Letters

Amendments to the Minimum Denomination Rule

Summary

SIFMA provided comments to the Securities and Exchange Commission (SEC) on amendments the to minimum denomination rule. The Municipal Securities Rulemaking Board (MSRB) recently proposed a new rule, Rule G-49, on Transactions Below the Minimum Denomination of an Issue. The proposed new rule incorporates from MSRB Rule G-15(f) the existing prohibition regarding below-minimum denomination transactions with customers, without substantive amendment, and the two exceptions to the prohibition, with certain amendments.

Proposed Rule G-49 includes a new third exception to permit a dealer to sell a below-minimum denomination position to one or more customers that have a position in the issue and any remainder to a maximum of one customer that does not have a position in the issue. Proposed Rule G-49 also would significantly amend, in the existing exception regarding dealer sales to customers, the requirement that a dealer determine, by receipt of a written statement provided by the party from which the dealer purchases the below-minimum denomination securities position, that the position acquired from such dealer and being sold to a customer is the result of a customer’s liquidation of its entire below-minimum denomination position.

Regarding the liberalization of that requirement, proposed Rule G-49 would apply restrictions to inter-dealer transactions in below-minimum denomination positions.

Proposed Rule G-49 would also eliminate, for a narrowly defined group of below-minimum denomination transactions, a dealer’s obligation to provide a minimum denomination sale disclosure to its customer on or with the confirmation of the transaction. Based on the organization of these related provisions in proposed Rule G-49, the existing minimum denomination provisions in Rule G-15(f) would be rescinded.

See also:

SEC filing

Federal Register Notice

PDF

Submitted To

Securities and Exchange Commission (SEC)

Submitted By

SIFMA

Committee

Municipal Securities Division

Date

2

March

2017