Notice2025-19382
Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change To Amend MSRB Rules A-11 and A-13 Pursuant to a Multi-Year Rate Card and To Make Related Technical Amendments
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 3, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 190 (Friday, October 3, 2025)</title>
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[Federal Register Volume 90, Number 190 (Friday, October 3, 2025)]
[Notices]
[Pages 48082-48091]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-19382]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104154; File No. SR-MSRB-2025-02]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of a Proposed Rule Change To Amend MSRB Rules
A-11 and A-13 Pursuant to a Multi-Year Rate Card and To Make Related
Technical Amendments
September 30, 2025.
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 September 30, 2025, 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
MSRB Rule A-11, on assessments for municipal advisor professionals
(``Rule A-11''), and Rule A-13, on underwriting and transaction
assessments for brokers, dealers, and municipal securities dealers
(``Rule A-13''), to establish new rates of certain assessments on
municipal advisors under Rule A-11 and brokers, dealers and municipal
securities dealers (collectively, ``dealers'' and, together with
municipal advisors, ``regulated entities'') under Rule A-13 pursuant to
a multi-year rate card, as well as to make certain related technical
amendments (the ``proposed rule change''). The MSRB requests that the
proposed rule change be approved with an effective date of January 1,
2026, provided that if approved by the Commission after January 1,
2026, the proposed rule change be made effective as of the first day of
the month following Commission approval.
The text of the proposed rule change is available on the MSRB's
website at <a href="https://msrb.org/2025-SEC-Filings">https://msrb.org/2025-SEC-Filings</a> and at the MSRB's
principal office.
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
Background
Rule A-13 currently requires dealers to pay (a) an underwriting fee
under Rule A-13(b) (the ``Underwriting Fee'') for municipal securities
purchased from an issuer by or through such dealer as part of a primary
offering,\3\ (b) a transaction fee under Rule A-13(d)(i) and (ii) (the
``Transaction Fee'') based on the par amount traded in inter-dealer
trades and customer sales, and (c) a trade count fee under Rule A-
13(d)(iv)(a) and (b) (the ``Trade Count Fee'') based on the number of
inter-dealer trades and customer sales (collectively, the ``Market
Activity Fees''). Rule A-11 currently requires municipal advisors to
pay to the MSRB a recurring annual fee (the ``Municipal Advisor
Professional Fee'' and, together with the Market Activity Fees, the
``Rate Card Fees'') for each associated person qualified as a municipal
advisor representative under MSRB Rule G-3 and for whom the municipal
advisor has on file with the Commission an active Form MA-I as of
January 31 of the applicable year (``covered professional''). The
purpose of the proposed rule change is to amend the rates of assessment
for the Rate Card Fees and to revise the MSRB's existing model for
establishing Rate Card Fees from an annual process to a multi-year
process based on the factors described below.
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\3\ Underwriting assessments charged pursuant to Rule A-13(c) to
dealers acting as underwriters of certain municipal fund securities
are not included in the assessment rates that would be amended by
this proposed rule change.
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[[Page 48083]]
The MSRB established its current rate card model in 2022 with the
stated goals of facilitating the MSRB's ability to manage its
organizational reserves year-to-year, mitigating the impact of market
volatility on fee revenue, and maintaining a fair and equitable balance
of reasonable fees and charges among regulated entities, while
prudently funding the MSRB's anticipated near-term operating
expenses.\4\ Pursuant to the current rate card model, in November 2023,
the MSRB filed with the Commission proposed amendments to Rules A-11
and A-13 to institute the rate card fees for 2024 (the ``2024 Rate Card
Proposal'').\5\ Five comment letters were submitted to the Commission
in response to the 2024 Rate Card Proposal, which highlighted concerns,
among others, related to the MSRB's rate setting processes and the
volatility and unpredictability of rates under the current rate card
model.\6\ On January 26, 2024, the MSRB submitted a response letter to
the Commission that outlined undertakings the MSRB intended to pursue
to address the concerns expressed by commenters with respect to the
MSRB's rate setting process, including the MSRB's determination to
undertake a retrospective review of this process.\7\ On January 29,
2024, the Commission temporarily suspended and instituted proceedings
to determine whether to approve or disapprove the 2024 Rate Card
Proposal, resulting in the MSRB's Rate Card Fees reverting to the rates
previously in effect.\8\ The MSRB then withdrew the 2024 Rate Card
Proposal on February 16, 2024,\9\ in order to meaningfully engage with
stakeholders to better understand and address their concerns, as well
as to fulfill its retrospective rule review commitment by conducting a
comprehensive review of the current rate card model.
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\4\ See Exchange Act Release No. 95417 (Aug. 3, 2022), 87 FR
48530, 48533-36 (Aug. 9, 2022), File No. SR-MSRB-2022-06. See also
MSRB Notice 2022-06, MSRB Revises and Resubmits Annual Rate Card
Amendments (July 29, 2022), available at <a href="https://www.msrb.org/sites/default/files/2022-09/2022-06.pdf">https://www.msrb.org/sites/default/files/2022-09/2022-06.pdf</a>. The amendments to Rules A-11 and
A-13 made by the 2022 filing, together with the MSRB's then-current
funding policy, constituted the rate card model instituted at that
time.
\5\ Exchange Act Release No. 99096 (Dec. 6, 2023), 88 FR 86188
(Dec. 12, 2023), File No. SR-MSRB-2023-06. See also MSRB Notice
2023-10, MSRB Establishes 2024 Annual Rate Card Fees for Dealers and
Municipal Advisors (Nov. 30, 2023), available at <a href="https://www.msrb.org/sites/default/files/2023-11/2023-10.pdf">https://www.msrb.org/sites/default/files/2023-11/2023-10.pdf</a>. The MSRB filed
the 2024 Rate Card Filing for immediate effectiveness.
\6\ Comments are available at <a href="https://www.sec.gov/comments/sr-msrb-2023-06/srmsrb202306.htm">https://www.sec.gov/comments/sr-msrb-2023-06/srmsrb202306.htm</a>.
\7\ See <a href="https://www.sec.gov/comments/sr-msrb-2023-06/srmsrb202306-416059-985442.pdf">https://www.sec.gov/comments/sr-msrb-2023-06/srmsrb202306-416059-985442.pdf</a> (the ``2024 MSRB Response Letter'').
\8\ Exchange Act Release No. 99444 (Jan. 29, 2024), 89 FR 7424
(Feb. 2, 2024), File No. SR-MSRB-2023-06. The 2024 Rate Card Fees
applied to activity subject to the Rate Card Fees occurring between
January 1, 2024 and January 28, 2024. See also MSRB Notice 2024-02,
Current Dealer and Municipal Advisor Fees Upon SEC Suspension of
2024 Annual Rate Card Fees (January 30, 2024), available at <a href="https://www.msrb.org/sites/default/files/2024-01/2024-02.pdf">https://www.msrb.org/sites/default/files/2024-01/2024-02.pdf</a>.
\9\ Exchange Act Release No. 99577 (Feb. 21, 2024), 89 FR 14552
(Feb. 27, 2024), File No. SR-MSRB-2023-06. See also MSRB Notice
2024-04, Existing Dealer and Municipal Advisor Fees Maintained Upon
Withdrawal of 2024 Annual Rate Card (February 16, 2024), available
at <a href="https://www.msrb.org/sites/default/files/2024-02/2024-04.pdf">https://www.msrb.org/sites/default/files/2024-02/2024-04.pdf</a>.
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Since withdrawing the 2024 Rate Card Proposal, the MSRB engaged in
what it believes to be substantive outreach with stakeholders,
particularly those who submitted comments in response to that proposal,
to better distill and understand the most important concerns that the
MSRB could meaningfully address in the near term and in the future. As
one example of this substantive outreach, the MSRB issued a Request for
Information (``RFI'') on its rate card process on October 30, 2024,
soliciting feedback from stakeholders on the MSRB's rate setting
process, the distribution of fees across regulated entities generally,
and the MSRB's management of its organizational reserve funds.\10\ The
MSRB received comments from six commenters in response to the RFI,
focusing on, among other matters, the volatility and unpredictability
of the current rate card model, the fee distribution between dealers
and municipal advisors, and strategies for management of reserve
levels.\11\
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\10\ See MSRB Notice 2024-14, Request for Information on the
MSRB's Rate Card Process (Oct. 30, 2024), available at <a href="https://www.msrb.org/sites/default/files/2024-10/MSRB-Notice-2024-14.pdf">https://www.msrb.org/sites/default/files/2024-10/MSRB-Notice-2024-14.pdf</a>.
Prior to publication of the RFI and informing many aspects of the
questions posed therein, the MSRB held outreach meetings with
industry groups representing regulated entities and other
stakeholders to discuss the MSRB's budget and rate card process,
including joint meetings with the National Association of Municipal
Advisors (``NAMA''), Bond Dealers of America (``BDA'') and the
Securities Industry and Financial Markets Association (``SIFMA'') on
March 14, 2024, and with the American Securities Association
(``ASA''), the Investment Company Institute, the Government Finance
Officers Association, the National Federation of Municipal Analysts,
NAMA, BDA and SIFMA on April 16, 2024. The MSRB also met
individually with SIFMA on June 17, 2024, NAMA on June 18, 2024, ASA
on June 20, 2024 and BDA on June 20, 2024. Additional examples of
such outreach include meetings held after the MSRB received comments
on the RFI with industry groups representing regulated entities to
further discuss the MSRB's budget and Rate Card Fees, including
meetings with NAMA on July 8 and 21, 2025; BDA on July 11 and 21,
2025; and SIFMA on July 15, 2025.
\11\ See infra Self-Regulatory Organization's Statement on
Comments on the Proposed Rule Change Received from Members,
Participants, or Others. Comments were received from Susan Gaffney,
Executive Director, NAMA (Jan. 28, 2025) (``NAMA Letter''); Thomas
F. Huestis, Senior Managing Director, Public Resources Advisory
Group, Inc. (Jan. 27, 2025) (``PRAG Letter''); Leslie M. Norwood,
Managing Director and Associate General Counsel and Gerald O'Hara,
Vice President and Assistant General Counsel, SIFMA (Jan. 28, 2025)
(``SIFMA Letter''); Michael Decker, Senior Vice President, BDA (Jan.
28, 2025) (``BDA Letter''); Jessica R. Giroux, General Counsel and
Head of Fixed Income Policy, ASA (Jan. 28, 2025) (``ASA Letter'');
and Robert Laorno, General Counsel, ICE Bonds Securities Corporation
(Jan. 21, 2025) (``ICE Bonds Letter'').
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After carefully considering the RFI responses and feedback received
from the MSRB's outreach to stakeholders,\12\ the MSRB has determined
to revise the current fee setting process from an annual rate card
model to a multi-year process and to propose new Municipal Advisor
Professional Fees assessed pursuant to Rule A-11 and Market Activity
Fees assessed pursuant to Rule A-13 based on the new multi-year rate
setting model (the ``Multi-Year Rate Card Process''), as described
below.
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\12\ See supra note 10.
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The new Multi-Year Rate Card Process is designed to enhance the
stability and predictability of Rate Card Fees, maintain fairness of
assessments on regulated entities, and allow the MSRB to manage
organizational reserves responsibly while minimizing uncertainty and
possible operational disruptions to regulated entities that could
result from more frequent and less predictable changes in assessment
rates.\13\ To that end, the proposed rule change implements a revised
approach to fee setting, intended to address stakeholder concerns, by
moving the process for determining Rate Card Fees from an annually
calculated adjustment to a fixed multi-year rate schedule for Rate Card
Fees, establishing appropriate parameters to limit the degree of annual
changes to Rate Card Fees, establishing a framework to effectively
address surplus reserves through rate adjustments to Market Activity
Fees, and maintaining the target balance of Rate Card Fees between
dealers and municipal advisors.
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\13\ These proposed rule changes are intended to address the
primary concerns of regulated entities that can reasonably be
implemented in the course of establishing this new set of Rate Card
Fees for 2026-2029 without undue delay. The MSRB remains committed
to on-going engagement with stakeholders to continue to explore
whether additional, longer-term changes to the MSRB's approach
should be implemented in the course of developing future rate cards
beyond 2029.
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Proposed Multi-Year Rate Card Fees
To provide greater predictability and stability of the Rate Card
Fees, the proposed rule change would establish Rate Card Fees for the
next four calendar years: 2026, 2027, 2028, and
[[Page 48084]]
2029 (the ``proposed Multi-Year Rate Card'').\14\ The Municipal Advisor
Professional Fee included in the Rate Card Fees for each of these years
would be operative from January 1 of each calendar year until December
31 for that year and the Market Activity Fees included in the Rate Card
Fees would be operative from January 1, 2026 until December 31,
2029.\15\ The MSRB anticipates that it would adopt a new set of Rate
Card Fees established through the Multi-Year Rate Card Process to
become effective beginning on January 1, 2030.\16\ Any subsequent
multi-year rate cards would be established by amendment to Rules A-11
and A-13 and in accordance with the principles and guidelines of the
MSRB's revised funding policy, available at <a href="https://www.msrb.org/MSRB-Funding-Policy-1">https://www.msrb.org/MSRB-Funding-Policy-1</a> (the ``Revised Funding Policy'').\17\
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\14\ The Municipal Advisor Professional Fee included in the
proposed new Rate Card Fees, for each year covered by the proposed
rule change, would be set out in Supplementary Material .01 of Rule
A-11. Each of the Market Activity Fees included in the proposed new
Rate Card Fees would be set out in Supplementary Material .01(a)(i)-
(iii) of Rule A-13.
\15\ If the proposed rule change is approved with an effective
date after January 1, 2026, the Rate Card Fees would instead become
operative from the first day of the month following Commission
approval, with the end dates for the respective Rate Card Fees
remaining unchanged.
\16\ If no new Rate Card Fees are established by January 1,
2030, the then-effective Rate Card Fees for 2029 would remain in
effect until any new fees are established.
\17\ The Revised Funding Policy becomes effective as of October
1, 2025. Any future revisions to the Revised Funding Policy,
including any changes to the provisions relating to the Multi-Year
Rate Card Process and to organizational reserve requirements, must
be approved by the MSRB's board of directors and would be posted on
the MSRB website at <a href="https://www.msrb.org/MSRB-Funding-Policy-1">https://www.msrb.org/MSRB-Funding-Policy-1</a>.
Revisions to the Revised Funding Policy would not result in changes
to the rates of filed Rate Card Fees absent a rule filing with the
Commission, but instead would have an impact on future rate-setting
through MSRB rulemaking. The proposed rule change would amend
Supplementary Material .01 to Rule A-11 and Supplementary Material
.01(b) to Rule A-13 to delete language describing aspects of the
prior rate setting process that would be superseded by the Multi-
Year Rate Card Process, to explicitly state that if no new rate card
is established at the end of the period covered by the proposed rule
change then the applicable rates would remain at the same level as
in effect prior to the end of that period, and to provide for the
on-going availability of the Revised Funding Policy, and any future
revisions thereto, on the MSRB website so long as the Revised
Funding Policy sets forth, in whole or in part, the MSRB's rate card
process.
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As discussed below, due to both the accumulation of excess reserves
(in part resulting from the suspension and subsequent withdrawal of the
2024 Rate Card Proposal, as well as heightened Market Activity Fee
revenues during a period of record trading and issuance volume \18\)
and a reduction in the MSRB's reserves target, the MSRB has determined
to reduce excess reserves through credits (``Temporary Credits'') of
45% applied to Market Activity Fees in 2026 and 2027, which would
produce a reduction in the amounts to be assessed to and paid by
dealers for Market Activity Fees during such years.\19\ The Rate Card
Fees, together with the net amount of Rate Card Fee assessments (taking
into account the Temporary Credits),\20\ are set forth in the following
table:
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\18\ See infra note 47.
\19\ The Temporary Credits that would be applied to the Market
Activity Fees included in the proposed new Rate Card Fees for the
calendar years 2026 and 2027 would be set out in Supplementary
Material .01(c) of Rule A-13.
\20\ The net amount of Market Activity Fees, taking into account
any applicable Temporary Credits, would be set out in Supplementary
Material .01(c)(i)-(iii) of Rule A-13.
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Assessment/
credit basis 2026 2027 2028 2029 *
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Underwriting Fee.............. Per $1,000 Par $0.0297 $0.0297 $0.0297 $0.0297
Underwritten.
45% Temporary (0.0134) (0.0134) 0 0
Credit.
Net Rate of 0.0163 0.0163 0.0297 0.0297
Assessment.
Transaction Fee............... Per 1,000 Par 0.0107 0.0107 0.0107 0.0107
Transacted.
45% Temporary (0.0048) (0.0048) 0 0
Credit.
Net Rate of 0.0059 0.0059 0.0107 0.0107
Assessment.
Trade Count Fee............... Per Trade....... 1.10 1.10 1.10 1.10
45% Temporary (0.49) (0.49) 0 0
Credit.
Net Rate of 0.61 0.61 1.10 1.10
Assessment.
Municipal Advisor Professional Per Covered 1,130 1,200 1,270 1,340
Fee **. Professional.
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* As noted above, if no new Rate Card Fees are established by January 1, 2030, the then-effective Rate Card Fees
for 2029 would remain in effect until any new fees are established.
** The Temporary Credits included in this proposed rule change would not apply to the Municipal Advisor
Professional Fee.
Multi-Year Rate Card Process and Reserves Management
The Multi-Year Rate Card Process is designed to address
stakeholders' concerns related to fee volatility inherent in the
current annual rate setting process and to facilitate the MSRB's
management of its organizational reserves. A multi-year rate card is a
fixed rate schedule for its multi-year term (four years in the case of
the proposed rule change) and is not intended to be modified during its
effective term, except as described below.\21\ In developing a fixed
set of Rate Card Fees for a multi-year period under the Multi-Year Rate
Card Process, the MSRB utilized a five-year historical average of
market volume for its underlying assumptions to smooth the annual
volatility in market activity.\22\ The Multi-Year Rate Card Process
seeks to provide certainty and enhanced stability in rates across the
multi-year period as compared to the existing annual process, with the
Revised Funding Policy reducing the maximum annual increase or decrease
in any baseline Rate Card Fee to 15% (the ``Annual Rate Change Limit'')
\23\ within a multi-year rate card period, as compared to the 25% cap
on increases and no cap on decreases that existed under the annual rate
card process, subject to potential Temporary Credits, as discussed
below.
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\21\ See Revised Funding Policy, supra note 17, at ``Multi-Year
Rate Card''.
\22\ The five-year historical averages of market volume used in
connection with the proposed rule change are based on the MSRB's
fiscal years 2021-2024 and its projections for fiscal year 2025. The
five-year market activity averages MSRB used are: $474 billion par
underwritten, $1.64 trillion par transacted, and 9.2 million trades.
Use of the five-year average is intended to mitigate the impact of
market volatility from year-to-year. For example, par underwritten
was $367 billion in fiscal year 2023 and $498 billion in fiscal year
2024.
\23\ The Annual Rate Change Limit would be set out in
Supplementary Material .01 of Rule A-11 and Supplementary Material
.01(b) of Rule A-13. See also Revised Funding Policy, supra note 17,
at ``Multi-Year Rate Card''.
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In the case of the Rate Card Fees proposed in this proposed rule
change, the baseline rates of the Market Activity Fees would remain
unchanged both from the rates currently in effect under the prior rate
card and throughout the
[[Page 48085]]
course of the proposed Multi-Year Rate Card.\24\ The Municipal Advisor
Professional Fee for 2026 would increase by approximately 6.6% from the
rate currently in effect and would increase on an annual basis during
the course of the proposed Multi-Year Rate Card by approximately 6% per
year.\25\ Thus, all baseline Rate Card Fees would be consistent with
the Annual Rate Change Limit under the Multi-Year Rate Card Process.
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\24\ While the baseline Market Activity Fees would remain the
same for all four years of the proposed Multi-Year Rate Card, future
rate cards established under the Multi-Year Rate Card Process could
have fees that differed from year to year within the period covered
by such new rate card, subject to the Annual Rate Change Limit.
\25\ The rates for the Municipal Advisor Professional Fee are
designed to generate a target 8% of total rate card revenue from the
Municipal Advisor Professional Fee by 2029. The 8% target was
initially established in the rate card model implemented in 2022.
See supra note 4, 87 FR 48530 at 48537-38. To enhance stability and
predictability, the Municipal Advisor Professional Fee increases are
the same dollar amount ($70) each year during the four years 2026-
2029. Based on the assumption that the number of covered
professionals will decrease by 25 individuals per year and using the
five-year market activity averages to project revenue from Market
Activity Fees, the MSRB projects that the Municipal Advisor
Professional Fee would generate 8% of rate card revenue in 2029.
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In the event the MSRB determines that it has a significant surplus
level of reserves to draw down upon, the MSRB may elect to utilize one
or more Temporary Credits within the proposed Multi-Year Rate Card or
in a future multi-year rate card.\26\ If Temporary Credits are applied
to a baseline Rate Card Fee, the Annual Rate Change Limit may be
exceeded. For example, to reduce the current surplus reserves described
above, the proposed Multi-Year Rate Card includes Temporary Credits
during the first two years which result in the net rate of assessments
for the Market Activity Fees increasing between 2027 and 2028 by more
than the percentage of the Annual Rate Change Limit, notwithstanding
the fact that the baseline rates would not change.\27\ To achieve
further stability and mitigate potential increases in Rate Card Fees
(for example, when market volume is materially reduced), the MSRB would
consider its reserves and could draw down upon reserve levels rather
than adjust the established rates of Rate Card Fees or the amounts of
previously approved Temporary Credits, which rate or credit adjustments
would remain as potential options but would require formal rulemaking
to effectuate.
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\26\ See Revised Funding Policy, supra note 17, at
``Organizational Reserves'' and ``Multi-Year Rate Card''.
\27\ Based on written comments from stakeholders responding to
the RFI, the MSRB determined to prioritize the reduction of reserves
through Temporary Credits over either more significant year-to-year
changes that could be allowed with a higher Annual Rate Change Limit
or mechanisms such as one-time rebates. See supra note 11, BDA
Letter at 2 and SIFMA Letter at 6, 11. This is due in part to the
additional certainty and stability in rates the MSRB is able to
provide through a multi-year rate card that would not depend on
unscheduled lump sum adjustments.
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A primary goal of a rate card is to effectively manage
organizational reserves, which at times may accumulate surplus funds
(or may experience deficits) driven by extraordinary market activity
volume or from other unexpected circumstances. The MSRB maintains a
targeted level of reserve funding in accordance with its Revised
Funding Policy, which is determined through a comprehensive analysis of
its operating environment. The MSRB's Revised Funding Policy
establishes a tolerance for variation from the organizational reserves
target of +/-20% of its target level (the ``Reserve Target
Tolerance'').\28\ Under the Multi-Year Rate Card Process, the MSRB
seeks to establish Rate Card Fees that appropriately balance
organizational reserves within the Reserve Target Tolerance over the
effective period of the rate card.
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\28\ See Revised Funding Policy, supra note 17, at
``Organizational Reserves''.
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The MSRB approved an organizational reserves target for 2026 of $30
million at its July 23-24, 2025, board of directors meeting. This level
of reserves translates to approximately eight months of MSRB operating
expenses.\29\ To ensure the MSRB maintains fiscal discipline and
responsibly manages reserves during the effective term of a multi-year
rate card, the Revised Funding Policy provides for an evaluation, at
the mid-point of a multi-year rate card, as to whether the Reserve
Target Tolerance has been exceeded.\30\ If, at the midpoint of the
effective multi-year rate card, organizational reserves are in excess
or deficient by more than the Reserve Target Tolerance, the MSRB would
consider increases or decreases for future rate card filings. The
Revised Funding Policy requires the MSRB to affirmatively address a
reserves surplus over the 20% Reserve Target Tolerance. A primary
method to address the surplus reserves would be to draw down on
reserves in a subsequent multi-year rate card to mitigate annual rate
changes. In the alternative, if there is a significant accumulation of
reserves the MSRB would engage with stakeholders and discuss options to
address the surplus and may choose to utilize a Temporary Credit during
the course of the existing rate card period to reduce reserve levels
more expeditiously than waiting until the next multi-year rate
card.\31\
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\29\ The board of directors of the MSRB has approved a budget of
$46.2 million for the fiscal year ending September 30, 2026. See
MSRB Press Release, MSRB Approves FY 2026 Budget, Amended Rate Card
Filing, Elects Board Leadership at Quarterly Board Meeting (July 24,
2025), available at <a href="https://www.msrb.org/Press-Releases/MSRB-Approves-FY26-Budget-Amended-Rate-Card-Filing-Elects-Board-Leadership-Quarterly">https://www.msrb.org/Press-Releases/MSRB-Approves-FY26-Budget-Amended-Rate-Card-Filing-Elects-Board-Leadership-Quarterly</a>. The MSRB will publish on its website its
fiscal year 2026 budget at the start of the fiscal year, on or
around October 1, 2025, which will be available at <a href="https://www.msrb.org/MSRB-News/About-Us#About_Us_Publications">https://www.msrb.org/MSRB-News/About-Us#About_Us_Publications</a>.
\30\ See Revised Funding Policy, supra note 17, at
``Organizational Reserves''.
\31\ See Revised Funding Policy, supra note 17, at ``Multi-Year
Rate Card''.
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Related Technical Amendments
The proposed rule change would include certain technical language
changes designed to ensure that the rule language reflects the proposed
Multi-Year Rate Card and the related changes to institute the Multi-
Year Rate Card Process. References to the current ``annual'' process
would be eliminated throughout Rules A-11 and A-13 and instead would
reflect the four-year term of the proposed Multi-Year Rate Card in the
proposed rule change.\32\ In particular, the proposed rule change
language refers to the rates that would be in effect (including any net
rates due to Temporary Credits, as applicable) for each year within the
course of the proposed Multi-Year Rate Card.\33\
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\32\ Thus, the word ``annual'' would be removed in references to
``annual rate card'' in Rule A-11(b), Supplementary Material .01 to
Rule A-11, Rule A-13(b), Rule A-13(d)(i)-(ii), Rule A-13(d)(iv)(a)-
(b), and Supplementary Material .01 and .01(b). Other uses of the
term ``annual'' in Rule A-11(b) are either retained without change
or are deleted as part of broader deletions of language described
above with respect to the change in the rate card model. See supra
note 17.
\33\ In the case of the Municipal Advisor Professional Fee,
language would be added in Supplementary Material .01 to Rule A-11
to make explicit that the charge is based on the number of covered
professionals in the respective year for which the fee is to be
assessed, and the rates for each year would be listed in clauses
(a)-(d) thereof. While the Market Activity Fees themselves would not
change from year to year within the four-year period covered by the
proposed rule change, since the Temporary Credit that would be
applied pursuant to Supplementary Material .01(c) to Rule A-13 for
the first two years, the net rate of assessment of the Market
Activity Fees for the first two years would be listed in clauses
(i)-(iii) thereof.
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2. Statutory Basis
Section 15B(b)(2)(J) of the Exchange Act 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
[[Page 48086]]
operating and administering the MSRB.\34\ 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 timeframes, any items of information or
documents required to be submitted under any rule issued by the
MSRB.\35\
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\34\ 15 U.S.C. 78o-4(b)(2)(J).
\35\ Id.
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The MSRB believes that the proposed rule change establishes
reasonable fees and charges to be paid by regulated entities consistent
with Section 15B(b)(2)(J) of the Exchange Act.\36\ The proposed rule
change is designed to promote the collection of reasonable,
predictable, and stable fees from MSRB regulated entities as may be
necessary or appropriate to defray the costs and expenses of operating
and administering the MSRB, including maintaining a responsible level
of organizational reserves. The MSRB's fiscal year 2026 budgeted
expenses total $46.2 million.\37\ This represents a 5.2% decrease in
expenses compared to the fiscal year 2025 budgeted expenses.\38\ In its
underlying analysis, the MSRB assumes an annual average expense growth
rate of 3.4% for fiscal years 2027 through 2029. In determining the
reasonableness of this expense growth rate, the MSRB consulted the
average annual growth rate of the Consumer Price Index, a standard
index of inflation, which over the prior 4-year period ranged from 3-5%
annual increases. At the end of fiscal year 2024, the MSRB's reserves
balance was $48.4 million and is projected to be $60.8 million by the
end of fiscal year 2025. To achieve a goal of reducing the MSRB's
reserves balance to within the 20% Reserve Target Tolerance of its
reserve target level of $30 million, the MSRB believes the 45%
Temporary Credit for the Market Activity Fees would effectively reduce
reserve levels, which were driven largely by market activity fee
revenue performance in recent years. With respect to its revenue
expectations for fiscal year 2026, the MSRB anticipates the revenue
from the Rate Card Fees to represent 78% of total revenues, with the
remaining 22% of revenues comprised of data subscription fees,
underwriting assessments for certain municipal fund securities
offerings under Rule A-13(c), annual and initial fees under Rule A-
12(b) and (c), investment income, fine revenue, and other miscellaneous
revenue (including examination fees under Rule A-16).
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\36\ Id.
\37\ See supra note 29. As in past years, the MSRB's fiscal year
2026 budget will include, among other things, information regarding
budgeted expenses by major organizational activities. Technology-
related activities generally comprise the largest share of budgeted
expenses, with such activities being generally divided between
information technology services and market transparency products and
services. Information technology services pertain to ensuring
security, availability and resiliency for both internal
organizational technology needs and external market and regulatory
transparency systems, and such services generally bridge internal
and external technology needs and only less frequently are confined
to one or the other. Similarly, market transparency products and
services pertain to the various different market and regulatory
transparency systems, and such systems generally operate using
shared technology platforms, data resources and information
technology services and only less frequently have such platforms,
resources and services that are confined to a single system. As
such, the MSRB does not budget based on systems. However, consistent
with the MSRB's commitment made in the 2024 MSRB Response Letter,
supra note 7, at 6-7, the MSRB has developed reasonable allocation
assumptions to assist in the understanding of the MSRB's technology
system-related expenses. Figures developed using those assumptions,
however, may not reflect the actual manner in which funds are
expended and effort is applied to a particular system. Using such
assumptions, the MSRB estimates that, of the combined information
technology services and market transparency products and services
budgets for fiscal year 2026 totaling $27.1 million, slightly more
than one-quarter would be allocable to trade data collection and
processing through the Real-Time Transaction Reporting System (RTRS)
under MSRB Rule G-14, on reports of sales or purchases, and
Information Facility 1 (IF-1). Approximately half of this combined
technology budget would be allocable, in approximately equal shares,
to: (i) the combined services for primary market disclosures through
the Electronic Municipal Market Access (EMMA[supreg]) Primary Market
Disclosure Service under MSRB Rule G-32, on disclosures in
connection with primary offerings, and Information Facility 3 (IF-
3), and continuing disclosures through the EMMA Continuing
Disclosure Service under IF-3 and Commission Rule 15c2-12, on
municipal securities disclosure, adopted by the Commission under the
Exchange Act; (ii) data dissemination services (including the EMMA
website for public dissemination as well as subscription services
under IF-3 for the MSRB's various market transparency systems to
subscribers for use either internally, to make available to their
client-base, or to develop or populate their data products for re-
dissemination to their customers); and (iii) regulatory, compliance
and administration services (including but not limited to
maintenance of the <a href="http://MSRB.org">MSRB.org</a> website, data/services for use solely by
other regulators through the Regulator Web (RegWeb) service, the
system for registering regulated entities with the MSRB under MSRB
Rule A-12, on registration, and authentication systems for secure
submissions to and other uses of MSRB transparency and other
systems, including MSRB Gateway). The final portion, constituting
approximately 20% of the combined technology budget, would be
allocable to (i) the system for variable rate securities interest
rate and documentation collection through the Short-Term Obligation
Rate Transparency (SHORT) System under MSRB Rule G-34, on CUSIP
numbers, new issue, and market information requirements, and
Information Facility 2 (IF-2), and (ii) all internal technology
needs. These figures are likely to vary from year to year. EMMA is a
registered trademark of the MSRB.
\38\ See <a href="https://www.msrb.org/sites/default/files/2024-10/MSRB-FY-2025-Budget-Summary.pdf">https://www.msrb.org/sites/default/files/2024-10/MSRB-FY-2025-Budget-Summary.pdf</a>.
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Thus, the MSRB believes that the proposed rule change is necessary
and appropriate to fund the operation and administration of the MSRB
and, thereby, satisfies the requirements of Section 15B(b)(2)(J) \39\
through the achievement of a reasonable fee structure that (i) improves
the stability and predictability of Rate Card Fees over time; (ii)
maintains an appropriate balance of assessments on regulated entities;
\40\ and (iii) improves the MSRB's ability to manage organizational
reserves responsibly while minimizing fee volatility and other
operational disruptions to regulated entities.
---------------------------------------------------------------------------
\39\ 15 U.S.C. 78o-4(b)(2)(J).
\40\ See supra note 25. The proposed rule change maintains the
contribution targets set forth when the MSRB established the rate
card process in 2022, which the MSRB believes remain appropriate as
no durable, material shift in market structure has occurred to
warrant alteration of current target contribution levels. The
proposed rule change's Temporary Credits apply to dealer Market
Activity Fees because the MSRB's excess reserves resulted from
revenue derived from extraordinary market trading and issuance
volume between 2023 and 2025. See infra note 47.
---------------------------------------------------------------------------
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 that is not
necessary or appropriate in furtherance of the purposes of the Exchange
Act.\41\ The proposed rule change, including the modifications to the
MSRB Rate Card Process through the proposed amendments to Rule A-11 and
Rule A-13, would not create any burden on competition. As intended
under the proposed rule change, the Rate Card Fees are applicable to
all dealers and municipal advisors over the course of the four years
covered by the proposed Multi-Year Rate Card. The MSRB therefore does
not believe the proposed rule change would create any burden on
competition for regulated entities, as the projected fee proportions
would maintain balance between Municipal Advisor Professional Fees and
Dealer Market Activity Fees, as well as among the three dealer fees
that make up the Market Activity Fees, and would enhance fairness in
fees across regulated entities by providing a clear blueprint of
financial expectations for the four years of the proposed Multi-Year
Rate Card. Therefore, since the proposed rule change would not create
any burden on competition, the MSRB believes that the proposed rule
change would meet the statutory requirement that its rules not impose
any burden on competition that is not necessary or appropriate in
[[Page 48087]]
furtherance of the purposes of the Exchange Act.
---------------------------------------------------------------------------
\41\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------
In determining whether the proposed rule change is necessary and
appropriate, the MSRB was guided by the MSRB's Policy on the Use of
Economic Analysis in MSRB Rulemaking.\42\ In accordance with this
policy, the MSRB evaluated the potential impacts of the proposed rule
change relative to the current baseline fee structure. The Multi-Year
Rate Card Process, proposed by the proposed rule change, 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) establish rates for a
four year cycle that would provide greater predictability and stability
of Rate Card Fees over the long term than the MSRB's current fee
structure.\43\ Furthermore, the Multi-Year Rate Card Process would
maintain balance between Municipal Advisor Professional Fees and
dealers' Market Activity Fees. This would be achieved by raising the
Municipal Advisor Professional Fee by 6.6% for 2026, and then
increasing it by approximately 6% per year through 2029, thereby
maintaining the contribution target for the Municipal Advisor
Professional fee at 8% of all Rate Card Fees collected by the fourth
year of the proposed Multi-Year Rate Card.\44\ Additionally, the MSRB
would provide a 45% discount, through the Temporary Credits, for Market
Activity Fees in 2026 and 2027. The MSRB believes that these actions
would provide balance for regulated entities. Lastly, as part of the
Revised Funding Policy, the MSRB would address its surplus reserves by
providing dealers with Temporary Credits in an effort to draw down the
organization's reserves. The current reserve levels exceeded the 20%
threshold \45\ in large measure resulting from the suspension and
subsequent withdrawal of the 2024 Rate Card Proposal and a period of
record trading and issuance volume that increased the excess
reserve.\46\ The MSRB anticipates that the Temporary Credits would
address stakeholder concerns regarding the organization's current
reserve levels.
---------------------------------------------------------------------------
\42\ See MSRB Policy on the Use of Economic Analysis in MSRB
Rulemaking, available at <a href="https://www.msrb.org/Policy-Use-Economic-Analysis-MSRB-Rulemaking">https://www.msrb.org/Policy-Use-Economic-Analysis-MSRB-Rulemaking</a>. 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.
\43\ See related discussion supra under Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change--Purpose--Proposed Multi-Year Rate Card
Fees.
\44\ See supra note 25.
\45\ See supra Self-Regulatory Organization's Statement of the
Purpose of, and Statutory Basis for, the Proposed Rule Change--
Purpose--Multi-Year Rate Card Process and Reserves Management. The
MSRB's reserves balance at the end of fiscal year 2024 was $48.4
million and is projected to be $60.8 million by the end of fiscal
year 2025.
\46\ Between 2022 and 2024 the market experienced three
consecutive years of record trade count, culminating with 14.5
million total trades in the calendar year of 2024, including trades
that MSRB does not bill for such as variable rate securities, a 10%
increase from the previous record year of 2023. Similarly, in
calendar year 2024, new issuance volume also reached record levels
exceeding $500 billion for the first time. The consecutive record
years for trading volume and new issuance volume have contributed
significantly to the MSRB exceeding its funding levels. See John
Bagley, Carol Converso and Marcelo Vieira, ``2024 Municipal Market
Year in Review,'' MSRB, January 2025, available at <a href="https://www.msrb.org/sites/default/files/2025-01/MSRB-2024-Municipal-Market-Year-in-Review.pdf">https://www.msrb.org/sites/default/files/2025-01/MSRB-2024-Municipal-Market-Year-in-Review.pdf</a>.
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The MSRB believes that the proposed rule change would address
industry concerns regarding the stability and predictability \47\ of
the proposed Rate Card Fees; enhance fairness in fee burdens between
dealers and municipal advisors as mentioned above; and allow the MSRB
to manage organizational reserves responsibly while minimizing
uncertainty and possible operational disruptions to regulated entities.
The proposed rule change is designed to provide greater predictability
and stability of the Rate Card Fees for the next four years: 2026,
2027, 2028, and 2029. Additionally, the proposed technical amendments
to Rule A-11 and Rule A-13 are intended to provide greater clarity on
the assessment of fees referenced in MSRB rules by removing references
to ``Annual'' Rate Card throughout. Without the proposed rule change,
the MSRB would be less able to maintain its target balance of Rate Card
Fees between dealers and municipal advisors or to manage fee volatility
while also ensuring that its organizational reserves are reflective of
the Revised Funding Policy.
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\47\ See supra note 11, SIFMA Letter at 5-6, 8; BDA Letter at 1
and 3; and ICE Letter at 1-2.
---------------------------------------------------------------------------
Baseline and Reasonable Alternative Approaches
The MSRB's Policy on the Use of Economic Analysis in MSRB
Rulemaking outlines that rulemaking must articulate a baseline against
which to measure the likely economic impact of the proposed rule
change,\48\ which is essential in considering the likely costs and
benefits of a proposed rule change when the proposal is fully
implemented (future state). For the proposed rule change, the baseline
is Rule A-11, on assessments for municipal advisor professionals and
Rule A-13, on underwriting and transaction assessments for brokers,
dealers and municipal securities dealers currently in effect. The
relevant portions of Rule A-11 and Rule A-13, the aforementioned
baseline, were last amended in 2022 and established a rate card model
intended to be amended on a yearly basis. However, as discussed in
previous sections, the MSRB withdrew its 2024 Rate Card Proposal based
on industry feedback and now seeks to establish a multi-year process.
---------------------------------------------------------------------------
\48\ See supra note 43. The policy identifies the baseline (in
point 2, titled ``Articulate a baseline against which to measure the
likely economic impact of the proposed rule change''), as ``an
assessment of the status of the markets and participants potentially
affected directly or indirectly by a proposed rule change
(collectively, the ``affected parties'') in the absence of the
proposed rule change being implemented.''
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In addition to the proposed Multi-Year Rate Card Process, the MSRB
also considered other fee assessment alternatives but ultimately
decided that the proposed Multi-Year Rate Card Process is the best
approach to provide greater predictability and stability for regulated
entities along with ensuring a stable revenue stream for the MSRB. In
one alternative, the MSRB considered the development of a new fee
structure without a specified time horizon for its applicability. The
alternative fee structure would become effective on January 1, 2026 and
would remain in place indefinitely until modified by a subsequent rule
filing. This alternative would provide regulated entities predictable
fees that would not be altered without a process of stakeholder
outreach and advanced notice. However, without the built-in combination
of flexibility and structure of the Multi-Year Rate Card Process, the
MSRB may, for example, develop accumulated excess reserves resulting
from additional revenue collected as compared to budget expectations
and, thereby, would be more likely to face the potential need for one-
time rate amendments in the form of more significant, ad hoc temporary
fee reductions or rebates.\49\ In comparison,
[[Page 48088]]
the proposed rule change establishing a Multi-Year Rate Card Process
would create a formalized process for the MSRB to reevaluate fees in
comparison to the MSRB's reserves and make adjustments at the end of
each multi-year period. Thus, comparing to the current no-end-date fee
structure, the proposed Multi-Year Rate Card framework would result in
more regular and potentially more frequent, but also more incremental,
adjustments to the four Rate Card Fees that generate the vast majority
of the MSRB's annual revenue. Following the implementation of the
proposed rule change, the MSRB will continue to take additional steps
to collect stakeholder feedback for future multi-year Rate Card Fee
adjustment. The proposed rule change is meant to avoid either the
accumulation of excess reserves resulting from additional revenue
collected or unexpected reserves and revenue shortfall due to market
volatility and, thereby, the need for rate amendments in the form of
more significant, ad hoc temporary fee adjustments. In summary, this
alternative of a fixed set of fees does not help achieve the reserve
management goals of the MSRB, and it is for this reason that the MSRB
assesses that the proposed rule change is superior to this alternative.
---------------------------------------------------------------------------
\49\ For example, in Fiscal Year 2020, the MSRB collected $4.9
million more than budgeted from market activity fess due to a
variety of factors including the COVID-19 pandemic and a low-
interest rate environment. See MSRB 2020 Annual Report, available at
<a href="https://www.msrb.org/sites/default/files/MSRB-2020-Annual-Report.pdf">https://www.msrb.org/sites/default/files/MSRB-2020-Annual-Report.pdf</a>. Conversely, in a slow trading environment, MSRB's
reserves may fall below the target amount and may require rulemaking
to potentially implement a one-time fee increase to make up the
shortfall.
---------------------------------------------------------------------------
Relatedly, the MSRB also considered different time horizons to be
used for the Multi-Year Rate Card Process, such as three years, five
years or more than five years. However, the MSRB ultimately decided
that a four-year time horizon is most appropriate. The MSRB made this
determination to balance stability and predictability in rates with the
potential risks of changes in market activity over a longer period that
could result in insufficient or excess reserves. Therefore, the MSRB
determined that two or three years would be too short and may add fee
uncertainty for regulated entities, while five years or longer would be
too long because market dynamics may change over that period, rendering
the established outdated or ineffective for reserves management.\50\
---------------------------------------------------------------------------
\50\ The four-year time period is also consistent with the
length of the forthcoming MSRB Strategic Plan 2026-2029.
---------------------------------------------------------------------------
Another alternative the MSRB reviewed was to include other sources
of revenue in the Multi-Year Rate Card Process, such as revenue derived
from bulk data users, initial and annual registration fees under MSRB
Rule A-12, and underwriting assessments for underwriters of certain
municipal fund securities under Rule A-13(c).\51\ However, the MSRB
ultimately decided not to include those fees for a variety of reasons.
Fees from bulk data users are voluntary while assessments on regulated
entities are mandatory. Also, each of the other noted fees constitutes
a much smaller proportion than the four categories in the proposed
Multi-Year Rate Card Process.\52\
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\51\ See e.g., MSRB 2024 Annual Report at p. 20, stating
revenues collected from such sources in fiscal year 2024, available
at <a href="https://www.msrb.org/sites/default/files/2025-01/MSRB-2024-Annual-Report_0.pdf">https://www.msrb.org/sites/default/files/2025-01/MSRB-2024-Annual-Report_0.pdf</a>.
\52\ The MSRB determined not to include initial and annual
registration fees in the Rate Card Fees and the Multi-Year Rate Card
Process. Historically, initial registration fee amounts have 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. In addition, annual
registration fees are intended to serve as a fixed, baseline
contribution from all registered regulated entities, irrespective of
a regulated entity's actual total market activities. Furthermore,
underwriting assessments for municipal fund securities are not based
on activity during a particular period but instead on aggregate
assets and therefore give rise to different considerations than do
the Rate Card Fees. The MSRB determined that, at this time, it was
not appropriate to incrementally adjust such fees each year through
the Multi-Year Rate Card Process.
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Finally, the MSRB also considered a different way to apportion fees
within each class of fee payer but decided that the proposed Multi-Year
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 regulated entity's revenue, for example, would not
be feasible at this time as the MSRB does not currently have such
information. In addition, many municipal advisory firms would likely
have business activities not solely related to municipal advisory
services. At this time, the MSRB believes that the Municipal Advisor
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. However, the MSRB
commits to engage with stakeholders to discuss possible alternative
methods for municipal advisor fees.
Benefits, Costs and Effect on Competition
The proposed rule change is intended to benefit regulated entities
by providing greater regulatory clarity for the assessment of fees on
MSRB regulated entities for a period of four years under the rules. The
proposed rule change also is intended to benefit dealers by providing a
two-year reduced rate for underwriting fees, transaction fees, and
trade count fees, as these Market Activity Fees were mainly responsible
for driving the MSRB's excess reserves from 2023 through 2025 because
of unprecedent market trading volume as described earlier. The proposed
Multi-Year Rate Card Process would likely result in smaller downward or
upward quadrennial adjustments to keep revenues more closely aligned
with budgeted expenses.
Benefits
The proposed rule change would result in a revised fee approach
intended to align revenues and expenses more closely and to reduce the
year-to-year volatility in the amount of fees collected by the MSRB. In
addition, the MSRB expects that the four-year period would improve the
stability and predictability of Rate Card Fees for regulated entities
and remove the variability that was present with the year-to-year
approach. Furthermore, the MSRB also expects that the proposed rule
change would ensure that there is a fair and equitable balance of fees
between all regulated entities. Lastly, the proposed rule change would
enhance the MSRB's ability to manage organizational reserves while
minimizing fee volatility and other operational disruptions to
regulated entities.
Costs
The MSRB anticipates that regulated entities would incur minor
costs from the Multi-Year Rate Card Process as part of their assessed
fees. While there may be additional costs associated with the Multi-
Year Rate Card Process for municipal advisors through the fee
assessment, dealers would see lower fees in 2026 and 2027. The MSRB
believes that the fees are reasonable and appropriate as they would
improve stability and predictability over time; enhance fairness of fee
burdens between regulated entities; and improve the MSRB's ability to
responsibly manage organizational reserves.
Proposed Rule Change
Some regulated entities would incur costs in the form of newly
assessed fees under the proposed Multi-Year Rate Card Process. This
includes the fact that the Municipal Advisor Professional Fee would
increase each of the four years; however, this is intended to maintain
an appropriate balance of assessments between dealers and municipal
[[Page 48089]]
advisors.\53\ In total, the MSRB does not believe the proposed Multi-
Year Rate Card Process would create any additional costs for regulated
entities when compared to the annual rate card process that was
established in 2022, as the aggregate fees assessed under the proposed
Multi-Year Rate Card Process--which would become effective in January
2026 with a two-year discounted rate for Market Activity Fees--are
expected to remain consistent.
---------------------------------------------------------------------------
\53\ For example, in future iterations of the Multi-Year Rate
Card Process, the Municipal Advisor Professional Fee may either
decrease or increase less than other fees based on the MSRB's
reserves and the proportionate fee contribution.
---------------------------------------------------------------------------
Regulated entities are expected to make minor one-time revisions to
their policies and procedures, including accounting systems or
processes, to address the technical amendments to Rule A-11 and Rule A-
13. It is possible that regulated entities may need to work with in-
house legal, compliance and accounting professionals to revise the
policies and procedures to comply with the proposed rule change.\54\
The MSRB anticipates that regulated entities would need approximately
5.75 hours on making the appropriate changes as they pertain to Rule A-
11 and Rule A-13, and estimates that the total upfront costs to
implement the technical amendments to be $1,990, as set forth in the
following table: \55\
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\54\ For example, the new issue fee may have to be changed in
the programs dealers use for new issues.
\55\ The hourly rate data was gathered from the Commission's
Amendments to Exchange Act Rule 3b-16. See Exchange Act Release No.
94062 (Jan. 26, 2022), 87 FR 15496, 15624, n. 1102 (March 18, 2022)
(File No. S7-02-22) (citing the original source of the data from
Securities Industry and Financial Markets Association Management &
Professional Earnings in the Securities Industry 2013). The data
reflects the 2025 hourly rate level after adjusting for the annual
wage inflation between 2013 and 2025, using the Federal Reserve Bank
of St. Louis Employment Cost Index: Wages and Salaries: Private
Industry Workers, available at: <a href="https://fred.stlouisfed.org/series/ECIWAG">https://fred.stlouisfed.org/series/ECIWAG</a>.
---------------------------------------------------------------------------
Estimated Technical Amendments Upfront Costs for Each Regulated Entity
\56\
---------------------------------------------------------------------------
\56\ Numbers in the table have been rounded to the dollar;
therefore, totals may not exactly match.
----------------------------------------------------------------------------------------------------------------
Hourly rate Number of Cost per firm
Cost components ($) hours ($)
----------------------------------------------------------------------------------------------------------------
Upfront Costs:
(a) Revision of Policies, Procedures and Accounting Systems
Compliance Manager...................................... 389 1 389
In-House Compliance Counsel............................. 459 0.5 230
System Analyst.......................................... 331 2 661
General Accounting Supervisor........................... 269 2 538
Chief Compliance Officer................................ 687 0.25 172
-----------------------------------------------
Total Upfront Costs................................. .............. 5.75 1,990
----------------------------------------------------------------------------------------------------------------
Effect on Competition, Efficiency and Capital Formation
The MSRB believes that the proposed Multi-Year Rate Card Process
would not impose any burden on competition, as it is intended to have a
fair and equitable balance of fees between all regulated entities. The
MSRB believes the proposed rate change for the Calendar Years 2026,
2027, 2028 and 2029 is necessary and appropriate to ensure prudent
funding for the MSRB 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, impede capital formation, reduce market efficiency, nor
otherwise harm the functioning of the municipal securities market.
Section 15B(b)(2)(L)(iv) of the Exchange Act \57\ 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 proposed Municipal Advisor Professional Fee
would not impose an unnecessary or inappropriate regulatory burden on
small municipal advisors since the total amount of the assessment
payable by each municipal advisory firm would continue to be
proportional to the number of Form 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.
---------------------------------------------------------------------------
\57\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
---------------------------------------------------------------------------
For the reasons noted above, the MSRB does not believe that the
proposed rule change would result in any burden on competition that is
not necessary or appropriate in furtherance of the purposes of the
Exchange Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The MSRB did not solicit comment on the proposed rule change.
However, the MSRB received comments from six commenters on the RFI,
with comments on the Rate Card Fees having informed the MSRB in
formulating the proposed rule change.\58\
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\58\ See NAMA Letter, PRAG Letter, SIFMA Letter, BDA Letter, ASA
Letter and ICE Bonds Letter, supra note 11. Comments are available
at <a href="https://www.msrb.org/sites/default/files/2025-02/All-Comments-to-Notice-2024-14.pdf">https://www.msrb.org/sites/default/files/2025-02/All-Comments-to-Notice-2024-14.pdf</a>. Some commenters also addressed MSRB budgetary
processes and related MSRB technology costs. The MSRB has engaged in
direct conversations on these matters with stakeholder groups in
connection with the MSRB's budget, including its adoption of the
2026 annual budget, both prior to and after publishing the RFI. See
supra note 10. While the MSRB addresses certain key budget, revenue
and technology cost matters above, see supra Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change--Statutory Basis, the discussion of
comments herein is generally confined to those comments addressing
the Rate Card Fees.
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While two commenters on the RFI supported the existing rate card
process,\59\ three commenters expressed the view that the existing rate
card process permits too much fee volatility and unpredictability from
year to year.\60\ One commenter suggested that the current cap on year-
over-year increases in Rate Card Fees should be reduced from 25% to
15%,\61\ with another commenter suggesting that such cap be reduced to
10%.\62\ Two commenters agreed that, when organizational
[[Page 48090]]
reserves are too high, fees should be lowered to reduce reserve levels
to established targets,\63\ with one commenter stating that the
existing reserve target is appropriate \64\ while the other commenter
suggested that the MSRB reduce its reserve target to six months of
operating expenses.\65\ These two commenters agreed that reserves
should be used to help keep rates stable from year to year but did not
support the establishment of a separate rate stabilization fund.\66\
One commenter noted that there may be value in a multi-year fee-setting
process to help stabilize fees \67\ and another commenter did not
oppose a multi-year process so long as there is a mechanism to adjust
fees if reserves grew too large.\68\
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\59\ See NAMA Letter at 1; PRAG Letter at 1.
\60\ See SIFMA Letter at 5; BDA Letter at 1; ICE Bonds Letter at
1.
\61\ See SIFMA Letter at 5.
\62\ See BDA Letter at 1.
\63\ See SIFMA Letter at 6; BDA Letter at 2.
\64\ See BDA Letter at 2.
\65\ See SIFMA Letter at 6.
\66\ See SIFMA Letter at 11; BDA Letter at 2.
\67\ See BDA Letter at 2.
\68\ See SIFMA Letter at 6.
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The MSRB believes that the proposed Multi-Year Rate Card Process
incorporates key elements that are responsive to these comments. The
Annual Rate Change Limit that would be included in the Multi-Year Rate
Card Process would be set at 15%, lower than the current 25% cap. The
proposed Temporary Credits for 2026 and 2027, and the potential use of
Temporary Credits in the future to reduce any excess reserves, is
responsive to commenters desire to use reserves for such purpose
without creating a separate stabilization fund. The MSRB believes that
these and other aspects of the Multi-Year Rate Card Process, including
the establishment of fees over a multi-year period rather than on an
annual basis, appropriately address the desire to reduce volatility and
unpredictability of fees.
Two commenters generally agreed that activity-based fees for the
Market Activity Fees are appropriate.\69\ One commenter suggested that
Market Activity Fees be based on activity in the preceding year rather
than on projections of activity,\70\ while another commenter suggested
that, in the case of a dealer operating an alternative trading system
(``ATS''), the MSRB should have an alternative method for assessing
market activity more tailored to the nature of the ATS business.\71\
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\69\ See SIFMA Letter at 5, 9; BDA Letter at 1.
\70\ See SIFMA Letter at 5-6, 8-9.
\71\ See ICE Bonds Letter at 1-2.
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The MSRB would maintain the existing Market Activity Fees under the
proposed rule change and believes that they remain the appropriate
mechanisms for assessing activity-based fees for dealers. The MSRB
believes that the use of a five-year historical average of market
volume for its underlying assumptions under the Multi-Year Rate Card
Process would better smooth the annual volatility in market activity
and therefore the amount of assessments imposed than would a model
that, on an annual basis, relies on the past year's levels of
activities, which can fluctuate considerably from year to year. The
MSRB appreciates the concerns expressed regarding ATS-related fees and
will continue to assess in the future whether the current model remains
appropriate in the context of considering more broadly the full range
of sources of MSRB revenues, including whether certain business models
merit alternative manners of assessments, whether existing fees and
charges not included in the Rate Card Fees should be modified, whether
any regulated entity activities that may not currently be subject to
any MSRB fees or charges should be made subject to assessment, and
whether current fee models for subscriptions to MSRB data products
should be revisited.
Three commenters suggested that the MSRB develop an activity-based
or revenue-based fee model for municipal advisors, which they believed
would be appropriate to address what they view as an imbalance in the
share of MSRB costs borne by dealers as compared to municipal
advisors.\72\ Two of these commenters suggested that the MSRB require
municipal advisors to report to the MSRB on their municipal advisory
activities and/or revenues.\73\ In contrast, two commenters argued that
the current Municipal Advisor Professional Fee based on covered
professionals of a municipal advisor should be maintained and that
activity-based fees for municipal advisors should not be
considered.\74\ These commenters stated that the MSRB had considered
the proper model and level of municipal advisor fees, including as
compared to dealer fees, in the course of developing the rate card
model and that no material changes had occurred since then that would
justify a change in the MSRB's approach.\75\ These commenters also
noted that municipal advisors engage in a variety of types and scopes
of municipal advisory and other activities and use a variety of
compensation structures, and that a reporting regime for such
information would be burdensome.\76\
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\72\ See SIFMA Letter at 3-5, 9-10; BDA Letter at 2; ASA Letter
at 1-2.
\73\ See SIFMA Letter at 4, 10; BDA Letter at 2.
\74\ See NAMA Letter at 4-5; PRAG Letter at 1.
\75\ See NAMA Letter at 2-3; PRAG Letter at 2.
\76\ See NAMA Letter at 5; PRAG Letter at 1.
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The MSRB continues to believe that, for purposes of the Multi-Year
Rate Card Process for establishing the Rate Card Fees pursuant to this
proposed rule change, it is appropriate to maintain the existing
Municipal Advisor Professional Fee, with a measured year-to-year
increase to maintain the balance between dealer and municipal advisor
fees determined by the MSRB when it established its original rate card
process. However, with respect to municipal advisor rate card
assessments, the MSRB believes that it would be appropriate, over the
course of this upcoming multi-year period, to undertake a review of
municipal advisory activities and any potential mechanisms for gauging
levels and types of such activities that might be appropriate for use
in future municipal advisor rate settings under the Multi-Year Rate
Card Process. The MSRB has launched a broader retrospective rule review
of its suite of municipal advisor rules \77\ adopted by the MSRB since
enactment in 2010 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act,\78\ which first defined the term ``municipal advisor''
and granted rulemaking authority to the MSRB in this area. The MSRB
will incorporate its review of potential alternative methods of
assessing municipal advisors within the scope of the retrospective rule
review, which will entail outreach to market participants and
opportunities for interested parties to provide comment on any proposed
changes to the municipal advisor assessment process.
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\77\ See MSRB Press Release dated Jan. 31, 2025, available at:
<a href="https://www.msrb.org/Press-Releases/MSRB-Discusses-Market-Regulation-Structure-and-Transparency-Initiatives-Quarterly">https://www.msrb.org/Press-Releases/MSRB-Discusses-Market-Regulation-Structure-and-Transparency-Initiatives-Quarterly</a>.
\78\ Public Law 111-203, 124 Stat. 1376 (2010), Section 975; 15
U.S.C. 78o-4(b)(2).
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III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period of up to 90 days (i) as
the Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing,
[[Page 48091]]
including whether the proposed rule change is consistent with the
Exchange Act. Comments may be submitted by any of the following
methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#90e2e5fcf5bdf3fffdfdf5fee4e3d0e3f5f3bef7ffe6"><span class="__cf_email__" data-cfemail="a6d4d3cac38bc5c9cbcbc3c8d2d5e6d5c3c588c1c9d0">[email protected]</span></a>. Please include
File Number SR-MSRB-2025-02 on the subject line.
Paper Comments
<bullet> 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-2025-02. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the filing 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-2025-02 and should be submitted on or before October 24, 2025.
For the Commission, pursuant to delegated authority.\79\
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\79\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-19382 Filed 10-2-25; 8:45 am]
BILLING CODE 8011-01-P
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