Changes come to EMMA as market participants look for user-friendliness

Bonds

WASHINGTON — Though the Municipal Securities Rulemaking Board’s EMMA has seen its share of improvements and upgrades over the years — and more are on the way — some market participants say it needs more user-friendliness, more organization and more accessibility in its filing process.

As EMMA is in its 11th year, Lisa Washburn, managing director at Municipal Market Analytics, said the site could be more user-friendly by making information more accessible and helping to clarify what’s going on in the marketplace. However, EMMA has been a huge improvement in the industry since it was implemented, Washburn said.

“It’s not as if things aren’t getting done,” Washburn said. “For sure, things are getting done there. It’s just where do they focus next? It may just be that they need to modernize EMMA and think of EMMA from a 2020 perspective versus a 2010 perspective.”

The MSRB plans to roll out changes this summer to simplify the submission process by creating a more user-friendly and streamlined document-submission experience for issuers. They also plan to develop navigation tools and resources on EMMA and improve the quality of indexing data for disclosure documents.

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“Modernization of the EMMA website is a priority for this Board,” said MSRB Board member and Technology Committee Chair Richard Ellis. “Last year we focused on improving navigation and usability. This year we are improving EMMA’s search capability and the issuer-submission experience, and will continue to make necessary strategic investments to support modernization of this critical market utility.”

The MSRB is currently focusing on an internal project — a data analytics prototype in the cloud to explore machine learning and artificial intelligence to leverage new technology tools that will extract information from unstructured data.

They are using primary market data, such as official statements on EMMA, in the prototype. The official statements are all in PDFs, meaning they’re unstructured and not machine readable. The board wants to see whether it can develop a search engine to use “natural language and free text search” to extract data.

Some of the changes this summer would include adopting a “wizard approach” — a guided question-and-response approach to take issuers through the process when they’re filing. It would take less time for an issuer to submit, and it would provide infrequent issuers prompts to connect them to resources and more information.

The MSRB also wants to break down the artificial barrier between the issuer and what the public can see so issuers can be more engaged with public tools and explore the EMMA website.

EMMA currently has three ways to search — advanced search, an interactive map and quick search. The MSRB has plans in the future, though no date is set yet, to improve its quick search. It’s useful for researching a CUSIP, but is a challenge when users don’t have the number on hand and inconsistent abbreviations and naming also make it difficult.

The MSRB wants to provide suggested terms as users type into the search box to help people find the issuer more quickly.

Washburn said one of the most important improvements would be to allow the ability to search and find information by obligor in EMMA.

“A lot of debt is issued through conduit issuers and that makes an issuer-based search system cumbersome for users,” she said.

In a filing with the Securities and Exchange Commission this week on primary offering practices, the MSRB said they are asking to start collecting the name of obligors, the first step to potentially getting them on EMMA and addressing stakeholders’ desire to be able to locate these entities on EMMA.

The MSRB said a lot of the information comes from a third-party provider, and they said it’s on their radar.

Washburn said another step would be to expand sector classifications. Currently, in the advanced search tab, the site has seven — education, health, housing, improvement, tax-revenue, utility and other.

The MSRB said changes this summer could also help with categorizing disclosures, since categorizing items as “other” isn’t helpful to investors, and its a term the Board wants to cut down on using.

“There are more sectors in the marketplace,” Washburn said. “It would be really great if there was industry consistency on this and I’d love to see the MSRB lead the way.”

Misclassification of material events in EMMA is troublesome, Washburn said. For example, the “other” category can be a fallback for issuers not certain on how things should be categorized. Washburn said this material event category can have everything from the resignation of a CEO to a payment default.

“I think part of the fix here has to be MSRB oversight, part it has to be continued issuer education,” Washburn said. “I also think that making it more difficult to load information into the more generic categories could serve as a gate to prevent the category from being overused.”

She also wants to see a way to clarify when material events have been resolved.

“There’s no obligation for an issuer to file that a material event has been cured, such as a reserve fund draw,” Washburn said. “But, EMMA could make it easier for an issuer to optionally communicate that information to the market by including a resolution field, for example.”

Washburn said there could be ways to use EMMA to help get issuers to file more quickly, an issue that has been talked about a lot lately. If there was a last audit counter placed on every issuer’s CUSIPs, investors would be able to see how much time has passed since the end of the fiscal year for which there is a filing. Also, automatic emails could be sent to issuers periodically to let them know if they are behind, such as 180 days after the end of their fiscal year.

“So it’s a soft way of trying to promote more timely disclosure,” Washburn said. “It could improve disclosure in the marketplace and greater transparency on disclosure timeliness that could result in more consistent pricing benefits for issuers that provide better disclosure.”

EMMA is approaching information overload and there needs to be a focus on high value, instead of high volume, said Jonas Biery, business services manager in the Bureau of Environmental Services in Portland, Oregon.

“EMMA is a great, great tool and a great improvement and I applaud the recognition that that tool needs to improve alongside the evolving municipal market,” Biery said. “I’d flag however that improvements need to acknowledge resource limitations that state and local governments face.”

The Bond Dealers of America said its primary concern was EMMA’s organization around a CUSIP which provides limited visibility to the other municipal securities of an issuer and to the municipal securities of other comparable issuers.

“Ideally, a user of EMMA should be able to easily identify all of the debt of the same credit of an issuer but also be able to easily identify other similar debt of similar issuers. The MSRB has continued to engage the industry on these and other concerns about the usability and accessibility of EMMA,” Mike Nicholas, CEO of the Bond Dealers of America, said in an email.

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