WASHINGTON -- The Municipal Securities Rulemaking Board has formed a committee to try to improve the dissemination of price information in the municipal bond market and has asked the Public Securities Association to participate.
In response, the PSA announced yesterday it is forming a committee to work with the MSRB, which will be chaired by Stanley Ciemniecki, a Lehman Brothers executive vice president who is head of the PSA's syndicate and trading committee.
The formation of the committees comes two years after the PSA convened a panel composed of only its own members that failed to recommend any solution to the complex price dissemination problem that has long nagged the market.
The PSA announced the formation of the committees after receving a letter from the MSRB recently warning that price dissemination in the municipal market "is an item that the Securities and Exchange Commission will pay more attention to" and one that "the Board intends to pursue actively during the next year."
The letter said the board wants to "open a dialogue" with the PSA on the subject and has formed a Pricing Committee, chaired by board member Harry Larson, president of First Chicago Capital Markets Inc., to "further this goal."
The moves by the MSRB and the PSA come as Congress and federal regulators have put the squeeze on the government securities market to get the word out on prices. That pressure recently spurred a major new private sector initiative coordinated by PSA, called GOVPX Inc., which disseminates real-time prices and quotes on all U.S. Treasury bills, notes, and bonds that includes "best offer" information.
In its letter to the PSA, the MSRB said it is vital that the association be involved in the effort to come up with a price dissemination system in the municipal arena.
"The PSA membership is intimately involved in the day-to-day valuation of municipal securities and recognized the problems involved in pricing such a large universe of thinly traded issues," Mr. Larson told PSA Chairman Ralph Horn.
Mr. Horn responded that the PSA welcomes the opportunity to begin a dialogue with the board on the complex issue.
Market participants say producing an exact list of current prices in the municipal market would be a massive undertaking, given the infrequency of trading in most of the more than 2 million issues in the nearly $800 billion market.
Over a dozen data services and brokers evaluate municipal bond prices on a daily basis, but little if any information goes directly to retail customers. Teh results are used almost exclusively by isntitutional portfolio managers, banks, and other large players in the market who are willing to pay, in some cases, significant fees for the information.
However, many of the firms that evaluate municipal bond prices say they are interested in finding ways to make such information more accessible.
Meanwhile, an aide to SEC Commissioner Richard Roberts, a strong supporter of improved price dissemination in the municipal market, said in June that the issue is "gaining momentum" at the agency.
Edward Pittman, counsel to the former Alabama bond counsel, said that in 1975 the SEC embarked on a major project to improve "price transparancy" for trades in corporate equities in the over-the-counter market. The decision was made at that point not to take on the debt markets, he said.
"Now, 15 years later, there's an enormous disparity between the kind of information you can get from sitting at a Quotron matchine trading equities and the amount of information available to the typical bond investor," he said. "There should not be that kind of spread in quotes."