FIMSAC urges more work on pre-trade transparency


The Securities and Exchange Commission’s Fixed Income Market Structure Advisory Committee is recommending that regulators explore ways to improve pre-trade transparency in the municipal market, a proposal that has received cautious approval from the dealer community.

FIMSAC’s Municipal Securities Transparency Subcommittee provided that preliminary recommendation during the advisory committee’s virtual meeting Monday, FIMSAC’s second meeting of 2020 and 10th since its formation in November 2017.

“We recommend that the commission review developments in this area in the past decade, including the manner in which retail trades are executed, the roles played by market participants, including intermediaries and marketplaces, and the manner and breadth of information dissemination to retail investors,” it said.

Greater pre-trade transparency has been a long-standing SEC goal.

“This is not a new issue and has been studied by the Commission and formally discussed in its 2012 Report on the Municipal Securities Market,” FIMSAC said. “At that time retail investors had access to relatively little information, thus making it difficult to determine what securities were available for trading, as well as prices associated with these securities. Since then, firms have focused on providing additional information to the user base, but the subcommittee still believes there are significant improvements to be made, particularly for the retail investor.”

The Securities Industry and Financial Markets Association weighed in shortly after FIMSAC voted on the recommendation, which was relatively non-specific.

The SEC’s Fixed Income Market Structure Advisory Committee is recommending the commission explore ways to improve pre-trade muni transparency.


“SIFMA strongly supports reasonable efforts to improve price transparency in the municipal securities markets,” the group said in a statement. “The dealer community has supported the MSRB’s RTRS and EMMA platform. These are the mechanisms for collecting and accessing trade prices indicative of actual market levels and other trade information. These MSRB systems also provide for the collection of disclosure information and other related municipal market information and data. We continue to support the ongoing development and operation of these systems through the fees our industry pays.”

“However, we are very concerned that a pre-trade price transparency regulatory initiative could be expensive to develop and implement while yielding limited useful information for investors,” SIFMA said. “Market liquidity would likely be impacted as well. We believe that regulators should be careful and thorough in their assessment of the costs and benefits of any pre-trade transparency proposals, and its potential impact on market liquidity. Today’s FIMSAC action supports that goal.”

SEC Chair Jay Clayton started the meeting off noting the muni market’s historical domination by retail investors, a narrative that some analysts have started to question due to the rise of separately managed accounts, or SMAs.

Clayton said he wants members of FIMSAC to continue serving on the committee until March of next year, but urged them to take some time to think about it and said he would understand if they choose to return to focusing on their personal responsibilities.

FIMSAC’s current term expires Nov. 13.

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