MSRB Testifies at SEC Hearing on State of the Municipal Securities Market

FINRA Municipal Securities Fraud Arbitration Attorney, Russell L Forkey, Esq.

July 30, 2011:

On July 30, 2011, the Municipal Securities Rulemaking Board (MSRB) testified at the Securities and Exchange Commission (SEC) field hearing on the state of the municipal market regarding MSRB initiatives to enhance municipal market transparency, specifically in the area of pre-trade price transparency. The hearing is one of several conducted by the SEC to gather information from key municipal market participants to help in preparing an SEC staff report.

MSRB General Counsel and Deputy Executive Director Ernesto Lanza noted the increased individual investor participation and reduced information asymmetries in the municipal market that have resulted from the MSRB's post-transparency efforts, most notably through the 2008 creation of the MSRB's Electronic Municipal Market Access (EMMA) website, which publishes real-time prices of municipal bonds for free. "EMMA serves as a free, user-friendly platform that brought retail investors for the first time onto a more even playing field with market professionals."

Lanza discussed the MSRB study that was recently undertaken with the assistance of Erik Sirri, professor of finance at Babson College and former SEC Chief Economist and Director of the Commission's Division of Trading and Markets. Lanza explained the study would focus on the effect of municipal market transparency, including pre-trade transparency, on investor protection and would likely result in MSRB initiatives in these areas.

Lanza told SEC staff, "Perhaps Professor Sirri's most challenging task is to develop a preliminary assessment of the impact of current forms of pre-trade transparency, such as through alternative trading systems or other market mechanisms, in light of the private nature of these venues and the limited dissemination of information from them to the broader market."

Lanza concluded by emphasizing the importance of continued coordination between the MSRB and SEC in their efforts to enhance transparency for participants in the municipal market.

For a complete copy of the MSRB's written statement follow the highlighted link.