Notice2026-08997
Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change To Amend MSRB Rule G-12(c) To Codify and Retire or Revise Certain Existing Interpretive Guidance on Confirmation Requirements for Those Inter-Dealer Municipal Securities Transactions That Are Ineligible for Automated Comparison
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
May 7, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 88 (Thursday, May 7, 2026)</title>
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[Federal Register Volume 91, Number 88 (Thursday, May 7, 2026)]
[Notices]
[Pages 24919-24929]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-08997]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105362; File No. SR-MSRB-2026-01]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of a Proposed Rule Change To Amend MSRB Rule G-
12(c) To Codify and Retire or Revise Certain Existing Interpretive
Guidance on Confirmation Requirements for Those Inter-Dealer Municipal
Securities Transactions That Are Ineligible for Automated Comparison
May 4, 2026.
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 April 30, 2026, 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 relating
to MSRB Rule G-12, on uniform practice (the ``proposed rule change'').
The proposed rule change would revise section (c) of Rule G-12 (``Rule
G-12'') to codify into rule language and to retire or revise existing
interpretive guidance on confirmation requirements for those inter-
dealer municipal securities transactions between two brokers, dealers
or municipal securities dealers (collectively, ``dealers'') that are
ineligible for automated comparison at a registered clearing agency, as
well as to retire or revise other related interpretive guidance and to
make technical amendments to simplify and clarify current rule
requirements.
If the Commission approves the proposed rule change, the MSRB would
announce the effective date of the proposed rule change in a regulatory
notice to be published on the MSRB website no later than 90 days
following Commission approval. The effective date would be no later
than one year following Commission approval.
The text of the proposed rule change is available on the MSRB's
website at <a href="https://msrb.org/2026-SEC-Filings">https://msrb.org/2026-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
Section (c) of Rule G-12 sets forth the confirmation requirements
for inter-dealer municipal securities transactions that are ineligible
for automated comparison in a system operated by a registered clearing
agency,\3\ also referred to herein as ``inter-dealer
[[Page 24920]]
confirmations.'' \4\ Since the original adoption of Rule G-12(c) in
1977, the rule has requirements for the exchange and comparison of
trade confirmations by dealers in inter-dealer transactions.\5\ Rule G-
12(c) outlines a list of content requirements related to inter-dealer
confirmations, analogous in scope to the content requirements for
customer confirmations listed in pre-1990s iterations of section (a) of
MSRB Rule G-15 (``Rule G-15''), on customer confirmations.
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\3\ A list of registered clearing agencies is available at
<a href="https://www.sec.gov/about/divisions-offices/division-trading-markets/clearing-agencies">https://www.sec.gov/about/divisions-offices/division-trading-markets/clearing-agencies</a>. Currently, registered clearing agencies
active in the municipal securities market consist of the Depository
Trust & Clearing Corporation and its affiliates.
\4\ Rule G-12(a) exempts inter-dealer transactions in municipal
securities submitted to a registered clearing agency for comparison
from the inter-dealer confirmation provisions of Rule G-12(c), since
the purposes of transaction confirmations are subsumed within the
automated comparison process as provided in Rule G-12(f)(i).
\5\ Order Approving Proposed Rule Change, Exchange Act Release
No. 13939 (Sept. 8, 1977), 42 FR 46445 (Sept. 15, 1977) (File No.
SR-MSRB-76-12).
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In 1983, the MSRB approved an amendment to Rule G-12 that required
that dealers use automated comparison through a registered clearing
agency for eligible inter-dealer trades, foregoing the need for the
sending of separate confirmations previously used for that purpose for
such eligible trades.\6\ By 1985, a majority of inter-dealer trades
were compared through such automated means \7\ and, after when-issued
securities became eligible for automated comparison, the MSRB assessed
in 1995 that nearly all new issue municipal securities were eligible
for automated comparison with the exception of those that do not meet
the eligibility requirements to be assigned a Committee on Uniform
Securities Identification Procedures (CUSIP) number.\8\ Thus, only a
very small number of inter-dealer trades remained subject to the
confirmation requirement of Rule G-12(c), predominantly due to their
ineligibility for CUSIP number assignment.
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\6\ Order Approving Proposed Rule Change of the Municipal
Securities Rulemaking Board, Exchange Act Release No. 20365 (Nov.
14, 21983), 48 FR 52531 (Nov. 18, 1983) (File No. SR-MSRB-83-13).
While confirmations are not required under Rule G-12(c) for inter-
dealer transactions eligible for automated comparison, such
transactions are subject to the requirements and processes specified
by Rule G-12(f).
\7\ See MSRB Reports Vol. 5, No. 2, (February 1985) at 7.
\8\ See Exchange Act Release No. 36352 (October 6, 1995), 60 FR
53652, at FN 6 (October 16, 1995) (File No. SR-MSRB-1995-14).
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Notwithstanding the low number of municipal securities that
currently remain ineligible for automated comparison and therefore
could be subject to Rule G-12(c), the MSRB observes that a population
of municipal securities that do not have CUSIP numbers--and are
therefore ineligible for automated comparison--persists. For example,
over five years, from 2020 to 2025, an annual average of 2,447 new
municipal securities were issued without assigned CUSIP numbers,\9\ so
that any inter-dealer trades in such securities would be ineligible for
automated comparison and would therefore be subject to Rule G-
12(c).\10\
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\9\ Based on submissions of MSRB Form G-32 by underwriters to
the Electronic Municipal Market Access (EMMA) website under MSRB
Rule G-32 for primary offerings for which CUSIP numbers had not been
assigned.
\10\ Because trades in securities without CUSIP numbers are not
subject to trade reporting to the MSRB's Real-Time Transaction
Reporting System (RTRS) under MSRB Rule G-14, the MSRB does not have
an estimate of how many inter-dealer trades may occur in such
securities.
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Because of the historically low number of transactions subject to
Rule G-12(c), the MSRB had not, to date, consolidated Rule G-12(c) and
its associated interpretive guidance, as the MSRB has already completed
for other MSRB rules whose provisions are more frequently used (e.g.,
Rule G-15).\11\ The proposed rule change is mainly intended to
significantly streamline the requirements of Rule G-12(c) and related
interpretations to the core elements needed to fulfill the purpose of
this confirmation requirement to facilitate comparison of inter-dealer
transactions where such transactions cannot use the standard automated
comparison system. The proposed rule change would, among other things,
incorporate those key comparison-related principles established in
interpretive guidance into the relevant rule text and eliminate certain
requirements, from the current rule text or certain interpretive
guidance, unrelated to the comparison process.\12\ The text of proposed
amended Rule G-12(c) would set out, in full and in a better organized
manner, the streamlined set of informational elements for inter-dealer
confirmations for which automated comparison is not available.
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\11\ Customer trades generally remained subject to the
confirmation requirements of Rule G-15(a)(i) and its interpretive
guidance, ultimately leading the MSRB to revise and consolidate much
of this guidance into the rule language in 1995. See Exchange Act
Release No. 35700 (May 10, 1995), 60 FR 26747, at FN 6 (May 18,
1995) (File No. SR-MSRB-1995-04).
\12\ As part of its efforts to streamline the rulebook, the MSRB
has identified requirements under the current rule text and related
pieces of interpretive guidance--pieces that have been rendered
obsolete in the context of modern transaction practices or that
otherwise are no longer necessary to promote the accuracy and
efficiency of inter-dealer confirmations--which this proposed rule
change would delete, as described herein.
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The MSRB believes that, given recent technological innovations in
the market, it is timely to update and streamline Rule G-12(c). The
MSRB understands that issuers and other market participants are
contemplating and, in some cases, may already be implementing new
technological approaches in the municipal securities market with the
rise of distributed ledger technologies (including blockchain
technology), digital assets and other decentralized finance approaches.
Some are beginning to explore the potential of issuing digital or
tokenized securities.\13\ The issuance and subsequent trading of such
securities could involve many unique features that did not exist at the
time that the current centralized processes for comparison, clearance
and settlement became the default manner for effecting municipal
securities transactions. Such features may include, among others,
digitizing and electronic record keeping of security ownership without
the need for a traditional bond certificate and other aspects that
would make such securities ineligible for the existing automated
comparison and/or book-entry settlement process envisioned under MSRB
rules. Thus, the MSRB believes that modernization of Rule G-12(c) is
even more significant in light of alternative models for securities
transactions that are emerging in the marketplace.\14\ The MSRB
believes that the proposed rule change would effectuate this
modernization of Rule G-12(c), ensuring that the rule continues to
achieve its goals consistent with current market practices while
simultaneously easing compliance burdens on regulated entities by
removing outdated informational elements, and thereby removing
potential impediments to market innovation and further perfecting the
mechanism of a free and open market in municipal securities.
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\13\ See Commissioner Hester M. Peirce, Enchanting, but Not
Magical: A Statement on the Tokenization of Securities, July 9,
2025, available at <a href="https://www.sec.gov/newsroom/speeches-statements/peirce-statement-tokenized-securities-070925">https://www.sec.gov/newsroom/speeches-statements/peirce-statement-tokenized-securities-070925</a>, regarding the
applicability of broker-dealer rules to tokenized securities.
\14\ The MSRB has launched a retrospective rule review of
certain of its rules, including Rule G-12, that relate to these key
market infrastructure processes that could provide opportunities for
removing barriers to technological and product innovation in the
municipal market. See MSRB Press Release of April 25, 2025,
available at <a href="https://www.msrb.org/Press-Releases/MSRB-Discusses-Market-Regulation-and-Transparency-Initiatives-Quarterly-Board">https://www.msrb.org/Press-Releases/MSRB-Discusses-Market-Regulation-and-Transparency-Initiatives-Quarterly-Board</a>. The
MSRB views this proposed rule change as being an early step in this
retrospective rule review, and believes among other things, it is
timely given the potential emergence of decentralized finance
practices and products in the municipal securities market.
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Therefore, in summary, the proposed rule change would:
[[Page 24921]]
<bullet> Codify principles from interpretive guidance into the rule
text and reorganize the content of Rule G-12(c);
<bullet> Remove certain existing requirements from current Rule G-
12(c) that no longer serve a beneficial purpose for dealers or the
market;
<bullet> Make technical modifications to the rule requirements that
would simplify and clarify the existing requirements under Rule G-
12(c), including amending current Rule G-12(c)(vi) to replace it with a
new definition section;
<bullet> Retire certain guidance that is being codified or is
already codified in current Rule G-12(c) or noted under other MSRB
rules; \15\ and
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\15\ The MSRB will publish a regulatory notice that sets forth a
list of each item of interpretive guidance that would be amended or
retired in connection with the proposed rule change, following the
Commission's approval.
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<bullet> Amend and retain certain interpretive guidance relevant to
Rule G-12 and Rule G-15 and retire certain other guidance that may be
obsolete or no longer serve a beneficial purpose to the market.\16\
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\16\ See supra note 15.
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Codification of Certain Principles From Existing Interpretive Guidance
and Reorganization of Rule G-12(c)
The proposed rule change would codify central principles of the
interpretive guidance using more succinct and precise language and
reorganize the content of Rule G-12(c)(v)-(vi) to clarify the existing
requirements of Rule G-12(c). The proposed rule change would not impose
any new requirements and would eliminate obsolete or superfluous
requirements. A portion of the proposed rule change discussed herein is
comprised of key informational elements drawn from pieces of certain
interpretive guidance which would be codified in the proposed rule
text.\17\
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\17\ The MSRB sought comment regarding the pieces of
interpretive guidance under consideration as part of its review of
Rule G-12(c). MSRB Notice 2023-08, Request for Comment on
Retrospective Rule Review of Rule G-12(c) on Inter-Dealer
Confirmations and Related Interpretive Guidance (Sep. 28, 2023)
(``Request for Comment''), available at <a href="https://www.msrb.org/sites/default/files/2023-09/2023-08.pdf">https://www.msrb.org/sites/default/files/2023-09/2023-08.pdf</a>.
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The proposed rule change would organize informational elements
required to be disclosed in a transaction subject to Rule G-12(c) into
three categories, with the first covering securities transaction
information, set forth in proposed Rule G-12(c)(v)(A), and the second
covering securities identification information, set forth in proposed
Rule G-12(c)(v)(B). The proposed rule change would also add, in
proposed Rule G-12(c)(v)(C), a third category of securities additional
information beyond the information noted under the securities
transaction and securities identification category that, in limited
circumstances, may be necessary to ensure that the counterparties are
in agreement as to the fundamental terms of an inter-dealer transaction
and to the identity of the specific security being transacted. The
items of information that would be required to be included on an inter-
dealer confirmation in these three categories pursuant to proposed
amended Rule G-12(c) are described below.
Securities Transaction Information
The proposed rule change would codify certain elements consisting
of securities transaction information into Rule G-12(c)(v)(A).\18\ The
following securities transaction information would be required to be
disclosed under the proposed rule change.
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\18\ Broadly, proposed Rule G-12(c)(v)(A) would include
informational elements currently described in Rule G-12(c)(v)(A)-
(D), G-12(c)(v)(G)-(N) and in the additional language following Rule
G-12(c)(v)(N).
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<bullet> The confirming party's name (that is, the name of the
dealer producing the confirmation) and its contact information; \19\
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\19\ Existing Rule G-12(c)(v)(A) would be redesignated as Rule
G-12(c)(v)(A)(1) and would be modified to instead reference the more
flexible contact information to reflect modernization and changes in
modes of communication. Updated rule language information would
allow for address, telephone number or other information providing
reasonable means of contacting the confirming party.
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<bullet> The contra party's identification (that is, the name of
the dealer with whom the confirming dealer is engaging in a transaction
ineligible for automated comparison); \20\
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\20\ Existing Rule G-12(c)(v)(B) would be redesignated as Rule
G-12(c)(v)(A)(2) without substantive change.
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<bullet> Designation of whether the transaction is a purchase from
or sale to the contra party; \21\
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\21\ Existing Rule G-12(c)(v)(C) would be redesignated as Rule
G-12(c)(v)(A)(3) without substantive change.
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<bullet> Par value of the securities; \22\
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\22\ Existing Rule G-12(c)(v)(D) would be redesignated as Rule
G-12(c)(v)(A)(4). The proposed rule change would further clarify
that, for zero coupon securities, the maturity value of the
securities must be shown if it differs from the par value. This
clarification incorporates language currently in the second
paragraph following Rule G-12(c)(v)(N), which would be deleted as
part of the proposed rule change.
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<bullet> Trade date; \23\
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\23\ Existing Rule G-12(c)(v)(G) would be redesignated as Rule
G-12(c)(v)(A)(5) without substantive change.
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<bullet> Settlement date; \24\
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\24\ Existing Rule G-12(c)(v)(H) would be redesignated as Rule
G-12(c)(v)(A)(6). The proposed rule change would also specify that
initial confirmations for ``when, as and if issued'' transactions
are excepted from this disclosure requirement. This exception
incorporates language currently in the third paragraph following
Rule G-12(c)(v)(N), which paragraph would be deleted as part of the
proposed rule change.
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<bullet> Yield and dollar price, to be computed and shown as
follows: \25\
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\25\ Existing Rule G-12(c)(v)(I) would be redesignated as Rule
G-12(c)(v)(A)(7) and revised to adopt a simpler format, similar to
the comparable provisions of Rule G-15(a)(i)(A)(5) for customer
confirmations. Proposed Rule G-12(c)(v)(A)(7) would also codify
guidance noted in certain pieces of interpretive guidance setting
forth the manner of computing the yield and dollar price in a manner
consistent with Rule G-15(a)(i)(A)(5). The proposed amendment would
also codify certain guidance set forth in several pieces of
interpretive guidance. See MSRB Interpretive Guidance, Pricing to
Call (Dec. 10, 1980), available at <a href="https://www.msrb.org/Pricing-Call">https://www.msrb.org/Pricing-Call</a>; MSRB Interpretive Guidance, Callable Securities: Pricing to
Call and Extraordinary Mandatory Redemption Features (Feb. 10,
1984), available at <a href="https://www.msrb.org/Callable-Securities-Pricing-Call-and-Extraordinary-Mandatory-Redemption-Features">https://www.msrb.org/Callable-Securities-Pricing-Call-and-Extraordinary-Mandatory-Redemption-Features</a>; MSRB
Interpretive Guidance, Confirmation Disclosure: Put Option Bonds
(Apr. 24, 1981), available at <a href="https://www.msrb.org/Confirmation-Disclosure-Put-Option-Bonds">https://www.msrb.org/Confirmation-Disclosure-Put-Option-Bonds</a>; MSRB Interpretive Guidance, Calculation
of Price and Yield on Continuously Callable Securities (Aug. 15,
1989), available at <a href="https://www.msrb.org/Calculation-Price-and-Yield-Continuously-Callable-Securities">https://www.msrb.org/Calculation-Price-and-Yield-Continuously-Callable-Securities</a>; MSRB Interpretive Guidance,
Notice Concerning the Application of Board Rules to Put Option Bonds
(Sep. 30, 1985), available at <a href="https://www.msrb.org/Notice-Concerning-Application-Board-Rules-Put-Option-Bonds">https://www.msrb.org/Notice-Concerning-Application-Board-Rules-Put-Option-Bonds</a>. The foregoing
items of interpretive guidance would be retired either in whole or
in part through this initiative. See supra note 15.
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[cir] For transactions effected on the basis of yield to maturity,
yield to call date, or yield to put date, proposed Rule G-
12(c)(v)(A)(7)(a) would require that the yield at which the transaction
was effected be shown and, if that yield is to a call or put date, this
must be noted, along with the date and dollar price of the call or put
date; \26\
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\26\ Proposed Rule G-12(c)(v)(A)(7)(a) would repurpose some text
from current Rule G-12(c)(v)(I); however, it would primarily codify
language noted in MSRB Interpretive Guidance, Notice Concerning the
Application of Board Rules to Put Option Bonds (Sep. 30, 1985),
available at <a href="https://www.msrb.org/Notice-Concerning-Application-Board-Rules-Put-Option-Bonds">https://www.msrb.org/Notice-Concerning-Application-Board-Rules-Put-Option-Bonds</a>.
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[cir] For transactions effected on the basis of dollar price,
proposed Rule G-12(c)(v)(A)(7)(b) would require that a dollar price at
which the transaction was effected be shown and, unless the transaction
was effected at par, a yield be computed and shown;
[cir] Proposed Rule G-12(c)(v)(A)(7)(c)(i) would specify that yield
shown on confirmations must be computed to the lower of call date or
maturity date (instead of lowest of price to call, price to par option,
or price to maturity, as stated in current Rule G-12(c)(v)(I)). For
purposes of computing yield to call or dollar price to call, proposed
Rule G-12(c)(v)(A)(7)(c)(ii) would limit call
[[Page 24922]]
features that may be used to only those call features that represent
``in whole calls'' of the type that may be used by the issuer without
restriction in a refunding.\27\ Proposed Rule G-12(c)(v)(A)(7)(c)(iii)
would clarify the computation and content requirements applicable to
securities subject to a series of pricing calls at declining
premiums,\28\ securities that, at the time of trade, are subject to a
notice of a pricing call at any time,\29\ and additional requirements
for zero coupon securities.\30\ Proposed Rule G-12(c)(v)(A)(7)(c)(iv)
would require all yield and dollar price computations to be made in
accordance with MSRB Rule G-33, on calculations (``Rule G-33''); \31\
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\27\ These changes would also effectively harmonize this aspect
of the rule text with the comparable provision in Rule G-
15(a)(i)(A)(5)(c) for customer confirmations, which the MSRB
understands represents current industry usage of the terms ``call
date'' to reflect any type of call, such as a par option call or a
premium call, and ``pricing calls'' to reflect only call features
available to issuers for use without restriction in a refunding.
\28\ Dealers would be required to consider the call date
resulting in the lowest yield or dollar price to be the yield to
call or dollar price to call. This provision would codify key
concepts relating to declining premium calls drawn from MSRB
Interpretive Guidance, Pricing to Call, supra note 25.
\29\ This provision would codify language relating to
continuously callable securities gleaned from MSRB Interpretive
Guidance, Calculation of Price and Yield on Continuously Callable
Securities, supra note 25.
\30\ The call price shown on the confirmation would be required
to be expressed in terms of a percentage of the security's maturity
value. See MSRB Interpretive Guidance, Yield Disclosures: Yields to
Call on Zero Coupon Bonds (Jan. 4, 1984), available at <a href="https://www.msrb.org/Yield-Disclosures-Yields-Call-Zero-Coupon-Bonds">https://www.msrb.org/Yield-Disclosures-Yields-Call-Zero-Coupon-Bonds</a>.
\31\ This proposed amendment codifies language regarding the
applicability of Rule G-33 to yield and dollar price computation,
which are drawn from MSRB Interpretive Guidance, Calculations for
Securities with Periodic Interest Payments (Feb. 23, 2016),
available at <a href="https://www.msrb.org/Calculations-Securities-Periodic-Interest-Payments">https://www.msrb.org/Calculations-Securities-Periodic-Interest-Payments</a>.
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[cir] Proposed Rule G-12(c)(v)(A)(7)(d) would not require yield to
be shown for securities traded on a discounted basis and would not
require dollar price to be shown for when-issued trades.\32\
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\32\ These exceptions would be incorporated from the first and
third paragraphs following current Rule G-12(c)(v)(N).
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<bullet> Amount of concession; \33\
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\33\ Existing Rule G-12(c)(v)(J) would be redesignated Rule G-
12(c)(v)(A)(8) without substantive change.
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<bullet> Final monies; \34\ and
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\34\ Existing Rule G-12(c)(v)(K)-(M) would be redesignated Rule
G-12(c)(v)(A)(9)(a)-(d). Proposed Rule G-12(c)(v)(A)(9)(a)-(d) would
also incorporate language currently in the three paragraphs
immediately following Rule G-12(c)(v)(N). Proposed Rule G-
12(c)(v)(A)(9)(a)-(d) would be revised to adopt a simpler format,
virtually identical in both structure and substance to the
corresponding and analogous provisions of Rule G-15(a)(i)(A)(6) for
customer confirmations. With the exception of initial confirmations
of transactions affected on a ``when, as and if issued'' basis,
proposed Rule G-12(c)(v)(A)(9) would clarify the computation and
content requirements by specifying the elements of information which
must be included: (a) the total dollar amount of the transaction;
(b) the amount of accrued interest (with additional provisions for
specific types of securities); (c) a notation of ``flat'' for
securities that pay interest on a current basis but are traded
without interest; and (d) the extended principal amount (with
additional provisions for specific types of securities).
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<bullet> Delivery of securities.\35\
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\35\ Existing Rule G-12(c)(v)(N) would be redesignated as Rule
G-12(c)(v)(A)(10), which would require inclusion of information
regarding denominations of bonds, other than denominations that are
multiples of $1,000 par value (up to $100,000 par value), largely
similar to corresponding provision of Rule G-15(a)(i)(A)(7)(b) on
customer confirmations. Proposed Rule G-12(c)(v)(A)(10)(b) would
retain the delivery instructions under existing Rule G-12(c)(v)(N),
which harmonizes with the corresponding provision of Rule G-
15(a)(i)(A)(7)(d) on customer confirmations.
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Securities Identification Information
The proposed rule change would codify certain informational
elements consisting of securities identification information into
proposed Rule G-12(c)(v)(B).\36\ The proposed rule change would require
inter-dealer confirmations to include the following elements of
securities identification information.
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\36\ Proposed Rule G-12(c)(v)(B) would largely consist of text
from Rule G-12(c)(v)(E), (v)(F) and (vi)(A). It would also
consolidate related text that appears in paragraphs between Rule G-
12(c)(v) and (vi).
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<bullet> The name of the issuer; \37\
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\37\ Existing requirements from Rule G-12(c)(v)(E) would be
redesignated as Rule G-12(c)(v)(B)(1), requiring name of the issuer,
which would codify principles from interpretive guidance to include
trade name and series designation for stripped coupon securities,
analogous to Rule G-15(a)(i)(B)(1)(a). See MSRB Interpretive
Guidance, Notice Concerning Stripped Coupon Municipal Securities
(Mar. 13, 1989), available at <a href="https://www.msrb.org/Notice-Concerning-Stripped-Coupon-Municipal-Securities">https://www.msrb.org/Notice-Concerning-Stripped-Coupon-Municipal-Securities</a>.
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<bullet> A securities identifier, if any, such as a CUSIP number or
an alternative securities identifier that is mutually agreed upon
between two parties; \38\
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\38\ Existing requirements from Rule G-12(c)(v)(F) would be
redesignated as Rule G-12(c)(v)(B)(4). The proposed rule change
would also broaden this provision by permitting use of an
alternative securities identifier that would assist parties to the
transaction to have assurance that they are each referencing the
same security, such as an identifier that may be assigned by a
vendor or other entity through which both parties are engaging in
key steps of the transaction. The MSRB is mindful that the data
standards to be adopted by the federal financial regulators that
could become applicable with respect to submissions of information
to the MSRB under the Financial Data Transparency Act, Public Law
117-263, title LVIII, 136 Stat. 2395, 3421 (2022) could include data
standards for securities identifiers encompassing identifiers beyond
CUSIP numbers. See Financial Data Transparency Act Joint Data
Standards, Exchange Act Release No. 100647 (Aug. 2, 2024), 89 FR
67890 (Aug. 22, 2024). Furthermore, if tokenized municipal
securities were to be traded on a blockchain and such securities
have not been assigned a CUSIP number, any alternative securities
identifier incorporated within the mechanics of the blockchain
itself could serve as a securities identifier. While the proposed
rule change would permit the use on a confirmation of an alternative
securities identifier and is not limited to the use of CUSIP number,
the decision to use an alternative securities identifier on the
confirmation would not obviate any obligation under other MSRB
rules, such as the requirement to report trades to RTRS under MSRB
Rule G-14, if the security in fact has a CUSIP number assigned to
it.
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<bullet> Maturity date; \39\
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\39\ Existing requirements from Rule G-12(c)(v)(E) would be
redesignated as Rule G-12(c)(v)(B)(2), which would codify
informational elements from interpretive guidance with respect to
stripped coupon securities to include maturity date of the
instrument in lieu of the maturity date of the underlying
securities. See MSRB Interpretive Guidance, Notice Concerning
Stripped Coupon Municipal Securities, supra note 37.
---------------------------------------------------------------------------
<bullet> Interest rate; \40\ and,
---------------------------------------------------------------------------
\40\ Existing requirements from Rule G-12(c)(v)(E) would be
redesignated as Rule G-12(c)(v)(B)(3), which would also codify
language from interpretive guidance requiring that, for zero coupon
securities, the interest rate would be shown as 0%, and for
securities with a variable or floating interest rate, the interest
rate would be shown as ``variable''. See MSRB Interpretive Guidance,
Notice Concerning ``Zero Coupon'' and ``Stepped Coupon'' Securities
(Apr. 27, 1982), available at <a href="https://www.msrb.org/Notice-Concerning-Zero-Coupon-and-Stepped-Coupon-Securities">https://www.msrb.org/Notice-Concerning-Zero-Coupon-and-Stepped-Coupon-Securities</a>. See also MSRB
Interpretive Guidance, Confirmation Disclosure Requirements
Applicable to Variable-Rate Municipal Securities (Dec. 10, 1980),
available at <a href="https://www.msrb.org/Confirmation-Disclosure-Requirements-Applicable-Variable-Rate-Municipal-Securities">https://www.msrb.org/Confirmation-Disclosure-Requirements-Applicable-Variable-Rate-Municipal-Securities</a>.
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<bullet> Dated date.\41\
---------------------------------------------------------------------------
\41\ Existing Rule G-12(c)(vi)(A) would be reorganized as Rule
G-12(c)(v)(B)(5), on disclosure requirements related to dated date.
The proposed rule change would also codify language from
interpretive guidance to specify that, for stripped coupon
securities, the date that interest begins accruing to the custodian
for payment to the beneficial owner would be shown in lieu of the
dated date of the underlying securities; this date, along with the
first date that interest will be paid to the owner, would be stated
on the confirmation whenever it is necessary for calculation of
price or accrued interest. See MSRB Interpretive Guidance, Notice
Concerning Stripped Coupon Municipal Securities, supra note 37.
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Securities Additional Information
The proposed rule change would move and modify language from
existing Rule G-12(c)(vi)(I) to proposed new Rule G-12(c)(v)(C), which
would retain the requirement that the confirmation include any
additional information necessary to ensure that the parties agree to
the details of the transaction, beyond the information that would be
required under proposed Rule G-12(c)(v)(A), and would add reference to
ensuring that the parties have uniquely identified the specific
securities being transacted, beyond the information that would be
required under proposed Rule G-12(c)(v)(B). While the MSRB expects that
such additional information would only rarely be needed, additional
information
[[Page 24923]]
about the securities at certain times may be necessary particularly
where no CUSIP number or other alternative identifier has been assigned
to the securities and/or where some event or change to the securities
gives rise to the need to distinguish the subject securities from other
securities that previously were fully fungible but which have become no
longer fungible.
The MSRB believes it is imperative for dealers to consider the
circumstances under which additional identifying information may be
required since it may be essential for both parties to agree upon which
security is being transacted. For example, where a portion of
securities might be secured by funds held in escrow, or may be backed
by a personal guarantee, or might have some other feature not known or
otherwise accessible to the market that could call into question the
fungibility of different portions of such securities, while another
portion may not have such backing or such other feature, there may be a
need to provide greater specificity to the counterparty to ensure that
both dealers engaged in an inter-dealer transaction are not mistaken as
to the specific securities being transacted. In such circumstances, the
dealers may need to include additional information on the confirmation
under proposed Rule G-12(c)(v)(C) to precisely identify which unique
securities are being transacted.
Amendments To Remove Certain Existing Requirements
The proposed rule change would remove current rule text pertaining
to confirmation requirements that are primarily of a descriptive
nature, which are unnecessary to provide a materially complete
description for purposes of the modern comparison process, and are
neither securities transaction information nor securities
identification information.\42\ Because trade confirmations are
delivered after the time of trade--documenting previously-agreed-upon
terms of the trade rather than providing disclosures necessary to
inform counterparties at or prior to the time of trade--the need for
securities descriptive information in a post-trade inter-dealer
confirmation is significantly less than in a customer confirmation
involving retail investors, who may value having documented in the
customer confirmation some of these material substantive disclosures.
In addition, for the vast majority of inter-dealer trades that are
eligible for automated comparison, the current processes that
substitute for trade confirmations under Rule G-12(c) do not entail the
dissemination of this type of securities descriptive information. The
proposed rule change would also retire certain pieces of interpretive
guidance currently memorializing such requirements.\43\
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\42\ This elimination of obsolete confirmation requirements is
consistent with the principles cited in the time of trade disclosure
guidance for inter-dealer transactions. See MSRB Interpretive
Guidance, Time of Trade Disclosures in Inter-Dealer Transactions
(March 3, 2025) (the ``Rule G-17 Inter-Dealer Time of Trade
Disclosure Guidance''), available at <a href="https://www.msrb.org/Rules-and-Interpretive-Guidance/Time-Trade-Disclosures-Inter-Dealer-Transactions">https://www.msrb.org/Rules-and-Interpretive-Guidance/Time-Trade-Disclosures-Inter-Dealer-Transactions</a> (In regard to inter-dealer transactions, the items of
information that professionals must exchange ``should be sufficient
to distinguish the municipal security from other similar issues.'').
See also Exchange Act Release No. 100508 (July 11, 2024), 89 FR
58229 (July 17, 2024) (File No. SR-MSRB-2024-03) (the ``Time of
Trade Disclosure Amendment Approval Order'').
\43\ The MSRB will publish a full list of interpretive guidance
that would be retired pursuant to this proposed rule change by no
later than 90 days from the approval date of this proposed rule
change. This notice would be the second of a series of two notices
and would be similar to the previously published first notice where
the MSRB retired nine pieces of guidance. See MSRB Notice 2024-07,
MSRB to Retire Select Interpretive Guidance Regarding Inter-Dealer
Confirmation Disclosures (May 22, 2024), available at <a href="https://www.msrb.org/sites/default/files/2024-05/2024-07.pdf">https://www.msrb.org/sites/default/files/2024-05/2024-07.pdf</a>.
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The proposed rule change would remove the following confirmation
requirements, which pertain to securities descriptive information.
<bullet> Credit backing (from current Rule G-12(c)(v)(E));
<bullet> Features of securities (from current Rule G-12(c)(vi)(B),
(E) and (G));
<bullet> Status of securities (from current Rule G-12(c)(vi)(H));
and
<bullet> Tax information (from current Rule G-12(c)(vi)(C) and
(D)).
The MSRB notes that removing such requirements from inter-dealer
confirmations would have no impact on whether dealers selling municipal
securities in an inter-dealer transaction with features that would have
been subject to confirmation disclosures under the current language of
Rule G-12(c) must still comply with their obligations under other MSRB
rules. For example, dealers would still be obligated to provide any
required disclosures at or prior to the time of trade to their dealer
counterparties under certain circumstances as provided in the Rule G-17
Inter-Dealer Time of Trade Disclosure Guidance.\44\ Of course, given
that a confirmation is not received by the counterparty until after a
transaction is effected, confirmation disclosure, even if it were to
include any such information, would not normally be timely for purposes
of a time of trade disclosure obligation.
---------------------------------------------------------------------------
\44\ See supra note 42.
---------------------------------------------------------------------------
Addition of a New Definition Section and Other Technical Amendments To
Simplify and Clarify Existing Requirements Under the Rule
Rule G-12(c) currently utilizes certain terms, the definitions of
which can be found in the text of other MSRB rules and interpretive
guidance. Drawing from these sources, the proposed rule change would
add a definition section to Rule G-12(c) to add clarity and facilitate
compliance by reorganizing and compiling relevant definitions within
the proposed rule text. The new definitions section would include the
terms ``stepped coupon securities,'' ``zero coupon securities,''
``stripped coupon securities'' and ``pricing call,'' codified as Rule
G-12(c)(vi)(A)-(D).
Additionally, the proposed rule change would implement certain
technical amendments to simplify, clarify and modernize existing
content requirements under Rule G-12 as noted below:
<bullet> The proposed rule change would update certain internal
cross references relating to the delivery of securities in Rule G-
12(e)(ii),\45\ on securities delivered, and Rule G-12(e)(iii),\46\ on
delivery ticket. The proposed rule change would also update Rule G-
12(e)(v), on units of delivery under delivery of securities, to remove
a separate reference to information regarding denomination of
certificates to be delivered in case of bearer bonds since bearer bonds
are no longer issued in the primary municipal securities market and any
outstanding bearer bonds could be delivered in the same denominations
applicable generally to municipal securities.
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\45\ The proposed rule change would update internal cross-
references under subparagraph (e)(ii)(A) from current rule language
pertaining to paragraph (c)(v) and (c)(vi) to information now set
forth in subparagraph (v)(B) of section (c) of this rule. The
proposed rule change would also remove certain text under Rule G-
12(e)(ii)(B) since the proposed rule change updating Rule G-
12(e)(ii)(A) as noted above would make the rest of the information
pertaining to CUSIP number under current Rule G-12(e)(ii)(B)
redundant.
\46\ The proposed rule change would update internal cross-
references under subparagraph (e)(iii) from current rule language
pertaining to information set forth in subparagraph (c)(v) and (vi)
to information now reflected under paragraph (v) of section (c) of
this rule except the information set forth in items (3), (7), (8)
and clauses (b) and (d) of item (9) of subparagraph (c)(v)(A)
thereof.
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<bullet> The proposed rule change would also update internal cross-
references under Rule G-12(g)(i) and (ii), on the reclamation
requirements, from subparagraph (c)(v)(E) to paragraph (v)(B)(1)-(3) of
section (c) of this rule.
[[Page 24924]]
Retirement of Interpretive Guidance Codified in the Proposed Rule Text
and Amendment of Certain Interpretive Guidance
As discussed above, the proposed rule change would amend Rule G-
12(c) not only through reorganization of existing rule text but also
through the codification of certain pieces of related interpretive
guidance. This codification of guidance would promote ease of
compliance with Rule G-12(c) both by improving the clarity of the
proposed rule text and by reducing the number of documents dealers and
compliance professionals must consult to understand Rule G-12(c). With
the codification of requirements previously included in interpretive
guidance, such source guidance would be retired in whole or have the
relevant portions modified or removed in light of the incorporation of
such requirements into the rule language.\47\
---------------------------------------------------------------------------
\47\ See supra note 43.
---------------------------------------------------------------------------
Thus, the proposed rule change would fully retire MSRB Interpretive
Guidance, Confirmation Disclosure Requirements for Callable Municipal
Securities (Feb. 20, 1986), pertaining to confirmation of disclosure
requirements for callable municipal securities, since the requirements
of Rule G-12(c), as amended by the proposed rule change, would codify
the confirmation requirements set forth therein, making such guidance
superfluous.\48\
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\48\ Currently available at <a href="https://www.msrb.org/Confirmation-Disclosure-Requirements-Callable-Municipal-Securities">https://www.msrb.org/Confirmation-Disclosure-Requirements-Callable-Municipal-Securities</a>. See Exchange
Act Release No. 22965 (Mar. 5, 1986), 51 FR 8931 (Mar. 14, 1986)
(File No. SR-MSRB-86-5).
---------------------------------------------------------------------------
In addition, the proposed rule change would amend five other pieces
of interpretive guidance to modify certain rule references to reflect
current rule language, including the new language of Rule G-12(c) under
the proposed rule change, or to remove portions of such guidance that
would be codified by the proposed rule change, that have previously
been codified into MSRB rules, or that address outdated practices that
are no longer relevant in the market, with the remaining portions of
such guidance continuing to be in effect:
<bullet> MSRB Interpretive Guidance, Yield Disclosures: Yields to
Call on Zero Coupon Bonds (Jan. 4, 1984),\49\ which would be amended to
conform a reference to Rule G-12 to the appropriate portion of the rule
(as it would be modified by the proposed rule change) and a parallel
reference to Rule G-15 to the appropriate current provision of that
rule, as well as to make a minor language change to reflect current
rule language; \50\
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\49\ Currently available at <a href="https://www.msrb.org/Yield-Disclosures-Yields-Call-Zero-Coupon-Bonds">https://www.msrb.org/Yield-Disclosures-Yields-Call-Zero-Coupon-Bonds</a>. See Exchange Act Release
No. 20628 (Feb. 8, 1984), 49 FR 6054 (Feb. 16, 1984) (File No. SR-
MSRB-84-2).
\50\ Specifically, a reference to former Rule G-15(a)(i)(I)
would be changed to current Rule G-15(a)(i)(A)(5), an older
reference to the Rule G-15 text would be removed, and a reference to
current Rule G-12(c)(v)(I) in a footnote would be changed to
proposed new rule text under Rule G-12(c)(v)(A)(7).
---------------------------------------------------------------------------
<bullet> MSRB Interpretive Guidance, Confirmation Requirements for
Partially Refunded Securities (Aug. 15, 1989),\51\ which would be
amended to remove references to Rule G-12, to conform references to
Rule G-15 to the appropriate current provisions of that rule, and to
remove references to retired guidance; \52\
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\51\ Currently available at <a href="https://www.msrb.org/Confirmation-Requirements-Partially-Refunded-Securities">https://www.msrb.org/Confirmation-Requirements-Partially-Refunded-Securities</a>. See Exchange Act Release
No. 27450 (Nov. 17, 1989), 54 FR 49157 (Nov. 29, 1989) (File No. SR-
MSRB-89-7).
\52\ Specifically, certain outdated pinpoint references to
provisions of Rules G-12(c) and G-15(a) in the third paragraph
relating to pricing calculations would be eliminated and the
footnote at the end of that paragraph would also be eliminated since
the referenced interpretive guidance has previously been retired.
See Time of Trade Disclosure Amendment Approval Order. In addition,
references to Rule G-12 in the fourth paragraph relating to
securities descriptive information in confirmation disclosures would
be eliminated since, pursuant to the proposed rule change, such
securities descriptive information would not be required under
proposed Rule G-12(c), as amended, in connection with inter-dealer
confirmations. However, the fourth paragraph would be retained in
connection with customer confirmations, with the reference to former
Rule G-15(a)(i)(E) to be changed to current Rule G-
15(a)(i)(C)(3)(a), the reference to former Rule G-15(a)(iii)(J) to
be changed to current Rule G-15(a)(i)(A)(8), and the footnote in
that paragraph to be eliminated since the portion of the referenced
interpretive guidance would be deleted by the proposed rule change.
---------------------------------------------------------------------------
<bullet> MSRB Interpretive Guidance, Notice of Interpretation on
Escrowed-to-Maturity Securities: Rules G-17, G-12 and G-15 (Sep. 21,
1987),\53\ which would be amended to delete the first and last sections
of the guidance so that the guidance would only apply to issues under
MSRB Rule G-17 (``Rule G-17''), on conduct of municipal securities and
municipal advisory activities; \54\
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\53\ Currently available at <a href="https://www.msrb.org/Notice-Interpretation-Escrowed-Maturity-Securities-Rules-G-17-G-12-and-G-15">https://www.msrb.org/Notice-Interpretation-Escrowed-Maturity-Securities-Rules-G-17-G-12-and-G-15</a>. See Exchange Act Release No. 25426 (Mar. 8, 1988), 53 FR 8533
(Mar. 15, 1988) (File No. SR-MSRB-87-11).
\54\ Specifically, the introductory paragraph and related
heading ``Introduction'' would be deleted since it references market
conditions in 1987, which may not reflect current market conditions
and does not provide substantive guidance on the matters covered by
the guidance. In addition, the final three paragraphs and related
heading ``Application of Rules G-12(c) and G-15(a) on Confirmation
Disclosure of Escrowed-to-Maturity Securities'' would be deleted
since the substantive requirements thereof have previously been
incorporated into Rule G-15(a) and, pursuant to the proposed rule
change, such securities descriptive information would not be
required under proposed Rule G-12(c), as amended, in connection with
inter-dealer confirmations.
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<bullet> MSRB Interpretive Guidance, Notice Concerning Stripped
Coupon Municipal Securities (Mar. 13, 1989),\55\ which would be amended
by removing language in the guidance pertaining to the confirmation
requirements under Rules G-12 and G-15 for transactions in stripped
coupon municipal securities which either were previously incorporated
into Rule G-15 and/or would be codified into Rule G-12(c) pursuant to
the proposed rule change; \56\
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\55\ Currently available at <a href="https://www.msrb.org/Notice-Concerning-Stripped-Coupon-Municipal-Securities">https://www.msrb.org/Notice-Concerning-Stripped-Coupon-Municipal-Securities</a>. See Exchange Act
Release No. 26706 (Apr. 10, 1989), 54 FR 15064 (Apr. 14, 1989) (File
No. SR-MSRB-89-2).
\56\ Specifically, the entire portion under ``Confirmation
Requirements'' would be deleted since it is already codified under
Rule G-15 and other portions would either be codified into Rule G-
12(c) pursuant to the proposed rule change or removed by the
proposed rule change. The final paragraph and the heading
``Clearance and Settlement of Stripped Coupon Municipal Securities''
would be retained as the title of the guidance, and footnote 7 would
be updated to footnote number 1, which would reflect the current
confirmation disclosure under Rule G-15. The reference to former
Rule G-12(c)(v)(N) would be changed to proposed new Rule G-
12(c)(v)(A)(10)(b) and the reference to former Rule G-15(a)(i)(N)
would be changed to current Rule G-15(a)(i)(A)(7)(d).
---------------------------------------------------------------------------
<bullet> MSRB Interpretive Guidance, Calculation of Price and Yield
on Continuously Callable Securities (Aug. 15, 1989),\57\ which would be
amended to conform a reference to Rule G-12 to the appropriate portion
of the rule (as it would be modified by the proposed rule change) and a
parallel reference to Rule G-15 to the appropriate current provision of
that rule.\58\
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\57\ Currently available at <a href="https://www.msrb.org/Calculation-Price-and-Yield-Continuously-Callable-Securities">https://www.msrb.org/Calculation-Price-and-Yield-Continuously-Callable-Securities</a>. See Exchange Act
Release No. 27460 (Nov. 21, 1989), 54 FR 49156 (Nov. 29, 1989) (File
No. SR-MSRB-89-8).
\58\ Specifically, a reference to current Rule G-12(c)(v)(I)
would be changed to proposed new Rule G-12(c)(v)(A)(7)(c), and a
reference to former Rule G-15(a)(v)(I) would be changed to current
Rule G-15(a)(i)(A)(5)(c).
---------------------------------------------------------------------------
2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2) of the Exchange Act,\59\ which provides that the MSRB
shall propose and adopt rules to effect the purposes of the Exchange
Act with respect to, among other matters, transactions in municipal
securities effected by dealers. Section 15B(b)(2)(C) of the Exchange
Act \60\ provides that the MSRB's rules shall be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of
[[Page 24925]]
trade, to foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in municipal securities and municipal
financial products, to remove impediments to and perfect the mechanism
of a free and open market in municipal securities and municipal
financial products, and, in general, to protect investors, municipal
entities, obligated persons, and the public interest.
---------------------------------------------------------------------------
\59\ 15.U.S.C. 78o-4(b)(2).
\60\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------
The MSRB believes the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Exchange Act \61\ because it would foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in municipal securities. The proposed rule
change streamlines the current rule on confirmation requirements for
inter-dealer transactions by removing informational elements that are
outdated and allows for key information to flow in a more efficient
manner to contra parties for these unique transactions that are not
eligible for automated comparison. Given that Rule G-12(c) allows for
exchange and comparison of key information for such unique
transactions, the MSRB believes that the proposed rule change, by
reorganizing the rule in categories similar to Rule G-15, would foster
cooperation and coordination with parties engaged in processing
information with respect to such transactions in municipal securities.
The MSRB also believes that consolidating its rulebook by removing
interpretive guidance that is outdated or has already been incorporated
into the rulebook would promote regulatory clarity by reducing the need
for industry participants to cross reference multiple sources and
provide for more efficiency in the marketplace. Specifically, the MSRB
believes that consolidating existing interpretive guidance into the
text of Rule G-12, where appropriate, and clarifying existing rule
language would facilitate compliance by dealers with existing
requirements under Rule G-12 and would thereby remove impediments to
and perfect the mechanism of a free and open market in municipal
securities.
---------------------------------------------------------------------------
\61\ Id.
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
Section 15B(b)(2)(C) of the Exchange Act \62\ 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. The MSRB has considered the economic impact of the proposed rule
change and believes that it would not impose any burden on competition,
as the proposed rule change to Rule G-12(c) on uniform practice for
dealer confirmations would codify certain existing interpretive
guidance for inter-dealer confirmation disclosure requirements that are
ineligible for automated comparison into Rule G-12(c), retire certain
other interpretive guidance, add a new definitions section and make
certain technical amendments to simplify and clarify current rule
requirements under Rule G-12(c). In addition, the proposed rule change
applies equally to all dealers who engage in these transactions.
Therefore, the MSRB believes the proposed rule change would not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Exchange Act.\63\
---------------------------------------------------------------------------
\62\ Id.
\63\ Id.
---------------------------------------------------------------------------
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.\64\ In accordance with this
policy, the MSRB evaluated the potential impacts of the proposed rule
change relative to the current baseline. The proposed rule change to
Rule G-12(c) is intended to modernize, streamline and clarify dealer
obligations under Rule G-12(c) as they relate to inter-dealer
confirmations.
---------------------------------------------------------------------------
\64\ See 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.
---------------------------------------------------------------------------
Specifically, the proposed rule change would: codify central
principles of the interpretive requirements in a more succinct and
precise manner, and reorganize the content of Rule G-12(c); remove
certain existing requirements from current Rule G-12(c) that no longer
serve a beneficial purpose for dealers or the market; amend current
Rule G-12(c)(vi) to replace it with a new definitions section; make
technical modifications to the rule requirements that would simplify
and clarify the existing requirements under Rule G-12(c); retire
certain guidance that is being codified or is already codified in
current Rule G-12(c) and amend certain guidance and where applicable,
retire guidance that is no longer beneficial to the market. The
proposed rule change would modernize the rule for inter-dealer
confirmations for securities ineligible for automated comparison by
clarifying the rule text and would reduce the burden for dealers.
Benefits, Costs and Effect on Competition
The proposed rule change to Rule G-12(c) is intended to benefit
dealers by providing clarification to dealers by streamlining and
centralizing the needed information for producing an inter-dealer
confirmation for securities transactions that are ineligible for
automated comparison, which is a small percentage of all inter-dealer
trades. The proposed rule change would ensure that Rule G-12(c) is
consistent with current market practices while simultaneously reducing
compliance costs on dealers, therefore promoting more efficiency in the
marketplace.
Benefits
The MSRB believes that retiring interpretive guidance that is
obsolete, superfluous or has been or is in the process of being
codified ensures that the intent of Rule G-12(c) is consistent with
current market practices while also reducing compliance burdens for
dealers. The benefits of the proposed rule change would be achieved by
eliminating outdated guidance and incorporating the remaining relevant
guidance into the body of the rule which would streamline and
consolidate duplicative guidance. Dealers would have additional clarity
for their regulatory obligations without having to refer to different
pieces of guidance, some of which are obsolete. The proposed rule
change would potentially promote ease of compliance with the same
requirements. The MSRB believes that dealers would also benefit from
increased efficiency and reduced compliance costs with streamlined rule
text and reorganized interpretive guidance. The MSRB also amends, where
applicable, and preserves certain pieces of interpretive guidance,
which may still be essential to a dealer's understanding of the
regulatory framework.
Costs
The MSRB notes that no incremental ongoing compliance burdens in
the form of new requirements or greater disclosures are being added by
the proposed rule change. MSRB acknowledges that dealers would likely
incur minor incremental costs as a
[[Page 24926]]
result of the proposed rule change, relative to the baseline state
(current state). These costs may include the potential one-time upfront
costs related to revising related policies and procedures to reflect
new rule citations and to decrease the items of information identified
as required in such inter-dealer confirmations,\65\ if existing
policies and procedures provide such detail or the dealer chooses to
include a greater degree of detail. In addition, to the extent that
dealers currently or plan in the future to produce these rare inter-
dealer confirmations on a systemic basis rather than on a one-by-one
basis as they execute inter-dealer trades that are ineligible for
automated comparison, dealers may incur costs in connection with such
system modification or development. However, the proposed rule change
likely would not add incremental ongoing costs since dealers are
presumably already in compliance with the existing interpretive
guidance and relevant MSRB rules, including the recordkeeping
requirements. Similarly, the revisions to a dealer's policies and
procedures may not be extensive if the dealer presumably already
incorporates the review of existing interpretive guidance into their
current policies and procedures. Nonetheless, the MSRB conducted an
analysis of the upfront costs a dealer may incur in implementing the
changes outlined in the proposed rule change.
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\65\ While the proposed rule change would reduce the number of
items required to be included in an inter-dealer confirmation, a
dealer could choose to retain any existing procedures and processes
that provide the broader array of information currently required
under Rule G-12(c) and related interpretations.
---------------------------------------------------------------------------
The MSRB identified certain upfront costs, mostly related to
updating existing policies and procedures which would entail
identifying compliance staff at a dealer firm to conduct an analysis of
the proposed new rule language and any remaining interpretive guidance
within their policies and procedures. Based on the MSRB's assumptions,
the total upfront costs per dealer would be estimated at $7,080 as
shown in Table 1. The upfront costs include 6 hours for a compliance
attorney ($461 x 6 = $2,766) to identify and change all references to
Rule G-12(c) in their policies and procedures. In addition to
identifying and changing the policies and procedures, the MSRB also
expects two hours for a Compliance Director ($607 x 2 = $1,214) to
review the changes and 0.5 hours for the Chief Compliance Officer to
sign off on the changes.
Additionally, changes may need to be made to the actual inter-
dealer confirmation process if a dealer chooses. The MSRB expects that
while the confirmation updates are not required as part of the proposed
rule change (that is, a dealer that currently conforms to Rule G-12(c)
and the related interpretations would not need to make any changes to
come into compliance with the proposed rule change, including not being
required to reduce the items of information it currently may provide as
it would not be a violation to provide more information than the
baseline requirement in the proposed rule change), many dealers may
elect to remove the additional information to minimize any potential
risk, and some dealers may elect to programmatically remove these items
through a technological project. To be conservative, the MSRB included
this cost in the estimate and anticipates that if a dealer chooses to
update their confirmations, they would spend a total of $2,755 to
remove information that would no longer be required as part of the
proposed rule change. This cost takes into account approximately two
hours for a Senior Business Analyst ($348 x 2 = $696) to develop the
requirements needed for IT staff to update the confirmations. In
addition, the MSRB also expects a Senior Programmer to take four hours
of work ($363 x 4 = $1,452) to change the coding that produces each
inter-dealer confirmation. Lastly, the changes made by the Senior
Business Analyst and the Senior Programmer would be reviewed for
approval by the Director of Compliance. The MSRB estimates one hour of
time ($607 x 1 = $607) for the approval to be completed. However, as
previously articulated, other dealers may not currently use and may
continue not to use a technological process for producing these inter-
dealer confirmations and those that do may elect not to amend their
inter-dealer confirmation process and would thus not incur any costs
associated with a technological change.
Table 1--Estimated Compliance Costs for Each Dealer \66\
----------------------------------------------------------------------------------------------------------------
Cost components Hourly rate Number of hours Cost per firm
----------------------------------------------------------------------------------------------------------------
Upfront Costs:
(a) Revision of Policies and Procedures:
Compliance Attorney................................ $461 6.0 $2,766
Director of Compliance............................. 607 2.0 1,214
Chief Compliance Officer........................... 607 2.0 1,214
4,325
(b) Inter-dealer Confirmation Update (Optional):
Senior Business Analyst............................ 348 2.0 696
Senior Programmer.................................. 363 4.0 1,452
Director of Compliance............................. 607 1.0 607
2,755
----------------------------------------------------------------------------------------------------------------
The MSRB believes that the benefits of the proposed rule change
from the cumulative compliance cost savings as a result of the
streamlining of the rule language and guidance would outweigh the
upfront costs associated with policies and procedures revision and
programmatic changes. The proposed changes are intended to provide
enhanced clarity to dealers when conducting an inter-dealer trade for
[[Page 24927]]
securities ineligible for automated comparison.
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\66\ The hourly-rate data is gathered from a variety of
Commission filings compiled by the MSRB for usage in economic
analysis. The Commission's economic analysis utilizes the Securities
Industry and Financial Markets Association's ``Management &
Professional Earnings in the Securities Industry--2013 Report'' for
the hourly rates of various financial industry market professionals.
To compensate for inflation, the data reflects the 2025 hourly rate
level after adjusting for the annual cumulative wage inflation rate
of 46.7% between 2013 and 2025. See 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>. The
MSRB estimates the number of hours for each task based on the MSRB's
consultation with regulated entities' compliance officers.
---------------------------------------------------------------------------
Effect on Competition, Efficiency, and Capital Formation
The MSRB believes that the proposed rule change to Rule G-12(c)
would neither impose a burden on competition nor hinder capital
formation. The proposed rule change would improve the municipal
securities market's operational efficiency and promote regulatory
certainty by providing dealers with a clearer understanding of
regulatory obligations that are incorporated into the rule text. At
present, the MSRB is unable to quantitatively evaluate the magnitude of
the efficiency gains or losses, but believes the overall incremental
benefits accumulated over time for all market participants would
outweigh the minor upfront costs of revising policies and procedures,
with no expected incremental change in the ongoing compliance and
recordkeeping costs by dealers. The MSRB does not expect that the
proposed rule change to Rule G-12(c) would impose a burden on
competition for dealers, as the proposed amendments are applicable to
all dealers and the upfront costs are expected to be relatively minor
for all dealers.
Reasonable Regulatory Alternatives
The MSRB's Policy on the Use of Economic Analysis in MSRB
Rulemaking requires the MSRB's economic analysis to identify and
discuss reasonable alternatives to the proposed rule.\67\ The MSRB has
identified two reasonable alternatives for the proposed rule change.
---------------------------------------------------------------------------
\67\ See supra note 64.
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One alternative the MSRB considered was to fully harmonize the Rule
G-12(c) requirements for inter-dealer confirmations for securities
ineligible for automated comparison with the provisions of Rule G-15(a)
on customer confirmations, rather than providing for a more streamlined
set of requirements under Rule G-12(c). While Rule G-12(c) addresses
solely those inter-dealer transactions that are ineligible for
automated comparison, Rule G-15(a) addresses the requirements for
dealers to provide customers with written confirmations in all customer
transactions. Under this alternative, dealers would be required to
provide confirmations to other dealers for inter-dealer municipal
securities transactions that are ineligible for automated comparison
with the same level of disclosure as on a customer confirmation. While
the MSRB generally seeks to harmonize existing rules, in this instance
it would not be appropriate or necessary. Dealers are generally more
sophisticated than customers, especially retail customers, and even
without any further disclosure requirement, dealers on both sides of an
inter-dealer trade already possess, or have the means for obtaining,
sufficient disclosure information to complete a trade, so that the
items of information that are of value to a dealer in an inter-dealer
trade ineligible for automated comparison are only those items
necessary to ensure that they are able to accurately and efficiently
compare and settle the transaction. Of note, there is no obligation to
provide the types of disclosure information that would be removed from
Rule G-12(c) for those inter-dealer trades that do use the automated
comparison system. It is for this reason that the MSRB has deemed this
alternative as inferior to the proposed rule change.
Another alternative the MSRB considered was to embed all remaining
pieces of guidance (after retiring certain superfluous guidance) into
Rule G-12(c) and Rule G-15(a). In this alternative, all guidance would
be directly added to both rules. As part of the rulebook modernization,
this would allow compliance personnel to only have to look to one place
(Rule G-12(c)) for inter-dealer confirmation requirements and one place
(Rule G-15(a)) for customer confirmation requirements. However, there
are benefits to not having every standalone interpretive guidance
embedded into rule text, as the purpose of interpretive guidance for
certain more complex or nuanced situations is to provide additional
clarity and context to existing rules while remaining flexible and to
allow for changes as industry practices and technology evolves. By
providing this information directly in the rule text, the MSRB would
limit its ability to adapt to potential changes in the future and might
design a rule that would be either overly broad and cumbersome or
overly restrictive. It is for this reason that the MSRB deemed this
alternative as inferior to the proposed rule change.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
In response to the Request for Comment,\68\ the MSRB received one
letter (the ``SIFMA Letter'') from Leslie M. Norwood, Managing Director
and Associate General Counsel, Securities Industry and Financial
Markets Association (SIFMA).\69\ The SIFMA Letter,\70\ and additional
engagement with the organization,\71\ raised two main themes: first,
that G-12(c) is obsolete/unnecessary because dealers' informational
needs relative to inter-dealer trades extend only to that information
that is necessary for trade settlement; \72\ and second, should Rule G-
12(c) be retained, its requirements should be drastically pared back to
only that information which is necessary to achieve settlement.\73\ The
main themes of the SIFMA Letter are summarized below in more detail
with MSRB responses provided.
---------------------------------------------------------------------------
\68\ See supra note 15.
\69\ SIFMA Letter, dated December 15, 2023, available at <a href="https://www.msrb.org/sites/default/files/2023-12/SIFMA-Comment-Letter-2023-08.pdf">https://www.msrb.org/sites/default/files/2023-12/SIFMA-Comment-Letter-2023-08.pdf</a>.
\70\ See SIFMA Letter passim.
\71\ On May 2, 2024, MSRB staff convened a virtual meeting with
Ms. Norwood and representatives of SIFMA members. Participants
discussed in greater detail the suggestions and concerns voiced in
the SIFMA Letter.
\72\ SIFMA Letter at 2.
\73\ Id. at 2-3.
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G-12(c) Is Obsolete and Unnecessary
The SIFMA Letter argued that paper interdealer confirmations are
obsolete \74\ and stated that dealers rely on their information service
vendors for all data points related to trade execution, confirmations,
clearance, and settlement, and industry practice is that inter-dealer
trades are evidenced (to Financial Industry Regulatory Authority
(FINRA) examiners) by screen captures, VCONs, or electronic blotters.
SIFMA further asserted that, as an ordinary part of the cost of doing
business, all dealers have access to a security master database or
reliable security master information.\75\ The MSRB believes that, while
dealers generally have securities masters with varying degrees of
information and completeness as to the full universe of municipal
securities, such securities masters are unlikely to address the
purposes of the proposed rule change. This is because almost all
securities that are ineligible for automated comparison lack CUSIP
numbers (and likely lack other alternative securities identifiers), and
dealer securities masters are almost universally based, at least in
large measure, on such securities identifiers. Thus, it is highly
unlikely that dealers on the two sides of an inter-dealer transaction
ineligible for automated comparison would, regardless of the breadth
and depth of their respective securities masters, have information on
the security in question included in such securities master that would
fully match with the counterparty's
[[Page 24928]]
information, much less have any information on the security included
therein at all. The more limited items of information that the MSRB
would retain under the proposed rule change in the streamlined version
of Rule G-12(c) would address the need to be able to properly compare,
clear and settle trades in such securities while reducing the burden of
having to compile and disclose other information that is extraneous to
this process.
---------------------------------------------------------------------------
\74\ Id. at 2.
\75\ Id.
---------------------------------------------------------------------------
While the proposed rule change would narrow the scope of
information required in such confirmations, further narrowing the scope
of information would risk a deterioration in the ability to transact in
such securities in an efficient and secure manner, which is a risk that
the MSRB is concerned could rise if decentralized finance processes and
products are introduced into the marketplace that might not allow for
the current automated comparison process. The MSRB believes the
proposed rule change would allow for modernization of information
needed for inter-dealer confirmations without sacrificing the
regulatory mandate by preserving the exchange of information sufficient
to prevent fraudulent obfuscation and promote efficient and accurate
trade settlement. Finally, the proposed rule change would not require
that inter-dealer confirmations be on paper so that, for example, if
tokenized municipal securities were to be traded on a blockchain,
dealers would be able to meet their inter-dealer confirmation
requirement through the transmission of the required information, such
as by means of a unique contract address, on or as part of the
mechanics of the blockchain itself.\76\
---------------------------------------------------------------------------
\76\ For example, for a tokenized municipal security traded on a
blockchain, its contract address or other innate unique identifier
could be deemed to satisfy the requirement for an alternative
securities identifier on the inter-dealer confirmation under the
proposed amendment to Rule G-12(c). See supra note 37.
---------------------------------------------------------------------------
G-12(c) Should Be Pared Down and Materially Simplified
SIFMA noted that for inter-dealer trades, the only information that
should be required to be transmitted is that which is required to
settle the trade and did not see the need for harmonizing disclosure
requirements under Rule G-12(c) to Rule G-15.\77\ SIFMA further noted
Rule G-15, as well as MSRB Rule G-47 describes information disclosures
due at the time of confirmation, or trade, to customers and such
disclosures are unnecessary to dealers and may create a ``web of
potential regulatory foot-faults'' without any corresponding
benefit.\78\
---------------------------------------------------------------------------
\77\ SIFMA Letter at 2.
\78\ Id.
---------------------------------------------------------------------------
The MSRB is aware that the informational requirements of customers
and dealers are fundamentally different, and that dealers may not
utilize information received through inter-dealer trade confirmations
for settlement and processing transactions. The MSRB agrees that the
scope of inter-dealer confirmation disclosure requirements should be
narrowed to focus on the purposes of inter-dealer confirmations in this
context and not be required to include information that is extraneous
to that purpose.
As detailed above, the MSRB has identified certain informational
elements required under the current rule text that may be
conceptualized as ``securities descriptive information'' that do not
assist in processing or clearing of transactions. The types of
information subsumed within the ``securities descriptive information''
category--consisting of credit backing, features of securities,
information on status of securities, and tax information--are primarily
of a substantive disclosure nature rather than of a securities
identification nature. Importantly, because trade confirmations are
delivered after the time of trade and therefore primarily serve to
document the terms of a trade already agreed to rather than as a
mechanism for providing disclosures that can inform counterparties at
or prior to the time of trade, the need for securities descriptive
information in a post-trade document is significantly less relevant for
dealers than for investors, who may value having documented in the
customer confirmation some of these material substantive disclosure
information. In addition, for the vast majority of inter-dealer trades
that are eligible for automated comparison, the current processes that
substitute for trade confirmations under Rule G-12(c) do not entail the
dissemination of this type of securities descriptive information.
Because this type of information is not essential in the context of
comparing, clearing and settling an inter-dealer trade, the MSRB
believes that it is appropriate that the proposed rule change would
eliminate these informational elements from the disclosure requirements
for inter-dealer confirmations.
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, including whether the proposed rule
change is consistent with the 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<ls-thn-eq> Send an email to <a href="/cdn-cgi/l/email-protection#7200071e175f111d1f1f171c0601320117115c151d04"><span class="__cf_email__" data-cfemail="255750494008464a4848404b5156655640460b424a53">[email protected]</span></a>. Please
include File Number SR-MSRB-2026-01 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-2026-01. 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-2026-01 and should be submitted on or before May 28, 2026.
[[Page 24929]]
For the Commission, pursuant to delegated authority.\79\
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\79\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2026-08997 Filed 5-6-26; 8:45 am]
BILLING CODE 8011-01-P
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