Here comes a whole new municipal bond market
How do you shake up the sleepy old municipal bond market? Gather up the most important data, organize it into an easy-to-search format and make it available to retail investors for free. It’s this blogger’s dream, and it is on its way. Muniland’s overseer, the Municipal Securities Rulemaking Board (MSRB), today released its long-range plan outlining the expansion of its free, public-facing disclosure system called EMMA.
The current EMMA system (EMMA 1.0) is already a vital resource for the municipal bond market. It was modeled broadly on the SEC’s EDGAR system for public companies. EDGAR and EMMA both take in public disclosure documents, categorize them and expose the documents through a free Internet portal. EMMA 1.0 is a much richer platform than EDGAR because it provides trade pricing for municipal bonds in addition to document disclosure. The MSRB recently enhanced EMMA 1.0 with credit ratings, making it the most complete public platform for any fixed-income class.
Now it’s time to roll out the plan for EMMA 2.0. Here is how MSRB describes their purpose:
Establishing an integrated set of market transparency products that progress continuously toward achieving the MSRB’s statutory mandate to remove impediments to and perfect the mechanisms of a free and open market in municipal securities and municipal financial products
That’s a mouthful, but 51 percent of municipal bonds are owned directly by individual investors. Prior to EMMA these investors did not have simple access to fundamental data on their securities. If you own stocks or mutual funds, you could easily go to Yahoo Finance, MSN Money or any number of free public websites to look up all the necessary information. Muniland has had no central portal to research and evaluate muni bonds. The municipal bond market will remain a complicated place, but when given the information, smart investors will take the time to dig down and find value in their local general obligation, sewer or school district bonds.
Here is what is on tap for EMMA 2.0:
Free public user accounts — At no charge, public non-professional users would be able to establish user accounts on EMMA that would allow them to: set personal preferences; save frequently used search criteria; create portfolios or categories of securities; manage EMMA alert settings; track documents and data for user-created portfolios of securities through a personal ticker that would flow each selected document, data point, or other tagged event into a “tape” that could be replayed, saved or exported to the users’ own files; and conduct free basic data queries.
Municipal issuer resources — The MSRB would introduce an EMMA account tier oriented toward the needs of municipal issuers. This would provide municipal entities with enhanced abilities to analyze the EMMA data and documents for their own securities and to establish a portfolio of comparator municipal entities allowing municipal entities to better track the performance of their securities and their own disclosure performance against their peers.
Tiered professional utilities – EMMA 2.0 would introduce tiered Web-based professional accounts through which customized feeds could be accessed and customized queries conducted on a long-term subscription basis or on a fee-for-service basis. The EMMA professional tiered accounts would provide professionals with the ability to receive and view their fee-based data in an integrated manner along with the free public use collection offered through EMMA.
EMMA 2.0 seems to have high aspirations to channel some of the information flow to retail investors, municipalities and market professionals who don’t work in massive broker-dealers. It’s hard to adequately describe EMMA 2.0’s potential to radically shake up the vendor community that supports muniland.
Kudos to the MSRB. If you keep going at this rate, our market will be more open and dynamic than the stock market.