Abstract:
In at least one aspect the invention comprises a computer-implemented method comprising: (a) electronically receiving data regarding characteristics of a plurality of tax exempt municipal bonds; (b) electronically receiving data describing a plurality of rules for inclusion of the tax exempt municipal bonds in a municipal bond index; (c) constructing a municipal bond index by applying the rules to characteristics of the plurality of tax exempt municipal bonds; and (d) quoting a municipal swap having a reference index, wherein the reference index is the municipal bond index. Other aspects comprise related computer systems and apparatuses, as well as various embodiments.

Description:
CROSS REFERENCE TO RELATED APPLICATIONS 
       [0001]    This application claims priority to U.S. Provisional Patent Application No. 60/992,563, fled Dec. 5, 2007. The entire contents of that provisional application are incorporated herein by reference. 
     
    
     INTRODUCTION 
       [0002]    The fixed-income capital markets have undergone a broad transformation due to the widespread acceptance and implementation of derivative products, such as rules-based total return indices. These indices are increasingly utilized as reference items in both fixed-income and commodity-based derivative products. 
         [0003]    Municipal structured products have also experienced rapid expansion over the past few years. The development of the municipal structured products market coincides with the increased penetration of municipal securities in global asset allocation strategies. However, the lack of investor confidence in a high-grade cash market reference curve has discouraged further participation in the municipal derivative market. Current reference curves are perceived to inadequately represent the movement of securities in the cash portion of the market. 
         [0004]    Exemplary embodiments of Municipal Index Swaps (MIS) of the present invention facilitate trading in high quality sectors of the municipal market. These products offer scalable access to the municipal market without the need for security specific analysis. MIS are based on an agreement to either go long or short the yield on a specific Municipal Bond Index over a specified period of time. A swap is an over-the-counter contract between two parties and is an unfunded transaction. The swap structure gives the receiver (long position) the economics of the Reference Index without actually owning the underlying assets. 
         [0005]    Exemplary MIS described herein are Municipal Index Swap General Obligation 5-Year (MISGO5), Municipal Index Swap General Obligation 10-Year (MISGO10), Index Swap Intermediate (MISINT), and Swap Long (MISLNG) indices. 
         [0006]    There are novel aspects of embodiments described herein, comprising swaps performed using a municipal entity as a reference item. The first aspect relates to the reference index and the manner in which it is constructed. The second aspect relates to the manner in which the municipal swap is performed or, more specifically, the quoting of municipal swaps on a total return basis relative to a published municipal benchmark. 
         [0007]    Both the indices and swap terms are described herein. There are additional novel aspects regarding the specific index rules (factors and values for selecting and weighting index constituents). 
         [0008]    In an exemplary embodiment, a municipal swap reference item with a rules based municipal index construction methodology which includes municipal securities is based on one or more of the following bond characteristics:
       final maturity or prerefunded date   market sector   credit quality   size of security or deal   issuer concentration   coupon level or frequency   tax-status   cash flow features       
 
         [0017]    Currently, it is common practice in the municipal market to enter into swap contracts based upon a rate lock format. A rate lock is an agreement to pay or receive the difference in the change in yield, with or without a spread adjustment, of one reference index versus another. The market has yet to trade a municipal based reference entity based on the change or cumulative total return of a published municipal based reference entity. 
         [0018]    In one aspect, the invention comprises a computer-implemented method comprising: (a) electronically receiving data regarding characteristics of a plurality of tax exempt municipal bonds; (b) electronically receiving data describing a plurality of rules for inclusion of the tax exempt municipal bonds in a municipal bond index; (c) constructing a municipal bond index by applying the rules to characteristics of the plurality of tax exempt municipal bonds; and (d) quoting a municipal swap having a reference index, wherein the reference index is the municipal bond index. 
         [0019]    In another aspect, the invention comprises a computer system comprising: (a) a hardware component that electronically receives data regarding characteristics of a plurality of tax exempt municipal bonds; (b) a hardware component that electronically receives data describing a plurality of rules for inclusion of the tax exempt municipal bonds in a municipal bond index; (c) a hardware component that constructs a municipal bond index by applying the rules to characteristics of the plurality of tax exempt municipal bonds; and (d) a hardware component that quotes a municipal swap having a reference index, wherein the reference index is the municipal bond index, and wherein the hardware components may be, but are not necessarily, distinct from each other. 
         [0020]    In another aspect, the invention comprises an apparatus comprising: (a) a first computer readable medium that stores data regarding characteristics of a plurality of tax exempt municipal bonds; (b) a second computer readable medium that stores data describing a plurality of rules for inclusion of the tax exempt municipal bonds in a municipal bond index; (c) a third computer readable medium that stores data describing a municipal bond index constructed by applying the rules to characteristics of the plurality of tax exempt municipal bonds; and (d) a fourth computer readable medium that stores one or more quotes regarding a municipal swap having a reference index, wherein the reference index is the municipal bond index, and wherein the computer readable mediums may be, but are not necessarily, distinct from each other. 
         [0021]    In various embodiments: (1) the swap is on a total return basis; (2) the rules comprise tax status; (3) the tax status relates to exemption from alternative minimum tax; (4) the swap is on a yield basis; (5) the municipal bond index comprises two sets of municipal bonds: a returns universe and a statistics universe; (6) the returns universe is adjusted only on a monthly basis; (7) the returns universe comprises municipal bonds whose value determines a value for the reference index; (8) composition of the statistics universe changes on a daily basis; (9) composition of the statistics universe accounts for changes due to one or more of new issuance, calls, rating changes, and remaining maturity; and (10) at the end of each month, the current statistics universe becomes the returns universe for the coming month. 
     
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
         [0022]      FIG. 1  illustrates a relationship between current (returns) and next month&#39;s (statistics) universes. 
           [0023]      FIG. 2  depicts a computer based system for processing data according to an embodiment of the invention. 
       
    
    
     DETAILED DESCRIPTION OF EMBODIMENTS 
       [0024]    Exemplary embodiments of the present invention are described in detail below. 
         [0025]    Utilizing a benchmark as part of an investment discipline enhances diversification of assets, discourages wholesale duration bets, provides objective performance measurement, encourages stable returns, and fosters efficient transaction management. A well-designed benchmark preferably has the following attributes:
       Universe is well defined.   Securities are investable.   Current characteristics are available (e.g. yield, price, coupon, duration, etc.).   Historical information is accessible.   Rules are objective and well understood. Performance is a reliable reflection of market performance.   Weightings are based on market value outstanding.   Risk characteristics are stated in advance of performance period.       
 
         [0033]    In an embodiment, a Municipal Index Swap uses a rules-based methodology. That is, to be included in the index a security must meet certain eligibility requirements. A well defined set of rules minimizes arbitrary exclusion of securities, ensures that the issues included have reasonable trading availability, and allows for maintenance of complete market data. This approach ensures that the Municipal Bond Index Swap of an embodiment is consistent, objective, replicable, reliable, and representative of the marketplace. Moreover, the index is unbiased, in that subjective factors do not enter into the selection process. 
       Exemplary Embodiments 
       [0034]    (1) Municipal Index Swap-GO 5-Year—(MISGO5)
       All Municipal bonds that comply with the following are eligible for inclusion in a 5-year GO (Aa3 or better) Municipal Bond Index Swap:   General Obligation classification, excluding insured and pre-refunded bonds.   Quality AA-/Aa3 or better.   Deal size over $75 million.   Maturity size of at least $7 million.   Dated date within 10-years.   Maturity of greater than 4-years and less than 6-years (4-5.999).   10% maximum issuer concentration.   Fixed coupon rate, excluding zeros.   Tax-Exempt/No AMT.   No secondary insured or private placement bonds.   No sinking funds.   Non-callable.       
 
         [0048]    (2) Municipal Index Swap-GO 10-Year—(MISG10)
       All Municipal bonds that comply with the following are eligible for inclusion in the 10-year GO (Aa3 or better) Municipal Bond Index Swap:   General Obligation classification, excluding insured and prerefunded bonds.   Quality AA-/Aa3 or better.   Deal size over $75 million.   Maturity size of at least $7 million.   Dated date within 10-years.   Maturity of greater than 8-years and less than 12-years (8-11.999).   10% maximum issue concentration.   Fixed coupon rate, excluding zeros.   Tax-Exempt/No AMT.   No secondary insured or private placement bonds.   No sinking funds.   Non-callable or minimum 7-years call protection.       
 
         [0062]    (3) Municipal Index Swap-Intermediate—(MISINT)
       All Municipal bonds that comply with the following are eligible for inclusion in the Intermediate (Aa3 or better) Municipal Bond Index Swap:   Deal Size over $75 million.   Maturity size of at least $7 million.   Tax-exempt/no AMT.   Excluding Housing, Hospital, and Leasing bonds.   Excluding airline and tobacco bonds.   Quality: not insured—AA-/Aa3 or better; insured—underlying A-/A3.   Dated date within 10-years.   Price of greater than and equal to 90 and less than and equal to 120.   Fixed coupon rate, excluding zeroes.   No secondary insured or private placement bonds.   No sinkers/callables within 7 years.   Maturity of greater than and equal to 8-years and less than 20-years [8, 20).   10% maximum issuer concentration.       
 
         [0077]    (4) Municipal Index Swap-Long—(MISLNG)
       All Municipal bonds that comply with the following are eligible for inclusion in the Long (Aa3 or better) Municipal Bond Index Swap:   Deal Size over $75 million.   Maturity size of at least $7 million.   Tax-exempt/no AMT.   Excluding Housing, Hospital, and Leasing bonds.   Excluding airline and tobacco bonds.   Quality: not insured—AA-/Aa3 or better; insured—underlying A-/A3.   Dated date within 10-years.   Price of greater than and equal to 90 and less than and equal to 120.   Fixed coupon rate, excluding zeroes.   No secondary insured or private placement bonds.   Sinkers/callables within 7 years.   Maturity of greater than and equal to 20-years and less than 35-years [20, 35).   10% maximum issuer concentration.   All securities in the Municipal Index Swap GO 5-Year (MISGO5) and Municipal Index Swap GO 10-Year (MISGO10) benchmarks preferably are general obligation (GO) bonds. A general obligation bond is a security that is backed by the full faith, credit and taxation powers of the issuer. GO bonds are further classified into State and Local. For example, a New York State GO bond is backed by the various taxes that the state levies. These taxes include income taxes, sales taxes, and excise taxes. Counties and cities tend to rely on property taxes for their GO bonds. The tax base of the issuing entity and its discretion are important factors in determining the pricing of GO bonds. For example, certain school districts and counties have a limit on the level of tax they may charge their residents. The tax base of the issuing city, growth rate of the local economy, property values, existing or outstanding debt obligations, and per capita debt are all important factors in judging the financial soundness of a GO bond. The MISGO5 and MISGO10 indicators preferably do not include insured, revenue, pre-refunded, or double-barreled securities.       
 
         [0093]    The tax-exempt bond market is one in which the interest from bonds that are issued and sold is exempt from federal income taxation, and may be exempt from state and local taxation. Capital gains, however, are still subject to the normal taxation rules that are applicable. States, municipalities, and counties raise the capital they need by issuing debt securities referred to as municipal debt securities. Since the majority of municipal debt securities are tax-exempt, the terms municipal market and tax-exempt market are used interchangeably. 
         [0094]    The municipal bond universe is a large, diverse, complex marketplace comprising an extremely large number of issues with relatively low market value. Other fixed income asset classes are larger on a market value basis; however, they do not have as many issues as the tax-exempt market. The large number of issues in the tax-exempt market enhances an investor&#39;s ability to diversify by credit quality, sector, and geographical location. 
         [0095]    As of Dec. 31, 2006, the municipal market contained approximately $2.5 trillion in bonds outstanding and was represented by more than 150,000 issuers. Over the last 25 years, the total issuance of municipal bonds has increased dramatically as a result of increased demand for public services, reduced federal funding, and fiscal limitations on pay-as-you-go funding of capital outlays. Another contributing factor has been the development of creative new uses for tax-exempt bonds by bond lawyers, public officials, and investment bankers. In 1980 the total new issuance of municipal bonds was $48.4 billion. In the years 2002-2006, an average of over $372.1 billion worth of new municipal bonds was issued each year; a record $408 billion was issued in 2005. 
         [0096]    Current (Returns) and Next Month (Statistics) Universe 
         [0097]    Each index of an embodiment comprises two universes of securities. The securities that are reference assets for the current month are based on a set of bonds determined at the beginning of the month and held constant until the beginning of the next month. This current (returns) universe is not adjusted for securities that become ineligible for inclusion in the index during the month (e.g., due to downgrades, called bonds, or securities falling below the maturity range), or for newly eligible issues (e.g., upgrades, newly issued bonds). The swap index performance numbers reflect the performance of the current universe over the specified holding period. By holding the universe constant throughout a month, the investor avoids having to account for a moving benchmark and is able to rebalance at the end of the month. The current (returns) universe represents the securities that are valued for all swap transactions. 
         [0098]    Next month&#39;s (statistics) universe is a dynamic set of bonds that changes daily to reflect the latest composition of the index. This universe accounts for changes due to new issuance. calls, rating changes, and remaining maturity. Changes due to new issuance, calls, or partial redemptions occur as of settlement date. Statistics such as market values, sector weightings, and various averages (e.g., coupon, duration, maturity, yield, price, etc.) are updated and reported daily. The statistics universe is not used as the reference asset for the swap. This basket is disclosed to provide insight into next month&#39;s swap index. At the end of each month, the latest statistics universe becomes the current universe for the coming month. The statistics universe allows investors to monitor changes in the index in advance of the index rebalance at month end. Active traders can modify their swaps as the index changes in preparation for the new index at the end of the month. 
         [0099]    The relationship between the current (returns) and next month&#39;s (statistics) universes during a month can be represented by two overlapping circles (see  FIG. 1 ). Circle  1  (area A) is the current universe during the month. Circle  2  (area C) is the statistics universe during the month. Area B denotes securities that are in both returns and statistics universes. Area A represents securities that have dropped out of the statistics universe during the month but remain in the returns universe, and Area C is new additions to the statistics universe that will be part of the returns universe beginning with the next month. 
         [0100]    Municipal Index results preferably are reported on a daily, month-to-date, monthly, annual, and since-inception basis. Performance is cumulative for the entire period. Intra-month cash flows contribute to monthly performance, but are not reinvested during the month and do not earn a reinvestment return. They are reinvested into the returns universe for the following month. Thus, index results over two or more months reflect monthly compounding. 
         [0101]    Market Weighting—yield and most summary statistics are fully market value weighted at the beginning of the period. 
         [0102]    Transaction Formats 
         [0103]    The indices of the above embodiments may be quoted and traded in one of two formats: a rate lock agreement and a total return basis. Exemplary details of these swap types are in provided in Appendix A and Appendix B below. Those skilled in the art will recognize, however, that other formats could be used with the present invention without departing from the scope of the invention. 
         [0104]    Embodiments of the present invention comprise computer components and computer-implemented steps that will be apparent to those skilled in the art. For example, calculations and communications can be performed electronically. An exemplary system is depicted in  FIG. 2 . As shown, computers  200  communicate via network  210  with a central server  230 . A plurality of sources of data  260 ,  270  relating to, for example, trading volume data, also communicate via network  210  with a central server  230 , processor  250 , and/or other component to calculate and transmit, for example, volume forecast data. The server  230  may be coupled to one or more storage devices  240 , one or more processors  250 , and software  260 . 
         [0105]    Other components and combinations of components may also be used to support processing data or other calculations described herein as will be evident to those skilled in the art. Server  230  may facilitate communication of data from a storage device  240  to and from processor  250 , and communications to computers  200 . Processor  250  may optionally include local or networked storage (not shown) which may be used to store temporary information. Software  260  can be installed locally at a computer  200 , processor  250  and/or centrally supported for facilitating calculations and applications. 
         [0106]    For ease of exposition, not every step or element of the present invention is described herein as part of a computer system and/or software, but those skilled in the art will recognize that each step or element may have (and typically will have) a corresponding computer system or software component. Such computer system and/or software components are therefore enabled by describing their corresponding steps or elements (that: is, their functionality), and are within the scope of the present invention. 
         [0107]    Moreover, where a computer system is described or claimed as having a processor for performing a particular function, it will be understood by those skilled in the art that such usage should not be interpreted to exclude systems where a single processor, for example, performs some or all of the tasks delegated to the various processors. That is, any combination of, or all of, the processors specified in the description and/or claims could be the same processor. All such combinations are within the scope of the invention. 
         [0108]    The present invention has been described by way of example only, and the invention is not limited by the specific embodiments described herein. As will be recognized by those skilled in the art, improvements and modifications may be made to the invention and the illustrative embodiments described herein without departing from the scope or spirit of the invention. 
       APPENDIX A 
     Municipal Index Swap—Rate Lock Format 
     Sample: Indicative Terms and Conditions 
     Date: Trade Date 
     To: Party B 
     From: Party A 
     SUBJECT: SWAP TRANSACTION (Ref: Trade ID) 
       [0109]    The purpose of this communication is to set forth the terms and conditions of the swap transaction entered into on the Trade Date referred to below (the “Swap Transaction”), between “Party A” and “Party B”. This communication constitutes a “Confirmation” as referred to in the Swap Agreement specified below. 
         [0110]    This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of ‘date’, as amended and supplemented from time to time, between Party A and Party B (the “Swap Agreement”). All provisions contained in, or incorporated by reference to, such Swap Agreement shall govern this Confirmation except as expressly modified below. 
         [0111]    Party A and Party B each represents that entering into this Transaction is authorized and does not violate any laws of its jurisdiction of organization or residence, or the terms of any agreement to which it is a party. Party A and Party B each represents that (i) it is not relying on the other party in connection with its decision to enter into this Transaction and neither party is acting as an advisor to or fiduciary of the other party in connection with this Transaction regardless of whether the other party provides it with market information or its views; (ii) it understands the risks of this Transaction and any legal, regulatory, tax, accounting and economic consequences resulting therefrom; and (iii) it has determined based upon its own judgment and upon any advice received from its own professional advisors as it has deemed necessary to consult that entering into this Transaction is appropriate for such party in light of its financial capabilities and objectives. This Confirmation incorporates the definitions and provisions contained in the 2000 ISDA Definitions as published by the International Swaps and Derivatives Association, Inc. (the “Definitions”). In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern 
         [0112]    The terms of the particular Swap Transaction to which this communication relates are as follows: 
         [0000]    
       
         
               
               
             
           
               
                   
               
             
             
               
                 Trade Date: 
                 T 
               
               
                 Termination 
                 T + 3-months (term) subject to 
               
               
                 Date: 
                 adjustment in accordance with the 
               
               
                   
                 Modified Following Business Day Convention 
               
               
                 Notional Amount: 
                 Min $10 mm 
               
               
                 INDEX 
               
               
                 FLOATING AMOUNT: 
               
               
                 Index Floating 
                 Party A 
               
               
                 Rate Payer 
               
               
                 Index Floating 
                 T + 3-months (term) subject to 
               
               
                 Rate Payer 
                 adjustment in accordance with the 
               
               
                 Payment Dates: 
                 Modified Following Business Day 
               
               
                   
                 Convention 
               
               
                 Floating Index: 
                 MIS Index: Municipal Swap Index 
               
               
                   
                 as published by with security prices 
               
               
                   
                 provided by Interactive Data Corporation 
               
               
                   
                 (IDC). In the event that IDC does not 
               
               
                   
                 provide the necessary data and Publisher 
               
               
                   
                 does not publish the Index on the Reset 
               
               
                   
                 Date, Party A shall determine the 
               
               
                   
                 MIS Index in a commercially reasonable 
               
               
                   
                 manner. 
               
               
                 PVO1: 
                 TBD 
               
               
                 Fixed Rate: 
                 TBD 
               
               
                 Index Floating 
                 For the Calculation Period, the Index 
               
               
                 Amount: 
                 Floating Amount is: 
               
               
                   
                 [Locked rate − MIS rate at termination] × 
               
               
                   
                 100 × Notional Amount/1000 × DVO1 
               
               
                   
                 If the Index Floating Amount for the 
               
               
                   
                 Calculation Period is a positive number 
               
               
                   
                 Party A will pay such amount to Party B. 
               
               
                   
                 If the Index Floating Amount is a negative 
               
               
                   
                 number Party B will pay the absolute value 
               
               
                   
                 of such amount to Party A. 
               
               
                 Designated 
                 10 Years (MISGO10) 
               
               
                 Maturity: 
               
               
                 Spread: 
                 None 
               
               
                 Reset Date 
                 The close of business on ‘date’ 
               
               
                 Other Provisions 
               
               
                 Calculation Agent: 
                 Party A, or as specified in the Swap Agreement 
               
               
                 Business Days: 
                 New York 
               
               
                 Account details: 
               
               
                 Account for payment 
                 Bank information. 
               
               
                 to Party A in: 
               
               
                 Account for Payment 
                 Bank information. 
               
               
                 to Party B in: 
               
               
                   
               
             
          
         
       
     
       APPENDIX B 
     Municipal Index Swap—TOTAL RETURN FORMAT 
     Date: [Date of Confirmation] 
     To: [Counterparty Contact Name] 
       [0113]    From: [Entity of]
 
Ref. Numbers: Risk ID: TBD/Effort ID: TBD/Global Deal ID: TBD
 
         [0114]    The purpose of this communication (this “Confirmation”) is to confirm the terms and conditions of the transaction (the “Transaction”) entered into between [Entity] (“Party A”) and [Counterparty Entity] (“Party B”) on the Trade Date specified below. This Confirmation constitutes a “Confirmation” as referred to in the Agreement specified below. 
         [0115]    This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of ______, as amended and supplemented from time to time, between Party A and Party B (the “Agreement”). All provisions contained in the Agreement shall govern this Confirmation except as expressly modified below. 
         [0116]    The definitions and provisions contained in the 2000 ISDA Definitions as published by the International Swaps and Derivatives Association, Inc. (the “Definitions”) are incorporated into this Confirmation. In the event of any inconsistency between the Definitions and the terms of this Confirmation, this Confirmation will govern. For the purpose of the Definitions, references herein to a “Transaction” shall be deemed to be references to a “Swap Transaction”. 
         [0117]    Party A and Party B each represents that entering into the Transaction is within its capacity, is duly authorized and does not violate any laws of its jurisdiction of organization or residence or the terms of any agreement to which it is a party. Party A and Party B each represents that (a) it is not relying on the other party in connection with its decision to enter into this Transaction, and neither party is acting as an advisor to or fiduciary of the other party in connection with this Transaction regardless of whether the other party provides it with market information or its views; (b) it understands the risks of the Transaction and any legal, regulatory, tax, accounting and economic consequences resulting therefrom; and (c) it has determined based upon its own judgment and upon any advice received from its own professional advisors as it has deemed necessary to consult that entering into the Transaction is appropriate for such party in light of its financial capabilities and objectives. Party A and Party B each represents that upon due execution and delivery of this Confirmation, it will constitute a legally valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable principles of bankruptcy and creditors&#39; rights generally and to equitable principles of general application. 
         [0118]    The terms of the particular Transaction to which this Confirmation relates are as follows: 
         [0119]    General Terms: 
         [0000]    
       
         
               
               
             
           
               
                   
               
             
             
               
                 General Terms: 
                   
               
               
                 Trade Date: 
                 T 
               
               
                 Effective Date: 
                 TBD 
               
               
                 Termination 
                 T + 3 month (term) subject to adjustment 
               
               
                 Date: 
                 in according with the Modified Following 
               
               
                   
                 Business Day Convention 
               
               
                 Notional Amount: 
               
               
                 Index Floating 
               
               
                 Amounts: 
               
               
                 Index Floating 
                 For each Calculation Period, the product of (i) 
               
               
                 Amount: 
                 the Notional Amount multiplied by (ii) the 
               
               
                   
                 difference of (x) the Bond Index Ratio for such 
               
               
                   
                 Calculation Period, minus (y) one 
               
               
                 Index Floating 
                 If the Index Floating Amount for a Calculation 
               
               
                 Amount Payer: 
                 Period is a positive number, Party A shall pay 
               
               
                   
                 such amount to Party B on the Index Floating 
               
               
                   
                 Amount Payment Date. If the Index Floating 
               
               
                   
                 Amount for a Calculation Period is a negative 
               
               
                   
                 number, Party B shall pay the absolute value 
               
               
                   
                 of such amount to Party A, in addition to 
               
               
                   
                 the Party B Floating Amount for such 
               
               
                   
                 Calculation Period on the Index Floating 
               
               
                   
                 Amount Payment Date. 
               
               
                 Index Floating 
                 T + 3-months (term) subject to adjustment in 
               
               
                 Amount Payer 
                 accordance with the Modified Following Business 
               
               
                 Period End Dates: 
                 Day Convention 
               
               
                 No Adjustment of 
                 Applicable 
               
               
                 Period End Dates: 
               
               
                 Delayed Payment: 
                 4 calendar days after each Index Floating Amount 
               
               
                   
                 Payer Period End Date, subject to adjustment in 
               
               
                   
                 accordance with the Modified Following Business 
               
               
                   
                 Day Convention. 
               
               
                 Bond Index 
                 For each Calculation Period, the quotient of (I) 
               
               
                 Ratio: 
                 the Bond Index as of one Business Day prior to 
               
               
                   
                 the Index Floating Amount Payer End Date divided 
               
               
                   
                 by (ii) the Bond Index as of one Business Day 
               
               
                   
                 prior to the Index Floating Amount Period End 
               
               
                   
                 Date of the previous Calculation Period. 
               
               
                   
                 For the initial Calculation Period, the Bond 
               
               
                   
                 Index Ratio will utilize the Index close as of 
               
               
                   
                 [TBD date], as (ii) in the above calculation. 
               
               
                   
                 For the final Calculation Period, the Bond Index 
               
               
                   
                 Ratio will utilize the Index close as of 
               
               
                   
                 [TBD date] as (i) in the above calculation. 
               
               
                 Bond Index: 
                 100 plus the total return since inception of the 
               
               
                   
                 Municipal Index Swap as published on page [ ] by 
               
               
                   
                 Bloomberg Financial Services, Inc. (“Bloomberg”) 
               
               
                   
                 under the captions Municipal, Muni Swap Aa3 Plus 
               
               
                   
                 GO. 
               
               
                   
                 MIS Index: Municipal Swap Index as published by 
               
               
                   
                 [publisher] with security prices provided 
               
               
                   
                 by Interactive Data Corporation (IDC). In the 
               
               
                   
                 event that IDC does not provide the necessary 
               
               
                   
                 data and publisher does not publish the Index 
               
               
                   
                 on the Reset Date, Party A shall determine the 
               
               
                   
                 MIS Index in a commercially reasonable manner. 
               
               
                 Correction 
                 If, in respect of this Transaction, the Bond Index 
               
               
                 of Index: 
                 published on a given day and used or to be used by 
               
               
                   
                 the Calculation Agent to determine the Bond Index 
               
               
                   
                 Ratio in respect of an Index Floating Amount Payer 
               
               
                   
                 Period End Date, is subsequently corrected and 
               
               
                   
                 published within 30 calendar days of the original 
               
               
                   
                 publication, either party may notify the other 
               
               
                   
                 party of (i) the correction and (ii) the amount 
               
               
                   
                 (if any) that is payable as a result of such 
               
               
                   
                 correction. Notification shall be in writing, 
               
               
                   
                 shall reasonably confirm such correction and 
               
               
                   
                 must be received not later than 30 calendar days 
               
               
                   
                 following publication of such correction. Upon 
               
               
                   
                 receipt of such notification, the party that 
               
               
                   
                 originally either received or retained such 
               
               
                   
                 amount shall, not later than three Business 
               
               
                   
                 Days after receipt of that notice, pay to the 
               
               
                   
                 other party that amount, together with interest 
               
               
                   
                 on that amount at a rate per annum equal to 
               
               
                   
                 the arithmetic average of the Federal Funds 
               
               
                   
                 (effective) Rate, as published in the H.15 
               
               
                   
                 (519), for the period from and including the 
               
               
                   
                 day on which a payment of the amount subject 
               
               
                   
                 to such correction originally was paid, to but 
               
               
                   
                 excluding the date of the refund or payment 
               
               
                   
                 resulting from that correction. 
               
               
                 Floating Amounts: 
               
               
                 Floating Rate 
                 Party B 
               
               
                 Payer: 
               
               
                 Floating Rate 
                 The first calendar day of each month, commencing 
               
               
                 Payer Period 
                 on trade date and ending on the Termination Date. 
               
               
                 End Dates: 
               
               
                 Delayed Payment: 
                 4 calendar days after each Index Floating Amount 
               
               
                   
                 Payer Period End Date, subject to adjustment in 
               
               
                   
                 accordance with the Modified Following Business 
               
               
                   
                 Day Convention. 
               
               
                 No Adjustment of 
                 Applicable 
               
               
                 Period End Dates: 
               
               
                 Floating Rate 
                 SIFMA average weekly reset rate over 3 months 
               
               
                 Option: 
               
               
                 Designated 
                 1 week 
               
               
                 Maturity: 
               
               
                 Spread: 
                 TBD 
               
               
                 Floating Rate Day 
                 Actual/Actual 
               
               
                 Count Fraction: 
               
               
                 Reset Dates: 
                 The first day of each Calculation Period 
               
               
                 Business Days: 
                 NY 
               
               
                 Miscellaneous: 
               
               
                 Calculation 
                 Party A 
               
               
                 Agent: 
               
               
                 Office: 
                 For the purposes of this Transaction, Party A 
               
               
                   
                 is not a Multibranch Party, and the Office of 
               
               
                   
                 Party B is its Head Office.