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Transaction Reporting of Dealer Buybacks of Auction Rate Securities: Rule G-14

September 2, 2008

MSRB NOTICE 2008-36

As a result of the unprecedented number of “failed auctions” in municipal Auction Rate Securities (“ARS”) that have occurred this year, many dealers have announced plans to offer to purchase customer positions in municipal ARS at a stated price, typically par (“ARS Buybacks”). These ARS Buyback programs predominantly have occurred pursuant to settlement agreements with state attorneys general. The MSRB has received questions from dealers whether ARS Buybacks must be reported to the MSRB Real-Time Transaction Reporting System (RTRS) and, if so, whether the M9c0 “away from market - other reason” special condition indicator must be included on such trade reports.

MSRB Rule G-14, on transaction reporting, requires all purchase-sale transactions in municipal securities to be reported to RTRS. Transactions in ARS must be reported to RTRS and trade reports of ARS Buybacks must be reported to RTRS without the M9c0 special condition indicator. The primary reason a trade report would be required to include the M9c0 special condition indicator is that the trade report contains information that could be misleading to users of price transparency reports. The MSRB does not believe that trade reports of ARS Buybacks would provide misleading information relating to the market value of ARS because the price at which ARS Buybacks are executed has been publicly announced. Therefore, trade reports of ARS Buybacks as well as of other purchases of ARS from holders at current market prices must be reported without the M9c0 special condition indicator.

Questions about this notice may be directed to Justin R. Pica, Uniform Practice Policy Advisor, at
703-797-6716.

 

 

 

RW Smith believes the information shown herein was obtained from a reliable source, but makes no representation and no guarantee as to its accuracy or completeness. RWS shall not be responsible for the consequences of your use of the information. Securities identified may be subject to additional call features, sinking funds, project features, or other factors that may affect market value. You must do your own independent research prior to submitting any bid.

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