Municipal bond board seeks to lift trade size mask
(Reuters) - The board that writes the rules for the $3.7 trillion municipal bond market moved a step closer on Friday to immediately making public the value of all trades as part of an effort to increase price transparency in the market.
The Municipal Securities Rulemaking Board submitted a proposal to the Securities and Exchange Commission to post the exact par amount of trades with par value of less than $5 million. Currently, that ceiling is $1 million.
For trades larger than $5 million, the MSRB web site known as EMMA would display the abbreviation "MM+" for five days and then reveal the exact amount.
The board had originally considered lifting the temporary trade size "mask" entirely, but dealers worried that would jeopardize trading partners' anonymity and reveal dealers' positions.
The board, a self-regulatory organization that writes the rules the SEC enforces, said in its proposal there may be more changes in the future.
"The MSRB believes that raising the par value threshold to par values over $5 million would be an appropriate first step to take in the short term as it would greatly reduce the number of trades subject to the par value mask," it said in the proposal.
"The MSRB plans to continue to evaluate whether this threshold can be raised further or completely eliminated," it added.
In 2011, 342,906 trades were able to use the five-day trade size "mask". If the threshold had been $5 million instead of $1 million, only 97,124 trades would have had the mask, the MSRB said.
The board is concerned about price transparency and any advantages institutional investors may have over retail investors, who dominate the market. A January report from the Government Accountability Office was critical of the market for not giving individual investors access to the same information institutions have.
Dealers have resisted eliminating temporary size masks entirely, saying they help facilitate trading .
The board said critics had said that "raising the par value threshold for masking large trade sizes would provide additional transparency to the municipal market without adversely impacting liquidity."
(Reporting By Lisa Lambert; editing by Andrew Hay)
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