Document ID: SEC-2023-1427-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2023-12-12T05:00Z

[Federal Register Volume 88, Number 237 (Tuesday, December 12, 2023)]
[Notices]
[Pages 86188-86193]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27159]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99096; File No. SR-MSRB-2023-06]

Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Establish the 2024 Rate Card Fees for Dealers and Municipal 
Advisors Pursuant to MSRB Rules A-11 and A-13

December 6, 2023.
    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 November 30, 2023, 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, 
consistent with the MSRB's annual rate-setting process (``Annual Rate 
Card Process''): \3\ (i) Supplementary Material .01 to Rule A-11 to 
modify the rate of assessment for the annual rate card fees on 
municipal advisors for covered professionals under Rule A-11(b) (the 
``Municipal Advisor Professional Fee''); and (ii) Supplementary 
Material .01 to Rule A-13 to modify the rate of assessments for the 
annual rate card fees on brokers, dealers, and municipal securities 
dealers (collectively, ``dealers'') for certain underwriting fees under 
Rule A-13(b), transaction fees under Rule A-13(d)(i) and (ii), and 
trade count fees under Rule A-13(d)(iv)(a) and (b) (collectively, the 
``Market Activity Fees'' and, together with the Municipal Advisor 
Professional Fee, the ``Rate Card Fees''). The proposed amendments to 
Supplementary Material .01 to Rule A-11 and Supplementary Material .01 
to Rule A-13 collectively make up the ``proposed rule change''.
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    \3\ See Exchange Act Release No. 95417 (Aug. 3, 2022), 87 FR 
48530 (Aug. 9, 2022), File No. SR-MSRB-2022-06 (establishing the 
MSRB's Annual Rate Card Process with respect to the setting of 
certain fee rates each calendar year (an ``Annual Rate Card'') and 
setting the initial Rate Card Fees through December 31, 2023) (the 
``Annual Rate Card Process Notice'').
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    The MSRB has designated the proposed rule change for immediate 
effectiveness.\4\ The new Rate Card Fees reflected in the proposed rule 
change will become effective as of January 1, 2024.\5\
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    \4\ The MSRB has designated the proposed rule change as 
establishing or changing a due, fee, or other charge under Section 
19(b)(3)(A)(ii) of the Exchange Act (15 U.S.C. 78s(b)(3)(A)(ii)) and 
Rule 19b-4(f)(2) (17 CFR 240.19b-4(f)(2)) thereunder.
    \5\ Rate Card Fees for activities occurring prior to the January 
1, 2024 effectiveness of the new rates will continue to accrue at 
the rates in effect prior to that date.
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    The text of the proposed rule change is available on the MSRB's 
website at https://msrb.org/2023-SEC-Filings, at the MSRB's principal 
office, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The purpose of the proposed rule change is to amend the rate of 
assessments for the MSRB's Rate Card Fees under its Annual Rate Card 
Process. The Annual Rate Card Process was established in 2022 to create 
a process by which the four individual Rate Card Fees would be adjusted 
on an annual basis under a single rate setting process.\6\ In 
conjunction with the establishment of the Annual Rate Card Process, the 
MSRB established its initial Annual Rate Card to implement Rate Card 
Fees intended to remain in effect through calendar year 2023 (the 
``2023 Rate Card''), with new Rate Card Fees expected to be established 
for subsequent calendar years. Pursuant to this process and consistent 
with the MSRB's funding policy (the ``MSRB Funding Policy''),\7\ the 
MSRB has conducted its annual review of the Rate Card Fees and has 
determined that an adjustment is necessary and appropriate to defray 
the costs and expenses of operating and administering the MSRB.\8\ 
Accordingly, the proposed rule change would effectuate a new Annual 
Rate Card (the ``2024 Rate Card'') which will remain in effect until a 
subsequent proposed rule change amending the Rate Card Fees becomes 
effective.\9\
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    \6\ See supra note 3.
    \7\ Available at https://www.msrb.org/MSRB-Funding-Policy-0. The 
board of directors of the MSRB approved its current Funding Policy 
on July 28, 2022 with an effective date of October 1, 2022.
    \8\ See Section 15B(b)(2)(J) of the Exchange Act (15 U.S.C. 78o-
4(b)(2)(J)).
    \9\ The MSRB anticipates amending the rates of assessment for 
the Rate Card Fees specified in the 2024 Rate Card with a subsequent 
rule filing with the Commission that would become effective as of 
January 1, 2025 for the calendar year 2025.
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MSRB Review of the Proposed Rate Card Fees for Fiscal Year 2024
    The MSRB undertook the Annual Rate Card Process as described in the 
MSRB Funding Policy to establish the proposed Rate Card Fees for 2024. 
The Annual Rate Card Process is intended to establish a fee structure 
that is more transparent and predictable for the MSRB's stakeholders 
while also retaining the MSRB's flexibility to react to changing market 
or budgetary circumstances when establishing reasonable fees to be paid 
by regulated entities. The Annual Rate Card Process consists of: (i) 
developing the fiscal year operational funding level for the upcoming 
fiscal year, (ii) reconciling any material reserves variances, (iii) 
incorporating other anticipated revenue for the upcoming fiscal year, 
(iv) validating contribution targets and reconciling any rate card fee 
variances from the prior fiscal year, and (v) setting rates of 
assessment for the Annual Rate Card based on forecasted volume of 
activity for the coming fiscal year.
    Development of the Fiscal Year Operational Funding Level. In July 
2023, the board of directors of the MSRB

[[Page 86189]]

approved an annual expense budget of approximately $47.4 million for 
Fiscal Year 2024, which represents a 4.8% increase over the prior 
fiscal year, and thereby established the baseline revenue that the 
organization will need to operate (i.e., the ``Operational Funding 
Level'').\10\
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    \10\ See MSRB Fiscal Year 2024 Budget, available at https://www.msrb.org/sites/default/files/2023-09/MSRB-FY-2024-Budget-Summary.pdf.
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    Reconciliation of Any Material Reserves Variances. Material 
reserves variances versus the MSRB's reserves target at the end of the 
prior fiscal year are also considered and may be added to or subtracted 
from the Operational Funding Level to develop a final ``Budgeted 
Revenue Target'' for a given fiscal year. For the 2024 Rate Card, based 
on the current reserves target and reserves philosophy, there were no 
resulting adjustments to the Operational Funding Level; therefore, the 
Budgeted Revenue Target is equal to the Operational Funding Level of 
approximately $47.4 million.\11\
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    \11\ See MSRB Funding Policy, supra note 7.
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    Incorporation of Other Anticipated Revenue. Forecasted revenue for 
Fiscal Year 2024 from sources other than the Rate Card Fees (e.g., 
annual and initial fees, data subscriptions, municipal fund 
underwriting fees and fine revenue) was established as part of the 
annual budget approved by the board of directors in July 2023, and that 
estimate was subtracted from the Budgeted Revenue Target to determine 
the total amount of funding needed to be generated from the Rate Card 
Fees established in the 2024 Rate Card (the ``Rate Card Funding 
Amount''). For Fiscal Year 2024, approximately $6.9 million is expected 
from other revenue sources, which reduced the Rate Card Funding Amount 
for 2024 to approximately $40.5 million.\12\
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    \12\ See MSRB Fiscal Year 2024 Budget, supra note 10.
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    Validation of Contribution Targets and Reconciliation of Any Rate 
Card Fee Variances from the Prior Fiscal Year. Each of the four Rate 
Card Fees are responsible for a proportionate amount of the overall 
Rate Card Funding Amount (each a ``Proportional Contribution Amount''). 
The MSRB maintains a fair and equitable balance of the Proportional 
Contribution Amounts by calculating contribution targets in line with 
recent historical precedents. The MSRB intends to maintain fairness and 
equity in fees through relatively stable contribution targets. 
Annually, the MSRB considers the historical revenue performance of each 
fee over time to assess whether 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. For the initial Rate Card Fees 
established in 2022 under the Annual Rate Card Process for 2023, the 
MSRB established contribution targets based on the distribution of 
revenue assessed over the prior two completed fiscal years (Fiscal Year 
2020 and Fiscal Year 2021).\13\ Since that time, material changes in 
the municipal market and broader macroeconomic conditions, including 
significantly higher interest rates, have materially shifted the 
balance of market activity. Specifically, primary market activity has 
been significantly lower and secondary market activity has been 
significantly higher. As a result, the MSRB determined that a durable, 
material shift in market structure or circumstances warranted 
adjustments to the contribution targets. For the Rate Card Fees 
proposed in this filing intended to be effective beginning on January 
1, 2024, the Rate Card Funding Amount was allocated to the Rate Card 
Fees based on the following contribution targets: underwriting fee at 
30%; transaction fee at 41%; trade count fee at 21%; and Municipal 
Advisor Professional Fee at 8%.\14\ This resulted in Proportional 
Contribution Amounts as follows for Fiscal Year 2024: underwriting fee 
of $12.15 million; transaction fee of $16.61 million; trade count fee 
of $8.51 million; and Municipal Advisor Professional Fee of $3.24 
million.
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    \13\ Contribution targets used for the 2023 Rate Card Fees were: 
underwriting fee 37%, transaction fee 39%, trade count fee 16%, 
Municipal Advisor Professional Fee 8%. See the Annual Rate Card 
Process Notice, supra note 3.
    \14\ These contribution targets were determined by averaging the 
distribution of revenue assessed for Rate Card Fees over the past 
two fiscal years (Fiscal Year 2022 and Fiscal Year 2023) and the 
distribution of revenue assessed for Rate Card Fees over the past 
five fiscal years (Fiscal Year 2019 through Fiscal Year 2023). These 
two periods of time were used to reflect a balance of current market 
conditions and a longer-term historical precedent. To make the data 
comparable across fiscal years, the calculations were completed 
using the Market Activity Fee rates that were in place prior to the 
2023 Rate Card, excluding the impact of the temporary fee 
reductions, and calculated as if the Municipal Advisor Professional 
Fee rate of $1,000 per covered professional that was in place for 
Fiscal Years 2021 and 2022 had been in place for all Fiscal Years 
used in the calculations. Resulting contribution targets were 
rounded to the nearest whole percent. See MSRB Fiscal Year 2024 
Budget, supra note 10.
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    Rate Card Fee variances between the budget and actual results of 
the Rate Card Fees for Fiscal Year 2023 were added to or subtracted 
from the respective Proportional Contribution Amount for each fee 
(``Final Contribution Amount'').\15\
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    \15\ In Fiscal Year 2023, the underwriting fee had a shortfall 
of $3.37 million versus budget. This shortfall was added to the 
Proportional Contribution Amount for the underwriting fee of $12.15 
million to determine the Final Contribution Amount of $15.52 
million. The transaction fee and trade count fee had surpluses 
versus budget of $2.73 million and $4.35 million, respectively. 
These surpluses were subtracted from the Proportional Contribution 
Amounts to determine the Final Contribution Amounts of $13.88 
million for the transaction fee and $4.16 million for the trade 
count fee. Finally, the Municipal Advisor Professional Fee had a 
shortfall $0.04 million versus budget in FY 2023. This amount was 
added to the Proportion Contribution Target for the Municipal 
Advisor Professional Fee to determine the Final Contribution Amount 
of $3.28 million. See MSRB Fiscal Year 2024 Budget, supra note 10. 
See also MSRB Funding Policy, supra note 7.
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    Forecast of Expected Activity and Setting the Annual Rate Card. The 
MSRB used historical and current data to inform the expectations for 
volume of activity for the coming fiscal year. Based on the anticipated 
volume of activity, the MSRB calculated rates of assessment for each of 
the Rate Card Fees to generate their respective Final Contribution 
Amounts for Fiscal Year 2024.\16\ To the extent that the volume of 
activity for Fiscal Year 2024 varies from the expectations used to 
calculate the rates of assessment, the resulting Rate Card Fee 
Variances in Fiscal Year 2024 will be incorporated into the next Annual 
Rate Card using the same process as described in the prior paragraph. 
The rates of assessment are subject to the limitations described below 
as applicable.
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    \16\ Consistent with the MSRB Funding Policy (see supra note 7), 
the assumptions used for expected volume of activity in Fiscal Year 
2024 are as follows: underwriting fee of $400 billion in par 
underwritten; transaction fee of $1.527 trillion in par transacted 
(five-year average volume); trade count fee of 7.34 million trades 
(five-year average volume); Municipal Advisor Professional Fee of 
2,830 municipal advisor professionals. The board of directors of the 
MSRB uses the best available information and business judgment to 
set expected volumes of activity for the coming fiscal year, which 
consists of an evaluation of and reliance on historical volume and 
averages, as well as observable trends and patterns. See also MSRB 
Fiscal Year 2024 Budget, supra note 10.
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Limitations on Rate Changes To Promote Predictability and Stability
    The MSRB included in the Annual Rate Card Process limitations on 
fee increases from year-to-year to promote greater predictability and 
stability.\17\

[[Page 86190]]

This included a 25% cap on the maximum increase in the assessment rate 
for an individual Rate Card Fee based on the highest assessment rate in 
the previous two annual rate cards. This 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.\18\ 
For the 2024 Rate Card, the initial calculation for the underwriting 
fee resulted in a rate of assessment that exceeded 25% over the 
underwriting fee rate in the 2023 Rate Card. As a result, the 
underwriting fee rate for 2024 was capped at a 25% increase over the 
2023 rate. Due to this limitation, the MSRB anticipates that the full 
amount of the negative Rate Card Fee variance for the underwriting fee 
in 2023 will not be fully recaptured in 2024 and the remaining 
shortfall will carry over into the calculation for the next Annual Rate 
Card.
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    \17\ 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. 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. See the Annual Rate Card Process 
Notice, supra note 3. See also MSRB Funding Policy, supra note 7.
    \18\ There is an additional limitation of a 10% cap on the 
maximum increase in the targeted revenue for an individual Rate Card 
Fee based on the highest amount of such targeted revenue in the 
previous two Annual Rate Cards. This 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. In Fiscal Year 2024, no targeted revenue exceeded 
the 10% cap. Because the rates of assessment for Rate Card Fees are 
based on both the targeted revenue for the Rate Card Fee and the 
underlying volume or activity level on which the Rate Card Fee is 
assessed, the rates themselves are subject to a potentially higher 
level of variability than the underlying targeted revenue intended 
to be generated by each Rate Card Fee. As the Annual Rate Card 
Process returns any Positive Rate Card Fee Variances in the 
subsequent year, outperforming volume in one year cannot be used to 
buffer under-performing volume in another year. The 10% maximum cap 
on targeted revenue is intended to be the primary limitation on 
revenue increases. The 25% maximum cap on assessment rate increases 
is intended to be a supplemental limitation that balances the 
potential impact of rate changes driven by underlying volume changes 
while retaining the MSRB's ability to assess and collect sufficient 
revenue to fund the organization's expenses. See the Annual Rate 
Card Process Notice, supra note 3. See also MSRB Funding Policy, 
supra note 7.
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    Proposed 2024 Rate Card. The MSRB uses adjustments to the Annual 
Rate Card to set and revise the Rate Card Fees in the 2024 Rate Card to 
levels that it anticipates will be sufficient to: (i) cover anticipated 
expenses for the related fiscal year, (ii) maintain target contribution 
balances between fees on regulated entities, (iii) address any prior-
year variance between the amounts of each of the Rate Card Fees 
actually collected versus budget, and (iv) address any variance between 
the amount of the MSRB's organizational reserves versus the MSRB's 
reserves target.
    The proposed rule change 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.

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                                                                                   Current  rate  Proposed  rate
                                                              Basis                  for  2023       for  2024
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Underwriting Fee..............................  Per $1,000 Par Underwritten.....         $0.0297         $0.0371
Transaction Fee...............................  Per $1,000 Par Transacted.......          0.0107          0.0091
Trade Count Fee...............................  Per Trade.......................            1.10            0.57
Municipal Advisor Professional Fee............  Per Covered Professional........           1,060           1,160
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    Consistent with the MSRB Funding Policy, the proposed Rate Card 
Fees in the 2024 Rate Card reflect the formulaic results of executing 
the Annual Rate Card Process as detailed above.\19\
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    \19\ See MSRB Funding Policy, supra note 7.
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    In order to effect these changes and set the Rate Card Fees in the 
2024 Rate Card, the MSRB proposes to amend Supplementary Material .01, 
on Annual Rate Card Fee, to MSRB Rule A-11 to modify the 2023 rate 
contained therein for the Municipal Advisor Professional Fee to the 
proposed rate for 2024 identified in the chart above and to clarify 
that the calculation of the Municipal Advisor Professional Fee is based 
on the number of covered professionals as of January 31, 2024, rather 
than 2023, and as of January 31 of each subsequent, applicable year 
thereafter.\20\ The MSRB also proposes to amend the second sentence of 
Supplementary Material .01, on Annual Rate Card Fee, to MSRB Rule A-11 
to replace the initial word ``The'' with ``Any'' to clarify the process 
for future Annual Rate Card Fee amendments. In addition, the MSRB 
proposes to amend Supplementary Material .01, on Annual Rate Card Fees, 
to MSRB Rule A-13 to modify the 2023 rates contained therein for the 
underwriting fee, transaction fee and trade count fee to the respective 
proposed rates for 2024 identified in the chart above. The MSRB also 
proposes to amend Supplementary Material .01, on Annual Rate Card Fees, 
to MSRB Rule A-13 to change the month that rates of assessment become 
effective, from ``October'' to ``January'' as the reference to 
``October'' was applicable only to establish the first Annual Rate 
Card, as discussed in the Annual Rate Card Process Notice. Lastly, the 
MSRB proposes to amend the first word of the last paragraph of 
Supplementary Material .01, on Annual Rate Card Fees, to MSRB Rule A-13 
to replace the word ``The'' with ``Any'' to clarify the process for 
future Annual Rate Card Fee amendments.
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    \20\ While the MSRB anticipates amending the rates of assessment 
for the Rate Card Fees specified in the 2024 Rate Card with a 
subsequent rule filing with the Commission that would become 
effective as of January 1, 2025 for the calendar year 2025, if the 
MSRB does not make such anticipated change, the Municipal Advisor 
Professional Fee for 2025 would be based on the number of covered 
professionals as of January 31, 2025.
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    These revised rates would become effective on January 1, 2024 and 
are expected to apply to activities occurring until a subsequent 
proposed rule change amending the Rate Card Fees becomes effective. The 
MSRB 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, 2025.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(J) of the Exchange Act,\21\ which states that the 
MSRB's rules shall provide that each municipal securities broker, 
municipal securities dealer, and municipal advisor shall pay to the 
MSRB such reasonable fees and charges as may be necessary or 
appropriate to defray the costs and expenses of operating and 
administering the MSRB.\22\ Such rules must specify the amount of such 
fees and charges, which may include charges for failure to submit to 
the MSRB, or to any information system operated by the MSRB, within the 
prescribed

[[Page 86191]]

timeframes, any items of information or documents required to be 
submitted under any rule issued by the MSRB.\23\
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    \21\ 15 U.S.C. 78o-4(b)(2)(J).
    \22\ Id. See also MSRB Fiscal Year 2024 Budget, supra note 10.
    \23\ 15 U.S.C. 78o-4(b)(2)(J).
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    The MSRB believes that the 2024 Rate Card provides for reasonable 
fees and charges to be paid by regulated entities. Moreover, the MSRB 
believes that the Rate Card Fees established in the 2024 Rate Card are 
necessary and appropriate to fund the operation and administration of 
the MSRB and, thereby, satisfy the requirements of Section 15B(b)(2)(J) 
\24\ through a reasonable 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. Specifically, the MSRB believes that the 2024 
Rate Card will achieve reasonable fees to be paid by regulated entities 
that (i) are necessary and appropriate to sustain the operation and 
administration of the MSRB by defraying the MSRB's anticipated Fiscal 
Year 2024 operating and administrative expenses; (ii) reasonably and 
appropriately allocate fees among firms by equitably distributing fees 
in accordance with each individual firm's overall market activities; 
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 
and Municipal Advisor Professional Fees collected as compared to budget 
into this and future rate-setting processes.\25\ As a result, the MSRB 
believes that the proposed rule change satisfies the applicable 
requirements of Section 15B(b)(2)(J) of the Exchange Act.\26\
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    \24\ Id.
    \25\ See the Annual Rate Card Process Notice, supra note 3.
    \26\ 15 U.S.C. 78o-4(b)(2)(J).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Exchange Act \27\ 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. The 
MSRB has considered the economic impact of the proposed rule change to 
Rule A-11 and Rule A-13.\28\ The MSRB believes that the proposed Rate 
Card Fees established in the 2024 Rate Card for the calendar year of 
2024 equitably and non-discriminatorily distribute the fee burden 
across all MSRB regulated entities who participate in the municipal 
securities market. In the 2024 Rate Card, the MSRB has proposed a rate 
increase for the underwriting fee, which would apply to all dealers who 
conduct underwriting activity, and for the Municipal Advisor 
Professional Fee, which would apply to all municipal advisor firms. In 
addition, the MSRB has proposed a rate decrease for the transaction fee 
and the trade count fee, which would apply to all dealers who conduct 
trading activities. While some firms may pay a higher (lower) share of 
fees than other firms when compared to Fiscal Year 2023,\29\ the 
increases (decreases) are the result of the MSRB's reconciliation of 
Rate Card Fee variances from Fiscal Year 2023 and changes in 
contribution targets for the various fee categories, as well as the 
expected market activities for Fiscal Year 2024. As intended under the 
Annual Rate Card Process, no firm would be unduly burdened when 
compared to another firm over the course of multiple years; the MSRB 
therefore does not believe the proposed rule change would create any 
burden on competition for regulated entities, as the projected fee 
proportions for 2024 are in line with the targeted contribution balance 
previously set in connection with the 2023 Rate Card. Finally, the MSRB 
believes the proposed Rate Card Fees under the 2024 Rate Card 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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    \27\ 15 U.S.C. 78o-4(b)(2)(C).
    \28\ See Policy on the Use of Economic Analysis in MSRB 
Rulemaking, available at https://www.msrb.org/Policy-Use-Economic-Analysis-MSRB-Rulemaking. In evaluating whether there was any burden 
on competition that is not necessary or appropriate in furtherance 
of the purposes of the Exchange Act, the MSRB was guided by its 
principles that required the MSRB to consider costs and benefits of 
a rule change, its impact on efficiency, capital formation and 
competition, and the main reasonable alternative regulatory 
approaches. For those rule changes which the MSRB files for 
immediate effectiveness under Section 19(b)(3)(A) of the Exchange 
Act (15 U.S.C. 78s(b)(3)(A)), while not subject to the policy, the 
MSRB usually focuses its examination exclusively on the burden of 
competition on regulated entities.
    \29\ Because of the timing of the adoption of the Annual Rate 
Card Process, the 2023 Rate Card's effective date was October 1, 
2022, and the Rate Card Fees thereunder remain effective until this 
proposed rule change amending those rates is filed and becomes 
effective as of January 1, 2024. Thereafter, the Rate Card Fees 
under the 2024 Rate Card would be effective for calendar year 2024 
and would remain effective until a subsequent proposed rule change 
amending such Rate Card Fees is filed and becomes effective.
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    As a background to this analysis, the adoption by the MSRB in 2022 
of its Annual Rate Card Process and the 2023 Rate Card introduced a new 
fee structure that would (i) maintain a fair and equitable balance of 
fees; (ii) better mitigate the impact of market volatility on the 
MSRB's revenue and reserve structure; and (iii) maintain rates within a 
reasonably predictable range.\30\ The MSRB determined it was necessary 
and appropriate to devise a methodology that reasonably and 
appropriately defrays the costs and expenses of operating and 
administering the MSRB, with a goal of arriving at a long-term solution 
for the MSRB's revenue generation process and ensuring a sustainable 
financial position.\31\ In addition, the MSRB believes the Rate Card 
Fee framework is more transparent and predictable for the MSRB's 
stakeholders in a manner that would reduce year-to-year variability in 
the MSRB's total fee assessments while also retaining the MSRB's 
ability to react to changing circumstances when establishing reasonable 
fees.\32\
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    \30\ See Annual Rate Card Process Notice, supra note 3.
    \31\ See id.
    \32\ See id. The MSRB adopted the new approach to reduce the 
variability in fee assessments from the impact of market volatility 
by adjusting for budget surpluses or shortfalls annually, therefore 
providing a better mechanism for effectively managing fee rates and 
reserve levels.
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    The MSRB's Annual Rate Card Process devised an annual rate-setting 
method to recalculate fee rates every year for the underwriting fee, 
transaction fee, trade count fee, and Municipal Advisor Professional 
Fee.\33\ The Annual Rate Card Process was designed to have more 
frequent but smaller downward and upward adjustments to keep budgeted 
revenues more closely aligned with budgeted expenses. It allows the 
MSRB to review a change in budgeted revenues and expenses relative to 
the prior year and any change in the actual reserves relative to the 
targeted reserves, assess the projected market activities for each 
category of fees in the upcoming year and incorporate any needed 
adjustments directly into the Annual Rate Card Process. 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, in 
addition to accommodating any change in other considerations.\34\
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    \33\ See id. Fees not included in the Annual Rate Card are 
Municipal Fund Securities Underwriting Fee, Annual Assessment, 
Initial Registration Fee, Professional Qualification Exam Fees, and 
Late Fees.
    \34\ For example, change in annual expenses, change in projected 
market volume, prior year revenue changes as compared to budget, 
change in reserve target and certain limitations on fee increases.
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Effect on Competition
    The Rate Card Fees under the 2024 Rate Card established pursuant to 
the

[[Page 86192]]

proposed rule change represent the first calendar-year adjustments for 
Rate Card Fees since the adoption of the Annual Rate Card Process and 
the initial 2023 Rate Card. During Fiscal Year 2023, the MSRB collected 
below-the-projected amount from the underwriting fee and Municipal 
Advisor Professional Fee, but above-the-projected amount from the 
transaction fee and trade count fee. The results were largely driven by 
market activities that featured heavy secondary market trading but 
relatively light primary market issuance.\35\ For the 2024 Rate Card, 
the MSRB has proposed a rate increase for the underwriting fee and the 
Municipal Advisor Professional Fee, and a rate decrease for the 
transaction fee and the trade count fee. These changes in rates are 
intended to reconcile with the Rate Card fee changes from Fiscal Year 
2023 and are also based on the MSRB's Fiscal Year 2024 budget and 
projected revenues and expenses, reserve target, and projected 
activities in each category for calendar year 2024, to maintain in 
general the targeted contribution balance between fee categories.
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    \35\ For example, in 2022, the municipal securities market had 
the highest par value traded since 2008 and the highest number of 
trades since 2005, and the market continues to experience higher-
than-normal trading activities in 2023. On the other hand, the 
underwriting volume was below the yearly average in recent years 
between October 2022 and September 2023.
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    The MSRB does not believe the proposed rule change would create any 
burden on competition for regulated entities, as the projected fee 
proportions for 2024 are in line with the targeted contribution balance 
previously set in connection with the 2023 Rate Card when the MSRB 
first adopted the Annual Rate Card Process. The MSRB believes the 
proposed rule change is necessary and appropriate to ensure prudent 
funding for the MSRB and that the changes to the Rate Card Fees 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. For example, while firms with underwriting activity 
may incur higher fees in 2024 than in Fiscal Year 2023 as a result of 
an increase in the underwriting fee, the transaction and trade count 
fees tied to their trading activity is expected to decrease assuming 
the same level of trading activity compared to the prior year. In 
addition, the increases and decreases are by design intended to 
reconcile with the changes year to year such that no firm would be 
unduly burdened as compared to another firm over the course of multiple 
years and the fee burden would be distributed equitably across all MSRB 
regulated entities.
    Section 15B(b)(2)(L)(iv) of the Exchange Act \36\ requires that 
MSRB rules not impose a regulatory burden on small municipal advisors 
that is not necessary or appropriate in the public interest and for the 
protection of investors, municipal entities, and obligated persons, 
provided that there is robust protection of investors against fraud. 
The MSRB believes that the increase for the Municipal Advisor 
Professional Fee would not impose an unnecessary or inappropriate 
regulatory burden on small municipal advisors. As the total amount of 
the assessment payable by each municipal advisory firm would continue 
to be proportional to the number of Forms MA-I filed by a firm and, 
therefore, would result in lower relative assessments for smaller 
firms. Based on the number of persons engaging in municipal advisory 
activities on behalf of a firm, the total fee would therefore bear a 
reasonable relationship to the level of regulated municipal advisory 
activities that are undertaken by each firm.
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    \36\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
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    For the reasons noted above, the MSRB believes that the proposed 
rule change would not impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Exchange 
Act.\37\
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    \37\ 15 U.S.C. 78o-4(b)(2)(C).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received on the 
proposed rule change.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \38\ and paragraph (f) of Rule 19b-4 
thereunder.\39\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \38\ 15 U.S.C. 78s(b)(3)(A).
    \39\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

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

Electronic Comments

     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-2023-06 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-2023-06. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the MSRB. Do not include 
personal identifiable information in submissions; you should submit 
only information that you wish to make available publicly. We may 
redact in part or withhold entirely from publication submitted material 
that is obscene or subject to copyright protection. All submissions 
should refer to File Number SR-MSRB-2023-06 and should be submitted on 
or before January 2, 2024.

[[Page 86193]]

    For the Commission, pursuant to delegated authority.\40\
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    \40\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27159 Filed 12-11-23; 8:45 am]
BILLING CODE 8011-01-P