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The Securities Industry and Financial Markets Association (SIFMA), in a comment letter filed with the Municipal Securities Rulemaking Board (MSRB), expressed its strong support for the MSRB’s proposal to develop a website which would display information on the results of auctions of auction rate securities.
“We believe it is very important to provide information to the market on the outcome of auctions and SIFMA encourages the MSRB to establish a website for this purpose as soon as possible,” said Leslie Norwood, SIFMA managing director and associate general counsel. “The ability to access increased data on auction rate securities is extremely useful for market participants, especially in the current period of market dislocation.”
In its letter, SIFMA suggests the MSRB create and launch the website without delay, using information that is readily available such as CUSIP number, number of days of the rest period, date and time of the auction and interest rate reset for the next period. While SIFMA agrees that the expanded level of information the MSRB proposal seeks to provide should eventually be made available, it notes that launching the website should not be delayed while the technology to capture this data is developed. Going forward, an indication of whether the clearing rate is a maximum rate, and all hold rate or set by auction may also be provided on the website.
Commenting on specific aspects of the proposal, SIFMA suggests that the website should receive reset rate information directly from issuers or auction agents. If, however, the MSRB requires program dealers to submit this information, which they receive from issuers or auction agents, SIFMA believes the dealers should not be legally accountable for the accuracy of data that they do not control. In addition, a lead program dealer should be designated as the only dealer who would be required to file information, as there are multiple program dealers on most auctions. This recommendation encourages a streamlined approach while avoiding duplicate filings.
SIFMA also suggests the MSRB develop a reporting template which would not require multiple submissions of static data such as the names of program dealers, noting that this information could be revised only when necessary. Finally, SIFMA recommends making the deadline for the submission of data 6:00 p.m. Eastern Time rather than 5:00 p.m. as originally proposed to allow for auctions taking place in other time zones.
