MSRB Works to Further Transparency In Municipal Market

The Municipal Securities Rulemaking Board establishes a long-term plan to enhance its Electronic Municipal Market Access and provide investors with additional transparency into municipal securities pricing.

The Municipal Securities Rulemaking Board (MSRB) — which regulates securities firms, banks and municipal advisers in the municipal securities market — recently released a new plan to increase transparency in the municipal bond market over the next two to three years.

Increasing transparency has always been the MSRB's No. 1 objective, and over the years the self-regulatory organization has rolled out various initiatives to do so, including the 2008 creation of its Electronic Municipal Market Access (EMMA) system. The system is a warehouse of information and tools critical to valuing municipal bonds. The EMMA platform includes information such as trade prices and data, interest rates, continuing disclosures, outstanding debt refinanced, and more.

The EMMA website also provides trade price and interest rate information for fixed and variable-rate municipal securities. "Credit ratings information from two rating agencies and other data give investors a more complete, real-time view," says Al Morisato, MSRB's chief operations and technology officer.

The goal is to provide investors with the information they need to understand the value of securities before they have a conversation with a market professional regarding buying or selling those securities. "In addition, they will better understand the terms, characteristics and risks of a particular security using the data that MSRB provides," Morisato contends.

"The data in EMMA was first disseminated to market participants through third-party data vendors," notes MSRB deputy executive director and general counsel Ernesto Lanza. "In 2008, the MSRB began making information available to the public on its EMMA website and has added new data, information and features every year since."

And this year, the MSRB is taking EMMA to the next level. The organization is preparing a multiyear plan to further increase transparency in the municipal market by adding new tools and data to EMMA.

The public has the ability to access any information on EMMA for free, similar to the Securities and Exchange Commission's Edgar system. "EMMA is a public venue that allows people to access municipal securities data directly from us at no charge," explains Morisato.

One of the drivers behind the creation of EMMA was the rule change in 2006 allowing for the dissemination of electronic prospectus. "We wanted to move the municipal marketplace in that direction as well, and make this type of information available to the general public online. At that time, there wasn't a central source for disclosure documents," says Lanza.

"This, for the first time, makes municipal bond data available to anyone in the marketplace, and individuals can have direct access," he adds, noting that the system has seen significant usage by retail investors.

The EMMA Pilot

The pilot of EMMA was launched in March 2008, including municipal bond data going back to 1990. Prior to 2000, according to Morisato, much of the data that came into the MSRB was paper-based and it had to be imaged and then burned on a CD to disseminate.

"For us, [EMMA offered] a much cheaper dissemination process. We didn't have to move all this data around in the mail. And, of course, it was a benefit to the general public. We're continuing to mature the process and evolve our product lines," Morisato adds. "We now have an agile methodology to push out new capabilities to the market."

EMMA was custom built in-house using a combination of Java and .NET, with industry-standard database management systems. From an operations standpoint, "We leverage three data centers for hosting data and information products, for redundancy purposes," Morisato says.

"The market really depends on our system being available all the time. If something does fail, the system has to be up and running," Lanza adds.

Before creating the long-term plan fro EMMA, MSRB executives did thorough outreach to market stakeholders to determine what functionality or data should be included in the system, and which should be addressed first, Lanza reports. "The intention of the plan was to lay out how we intend to evolve and provided a road map. There's a lot of detail in the plan," he says.

One of the items on the agenda for the long-term plan is to improve the way users search and retrieve data. "We're calling this EMMA 2.0, and in this version we will increase the functionality and ease of use of EMMA," Morisato says. "There will be different ways to search for information and better integration, in addition to more layers of information. We are constantly improving our systems."

Participants can search for information based on unique CUSIP number, date and other parameters, Morisato explains. "The goal is to make the search more extensive and easier to find what participants are looking for," he says.

Executives also plan to refresh some of the older technology that was used to build the system. Meanwhile, the MSRB will begin to introduce the pieces of real-time trade information, including what happens before or after the sale occurs, as well as the ability to compare different securities.

The idea is to have one centralized place to go if you you're looking for pricing-related information, Morisato says. "The goal is to create that core architecture and layer in all the information so users have one place to find all information on a security as well as related securities to make comparisons," he comments.

"It is not a marketplace, but it does allow retail investors to have a better sense of the value of a municipal security so they are better informed when they go to a [financial professional] to take action on their portfolio," Lanza adds.

Next Page: EMMA 2.0: Key Elements of the Plan