule A-13(c)(i).
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    (vi) Municipal Funds Underwriting Fee: 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 Rule G-45) of a primary offering of certain 
municipal fund securities; \18\
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    \18\ Current Rule A-13(c)(ii). Assessments charged pursuant to 
Rule A-13(c)(ii) related to certain municipal fund securities are 
not included in the Rate Card Fees that would be amended by this 
proposed rule change. The basis upon which the municipal funds 
underwriting fee is assessed (i.e., the total aggregate assets for 
the reporting period) is not subject to the same type of volatility 
as the Market Activity Fees, but instead is expected to generally 
continue to grow over time. For example, municipal funds 
underwriting fee revenue amounted to approximately $1,332,000 in 
Fiscal Year 2021, approximately $1,167,000 in Fiscal Year 2020, and 
approximately $991,000 in Fiscal Year 2019. See MSRB 2021 Annual 
Report, available at https://www.msrb.org/-/media/Files/Resources/MSRB-2021-Annual-Report.ashx?. As a result, the Board determined 
that, at this time, it was not beneficial or necessary to 
incrementally adjust the rate of assessment each year through an 
annual rate setting process. See discussion infra under ``Board 
Review of the Current Fee Structure'' and ``Proposed Annual Rate 
Card Approach.''
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    (vii) Transaction Fee: A fee amount of .001% ($.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 Rule G-14(b), on transaction reporting 
requirements (the ``Transaction Fee''); \19\
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    \19\ Rule A-13(d)(i) (transaction fee on inter-dealer sales) and 
Rule A-13(d)(ii) (transaction fee on customer sales).
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    (viii) Technology Fee: \20\ 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 Rule G-14(b) (the ``Trade Count 
Fee''); \21\ and
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    \20\ As further described herein, the proposed rule change would 
provide a technical amendment to this provision of Rule A-13 to 
rename this fee to the ``trade count fee.''
    \21\ Rule A-13(d)(vi).
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    (ix) Examination Fee: A $150 test development fee assessed per 
candidate for each MSRB examination.\22\
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    \22\ Rule A-16. Assessments charged pursuant to Rule A-16 
related to such examination fees are not included in the Rate Card 
Fees that would be amended by this proposed rule change. Given that 
the rate of assessment for the examination fee historically has been 
set with the intention of defraying a portion of the overall costs 
of the MSRB's professional qualification and testing program, the 
Board determined that, at this time, it was not beneficial or 
necessary to incrementally adjust the rate of assessment of such fee 
each year through an annual rate setting process. See Exchange Act 
Release No. 85135 (Feb. 14, 2019), 84 FR 5513 (Feb. 21, 2019) File 
No. SR-MSRB-2019-02 (stating the examination fee is intended to 
partially offset the overall program costs to the MSRB of its 
professional qualification and testing program). See also discussion 
infra under ``Board Review of the Current Fee Structure'' and 
``Proposed Annual Rate Card Approach.''

In addition to these fees assessed on regulated entities, the Board 
also receives revenues from certain other sources, such as investment 
income, regulatory fine sharing,\23\ and MSRB data subscription 
fees.\24\ These revenue sources contribute a much smaller portion to 
the overall MSRB funding.\25\
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    \23\ Fine revenue became a 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).
    \24\ The MSRB charges data subscription service fees for 
subscribers, including regulated entities and non-regulated 
entities, seeking direct electronic delivery of municipal trade data 
and disclosure documents associated with municipal bond issues. This 
information is also available without direct electronic delivery on 
the EMMA website without charge.
    \25\ For example, fine-sharing revenue amounted to approximately 
0.9% of the MSRB's overall revenue in Fiscal Year 2021 (or 
approximately $322,000), 3.3% in Fiscal Year 2020 (or approximately 
$1.5 million), and 0.4% (or approximately $151,000) in Fiscal Year 
2019. See MSRB 2021 Annual Report, available at https://www.msrb.org/-/media/Files/Resources/MSRB-2021-Annual-Report.ashx?. 
Given that this revenue is collected by FINRA and the SEC for 
violations of MSRB rules and the fact that the Board does not set 
the rates of assessment for the collection of such fines, the Board 
does not believe that it is appropriate to separately consider fine-
sharing revenue for potential rebates to regulated entities by 
operation of the proposed Annual Rate Cards and the annual rate 
setting process.
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Board Review of the Current Fee Structure
    Early in Fiscal Year 2021, the Board determined that it should 
review the current fee structure in relation to the MSRB's long term 
financial position and near-term anticipated funding needs (the ``Fee 
Review''). Through its Fee Review, the Board sought to identify 
potential improvements to the MSRB's current fee structure that would: 
(i) maintain a fair and equitable balance of reasonable fees and 
charges among regulated entities; \26\ (ii) mitigate the

[[Page 36167]]

impact of market volatility on the amount of fee revenue actually paid 
each year \27\ and, correspondingly, facilitate the Board's ability to 
manage the amount held by the MSRB in organizational reserves year-to-
year; \28\ and (iii) prudently fund the MSRB's anticipated near-term 
operating expenses.\29\
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    \26\ While engaging in the Fee Review, and consistent with the 
MSRB Funding Policy, the Board considered how potential 
modifications to the current fee structure would impact the 
diversity of the MSRB's funding sources. See MSRB Funding Policy, 
available at https://www.msrb.org/About-MSRB/Financial-and-Other-Information/Financial-Policies/Funding-Policy (hereinafter, the 
``MSRB Funding Policy'') (stating that the ``MSRB strives to 
diversify funding sources among regulated entities and other 
entities that fund MSRB services in a manner that ensures long-term 
sustainability, seeking to achieve an equitable balance among 
regulated entities and a fair allocation of the costs of systems and 
services among other users and regulated entities to the extent 
allowed by law.'')
    \27\ 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 has often 
exceeded the amount budgeted in recent fiscal years. The MSRB's 
Financial Statements for recent fiscal years are available at http://msrb.org/About-MSRB/Financial-and-Other-Information/Annual-Reports.aspx. See ``Chart 2--Historical Budget vs. Actual Revenue 
for the Rate Card Fees'' and ``Chart 4--Rate Card Fees: Historical 
Activity Volume Variance Budget to Actual.''
    \28\ The Board established a reserves target to ensure that the 
organization maintains a prudent level of financial resources 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. See 
MSRB Funding Policy (link at note 26 supra) (these four categories 
are identified in the discussion under ``Reserve Considerations''). 
The Board reviews and adjusts the reserves target on an annual basis 
to ensure that it remains appropriately aligned with the 
organization's needs. See MSRB Fiscal Year 2022 Budget for a further 
discussion of the MSRB's budget and reserves, available at https://www.msrb.org/-/media/Files/Resources/MSRB-FY-2022-Budget-Summary.ashx?.
    \29\ See, e.g., Exhibit 3, ``Chart 8--Historical Actual 
Expenses,'' ``Chart 10--Historical and Projected Revenue without 
Rate Card Model Compared to Historical and Pro Forma Expenses,'' 
``Chart 11--Historical and Projected Revenue with Rate Card Model 
Compared to Historical and Pro Forma Expenses.''
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    Maintaining a Fair and Equitable Balance of Fees. As part of its 
Fee Review, the Board evaluated the MSRB's current fee structure to 
determine whether the fees and charges assessed upon regulated entities 
remain reasonable, fair, and equitable. Among other factors considered 
during the Fee Review, the Board: (i) analyzed publicly available data 
on the revenue models of dealers and municipal advisors across 
geographic areas; \30\ (ii) examined MSRB expense allocations to inform 
its understanding of how much of the MSRB's expense budget relates to 
various activities; \31\ (iii) evaluated historical budgeted revenue 
versus actual revenues generated for the existing fee categories; \32\ 
(iv) gauged the MSRB's fee distribution across varying business models 
of dealer and municipal advisory firms; \33\ and (v) deliberated upon 
feedback from stakeholder discussions and prior written comments on the 
topic of the MSRB's fees and expenses.\34\
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    \30\ The Board considered market data from various external and 
internal sources, such as the Texas Bond Review Board State and 
Local Annual Reports (http://www.brb.state.tx.us/publications.aspx), 
the California State Treasurer's Office--California Debt and 
Investment Advisory Commission (CDIAC) (https://data.debtwatch.treasurer.ca.gov/Government/CDA-All-Data/yng6-vaxy), 
primary market data included in official statements and other 
offering documents, and trading and other secondary market data. See 
also, e.g., the MSRB's published Fact Books, which provide various 
historical data sets related to market activities, such as the 
distribution of municipal trades by dealers, available at https://www.msrb.org/Market-Transparency/Market-Data-Publications/MSRB-Fact-Book.aspx.
    \31\ See, e.g., Exhibit 3, ``Chart 9--Historical Budgeted 
Expense by Function.''
    \32\ See Exhibit 3, ``Chart 1--Historical Revenue Variances: 
Budget vs. Actual'' and ``Chart 2--Historical Budget vs. Actual 
Revenue for the Rate Card Fees.''
    \33\ As non-exhaustive examples, the Board considered fee 
distribution across the business models of: (i) small, medium, and 
large firms, (ii) dually registered firms versus firms registered 
only as dealers or municipal advisors, and (iii) firms that engage 
in underwriting activities versus secondary market activities. See 
also Exhibit 3, ``Chart 14--Distribution of Registrants by Range of 
Total Fees Assessed Under Current Fee Structure Compared to 
Projected Distribution Under the Rate Card Model (Exclusive of Late 
Fees and Examination Fees).''
    \34\ See, e.g., MSRB Notice 2020-19: ``MSRB Requests Input on 
Strategic Goals and Priorities'' (Dec. 7, 2020), available at 
https://msrb.org/-/media/Files/Regulatory-Notices/RFCs/2020-19.ashx??n=1, and related stakeholder comments (hereinafter, the 
``Stakeholder Comments to the MSRB's Strategic Priorities''), 
available at https://msrb.org/Rules-and-Interpretations/Regulatory-Notices/2020/2020-19?c=1. See also, e.g., comments provided on 
Exchange Act Release No. 87075 (Sep. 24, 2019), 84 FR 51698 (Sep. 
30, 2019) File No. SR-MSRB-2019-11, available at https://www.sec.gov/comments/sr-msrb-2019-11/srmsrb201911.htm, and comments 
provided on Exchange Act Release No. 81264 (July 31, 2017), 82 FR 
36472 (Aug. 4, 2017) File No. SR-MSRB-2017-05, available at https://www.sec.gov/comments/sr-msrb-2017-05/msrb201705.htm.
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    Based on these factors considered, the Board found that the current 
fee structure--including the basis on which fees are assessed and the 
relative contribution of revenue from each of the current fees assessed 
on regulated entities--overall remains reasonable, fair, and equitable. 
However, as further discussed below, the Board also determined that the 
current fee structure could be improved with certain process changes 
and targeted rule amendments to address the challenges associated with 
(i) the revenue impact of market volatility and (ii) the MSRB's 
anticipated near-term funding needs.
    Mitigating the Impact of Market Volatility. As part of the Fee 
Review, the Board analyzed the historical revenue generated under the 
MSRB's current fee structure as compared to the historical amounts 
budgeted over the same fiscal years.\35\ While the various fees 
actually paid by regulated entities have, in some recent fiscal years, 
marginally exceeded or underperformed their budgeted amounts, the Board 
found that the amount of the three Market Activity Fees actually 
collected have often exceeded their annual budget targets by more than 
marginal amounts.\36\ The Board also found that the recurring variances 
between budgeted amounts and actual amounts of Market Activity Fees 
collected directly contributed to the periodic build-up of excess 
reserves and, consequently, precipitated the need for the MSRB to use 
rebates or temporary fee reductions as a mechanism to rightsize 
organizational reserve positions back to the Board's target.\37\ Based 
on these causal links between fluctuations in market activity year-to-
year, variances in the amount of Market Activity Fees actually 
collected versus budgeted amounts, and the need for rebates or 
temporary fee reductions to rightsize organizational reserves, the 
Board prioritized the identification of alternative fee approaches that 
would better mitigate the impact of the inevitable, year-to-year 
fluctuations in activity in the municipal securities market.
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    \35\ See, e.g., Exhibit 3, ``Chart 1--Historical Revenue 
Variances: Budget vs. Actual'' and ``Chart 2--Historical Budget vs. 
Actual Revenue for the Rate Card Fees.''
    \36\ See Exhibit 3, ``Chart 1--Historical Revenue Variances: 
Budget vs. Actual,'' ``Chart 2--Historical Budget vs. Actual Revenue 
for the Rate Card Fees,'' and ``Chart 4--Rate Card Fees: Historical 
Activity Volume Variance Budget to Actual.'' Relatedly, the Board 
determined that such recurring variances could not be fully 
addressed with further refinements to the MSRB's budgeting process; 
rather, the variances were inherent to the imprecision associated 
with budgeting future market volumes related to underwriting and 
trading activity that exists within the overall dynamic of the 
municipal securities market.
    \37\ Compare, e.g., Exhibit 3, ``Chart 2--Historical Budget vs. 
Actual Revenue for the Rate Card Fees,'' Chart 5--Historical 
Effective Fee Rate Changes'' and ``Chart 12--Total Reserves vs. 
Target: Historical and Projected without Rate Card Model.''
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    After considering alternatives, the Board first determined that the 
Municipal Advisor Professional Fee and the current set of Market 
Activity Fees--i.e., Underwriting Fees, Transaction Fees, and Trade 
Count Fees--remain the most reasonable and practical mechanisms for 
assessing fees on regulated entities and so should not be replaced with 
alternative fee

[[Page 36168]]

mechanisms. The Board came to this determination primarily because it 
continues to believe that the respective mechanisms for assessing the 
Municipal Advisor Professional Fee and the Market Activity Fees remain 
superior to potential alternatives--some of which may require 
significantly more burdensome firm reporting to achieve comparatively 
greater precision in the alignment of the total amount of the fees 
assessed on a given firm with such firm's total regulated activities; 
\38\ and, therefore, these fee mechanisms remain the best option among 
alternatives to ensure that the amount of the Municipal Advisor 
Professional Fees and Market Activity Fees paid by a given firm is both 
(i) appropriately balanced to the burdens and benefits of the MSRB's 
regulatory and transparency activities, and also (ii) generally 
proportional to the differing resources devoted to the regulation of 
firms with different business models and differing degrees of 
complexity.\39\ These existing fee methods also have the advantage of 
being established mechanisms for assessing fees on regulated entities; 
and, in this regard, the Board believes that maintaining this current 
set of fee methods is more advantageous than other alternatives because 
firms already understand and have embedded such assessments into their 
business operations.
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    \38\ See also related discussion infra under ``Self-Regulatory 
Organization's Statement on Burden on Competition--Baseline and 
Reasonable Alternative Approaches.''
    \39\ The Board considers the distribution of its fees among 
regulated entities of differing sizes, complexities, and business 
models and strives for proportionality in the distribution of fees 
as much as feasible within the broader set of considerations 
described in the MSRB Funding Policy. See, e.g., related discussion 
supra under ``Board Review of the Current Fee Structure--Maintaining 
a Fair and Equitable Balance of Fees'' and Exhibit 3, ``Chart 14--
Distribution of Registrants by Range of Total Fees Assessed Under 
Current Fee Structure Compared to Projected Distribution Under the 
Rate Card Model (Exclusive of Late Fees and Examination Fees).'' See 
also Release No. 34-87075 (Sep. 24, 2019), 84 FR 51698 (Sep. 30, 
2019) File No. SR-MSRB-2019-11 (providing for increases to the 
Municipal Advisor Professional Fee and discussing the superiority of 
maintaining the Municipal Advisor Professional Fee in light of 
possible alternatives that would require creating a novel and, 
therefore, likely more burdensome reporting requirement).
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    While the Board determined that the mechanisms for assessing the 
Municipal Advisor Professional Fee and the Market Activity Fees should 
not be replaced, the Board also determined it would be beneficial to 
refine its approach to review and amend these fee rates for each 
calendar year on an annual basis going forward. Specifically, to avoid 
the MSRB accumulating excess reserves through the collection of fee 
revenue above budgeted amounts over multiple fiscal years and then 
utilizing short-term fee reductions to return the excess revenues to 
the regulated entities who paid the fees, the Board is proposing to 
review and incrementally refine the rates of assessment for each of 
these fees each year. This revised approach would more closely align 
the rates of assessment for the Municipal Advisor Professional Fee and 
the Market Activity Fees to the MSRB's annual revenue requirements, 
including by factoring revenue surpluses and shortfalls against 
budgeted amounts for each of these fees from the prior year directly 
into the annual rate calculation process. As further described in the 
section below entitled ``Proposed Annual Rate Card Approach,'' the 
Board's proposed approach would (i) better mitigate the impact of 
market volatility on the MSRB's revenue structure (and, consequently, 
also better mitigate the impact of market volatility on the MSRB's 
organizational reserves), and (ii) maintain rates within a reasonably 
predictable range that, while subject to more incremental changes each 
year, would be comparably more stable over the long term than the 
MSRB's current fee structure.\40\
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    \40\ See related discussion infra under ``Proposed Annual Rate 
Card Approach--Limitations on Rate Changes to Promote Predictability 
and Stability'' (discussing various limitations on future increases 
of the Rate Card Fees). See also Exhibit 3, ``Chart 5--Historical 
Effective Fee Rate Changes.''
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    Funding the MSRB's Anticipated Near-Term Operating Expenses. In 
addition to analyzing the impact of variable market activity as part of 
its Fee Review, the Board also analyzed the MSRB's current budget 
projections for Fiscal Year 2023 and the anticipated funding needs in 
the near term beyond Fiscal Year 2023.\41\ Specific to the projections 
for Fiscal Year 2023, the MSRB's pro forma estimate currently 
anticipates an operating deficit for the twelve-month period, based on 
preliminary projected expenses and projected revenue under the current 
fee structure (and without the Rate Card Amendments). Beyond Fiscal 
Year 2023, the Board assumed at least modest expense growth in the 
near-term fiscal years in line with the MSRB's ten-year compound annual 
growth rate,\42\ particularly in consideration of the current impacts 
of inflation and other key expenses associated with modernizing and 
operating the MSRB's technology systems. Based on these budgetary 
expectations, the Board analyzed options for how expense control and 
additional revenue generation could address both the projected 
operating deficit for Fiscal Year 2023 and the likelihood of expense 
growth in future near-term fiscal years.
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    \41\ Specific to the scope of the Board's near-term funding 
analysis, the Board considered various funding scenarios for Fiscal 
Year 2023 through Fiscal Year 2025. See, e.g., Exhibit 3, ``Chart 
8--Historical Actual Expenses'' (showing a ten-year historical 
compound annual growth rate of 4.2%), ``Chart 10--Historical and 
Projected Revenue without Rate Card Model Compared to Historical and 
Pro Forma Expenses,'' ``Chart 11--Historical and Projected Revenue 
with Rate Card Model Compared to Historical and Pro Forma 
Expenses.''
    \42\ See Exhibit 3, ``Chart 8--Historical Actual Expenses.''
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    In terms of expense control, the MSRB remains committed to 
responsibly managing expenses and aligning its resources to the 
fulfillment of the Board's statutory mandate.\43\ Accordingly, the 
Board reviewed anticipated expenses against various factors, including 
(i) the MSRB's ``Strategic Plan--Fiscal Years 2022-2025;'' \44\ (ii) 
actual historical expenses versus budgeted expenses for certain 
activities; \45\ and (iii) stakeholder feedback and comments.\46\ Based 
on these and other aspects of its Fee Review, the Board determined that 
the MSRB's Strategic Plan should serve as the main budgetary guidepost 
for how the MSRB allocates its limited resources and resolves competing 
fiscal priorities, particularly because various stakeholders provided 
significant written input regarding the Strategic Plan.\47\ 
Consequently, the Board determined that the MSRB's expenditures in 
Fiscal Year 2023 and future near-term fiscal years generally should 
align with the expenses necessary to discharge its statutory mandate in 
accordance with the Strategic Plan.\48\ As a result, at least modest 
expense growth, in line with the MSRB's ten-year compound annual growth 
rate,\49\ is assumed given various

[[Page 36169]]

considerations, including the current Strategic Plan's emphasis on the 
modernization of the MSRB's technology systems and the MSRB's ongoing 
efforts to advance the quality, accessibility, security, and value of 
the MSRB's market data for all participants in the municipal securities 
market. The Board will continue to actively monitor and manage its 
financial position to ensure prudent expense alignment to the MSRB's 
statutory mandate and the corresponding objectives of the MSRB's 
Strategic Plan.
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    \43\ See, e.g., ``Controlling Expenses'' in MSRB Fiscal Year 
2022 Budget at page 12 and related discussion, available at https://msrb.org/-/media/Files/Resources/MSRB-FY-2022-Budget-Summary.ashx?. 
See also Exhibit 3, ``Chart 6--Historical Expense Variances: Budget 
vs. Actual.''
    \44\ The MSRB's Strategic Plan--Fiscal Years 2022-25 is 
available at https://msrb.org/-/media/Files/Resources/MSRB-Strategic-Plan-2022-2025.ashx? (the ``Strategic Plan'').
    \45\ See Exhibit 3, ``Chart 6--Historical Expense Variances: 
Budget vs. Actual'' and ``Chart 9--Historical Budgeted Expense by 
Function.''
    \46\ See, e.g., Stakeholder Comments to the MSRB's Strategic 
Priorities (link at note 34 supra).
    \47\ Id.
    \48\ The MSRB notes that its anticipated expenditures for the 
near-term fiscal years beyond Fiscal Year 2023 are subject to 
greater uncertainty caused by the higher potential for changing 
circumstances and, correspondingly, its budgetary assumptions for 
these years are also less certain.
    \49\ See Exhibit 3, ``Chart 8--Historical Actual Expenses.''
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    In terms of revenue, the Board determined that the current fee 
structure should be amended to increase total revenue and, thereby, 
reduce the likelihood of a near-term operating deficit for Fiscal Year 
2023.\50\ The Board is proposing to raise this additional revenue in 
accordance with a new rate setting approach as described in the 
following section entitled ``Proposed Annual Rate Card Approach.'' The 
Board considered comments from regulated entities about the 
consequences associated with the MSRB collecting more fee revenue than 
needed and with the MSRB maintaining organizational reserves in excess 
of what is required.\51\ In response to such concerns, the Board has 
undertaken significant efforts to determine the level of organizational 
reserves needed and, correspondingly, refined and reduced its 
organizational reserves target.\52\ To bring the MSRB's excess 
organizational reserves in-line with this refined target, the Board has 
intentionally budgeted operating deficits in recent fiscal years, 
primarily by temporarily reducing certain fees on regulated entities 
and, thereby, collecting less revenue as a result of those fee 
reductions.\53\ At the same time, the Board has designated funds from 
the MSRB's organizational reserves for necessary multiyear systems 
modernization initiatives, which has further aligned organizational 
reserves to target.\54\ As a result of these efforts, the MSRB's 
organizational reserves presently are on track to be aligned with the 
Board's reserves target for Fiscal Year 2023.\55\ In this way, while 
the Board determined that additional funding is needed for Fiscal Year 
2023, the Board also determined that such funding would be best 
obtained through an increase in fees as opposed to the further drawing 
down of organizational reserves below target.\56\
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    \50\ See Exhibit 3, ``Chart 10--Historical and Projected Revenue 
without Rate Card Model Compared to Historical and Pro Forma 
Expenses'' and ``Chart 11--Historical and Projected Revenue with 
Rate Card Model Compared to Historical and Pro Forma Expenses.''
    \51\ See, e.g., letter from Mike Nicholas, Chief Executive 
Officer, Bond Dealers of America (``BDA''), (Jan. 11, 2021) 
(hereinafter, the ``BDA Comment Letter'') (responding to the MSRB's 
Request for Input on Strategic Goals and Priorities and stating 
``[w]e strongly urge the Board to take a comprehensive look at its 
finances with the goal of once and for all establishing a funding 
mechanism that fairly allocates the MSRB's expenses among regulated 
entities and does not assess the industry for more money than the 
MSRB needs''), available at https://www.msrb.org/rfc/2020-19/Dbamerica.pdf.
    \52\ See Exhibit 3, ``Chart 12--Total Reserves vs. Target: 
Historical and Projected without Rate Card Model'' and ``Chart 13--
Total Reserves vs. Target: Historical and Projected with Rate Card 
Model.''
    \53\ See the 2021 Temporary Fee Reduction (citation and link at 
note 12 supra); Release No. 34-85400 (Mar. 22, 2019), 84 FR 11841 
(Mar. 28, 2019) File No. SR-MSRB-2019-06 (providing for a temporary 
fee reduction); and Release No. 34-83713 (July 26, 2018), 83 FR 
37538 (Aug. 1, 2018) File No. SR-MSRB-2018-06 (providing for a 
temporary fee reduction). See also Exhibit 3, ``Chart 1--Historical 
Revenue Variances: Budget vs. Actual,'' ``Chart 2--Historical Budget 
vs. Actual Revenue for the Rate Card Fees,'' ``Chart 5--Historical 
Effective Fee Rate Changes,'' and ``Chart 7--Historical Budgeted 
Revenue and Budgeted Expense.''
    \54\ See the MSRB's Fiscal Year 2022 Budget, at page 13 
(discussing the MSRB's system modernizations investments), available 
at https://msrb.org/-/media/Files/Resources/MSRB-FY-2022-Budget-Summary.ashx?. See also, e.g., the MSRB's 2021 Annual Report, at 
page 2 (link at note 25 supra); the MSRB's 2020 Annual Report, at 
page 35 (discussing certain modernization investment efforts), 
available at https://msrb.org/-/media/Files/Resources/MSRB-2020-Annual-Report.ashx?; and the MSRB's 2019 Annual Report, at page 11 
(discussing the MSRB's cloud investments), available at https://msrb.org/-/media/Files/Resources/MSRB-2019-Annual-Report.ashx?.
    \55\ See Exhibit 3, ``Chart 13--Total Reserves vs. Target: 
Historical and Projected with Rate Card Model.''
    \56\ See Exhibit 3, ``Chart 10--Historical and Projected Revenue 
without Rate Card Model Compared to Historical and Pro Forma 
Expenses,'' ``Chart 11--Historical and Projected Revenue with Rate 
Card Model Compared to Historical and Pro Forma Expenses,'' and 
``Chart 12--Total Reserves vs. Target: Historical and Projected 
without Rate Card Model,'' and ``Chart 13--Total Reserves vs. 
Target: Historical and Projected with Rate Card Model.''
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Proposed Annual Rate Card Approach
    Consistent with the Board's analysis and conclusions discussed 
above, the Board proposes to amend the Municipal Advisor Professional 
Fee assessed pursuant to Rule A-11 and the Market Activity Fees 
assessed pursuant to Rule A-13 (i.e., the Rate Card Fees). Underlying 
the proposed textual amendments to Rule A-11 and Rule A-13 is a revised 
fee approach, whereby the Board anticipates reviewing the Rate Card 
Fees each year and modifying them through the filing of a proposed rule 
change with the Commission. In this way, the MSRB's Annual Rate Cards 
will propose amended rates of assessment for each of the four fees on 
regulated entities that make up the Rate Card Fees (i.e., Underwriting 
Fees, Transaction Fees, Trade Count Fees, and Municipal Advisor 
Professional Fees). Subsequent to the Annual Rate Card described in 
this proposed rule change,\57\ the Board anticipates filing such 
proposed rule changes enumerating the Annual Rate Cards to be effective 
as of January 1st of each calendar year beginning with January 1, 
2024.\58\
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    \57\ Because of the expiration of the 2021 Temporary Fee 
Reduction on September 30, 2022, the proposed rule change's Annual 
Rate Card for Fiscal Year 2023 and the first quarter of Fiscal Year 
2024 will become effective on October 1, 2022, and, in this way, is 
intended to be operative for a fifteen-month period running from 
October 1, 2022, to December 31, 2023.
    \58\ As the proposed rule change is structured, a given Annual 
Rate Card would remain effective and operative until a subsequent 
proposed rule change amending such rates is filed, effective, and 
operative. As stated, the MSRB anticipates that subsequent Annual 
Rate Cards for future years will be filed with the Commission 
through a proposed rule change and the MSRB would seek to have such 
rates operative for twelve months running from January 1 to December 
31 (i.e., a calendar-year basis). In order to execute the Annual 
Rate Card Process, the MSRB determined to establish the Annual Rate 
Card on a calendar-year basis. This allows the MSRB to determine any 
prior fiscal year variances and return excess revenue or assess 
revenue shortfalls through the new Rate Card Fees. Nevertheless, as 
changing fiscal circumstances may warrant, the MSRB will retain the 
flexibility to amend the rates of assessment specified by a given 
Annual Rate Card under this modified approach in accordance with 
applicable statutory requirements governing any such proposed rule 
change.
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    The Annual Rate Card approach is expected to ensure the MSRB's 
financial model remains sustainable, while (i) adequately funding 
future MSRB expenses and also (ii) providing a greater degree of 
flexibility than the MSRB's current fee structure to mitigate the 
impact of market volatility (and effectively manage organizational 
reserve levels). The Annual Rate Card approach differs from the MSRB's 
current approach by instituting a framework of more frequent, but also 
more incremental adjustments, to the four fees that generate the vast 
majority of the MSRB's annual revenue. The increased frequency of the 
MSRB's amendments to the Rate Card Fees is meant to avoid the 
accumulation of excess reserves resulting from additional revenue 
collected due to market volatility as compared to budget expectations 
and, thereby, the need for rate amendments in the form of more 
significant, ad hoc temporary fee reductions or rebates.\59\ To ensure 
that

[[Page 36170]]

the Board's adjustments to the Annual Rate Card will remain 
incremental, the Board is proposing certain maximum caps on the amount 
of such year-to-year increases, as discussed below under the section 
entitled ``Limitations on Rate Changes to Promote Predictability and 
Stability.'' \60\
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    \59\ The proposed rule change would not amend the underlying 
activities that are the subject of such assessments. In other words, 
the respective volumes of underwriting and transaction activities of 
a dealer firm would continue to serve as the basis upon which Market 
Activity Fees are assessed under Rule A-13; and the number of 
covered professionals associated with a municipal advisory firm 
would continue to serve as the basis upon which the rate of the 
Municipal Advisor Professional Fee is assessed under Rule A-11. 
Other fees assessed on regulated entities--specifically, the initial 
registration fee, annual registration fee, late fee, municipal funds 
underwriting fee, and examination fees--will be unchanged.
    \60\ If the proposed rule change becomes operative, the MSRB 
Funding Policy will be updated as of such operative date to reflect 
this Annual Rate Card approach, including with respect to certain 
maximum caps incorporated into the Annual Rate Card Process (as 
defined infra) regarding (i) a maximum cap on targeted revenue, 
which would generally cap a year-over-year increase in the total 
targeted revenue for a Rate Card Fee at 10% when applicable, and 
(ii) a maximum cap on assessment rate increases, which would 
generally cap the maximum year-over-year increase in the assessment 
rate for a Rate Card Fee at 25% when applicable. See related 
discussion infra under ``Limitations on Rate Changes to Promote 
Predictability and Stability.'' The current MSRB Funding Policy is 
publicly available, presently at https://www.msrb.org/About-MSRB/Financial-and-Other-Information/Financial-Policies/Funding-Policy.
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    Objectives of the Annual Rate Card. Adjustments to the Annual Rate 
Card will be used to revise the Rate Card Fees to annual levels that 
the MSRB anticipates will be sufficient to: (i) cover anticipated 
expenses for the related fiscal year; \61\ (ii) maintain target 
contribution balances between fees on regulated entities in line with 
recent historical precedents; \62\ (iii) address any prior-year 
variance between the amounts of each of the Rate Card Fees actually 
collected versus budget (i.e., ``Rate Card Fee Variances''); \63\ and 
(iv) address any variance between the amount of the Board's 
organizational reserves versus the Board's target (i.e., ``Reserves 
Variances'').\64\ Fee rates may increase year-to-year, subject to 
certain limitations discussed in additional detail below, or decrease 
from year-to-year, as needed to meet these objectives.
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    \61\ As noted, the MSRB anticipates that, subsequent to the 
Annual Rate Card proposed herein and currently anticipated to be 
operative for the fifteen months from October 1, 2022 to December 
31, 2023, future Annual Rate Cards would become effective on January 
1, while the MSRB fiscal year would start on the prior October 1. 
See also Exhibit 3, ``Chart 11--Historical and Projected Revenue 
with Rate Card Model Compared to Historical and Pro Forma 
Expenses.''
    \62\ That is, this factor is intended to maintain a 
proportionate percentage amount of the MSRB's anticipated expenses 
for the fiscal year among each of the Market Activity Fees and the 
Municipal Advisor Professional Fee. See, e.g., Exhibit 3, ``Chart 
3--Historical Actual Revenue for the Rate Card Fees as a Percentage 
of the Total Rate Card Fee Revenue'' and ``Chart 14--Distribution of 
Registrants by Range of Total Fees Assessed Under Current Fee 
Structure Compared to Projected Distribution Under the Rate Card 
Model (Exclusive of Late Fees and Examination Fees)'' (reflecting 
that the distribution of registrants by range of total fees assessed 
under the current fee structure are currently anticipated to be 
relatively stable if the proposed Rate Card Amendments are 
implemented).
    \63\ A positive variance may occur, for example, when the actual 
revenue from Rate Card Fees collected for a fiscal year exceeds 
budgeted amounts (a ``Positive Rate Card Fee Variance''). See, e.g., 
Exhibit 3, ``Chart 2--Historical Budget vs. Actual Revenue for the 
Rate Card Fees,'' at Fiscal Year 2020 (reflecting the actual revenue 
generated from the Underwriting Fee and Transaction Fee exceeding 
budget). A negative variance may occur, for example, when the actual 
revenue from Rate Card Fees collected for a fiscal year is below 
budgeted amounts (a ``Negative Rate Card Fee Variance''). See, e.g., 
Exhibit 3, ``Chart 2--Historical Budget vs. Actual Revenue for the 
Rate Card Fees,'' at Fiscal Year 2020 (reflecting the actual revenue 
generated from the Technology Fee below budget).
    \64\ A positive variance above the reserves target may occur, 
for example, due to actual expense savings, actual revenue above 
budget from sources other than Rate Card Fees, or the Board's 
determination to decrease the reserves target in light of revised 
organizational needs (a ``Positive Reserves Variance''). See, e.g., 
Exhibit 3, ``Chart 12--Total Reserves vs. Target: Historical and 
Projected without Rate Card Model,'' at Fiscal Year 2021 (reflecting 
actual reserves exceeding target). A negative variance below the 
reserves target may occur, for example, due to an increase in actual 
expenses, shortfall in revenue from sources other than Rate Card 
Fees, or the Board's determination to increase the reserves target 
in light of revised organizational needs (a ``Negative Reserves 
Variance''). See, e.g., Exhibit 3, ``Chart 12--Total Reserves vs. 
Target: Historical and Projected without Rate Card Model,'' at 
Fiscal Year 2011 (reflecting actual reserves below target).
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    Process for Setting the Annual Rate Card. The Board will develop an 
Annual Rate Card for future fiscal years through a uniform process 
consistent with the objectives discussed above (the ``Annual Rate Card 
Process'').\65\ The Annual Rate Card Process is intended to establish a 
fee framework that is more transparent and predictable for the MSRB's 
stakeholders while also retaining the Board's ability to flexibly react 
to changing circumstances when establishing reasonable fees on 
regulated entities. The Annual Rate Card Process will consist of the 
activities below.
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    \65\ The amended Annual Rate Cards resulting from the Annual 
Rate Card Process will be filed with the Commission as proposed rule 
changes consistent with the Act.
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    Development of the Fiscal Year Operational Funding Level. 
Consistent with its existing budgeting process, the Board will approve 
the annual expense budget and, thereby, establish the baseline revenue 
that the organization will need to operate for that fiscal year (i.e., 
the ``Operational Funding Level''). As previously discussed, the MSRB 
anticipates the Operational Funding Level in the near-term fiscal years 
to align with the discharge of the Board's statutory mandate and 
corresponding initiatives outlined in the MSRB's current Strategic 
Plan. Once the Board sets the Operational Funding Level, any Reserves 
Variances may further adjust the amount of the Operational Funding 
Level, as discussed below.
    Reconciliation of Any Material Reserves Variances. While the Board 
currently projects that the MSRB's reserves will be at their target 
level at the end of Fiscal Year 2022, based on current circumstances, 
if there are material Reserves Variances in future fiscal years, the 
amount of such Reserves Variances will be added to or subtracted from 
the Operational Funding Level to develop a final ``Budgeted Revenue 
Target'' for a given fiscal year. For example, if there is a Negative 
Reserves Variance, the Board may determine, in accordance with the MSRB 
Funding Policy, that some or all of the reserves shortfall will be 
incorporated into the total revenue that needs to be collected for that 
fiscal year.\66\ Conversely, if there is a material Positive Reserves 
Variance, the Board may determine, in accordance with the MSRB Funding 
Policy, that some or all of the excess will offset an amount of the 
total revenue that needs to be collected for that fiscal year.\67\
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    \66\ Stated differently, the Board may decide that some or all 
of such a Negative Reserves Variance amount will be added to that 
fiscal year's Operational Funding Level when determining the 
cumulative Budgeted Revenue Target for that fiscal year. Notably, 
the Board would have the flexibility to close the Negative Reserves 
Variance (i.e., increase reserves funding to reach the target) over 
a period of multiple fiscal years, rather than all in one fiscal 
year, and so could determine to only address some of the Negative 
Reserves Variance in a given fiscal year. For example, if the 
Operational Funding Level was determined to be $45 million and there 
was a Negative Reserves Variance of $1 million (i.e., actual 
reserves were under target by $1 million), then the Board could seek 
to resolve that difference by increasing the target amount of 
revenue to be generated from the applicable Annual Rate Card by $1 
million and set a final Budgeted Revenue Target of $46 million. 
Alternatively, the Board may determine to seek to resolve the $1 
million difference over the course of two Annual Rate Cards and set 
the final Budgeted Revenue Target for the first of those two Annual 
Rate Cards at, for example, $45.5 million.
    \67\ Stated differently, the Board may decide that some or all 
of such a Positive Reserves Variance amount will be subtracted from 
that fiscal year's Operational Funding Level to determine the 
Budgeted Revenue Target for that fiscal year. As discussed in the 
immediately prior footnote, the Board would have the flexibility to 
close the Positive Reserves Variance (i.e., decrease reserves 
funding to target) over a period of multiple fiscal years, rather 
than all in one fiscal year, and so could determine to only address 
some of the Positive Reserves Variance in a given fiscal year. For 
example, if the Operational Funding Level was determined to be $45 
million and there was a Positive Reserves Variance of $1 million 
(i.e., actual reserves were over target by $1 million), then the 
Board could seek to resolve that variance by decreasing the target 
amount of revenue to be generated from the applicable Annual Rate 
Card by $1 million and set a final Budgeted Revenue Target of $44 
million. Alternatively, the Board may determine to seek to resolve 
the $1 million variance over the course of two Annual Rate Cards and 
set the final Budgeted Revenue Target for the first of those two 
Annual Rate Cards at, for example $44.5 million.

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[[Page 36171]]

    Incorporation of Other Anticipated Revenue. Revenue from sources 
other than the Rate Card Fees will be forecasted, and that estimate 
will be credited against the Budgeted Revenue Target. The amount 
remaining after these revenue estimates are incorporated will be the 
remaining revenue amount that will determine the total amount of 
funding needed to be generated from the Rate Card Fees (the ``Rate Card 
Funding Amount'').
    Reconciliation of Any Rate Card Fee Variances from the Prior Fiscal 
Year. Each of the four Rate Card Fees will be responsible for a 
proportionate amount of the overall Rate Card Funding Amount (each a 
``Proportional Contribution Amount''). The MSRB will maintain a fair 
and equitable balance of the Proportional Contribution Amounts in line 
with recent historical precedents.\68\ Beginning with the Annual Rate 
Card for Fiscal Year 2024, any Rate Card Fee Variances between the 
budget and actual results of the Rate Card Fees for the prior fiscal 
year will be added to (or subtracted from) the Proportional 
Contribution Amount (``Final Contribution Amount'').\69\ For example, 
if new issuance underwriting volume were to exceed the budgeted amount 
in Fiscal Year 2023, resulting in a Positive Rate Card Fee Variance for 
that fee, the Proportional Contribution Amount for the Underwriting Fee 
would be adjusted downward sufficient to offset the excess Underwriting 
Fee revenue collected (and vice versa). In this way, Rate Card Fee 
Variances related to a specific Rate Card Fee will only impact the 
Proportional Contribution Amount for that specific fee.
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    \68\ The Board will consider whether contribution targets should 
be revisited when setting rates each year. However, to maintain 
fairness and equity in fees, the Board intends contribution targets 
to be relatively stable over time, unless there is a durable, 
material shift in market structure or circumstances that would 
indicate that the expectations for the relative contributions from 
one or more fees are no longer reasonable or appropriate. See 
Exhibit 3, ``Chart 3--Historical Actual Revenue for the Rate Card 
Fees as a Percentage of the Total Rate Card Fee Revenue'' and also 
``Chart 14--Distribution of Registrants by Range of Total Fees 
Assessed Under Current Fee Structure Compared to Projected 
Distribution Under the Rate Card Model.''
    \69\ More specifically, a Negative Rate Card Fee Variance will 
increase the rate of assessment for a Rate Card Fee by increasing 
its Final Contribution Amount. A Positive Rate Card Fee Variance 
will reduce the rate of assessment for a Rate Card Fee by reducing 
its Final Contribution Amount. See note 63 supra and related 
discussion regarding Rate Card Fee Variances.
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    Forecast of Expected Activity and Setting the Annual Rate Card. The 
MSRB will use the best available information to set expected volume of 
activity for the coming fiscal year. Based on the anticipated volume of 
activity, the MSRB will calculate rates of assessment for each of the 
Rate Card Fees to generate their respective Final Contribution Amounts.
    Limitations on Rate Changes to Promote Predictability and 
Stability. To alleviate the potential for greater uncertainty among 
regulated entities regarding the variability of the Rate Card Fees 
under this revised approach, the Board has also established certain 
limitations on fee increases from year-to-year to promote greater 
predictability and stability.\70\
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    \70\ If the full amount of a Negative Rate Card Fee Variance 
cannot be recaptured in a single year due to these limitations, the 
remaining amount of such variance will carry over into the 
calculation of the Rate Card Funding Amount for the following fiscal 
year(s) and, all else being equal, increase the rate of assessment 
for such Rate Card Fee as described above. Conversely, there are no 
limits on potential decreases to the rates of assessment for the 
Rate Card Fees that may result from Positive Rate Card Fee Variances 
and, if warranted, Positive Reserves Variances.
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    10% Maximum Cap on Targeted Revenue. The first limitation is a 10% 
cap on the maximum year-over-year increase in the targeted revenue for 
a Rate Card Fee.\71\ This maximum cap is intended to limit large 
increases in the rate of assessment for the Rate Card Fees to ensure 
that fee increases remain incremental and, accordingly, regulated 
entities have the time to operationalize such increases into their 
business models.
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    \71\ Note that the 10% revenue cap is based on targeted revenue 
dollars. The underlying market activity volume will likely vary 
based on projected market conditions for the respective fiscal year. 
For illustrative purposes only, if the target revenue for one of the 
Rate Card Fees in Year 1 is $13,000,000, the maximum target revenue 
in Year 2 would be $14,300,000. In addition, if target revenue 
decreased in Year 2--such as to return excess revenue collected in 
Year 1--then the cap for Year 3 would be calculated based on the 
higher revenue target in the year prior to the decrease (i.e., the 
higher prior revenue level in Year 1, which is $13,000,000 in this 
example).
---------------------------------------------------------------------------

    25% Maximum Cap on Assessment Rate Increases. The second limitation 
is a 25% cap on the maximum year-over-year increase in the assessment 
rate for a Rate Card Fee.\72\ The secondary cap is intended to limit 
large increases in rates of assessment for the Rate Card Fees in 
instances where expected volume decreases significantly from the prior 
year.
---------------------------------------------------------------------------

    \72\ For illustrative purposes only, if the Trade Count Fee is 
set at $1.10 in Year 1, the maximum rate in Year 2 would be $1.38 
under the 25% maximum cap on assessment rate increases. In addition, 
if the assessment rate decreased in Year 2--such as to return excess 
revenue collected in Year 1--then the cap for Year 3 would be 
calculated based on the higher assessment rate in the year prior to 
the decrease.
---------------------------------------------------------------------------

    If the proposed rule change becomes operative, the MSRB Funding 
Policy will be updated as of such operative date to reflect the Annual 
Rate Card Process, including the Maximum Cap on Targeted Revenue and 
the Maximum Cap on Assessment Rate Increases. It should be noted that, 
pursuant to its terms, the principles described in the MSRB Funding 
Policy do not bind individual Board decisions but instead generally are 
intended as a guide to provide continuity in funding decisions and to 
help align strategic, operational, and financial planning.\73\ If the 
Annual Rate Card Process becomes operative and a future proposed 
amendment to the rates of assessment for the Rate Card Fees would 
exceed the Maximum Cap on Targeted Revenue or the Maximum Cap on 
Assessment Rate Increases, as applicable, then such future amendment 
would address any such deviation in the corresponding proposed rule 
change.
---------------------------------------------------------------------------

    \73\ See MSRB Funding Policy (link at note 26 supra).
---------------------------------------------------------------------------

Proposed Rate Card Amendments
    The proposed Rate Card Amendments are designed to promote the 
collection of reasonable fees and charges from MSRB regulated entities 
as are necessary or appropriate to defray the costs and expenses of 
operating and administering the Board.\74\ The Board believes that the 
Annual Rate Card Process enables it to consider the necessary factors 
and to sufficiently deliberate on those factors in order to arrive at 
reasonable fees and charges as may be necessary or appropriate to 
defray the costs and expenses of operating and administering the Board. 
Accordingly, among the other reasons discussed herein, the Board 
believes that the proposed rule change achieves reasonable fees and 
charges consistent with the Act because the Rate Card Amendments 
adhered to the Annual Rate Card Process. Specifically, the Board (i) 
developed the Operational Funding Level for Fiscal Year 2023 based on 
existing pro forma estimates; (ii) incorporated other anticipated 
revenue into its funding analysis; and (iii) forecasted expected volume 
activity to appropriately set the rates of assessment for each of the 
Rate Card Fees, all as further described above.\75\
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    \74\ See Section 15B(b)(2)(J) of the Act. 15 U.S.C. 78o-
4(b)(2)(J).
    \75\ The Board did not engage in the reconciliation of any 
material reserves variances because the Board anticipates that 
organizational reserves would be at or near target on the proposed 
effective date of October 1, 2022. Nor did the Board engage in the 
reconciliation of any Rate Card Fee Variances because, as noted, 
this is the first use of the Annual Rate Card approach, so no such 
Rate Card Fee Variances yet exist.

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[[Page 36172]]

    Proposed Annual Rate Card. The Rate Card Amendments would establish 
the Municipal Advisor Professional Fee specified in Rule A-11 and the 
Market Activity Fees specified in Rule A-13 in accordance with the 
chart below.

----------------------------------------------------------------------------------------------------------------
                                                                                 Current rate
                                                          Basis                      \76\         Proposed rate
----------------------------------------------------------------------------------------------------------------
Underwriting Fee..........................  Per $1,000 Par Underwritten......           $0.0275          $0.0297
Transaction Fee...........................  Per $1,000 Par Transacted........            0.0100           0.0107
Trade Count Fee...........................  Per Trade........................              1.00             1.10
Municipal Advisor Professional Fee........  Per Covered Professional.........             1,000            1,060
----------------------------------------------------------------------------------------------------------------

    These revised rates would become effective on October 1, 2022 and 
are expected to apply to activities occurring through December 31, 
2023. The Board anticipates amending the rates of assessment specified 
in this proposed Annual Rate Card with a subsequent rule filing with 
the Commission that would become effective as of January 1, 2024.\77\
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    \76\ The Rate Card Fees listed do not indicate the current 
temporary fee reductions for the Market Activity Fees that expire on 
September 30, 2022. See Rule A-13(h) and the 2021 Temporary Fee 
Reduction (citation and description at note 12 supra).
    \77\ The Rate Card Amendments are intended to revise the rates 
of assessment for the Market Activity Fees prior to the expiration 
of the 2021 Temporary Fee Reduction on October 1, 2022. As a result, 
the Board notes that its fifteen-month budgetary and rate 
assumptions are subject to a greater degree of uncertainty than 
would be expected in future years, which would only have twelve-
month budgetary and rate assumptions. Consequently, there is an 
increased risk that the Board may need to exercise its flexibility 
to revise this rate card prior to its implementation on October 1, 
2022 in accordance with the totality of the circumstances and as 
prudence necessitates. However, that is not the current expectation.
---------------------------------------------------------------------------

Purpose and Description of the Technical Amendments
    Consistent with the Board's Fee Review, the MSRB identified 
instances across Rule A-11, Rule A-12, and Rule A-13 where amendments 
would improve the clarity of application of these MSRB rules. 
Specifically, the MSRB determined that Rule A-11, Rule A-12, and Rule 
A-13 could benefit from: (i) the creation of defined terms for existing 
concepts that would help streamline the rule text and improve 
readability; (ii) the clarification of existing terms and concepts 
through the consolidation of previously published regulatory guidance 
into the proposed rule change and the direct incorporation of cross-
referenced definitions from other MSRB rules into the proposed rule 
change; and (iii) the deletion of obsolete rule language to streamline 
the rule text and avoid the potential for regulatory confusion as to 
why such obsolete language continues to be incorporated into MSRB 
rules. Accordingly, the proposed rule change would also amend Rule A-
11, Rule A-12, and Rule A-13 with certain technical, non-substantive 
amendments.
Technical Amendments to Rule A-11
    The proposed Technical Amendments would amend Rule A-11 to (i) 
create a separately defined term for the concept of a ``covered 
professional;'' (ii) reformat the applicable subsections of Rule A-11 
with the appropriate subsection designations and update the applicable 
cross-references in the rule text; and (iii) directly incorporate the 
definition for ``Prime Rate'' into the text of the rule. Importantly, 
the proposed definition for the new term ``covered professional'' is 
intended to be non-substantive and to match the existing rule text and 
understanding of the descriptive phrase in Rule A-11 regarding a 
``person associated with the municipal advisor who is qualified as a 
municipal advisor representative in accordance with Rule G-3 and for 
whom the municipal advisor has on file with the Commission a Form MA-I 
as of January 31 of each year.'' The proposed amendment would also 
incorporate the concept of an ``active'' Form MA-I to make expressly 
clear the existing application of Rule A-11 that, if a firm has filed 
an amendment to indicate that an individual is no longer an associated 
person of the municipal advisory firm or no longer engages in municipal 
advisory activities on its behalf, then that individual's Form MA-I 
would not be deemed as active for purposes of the Municipal Advisor 
Professional Fee and would not be counted in the January 31st 
calculation regarding the assessment of the Municipal Advisor 
Professional Fee. In this way, the proposed amendments are intended to 
define the same category of associated persons as the existing text of 
the rule and, all else being equal, would not capture any greater or 
fewer individuals in its scope. Consequently, the proposed defined term 
for a covered professional would not change the MSRB's current method 
for calculating and applying the amount of the Municipal Advisor 
Professional Fee under Rule A-11. The proposed amendment is merely 
intended to provide greater regulatory clarity for the application of 
Rule A-11. Therefore, the MSRB believes it is a technical, clarifying 
amendment to the rule text that would improve its readability and would 
not modify any existing regulatory burdens or obligations, nor create 
any new regulatory burdens or obligations.
    Consistent with separately defining the term ``covered 
professional,'' the proposed rule change would also reformat the 
applicable subsections of Rule A-11 with the appropriate subsection 
designations and update the applicable cross-references in the rule 
text. These related amendments are merely intended to provide internal 
consistency to Rule A-11 in light of the other amendments and, 
therefore, the MSRB believes they are technical, non-substantive 
amendments.
    Lastly, the proposed Technical Amendments to Rule A-11 would strike 
the current reference to the MSRB Registration Manual from current 
subsection (b) and directly incorporate the definition for ``Prime 
Rate'' in Supplementary Material .02. The new definition provided in 
Supplementary Material .02 would match the existing definition provided 
in the MSRB Registration Manual, stating that ``. . . the Prime Rate is 
the annual rate of the commercial prime rate of interest as last 
published in The Wall Street Journal prior to the date such charge is 
computed.'' Given that this proposed definition is the same as the one 
currently provided in the MSRB Registration Manual, the MSRB believes 
this amendment is a technical, clarifying amendment to the rule text 
that would improve regulatory understanding of Rule A-11 and would not 
modify any existing regulatory burdens or obligations, nor create any 
new regulatory burdens or obligations. Moreover, the MSRB believes that 
moving this language directly into Rule A-11 consolidates the operative 
regulatory text and, thereby, is likely to lead to less regulatory 
confusion for regulated entities, who would no longer

[[Page 36173]]

have to separately reference Rule A-11 and the MSRB Registration 
Manual.
Technical Amendments to Rule A-12
    The proposed Technical Amendments would amend Rule A-12 to (i) 
eliminate its existing reference to Rule A-13 regarding the imposition 
of late fees under Rule A-13; (ii) delete the now obsolete language in 
Supplementary Material .01 regarding the temporary suspension of late 
fees from March 1, 2020 to July 1, 2020; and (iii) directly incorporate 
the definition for ``Prime Rate'' into the text of the rule. In terms 
of deleting the reference to the imposition of late fees owed pursuant 
to Rule A-13, the MSRB believes that regulatory clarity would be 
improved if this fee concept was deleted from Rule A-12 and 
incorporated directly into Rule A-13. The proposed amendment to Rule A-
13 that would incorporate this concept in an amendment to that rule 
text and, thereby, retain this fee concept in the MSRB's fee structure 
is discussed in the following section. Notably, the deletion of this 
fee concept in Rule A-12 and its incorporation in Rule A-13 would not 
change the MSRB's current method for calculating and applying the 
amount of such late fees; and, therefore, the MSRB believes it is a 
technical, clarifying amendment to the rule text that improves its 
readability and does not modify any existing regulatory burdens or 
obligations, nor create any new regulatory burdens or obligations.
    In terms of deleting the language in Supplementary Material .01 of 
Rule A-12, the language is no longer operative at this time and, 
therefore, the MSRB believes that deleting it from the rule text would 
improve the clarity of the application of Rule A-12. Specifically, the 
deletion of the text of Supplementary Material .01 from Rule A-12 would 
help streamline the rule text and reduce the potential for regulatory 
confusion as to why it continues to be included in the text of the 
rule.
    In addition, the proposed Technical Amendments to Rule A-12 would 
strike the reference to the MSRB Registration Manual from subsection 
(d) and directly incorporate the definition for ``Prime Rate'' in 
Supplementary Material .01. The new definition provided in 
Supplementary Material .01 would match the existing definition provided 
for in the MSRB Registration Manual, stating that ``. . . the Prime 
Rate is the annual rate of the commercial prime rate of interest as 
last published in The Wall Street Journal prior to the date such charge 
is computed.'' Given that this proposed definition is the same as the 
one currently provided in the MSRB Registration Manual, the MSRB 
believes this amendment is a technical, clarifying amendment to the 
rule text that would improve regulatory understanding of Rule A-12 and 
would not modify any existing regulatory burdens or obligations, nor 
create any new regulatory burdens or obligations. Moreover, the MSRB 
believes that moving this language directly into Rule A-12 consolidates 
the operative regulatory text and, thereby, is likely to lead to less 
regulatory confusion for regulated entities, who would no longer have 
to separately reference Rule A-12 and the MSRB Registration Manual.
Technical Amendments to Rule A-13
    The proposed Technical Amendments would amend Rule A-13 to: (i) 
reformat and clarify the definition of ``primary offering'' consistent 
with the historical understanding and current application of Rule A-13; 
(ii) further clarify that certain transactions in municipal securities 
must meet the definition of a ``variable rate demand obligation'' or 
``VRDO'' under Rule G-34, on CUSIP numbers, new issue, and market 
information requirements, in order to be exempt from Transaction Fees 
pursuant to Rule A-13(d)(iii)(c)'s subsection identifying 
``Transactions Not Subject to Transaction Fee;'' \78\ (iii) uniformly 
revise Rule A-13's references to the term ``technology fee'' to ``trade 
count fee;'' (iv) incorporate the existing concept regarding the 
imposition of late fees into the rule text (which concept currently 
exists in Rule A-12, but is being deleted from Rule A-12 as part of the 
proposed amendments, as discussed above); (v) delete the language that 
would become obsolete on September 30, 2022 regarding the temporary fee 
reduction of the Market Activity Fees for activities occurring between 
April 1, 2021 through September 30, 2022; (vi) delete the now obsolete 
language in Supplementary .01 regarding the waiving of certain 
assessments for transactions with the Municipal Liquidity Facility 
established by the Federal Reserve Board of Governors; and (vii) 
directly incorporate the definition for ``Prime Rate'' into the text of 
the rule.
---------------------------------------------------------------------------

    \78\ This language is currently found in subsection (d)(iii)(c) 
of Rule A-13 and the proposed rule change would not amend its 
location.
---------------------------------------------------------------------------

    The proposed Technical Amendments regarding the definition of 
primary offering for purposes of Rule A-13 would reformat the existing 
definition to the first subsection of the rule, as well as incorporate 
clarifying revisions expressly codifying the existing application of 
Rule A-13 to private placements.\79\ Specifically, the proposed 
amendment would incorporate text expressly stating that, consistent 
with the definition for the same term found in Rule 15c2-12(f)(7) under 
the Act,\80\ certain circumstances where a dealer acts as an agent for 
an issuer to arrange the placement of a new issue of municipal 
securities would be included in the definitional scope of a ``primary 
offering'' under Rule A-13. Accordingly, the MSRB believes that these 
amendments are technical, clarifying modifications to the rule text 
that (i) would improve the readability of Rule A-13 and facilitate 
greater regulatory clarity regarding the current application of the 
Underwriting Fee and (ii) would not modify any existing regulatory 
burdens or obligations, nor create any new regulatory burdens or 
obligations.
---------------------------------------------------------------------------

    \79\ Since the inception of the Underwriting Fee, the 
application of Rule A-13 has encompassed those primary offerings 
where a municipal securities dealer acts agent for the issuer 
arranging the direct placement of new issue municipal securities 
with institutional customers or individuals. See ``Underwriting 
assessment: application to private placements'' (Feb. 22, 1982), 
available at https://msrb.org/Rules-and-Interpretations/MSRB-Rules/Administrative/Rule-A-13?tab=2. Given this amendment to Rule A-13, 
the February 22, 1982 guidance will be removed from the MSRB rule 
book as of the operative date of the Technical Amendments and will 
be archived by relocating it to a dedicated MSRB Archived 
Interpretive Guidance page at: www.msrb.org/Rules-andInterpretations/Archived-Guidance-Rule-Book-Review.aspx. The 
guidance will be clearly labeled with its date of archival and can 
be accessed for its historical value.
    \80\ 17 CFR 240.15c2-12(f)(7) (stating that the term ``primary 
offering'' means ``an offering of municipal securities directly or 
indirectly by or on behalf of an issuer of such securities'').
---------------------------------------------------------------------------

    In addition, the proposed Technical Amendments to Rule A-13 would 
clarify that only transactions in municipal securities that meet the 
definition of a ``variable rate demand obligation'' under Rule G-34 are 
exempt from Transaction Fees pursuant to Rule A-13's language regarding 
``Transactions Not Subject to Transaction Fee.'' Specifically, the 
current definitional language in that subsection of Rule A-13 does not 
precisely match the corresponding definition in Rule G-34.\81\ Yet, the 
MSRB's internal billing process currently relies on reports made

[[Page 36174]]

pursuant to Rule G-34's Short-term Obligation Rate Transparency System 
and, thereby, Rule G-34's variable rate demand obligation definition, 
to identify such transactions that should not be billed under Rule A-
13. To avoid the possibility of any potential unintended consequences 
resulting from the differences between the definition currently stated 
in Rule A-13 versus the variable rate demand obligation definition in 
Rule G-34 that is currently utilized for purposes of the MSRB's 
internal billing logic, the proposed rule change would amend Rule A-13 
to expressly cross-reference Rule G-34(e)(viii) and expressly restate 
the variable rate demand obligation definition directly in the text of 
Rule A-13. The MSRB believes that the proposed amendments to expressly 
incorporate Rule G-34's variable rate demand obligation definition into 
Rule A-13 will improve regulatory clarity for regulated entities 
regarding the MSRB's billing process and which transactions are exempt 
from certain fees. In this way, the proposed definition is intended to 
define the same category of activity and instruments as the existing 
text of the rule and, all else being equal, would not capture any 
greater or fewer transactions than the current application of the Rule 
A-13.
---------------------------------------------------------------------------

    \81\ See Rule G-34(e)(viii) (``The term `variable rate demand 
obligation' shall mean securities in which the interest rate resets 
on a periodic basis with a frequency of up to and including every 
nine months, where an investor has the option to put the issue back 
to the trustee, tender agent or other agent of the issuer or 
obligated person at any time, typically within a notification 
period, and a broker, dealer or municipal securities dealer acts as 
a remarketing agent responsible for reselling to new investors 
securities that have been tendered for purchase by a holder.'')
---------------------------------------------------------------------------

    As previously mentioned above, the proposed Technical Amendments 
would uniformly revise Rule A-13's references to the term ``technology 
fee'' to the term ``trade count fee.'' The MSRB believes that this non-
substantive change is warranted because the use of the phrase 
``technology fee'' is outdated. The MSRB believes ``trade count'' fee 
is a better descriptor because the revenue generated from this fee is 
not strictly used for technology expenses but is aggregated with the 
other fee revenue the MSRB collects and utilized for the most 
appropriate organizational uses.\82\ Accordingly, the MSRB believes 
that the term ``trade count fee'' is a more accurate descriptor and, 
thereby, less likely to lead to regulatory confusion about this fee.
---------------------------------------------------------------------------

    \82\ See Exchange Act Release No. 75751 (Aug. 24, 2015), 80 FR 
52352 (Aug. 28, 2015) File No. SR-MSRB-2015-08, at 52355 (discussing 
the fact that the revenue from the technology fee will no longer be 
designated exclusively for capitalized hardware and software 
expense).
---------------------------------------------------------------------------

    Consistent with Technical Amendments to Rule A-11 and Rule A-12, 
the proposed Technical Amendments to Rule A-13 would also copy language 
into new Rule A-13(g) incorporating the existing concept currently 
articulated in current Rule A-12(d) regarding the imposition of late 
fees on the fees assessed pursuant to Rule A-13. As noted above, 
currently, the operative rule text for this late fee concept is 
provided for in Rule A-12(d), and the proposed rule change would delete 
this language from Rule A-12(d) specific to Rule A-13's fees. 
Importantly, the incorporation of this language directly into new Rule 
A-13(g) would not change the MSRB's current method for calculating and 
applying the amount of such late fees; and, therefore, the MSRB 
believes it is a technical, clarifying amendment to the rule text that 
improves the readability of both Rule A-12 and also Rule A-13 and would 
not modify any existing regulatory burdens or obligations, nor create 
any new regulatory burdens or obligations. The MSRB believes that 
moving this language into Rule A-13 consolidates the operative 
regulatory text and, thereby, is likely to lead to less regulatory 
confusion for regulated entities, who would no longer have to 
separately reference Rule A-12 to identify that such late fees were 
applicable to the fees assessed pursuant to Rule A-13.
    Relatedly, and similar to the proposed amendments to Rule A-11 and 
Rule A-12 on the same topic of late fees, the proposed Technical 
Amendments to Rule A-13 would also directly incorporate the definition 
for ``Prime Rate'' in new Supplementary Material .02. This definition 
provided in Supplementary Material .02 would match the current 
definition provided in the MSRB Registration Manual, stating that ``. . 
. the Prime Rate is the annual rate of the commercial prime rate of 
interest as last published in The Wall Street Journal prior to the date 
such charge is computed.'' Given that this proposed definition is the 
same as the one currently provided for in the MSRB Registration Manual, 
the MSRB believes this amendment is a technical, clarifying amendment 
to the rule text that would improve regulatory understanding of Rule A-
13 and would not modify any existing regulatory burdens or obligations, 
nor create any new regulatory burdens or obligations.
    In addition, the proposed Technical Amendments to Rule A-13 would 
delete the language that would become obsolete on September 30, 2022, 
regarding the temporary fee reduction of the Market Activity Fees for 
those activities occurring between April 1, 2021 through September 30, 
2022. Given the MSRB's proposed effective date for this proposed rule 
change, the MSRB believes that this deletion would improve regulatory 
clarity for regulated entities because this language would no longer be 
operative as of October 1, 2022, and, therefore, its continued 
inclusion in the rule text may cause regulatory confusion. Similarly, 
the proposed Technical Amendments would delete the now obsolete 
language in Supplementary .01 of Rule A-13 regarding the waiving of 
certain assessments for transactions with the Municipal Liquidity 
Facility (the ``MLF'') established by the Federal Reserve Board of 
Governors. Given that the MLF and the language used to reference it 
here is no longer operative, the MSRB believes that this deletion would 
improve regulatory clarity for regulated entities.
    Lastly, consistent with all the other proposed Technical Amendments 
to Rule A-13, the proposed rule change would also reformat the 
applicable subsections of Rule A-13 with the appropriate subsection 
designation and update the applicable cross-references in the rule 
text. These related amendments are merely intended to provide internal 
consistency to Rule A-13 in light of the other amendments and, 
therefore, the MSRB believes they are technical, non-substantive 
amendments.
2. Statutory Basis
Statutory Basis for the Rate Card Amendments
    The MSRB believes that the proposed Rate Card Amendments are 
consistent with Section 15B(b)(2)(J) of the Act,\83\ which states that 
the MSRB's rules shall 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.\84\ Such rules must 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 submitted under any rule issued by the Board.\85\
---------------------------------------------------------------------------

    \83\ 15 U.S.C. 78o-4(b)(2)(J).
    \84\ Id.
    \85\ Id.
---------------------------------------------------------------------------

    The MSRB believes that the Rate Card Amendments provide for 
reasonable fees and charges to be paid by regulated entities. Moreover, 
the MSRB believes that the Rate Card Amendments are necessary and 
appropriate to fund the operation and administration of the Board and, 
thereby, satisfy the requirements of Section 15B(b)(2)(J) \86\ through 
the achievement of a reasonable

[[Page 36175]]

fee structure that ensures (i) an equitable balance of necessary and 
appropriate fees among regulated entities and (ii) a fair allocation of 
the burden of defraying the costs and expenses of the MSRB.\87\ 
Specifically, the Board believes that the Rate Card Amendments will 
achieve reasonable fees on regulated entities \88\ that (i) are 
necessary and appropriate to sustain the operation and administration 
of the Board by defraying the MSRB's anticipated Fiscal Year 2023 
operating and administrative expenses; \89\ (ii) reasonably and 
appropriately allocate fees among firms by equitably distributing fees 
in accordance with each individual firm's overall market activities; 
\90\ and (iii) reasonably and appropriately adjust for the annual 
fluctuations in the volume of market activity as compared to budget 
expectation by incorporating the actual amounts of Market Activity Fees 
collected as compared to budget into this and future rate-setting 
processes.\91\ As a result, the MSRB believes that the proposed rule 
change satisfies the applicable requirements of Section 15B(b)(2)(J) of 
the Act,\92\ and the Board has developed a reasonable and appropriate 
fee mechanism that will sufficiently fund future expenses and better 
manage reserves at appropriate levels.\93\
---------------------------------------------------------------------------

    \86\ Id.
    \87\ See, e.g., Exhibit 3, ``Chart 14--Distribution of 
Registrants by Range of Total Fees Assessed Under Current Fee 
Structure Compared to Projected Distribution Under the Rate Card 
Model (Exclusive of Late Fees and Examination Fees).''
    \88\ In addition to the following citations within this sentence 
in support of the reasonability of the Rate Card Amendments, see 
also related discussion supra under ``Board Review of the Current 
Fee Structure--Maintaining a Fair and Equitable Balance of Fees,--
Mitigating the Impact of Market Volatility, and--Funding the MSRB's 
Anticipated Near-Term Operating Expenses'' and ``Proposed Rate Card 
Amendments.'' See also related discussion infra under ``Self-
Regulatory Organization's Statement on Burden on Competition.''
    \89\ See Exhibit 3, ``Chart 10--Historical and Projected Revenue 
without Rate Card Model Compared to Historical and Pro Forma 
Expenses'' and ``Chart 11--Historical and Projected Revenue with 
Rate Card Model Compared to Historical and Pro Forma Expenses.''
    \90\ See related discussion supra under section entitled ``Board 
Review of the Current Fee Structure--Mitigating the Impact of Market 
Volatility.'' See also Exhibit 3, ``Chart 14--Distribution of 
Registrants by Range of Total Fees Assessed Under Current Fee 
Structure Compared to Projected Distribution Under the Rate Card 
Model (Exclusive of Late Fees and Examination Fees)'' (reflecting 
that the distribution of registrants by range of total fees assessed 
under the current fee structure are currently anticipated to be 
relatively stable if the proposed Rate Card Amendments are 
implemented).
    \91\ See related discussion supra under section entitled ``Board 
Review of the Current Fee Structure--Mitigating the Impact of Market 
Volatility.'' See also Exhibit 3, ``Chart 2--Historical Budget vs. 
Actual Revenue for the Rate Card Fees'' and ``Chart 4--Rate Card 
Fees: Historical Activity Volume Variance Budget to Actual.''
    \92\ 15 U.S.C. 78o-4(b)(2)(J).
    \93\ See also related discussion supra under ``Board Review of 
the Current Fee Structure--Maintaining a Fair and Equitable Balance 
of Fees,--Mitigating the Impact of Market Volatility, and--Funding 
the MSRB's Anticipated Near-Term Operating Expenses'' and ``Proposed 
Rate Card Amendments.'' See also related discussion infra under 
``Self-Regulatory Organization's Statement on Burden on 
Competition.''
---------------------------------------------------------------------------

Statutory Basis for the Technical Amendments
    The MSRB believes that the proposed Technical Amendments are 
consistent with Section 15B(b)(2)(C) of the Act,\94\ which states 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.\95\
---------------------------------------------------------------------------

    \94\ 15 U.S.C. 78o-4(b)(2)(C).
    \95\ Id.
---------------------------------------------------------------------------

    The MSRB believes that the Technical Amendments would promote just 
and equitable principles of trade by ensuring that existing rule 
provisions are accurate and understandable by: (i) creating newly 
defined terms for existing concepts that will help streamline the rule 
text and improve its readability; (ii) clarifying the application of 
existing terms and concepts through the consolidation of previously 
published regulatory guidance into the proposed rule change and the 
direct incorporation of cross-referenced definitions from other MSRB 
rules into the proposed rule change; and (iii) deleting obsolete rule 
language to streamline the rule text and avoid the potential for 
regulatory confusion as to why such language continues to be 
incorporated into MSRB rules. While the Technical Amendments would 
affect rules applicable to MSRB regulated entities, the amendments are 
meant to clarify Rule A-11, Rule A-12, and Rule A-13, respectively, and 
would not (i) modify any existing regulatory burdens or obligations, 
(ii) create any new regulatory burdens or obligations, or (iii) affect 
the registration status of any persons under MSRB rules.

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

    Section 15B(b)(2)(C) of the Exchange Act requires that MSRB rules 
not be designed to impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Exchange Act.\96\ The 
MSRB has considered the economic impact of the proposed rule change, 
including a comparison to reasonable alternative regulatory 
approaches.\97\
---------------------------------------------------------------------------

    \96\ Id.
    \97\ Id.
---------------------------------------------------------------------------

    The Annual Rate Card Process proposed by the Rate Card Amendments 
is intended to introduce a new fee structure that would (i) better 
mitigate the impact of market volatility on the MSRB's revenue 
structure (and, consequently, also better mitigate the impact of market 
volatility on the MSRB's organizational reserves), and (ii) maintain 
rates within a reasonably predictable range that, while subject to more 
incremental changes each year, would be comparably more stable over the 
long term than the MSRB's current fee structure.\98\ Furthermore, the 
Annual Rate Card process applies equally to all those MSRB regulated 
entities who may pay dealer Market Activity Fees and/or the Municipal 
Advisor Professional Fees. Accordingly, the MSRB believes that the 
proposed Annual Rate Card Process would not have an impact on 
competition and, consequently, would not impose any burden on 
competition, relieve a burden on competition, nor promote competition. 
The MSRB therefore believes the Annual Rate Card Process would not 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Exchange Act.
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    \98\ See related discussion supra under ``Board Review of the 
Current Fee Structure--Mitigating the Impact of Market Volatility'' 
and ``Proposed Annual Rate Card Approach--Limitations on Rate 
Changes to Promote Predictability and Stability'' (discussing 
various limitations on future increases of the Rate Card Fees). See 
also Exhibit 3, ``Chart 5--Historical Effective Fee Rate Changes.''
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    The increase in the rates of assessment for the Rate Card Fees 
proposed by the Rate Card Amendments (i.e., the Underwriting Fee, 
Transaction Fee, Trade Count Fee, and Municipal Advisor Professional 
Fee) are necessary and appropriate to cover the currently anticipated 
operating deficit for Fiscal Year 2023, which would have occurred even 
with the current fee structure, to ensure prudent funding for the 
operation and administration of the Board. Moreover, the Board's Rate 
Card Amendments apply equally to each MSRB regulated entity who may pay 
the Rate Card Fees and, thereby, equitably

[[Page 36176]]

and non-discriminatorily distribute the fee burden across all MSRB 
regulated entities who participate in the municipal securities market. 
In this way, no firm would be unduly burdened as compared to another 
firm. In particular, smaller municipal advisory firms would continue to 
pay less Municipal Advisor Professional Fees than larger municipal 
advisory firms, and, therefore, the Rate Card Fees proposed by the Rate 
Card Amendments are not unduly burdensome, comparatively, between small 
municipal advisory firms and large municipal advisory firms. Because 
the Rate Card Fees proposed by the Rate Card Amendments would equitably 
and non-discriminately distribute the fee burden across all MSRB 
regulated entities, the MSRB believes that the Rate Card Fees proposed 
by the Rate Card Amendments would not have an impact on competition 
and, consequently, would not impose any burden on competition, relieve 
a burden on competition, nor promote competition. Accordingly, the MSRB 
believes the Rate Card Fees proposed by the Rate Card Amendments would 
not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Exchange Act.
    The Board determined it was necessary and appropriate to conduct a 
comprehensive review of the MSRB's overall fee structure to devise a 
methodology that reasonably and appropriately defrays the costs and 
expenses associated with operating and administering the Board, with a 
goal of arriving at a longer-term solution for MSRB's revenue 
generation process that continues to ensure a sustainable financial 
position. The current fee structure has a semipermanent fixed rate of 
assessment for each of the above categories. Under the proposed Annual 
Rate Card Process, categories of fees assessed for regulated entities 
would remain the same. However, the Board proposes using an annual 
rate-setting method to recalculate fee rates every year for each 
category based on factors described herein.\99\
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    \99\ The SEC and FINRA use this approach for some fees. See SEC 
Section 31 rate fees: https://www.sec.gov/divisions/marketreg/sec31feesbasicinfo.htm; see also FINRA Trading Activity Fee (TAF) 
https://www.finra.org/rules-guidance/guidance/trading-activity-fee.
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    With the proposed Annual Rate Card Process, the Board is adopting a 
programmatic methodology for assessing the fees in each category. While 
the current categories of fees divided amongst regulated entities would 
not change (i.e., the Underwriting Fee, Transaction Fee, Trade Count 
Fee, and Municipal Advisor Professional Fee) in the proposed Annual 
Rate Card Process, the proportional share of each category would vary 
less over the long term than under the current fee structure and would 
be consistent with the average shares paid by each category of fees in 
recent fiscal years.\100\ The proposed Annual Rate Card Process allows 
the Board to review a change in budgeted expenses compared to the prior 
year and compare it to the projected market activities for each 
category of fees in the upcoming year. Any over/under assessment in the 
prior year within each class of fee payer would be factored into any 
change in the fee rate for the subsequent year. Fee rates would be 
established prior to or in the fourth quarter of each calendar year to 
be effective on the following January 1 and would last until December 
31. However, for Fiscal Year 2023, the first year of adoption, the 
effective date would start from October 1, 2022 and end on December 31, 
2023 for a fifteen-month period. Following the inaugural fifteen-month 
Annual Rate Card proposed by the Rate Card Amendments, in subsequent 
years, the fee rates for each category would be adjusted on a calendar 
year basis starting in January to compensate for any over/under 
assessment in the prior fiscal year, in addition to accommodating any 
change in other considerations (e.g., change in annual expenses, change 
in projected market volume, prior year revenue variances as compared to 
budget, change in reserve target and certain limitations on fee 
increases).
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    \100\ See Exhibit 3, ``Chart 3--Historical Actual Revenue for 
the Rate Card Fees as a Percentage of the Total Rate Card Fee 
Revenue,'' ``Chart 4--Rate Card Fees: Historical Activity Volume 
Variance Budget to Actual,'' ``Chart 5--Historical Effective Fee 
Rate Changes,'' and ``Chart 14--Distribution of Registrants by Range 
of Total Fees Assessed Under Current Fee Structure Compared to 
Projected Distribution Under the Rate Card Model (Exclusive of Late 
Fees and Examination Fees)'' (reflecting that the distribution of 
registrants by range of total fees assessed under the current fee 
structure are currently anticipated to be relatively stable if the 
proposed Rate Card Amendments are implemented). As to how the 
proportion was devised, in addition to the costs of regulatory 
activities, the cost of servicing each category of fees is also a 
consideration, as it costs the MSRB significantly more to collect 
and disseminate trading data for transparency purposes than 
municipal advisory firm professional data. It should be noted that 
all regulated entities benefit from this publicly available 
transparency information.
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    For Fiscal Year 2023, the Board is also projecting a revenue/
expense imbalance (i.e., an operating deficit) without a change in the 
current fee structure.\101\ In the past, excess organizational reserves 
buffered budget deficits (though the budgeted deficits were typically 
not realized due to excess revenue collected versus budget or expense 
savings, unless intended deficits due to rebates or temporary fee 
reductions); however, now that the excess reserves are being eliminated 
because of the Fiscal Year 2021 Temporary Fee Reduction, any deficit 
would require a fee increase in Fiscal Year 2023 to cover the gap and 
maintain a balance between revenues and expenses, regardless of the fee 
structure used. Therefore, the proposed rule change also includes a 
rate increase for the Underwriting Fee, Transaction Fee, Trade Count 
Fee, and Municipal Advisor Professional Fee for the Annual Rate Card 
proposed by the Rate Card Amendments. It should be noted that the Board 
last raised the rate for the Transaction Fee and technology fee in 
Fiscal Year 2011 when the technology fee was first imposed, and last 
raised the rate for the Underwriting Fee more than 20 years ago.\102\
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    \101\ See Exhibit 3, ``Chart 10--Historical and Projected 
Revenue without Rate Card Model Compared to Historical and Pro Forma 
Expenses.''
    \102\ The Municipal advisory firm professional fee was raised 
three times since inception in Fiscal Year 2014 (Fiscal Year 2018, 
Fiscal Year 2020, and Fiscal Year 2021).
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Necessity of the Rate Card Amendments
    The Board believes Rate Card Amendments are necessary and 
appropriate to:
    (i) maintain a fair and equitable balance of reasonable fees and 
charges among regulated entities; \103\
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    \103\ See discussion supra under ``Statutory Basis for the Rate 
Card Amendments'' near notes 87 and 88.
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    (ii) better mitigate fee assessment volatility based on Market 
Activity Fees,\104\ which has contributed to the growth of the MSRB's 
excess reserves; \105\ and
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    \104\ See related discussions supra under sections entitled 
``Board Review of the Current Fee Structure--Mitigating the Impact 
of Market Volatility'' and ``Proposed Annual Rate Card Approach--
Limitations on Rate Changes to Promote Predictability and 
Stability.'' See also Exhibit 3, ``Chart 2--Historical Budget vs. 
Actual Revenue for the Rate Card Fees,'' ``Chart 4--Rate Card Fees: 
Historical Activity Volume Variance Budget to Actual,'' and ``Chart 
5--Historical Effective Fee Rate Changes.''
    \105\ Id.
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    (iii) ensure a prudent long-term approach to organizational funding 
that addresses projected structural operating deficits under the 
current fee structure in near-term fiscal years.\106\
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    \106\ See, Exhibit 3, ``Chart 8--Historical Actual Expenses'' 
(showing a ten-year historical compound annual growth rate of 
4.2%),''Chart 10--Historical and Projected Revenue without Rate Card 
Model Compared to Historical and Pro Forma Expenses,'' ``Chart 11--
Historical and Projected Revenue with Rate Card Model Compared to 
Historical and Pro Forma Expenses,'' ``Chart 12--Total Reserves vs. 
Target: Historical and Projected without Rate Card Model,'' and 
``Chart 13--Total Reserves vs. Target: Historical and Projected with 
Rate Card Model.''

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[[Page 36177]]

    Because market events, when combined with the current fee 
structure, partially contributed to the excess reserves in recent 
years, the Board believes it is reasonable and appropriate to adopt a 
new approach to reduce the variability over time in fee assessments and 
mitigate the impact of market volatility over time by adjusting for 
budget surpluses or shortfalls annually, therefore providing a better 
mechanism for effectively managing fee rates and reserve levels.\107\ 
In the recent past, higher-than-expected new issue and secondary market 
volumes caused fees assessed from dealers to exceed budgets and, 
combined with lower-than-expected expenses, led to increases in 
reserves that necessitated rebates or temporary fee reductions to 
manage reserve levels. To reduce excess reserves, the Board instituted 
ad hoc rebates in Fiscal Year 2014 and Fiscal Year 2016 and temporary 
fee reductions via filings with the Commission for Fiscal Year 2019 and 
for Fiscal Year 2021 and Fiscal Year 2022 to reduce the excess 
reserves.\108\ As a result, there has been volatility in fee 
collections (since these are market-based fees) and MSRB's reserve 
levels in recent years.\109\ The same dynamics could also exist if 
actual new issue and secondary market activities fail to meet projected 
volumes, resulting in a revenue shortfall, which would prompt new 
filings to increase rate assessments to close the gap.
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    \107\ See related discussion supra under section entitled 
``Board Review of the Current Fee Structure--Mitigating the Impact 
of Market Volatility.'' See also Exhibit 3, ``Chart 1--Historical 
Revenue Variances: Budget vs. Actual,'' ``Chart 2--Historical Budget 
vs. Actual Revenue for the Rate Card Fees,'' and ``Chart 4--Rate 
Card Fees: Historical Activity Volume Variance Budget to Actual.''
    \108\ The 2021 Temporary Fee Reduction is the MSRB's largest 
temporary fee reduction, which was initiated during Fiscal Year 2021 
and is expected to last until September 30, 2022. Link to the 2021 
Temporary Fee Reduction and related citations supra at note 12. The 
MSRB also filed for a separate temporary fee reduction during Fiscal 
Year 2019. See Exchange Act Release No. 85400 (Mar. 22, 2019), 84 FR 
11841 (Mar., 28 2019) File No. SR-MSRB-2019-06.
    \109\ See Stakeholder Comments to the MSRB's Strategic 
Priorities (link at note 34 supra). Specifically, one commenter 
asked the MSRB to better address the volatility in revenues and the 
corresponding excess in MSRB organizational reserves. See, e.g., BDA 
Comment Letter, at p. 3-4 (link and citation at note 51).
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    Without devising a new fee approach, it is likely the MSRB would 
again be forced to deal with large reserve excesses or shortfalls on an 
ad hoc basis in the future, which would not be a sustainable path going 
forward.\110\ Specifically, the proposed Annual Rate Card Process would 
(i) better mitigate the impact of market volatility on the MSRB's 
revenue structure (and, consequently, also better mitigate the impact 
of market volatility on the MSRB's organizational reserves), and (ii) 
maintain rates within a reasonably predictable range that, while 
subject to more incremental changes each year, would be comparably more 
stable over the long term than the MSRB's current fee structure.\111\ 
In this way, the Annual Rate Process is intended to establish a fee 
framework that is more transparent and predictable for the MSRB's 
stakeholders that would mitigate market volatility over time, while 
also retaining the Board's ability to flexibly react to changing 
circumstances year-to-year when establishing reasonable fees on 
regulated entities.\112\
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    \110\ See related discussion supra under section entitled 
``Board Review of the Current Fee Structure--Mitigating the Impact 
of Market Volatility.'' See also Exhibit 3, ``Chart 1--Historical 
Revenue Variances: Budget vs. Actual,'' ``Chart 2--Historical Budget 
vs. Actual Revenue for the Rate Card Fees,'' and ``Chart 4--Rate 
Card Fees: Historical Activity Volume Variance Budget to Actual.''
    \111\ See related discussion supra under ``Proposed Annual Rate 
Card Approach--Limitations on Rate Changes to Promote Predictability 
and Stability'' (discussing various limitations on future increases 
of the Rate Card Fees). See also Exhibit 3, ``Chart 5--Historical 
Effective Fee Rate Changes.''
    \112\ See related discussion supra under ``Proposed Annual Rate 
Card Approach.''
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Baseline and Reasonable Alternative Approaches
    The current fee assessment structure is used as a baseline to 
evaluate the benefits, the costs, and the burden on competition of the 
proposed Annual Rate Card Process. Furthermore, the proposed rate 
increase for Market Activity Fees and Municipal Advisor Professional 
Fee for the Fiscal Year 2023 Annual Rate Card would have occurred 
regardless of which fee structure is adopted since excess reserves are 
being eliminated through the 2021 Temporary Fee Reduction and the need 
to cure the Fiscal Year 2023 structural budget deficit; therefore, the 
Board's assessment in this section focuses on the comparison of the two 
fee structures setting aside the increases to the rates of assessment 
for the Rate Card Fees proposed by the Rate Card Amendments for Fiscal 
Year 2023 extending to December 2023.
    In addition to the proposed new fee rate setting approach, the MSRB 
also considered a few other fee assessment options but ultimately 
decided that the proposed Rate Card Fee structure is the best approach 
to ensure a stable revenue stream for the MSRB while reducing the 
volatility from Market Activity Fees assessed and the need for ad hoc 
fee filings with the Commission, without instituting a fundamental 
change in how the MSRB assesses fees that may disrupt regulated 
entities' financial expectations and operations.
    For example, one alternative the MSRB reviewed was to include other 
sources of revenue in the Annual Rate Card Process. The MSRB evaluated 
whether to include in the variable rate card pool approach the 
municipal funds underwriting fees, annual fees, and initial fees. 
However, the MSRB ultimately decided not to include those fees for a 
variety of reasons, including the fact that each of those fees 
constitutes a much smaller proportion than the four categories in the 
proposed Annual Rate Card Process.\113\
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    \113\ See notes 14, 15, 18, and 22 supra and related discussion 
for explanations of why the Board to determined not to include 
certain fees in the Rate Card Fees and the Annual Rate Card Process.
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    Additionally, the Board also considered a different way to 
apportion fees within each class of fee payer but decided that the 
proposed Annual Rate Card Process is the best way to achieve 
proportionate revenue based on the MSRB's available information, i.e., 
underwriters pay based on their volume underwritten, trading firms pay 
based on their trading activities (in par value and trade count), and 
municipal advisory firms pay based on the headcount of a firm.
    A fee assessment method based on a percentage of each municipal 
advisory firm's revenue, for example, would not be feasible at this 
time as the MSRB does not currently require municipal advisory firms to 
report such information under existing rules; and, more importantly, 
many municipal advisory firms would likely have business activities not 
solely related to municipal advisory services. In addition, it would 
increase the burden on municipal advisory firms as municipal advisory 
firms would have the responsibility to collect the relevant information 
to be used for MSRB's fee assessment and also would then be required to 
report it. The MSRB believes at this time that the costs and burdens 
associated with collecting and reporting such information are not 
justified, and the Municipal Advisor Annual Professional Fee for each 
person associated with the firm who is qualified is a reasonable proxy 
for the size of relevant business activities conducted by each 
municipal advisory firm.
Benefits, Costs, and Burden on Competition
    The proposed amendments to MSRB rules would result in a new fee

[[Page 36178]]

approach intended to align revenues and expenses more closely and to 
reduce the year-to-year volatility in the amount of fees assessed (and, 
as a result, reduce the likelihood of accumulating excess reserves) by 
targeting each fee category to a pre-determined proportion of the total 
revenue based on respective projected volumes.\114\ The proposed Annual 
Rate Card Process would result in more frequent (annual), but smaller 
downward and upward, adjustments to keep revenues more closely aligned 
with budgeted expenses.
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    \114\ See, e.g., related discussion supra under ``Proposed 
Annual Rate Card Approach--Objectives of the Annual Rate Card'' and 
``Proposed Annual Rate Card Approach--Process for Setting the Annual 
Rate Card.''
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    The proposed Annual Rate Card Process addresses the following goals 
and issues the Board identified before initiating the Fee Review and 
would therefore achieve the intended benefits:
     Continue to maintain a fair and equitable balance of fees 
among all regulated entities, as the MSRB's new fee approach proposal 
does not change the division of fees amongst regulated entities;
     Design a durable fee structure for MSRB's long-term needs;
     Ensure that excess reserves would not likely be built up 
at a high level again by reviewing the actual reserves compared to the 
targeted reserves annually and incorporating any needed adjustments 
directly into the Annual Rate Card Process;
     Mitigate the need for an ad hoc ``rebate'' process, as any 
excess revenue would be used to reduce future years' fees; and
     Lower year-to-year variability in fee assessments, which 
would smooth out regulated entities' budget outlays.
    For the Annual Rate Card proposed by the Rate Card Amendments, the 
proposed rate increases for Market Activity Fees,\115\ which would be 
applicable to all dealers who conduct municipal market business, and 
for Municipal Advisor Professional Fee, which would be applicable to 
all municipal advisory firms, are intended to pay for the expenses of 
operating and administering the Board, including execution of the 
MSRB's Strategic Plan for ongoing technology and data investments, and 
would occur regardless of which fee structure the MSRB would adopt. 
Aside from the proposed rate increases for this Annual Rate Card, the 
Board does not believe the proposed Annual Rate Card Process would 
create any additional costs for regulated entities when compared to the 
current fee structure, as the aggregate fees assessed using the 
proposed Annual Rate Card Process over the course of multiple years 
would be equivalent to the aggregate fees assessed using the current 
fee structure, except with less year-to-year fluctuation since over or 
under revenue assessments related to market volatility would be 
operationalized through the Rate Card Process.
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    \115\ These increases would be the first rate increases to any 
of the three Market Activity Fees since Fiscal Year 2011. As 
mentioned above, the Transaction Fee was last raised in Fiscal Year 
2011 and the Trade Count Fee was initiated in Fiscal Year 2011 as 
the technology fee. The Underwriting Fee was not changed in Fiscal 
Year 2011 but was last changed in Fiscal Year 2016, when it was 
reduced. In addition, the annual and initial fees paid by both 
dealers and municipal advisory firms were last raised in Fiscal Year 
2016.
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    The proposed Annual Rate Card Process would introduce a new fee 
structure to reduce year-to-year fluctuation in the amount of market-
based fees paid by each regulated entity over time. The MSRB believes 
that the proposed Annual Rate Card Process would not have an impact on 
competition and, consequently, would not impose any burden on 
competition, relieve a burden on competition, nor promote competition. 
The MSRB believes the proposed rate increase for the Fiscal Year 2023 
Annual Rate Card (extending to December 2023) is necessary and 
appropriate to ensure prudent funding for the Board and that such fee 
increases are reasonably and fairly designed to be proportionately 
distributed across regulated entities in such a way that would not harm 
competition among regulated entities, nor otherwise harm the 
functioning of the municipal securities market. As a result, the Board 
does not believe that the proposed rate increase would result in any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as it would be applicable to 
all regulated entities. The Board also believes that no firm would be 
unduly burdened as compared to another firm in terms of the proposed 
rate increase. Dealers with different levels of underwriting and 
trading activities as well as municipal advisory firms with a range of 
headcounts would all be impacted proportionately by the proposed Annual 
Rate Card Process, including the proposed increases for the rates of 
assessment for the Fiscal Year 2023 Annual Rate Card.

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 related to the Rate Card Amendments has 
become effective pursuant to Section 19(b)(3)(A) of the Act \116\ and 
paragraph (f) of Rule 19b-4 \117\ thereunder. Because the foregoing 
proposed rule change related to the Technical Amendments does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \118\ and Rule 
19b-4(f)(6) \119\ thereunder.
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    \116\ 15 U.S.C. 78s(b)(3)(A).
    \117\ 17 CFR 240.19b-4(f).
    \118\ 15 U.S.C. 78s(b)(3)(A).
    \119\ 17 CFR 240.19b-4(f)(6).
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    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.

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 [email protected]. Please include 
File Number SR-MSRB-2022-03 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-2022-03. 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/

[[Page 36179]]

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-2022-03 and should be 
submitted on or before July 6, 2022.

    For the Commission, pursuant to delegated authority.\120\
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    \120\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-12839 Filed 6-14-22; 8:45 am]
BILLING CODE 8011-01-P