Reuters: Regulatory News: Muni regulators, index providers to meet on market pricing

Reuters: Regulatory News Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

Muni regulators, index providers to meet on market pricing Aug 3rd 2012, 21:48 Fri Aug 3, 2012 5:48pm EDT * MSRB announced on Monday it would study market indexes * SEC calls for easier price discovery * Market illiquid By Lisa Lambert Aug 3 (Reuters) - The Municipal Securities Rulemaking Board will meet Aug. 16 with the major providers of U.S. municipal market indexes to discuss improving transparency in the $3.7 trillion tax-free bond market. With U.S and European regulators probing allegations of rigging in a widely used interbank funding rate, the London interbank offered rate, or Libor, concerns on how prices are set and indexes work widened across different assets and financial markets. "The MSRB plans to meet with municipal market index and benchmark providers," the MSRB's executive director, Lynnette Kelly, said. MSRB, which is a self-regulatory organization made up of banks, issues and advisers, will also discuss measures to boost price transparency on its website and a better understanding of the indexes' methodologies used on the market. The board had said on Monday it would study the indexes and release educational materials in the near future. The board's chairman, Alan Polsky, said he had no reason to believe that the municipal indexes have been manipulated. There are around 55,000 small and large issuers across the United States that tap the municipal bond market as a vital source of borrowing for short- and long-term needs. Fewer dealers are involved in transactions in the secondary market after a rule change requiring them to report trades within 15 minutes went into effect, creating more efficiency. Erik Sirri, the former director of trading and markets at the Securities and Exchange Commission, told a conference on Friday that since this 2005 rule went into effect there are fewer dealers for each bond and trading costs have fallen. A study Sirri did that was commissioned by the MSRB shows an increased efficiency that may lead to lower borrowing costs for the states and cities selling the debt. Retail investors dominate the muni bond market, and most hold their bonds to maturity. But those wishing to sell their securities find they "have access to relatively little pricing information about municipal securities, and generally have limited knowledge about the execution options," the SEC said in a report released on Tuesday. The report calls for easier price discovery, especially for retail investors, and suggests expanded use of "alternative trading systems." These systems operate like bulletin boards where broker-dealers post bonds for sale. A variety of indexes, based on both the primary and secondary market, give extra information to market participants. There are several muni index providers, including Municipal Market Data, a Thomson Reuters company; Municipal Market Advisors, the Bond Buyer, Standard & Poor's and Bloomberg. Unlike the banks accused of rigging Libor, these index providers are publishing companies and do not trade. INFORMATION PROVIDERS MMD is a leading source of benchmark information for the municipal bond market, focused on the production of daily benchmark yield curves for the municipal marketplace. "Thomson Reuters completely supports efforts by the MSRB to improve transparency and accountability across the financial markets," a spokeswoman for the company said. One of MMD's competitors, MMA, also said that multiple providers of information are adding to the transparency. "The market is well served by various data points. In the municipal markets there are a lot of complexities and differences and our contribution is to provide a clear scale," Bob Donohue at MMA told Reuters. Traders and portfolio managers said this week they use a variety of data to determine prices in the muni market. "I find the scales helpful, but the scales are not the market," said Gary Pollack, managing director at Deutsche Bank Private Wealth Management. "There are times they are right and there are times when they don't really reflect yields in the market. My job as an investor is to know the difference." Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions