Another tool to make people more comfortable
— Tim Husson (@TimHussonSLCG) June 10, 2014
After the launch of the MSRB’s new price discovery tool on EMMA I chatted with Executive Director Lynnette Kelly about it and other transparency initiatives. Kelly led the launch of the EMMA website in 2008 and she has continued to champion its expansion to increase transparency in the municipal market. Kelly said that the new and better EMMA was “another tool to make people more comfortable owning municipal bonds.”
It’s astonishing how much transparency muniland has today compared to the pre-EMMA days. Back then, finding offering documents for new bond issues meant searching through a diffuse set of document libraries and waiting for a hard copy to be mailed. Trade data was available, but it was in a very crude, unusable form for retail investors. EMMA is much more than bond documents. Here is the official description:
The Electronic Municipal Market Access system, or EMMA®, is the official repository for information on virtually all municipal bonds. EMMA provides free public access to official disclosures, trade data, credit ratings and educational materials and other information about the municipal securities market.
EMMA provides investors with key information about municipal securities and is presented in a manner specifically tailored for retail, non-professional investors who may not be experts in financial or investing matters.
Kelly said that EMMA provides information on variable rate and short-term debt as well as long maturity bonds. The MSRB has done an outstanding job creating transparency, putting it above FINRA’s corporate bond site TRACE.
The MSRB Real Time Trade Reporting System (RTRS) is the original trade reporting system from which EMMA’s trade details and graphing features are built. Kelly gets feedback every day from EMMA users and the MSRB has a process to evaluate the feedback. The MSRB’s board of directors is involved in setting the overall strategy, budget and metrics for the platform. Kelly said that the EMMA original launch was great, but the board wants Emma 2.0, which is being built now.
More developments are in the pipeline for EMMA, specifically adding the ability to chart yields in addition to price for trade data. Kelly said that EMMA could incorporate other databases of municipal information. The MSRB has some outside consultants for EMMA, but the technology development is done in-house.
EMMA’s developers rely on user groups and feedback from regulators. Many taxpayers, academics and journalists use EMMA for other than investment purposes.
The MSRB collects a technology fee from dealers that partially pays for EMMA upgrades. Some of the cost of enhancements comes from the general budget.
One of the most powerful aspects of the EMMA upgrades is that trade reports are updating into the site on a streaming basis. The MSRB requires that trades be reported within 15 minutes. Kelly said that most trade reports come into the system within a minute of execution, although some manually-reported trades take longer. Kelly said that they need to find the right balance for dealers of all sizes and that missing a reporting deadline would be considered “a foot fault” and not egregious. The MSRB has a proposed rule out for public comment on trade reporting.
Kelly said that the RTRS trade reporting system was over 10 years old and they are considering ways to open up the data fields and possibly collect additional post-trade data elements. The MSRB will be issuing a concept release in the late summer or early fall on pre-trade transparency. Kelly said that they have been working on the issue for a long time.
Kelly is a great leader for muniland transparency. Kudos to her and her entire team.