Ronald W. Smith
Corporate Secretary
Municipal Securities Rulemaking Board
1300 I Street NW
Suite 1000
Washington, DC 20005

Re: MSRB Notice 2018-15: Request for Comment Draft Amendments to MSRB Rules on Primary Offering Practices

Dear Mr. Smith:

The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates this opportunity to respond to Notice 2018-15 (the “Notice”)2 issued by the Municipal Securities Rulemaking Board (the “MSRB”) in which the MSRB is requesting comment on draft amendments to MSRB Rule G-11, on primary offering practices, and MSRB Rule G-32, on disclosures in connection with primary offerings of municipal securities by brokers, dealers and municipal securities dealers (collectively, “dealers”). SIFMA is pleased to play a part in the conversation about potential rulemaking or additional guidance in connection with primary offering practices.

I. Rule G-11 – Primary Offering Practices

A. Free to Trade Wire

SIFMA members are supportive of requiring the senior syndicate manager to notify the syndicate via a free-to-trade wire when the syndicate restrictions are lifted. If the requirement only applied when the underwriter has generated a free-to-trade wire, the new requirement would be marginally less burdensome. SIFMA and its members agree that a standardized process for issuing the free-to-trade wire is consistent with the MSRB’s original intent with respect to Rule G-11. Communications to syndicate members via wire are standard practice in the market. It would not cause a significant burden to require the senior syndicate manager to notify the syndicate members simultaneously that restrictions on an issue of municipal securities have been lifted and sales in the secondary market may commence.

B. Additional Information for the Issuer 

SIFMA and its members believe that issuers generally understand that information regarding the designations and allocations of  securities in an offering is available either from the senior syndicate manager or certain third-party information resources. It is not uncommon for a municipal securities issuer to either sit on the syndicate desk during pricing, or log in to an electronic syndicate  management system to monitor orders, designations and allocations. SIFMA would be supportive of further issuer education on this subject. SIFMA and its members are most supportive of only requiring the senior syndicate manager to send the designations and allocation information under Rule G-11(g) upon the request of the issuer, as this is current market practice. We do not believe that the senior syndicate manager should be required to provide the information to the issuer regardless of whether it is requested, as some issuers may not be interested in such information. SIFMA and its members believe that if such a requirement were to be included in Rule G-11, then issuers should be permitted to opt out of receiving the information. Also, if managers are required to provide designation and allocation information to issuers, we feel that guidance will be critical to ensure that this is done in a consistent manner across the industry in order for the information to be useable.

C. Alignment of the Timeframe for the Payment of Group Net Sales Credits with the Payment of Net Designation Sales Credits

As described in our letter on the concept release,3 SIFMA understands the MSRB’s desire to require group net and net designation sales credits to be subject to the same regulatory timeframe of within 10 calendar days following receipt of the securities. However, there are considerations that weigh against the harmonization of the timing for those payments. The determination of amounts due and owing to each syndicate member for group orders and for designated orders is dependent on different inputs. The time pressure to get the payments for group net sales credits processed would pose an additional burden on the syndicate manager, increasing the potential risk of incorrect payments being sent. Absent evidence of significant problems with the current timing of payments for group and designated orders and in the spirit of efficiency, SIFMA believes that no changes to the timeframes in the current rule should be made.

On another note, current Rule G-11(j) requires the payment of designations within 10 calendar days of delivery by the issuer. Firms handle payment in different ways, with some sending paper checks, and others distributing wires. SIFMA asks that the MSRB consider amending the verbiage to reflect that payment must made within 10 calendar days following delivery to the syndicate by “electronic means.” If the MSRB put such a rule change out for comment, they might be better able to determine the industry costs and benefits of such a rule change. At this time, SIFMA and its members feel the term “electronic means” is general enough to accommodate changes in technology which make payments occur faster thus reducing risk, and eliminates the use of paper checks which are less efficient, slower to receive, and slower to process. SIFMA and its members suggest a parallel change for current Rule G-11(i) with respect to the settlement of syndicate accounts.

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