MSRB approves $48.8 million budget

The Municipal Securities Rulemaking Board has approved a $48.8 million budget for the 2025 fiscal year, a 2.9% increase from the prior year and its first after the Securities and Exchange Commission suspended its FY2024 rate card and after the board conducted a couple of stakeholders meetings on its budgeting process.

For FY 2025, $15.1 million will be going to information technology services, $12.5 million will be going to market transparency products and services, $6.7 million for market regulation and market structure, $5.7 million for governance and leadership, $5.6 million for finance, risk, human resources and administration and $2.9 million for external relations.

The board's first meeting with stakeholders to discuss the budget process centered on the rate card model, and the second opened the floor up to stakeholders to discuss the budget process more generally, and included representatives from the American Securities Association, Bond Dealers of America, Government Finance Officers Association, and Investment Company Institute, among others.

"We have taken to heart stakeholder requests for more clarity around our budget, particularly regarding our investments in technology, which represent our largest expense and approximately half of our annual budget," said MSRB chair Bo Daniels and MSRB chief executive Mark Kim in a letter to stakeholders. "We've reorganized our technology functions into more discrete units, which enabled us to provide more relevant budgetary information about these functions."

The FY 2025 budget includes slight increases for everything except market transparency products and services, which dipped to $12.5 million from $12.6 million and external relations, which fell to $2.91 million from $2.92 million.

By category, personnel made up 61% of the budget, computer licenses, equipment, cloud services providers and telecommunications made up 14%, consultants and professional service fees made up 8%, rent accounted for 6%, third-party data services made up 3%, board compensation 2%, travel and meetings 2%, training, office expenses and "other" made up 2%, and legal and audit services and corporate insurance and taxes each made up 1%.

"MSRB's primary budget philosophy is fiscal discipline and responsibility," the budget summary said. "MSRB's five-year actual compounded annual growth rate in expenses from FY 2020 to FY 2024 is projected to be 5.1%."

The FY 2025 budget is made up eight different categories of revenue streams, with market activity fees by far making up the most with $39.1 million, municipal advisor professional fees coming in at $2.9 million, data subscriber fees coming in at $2.4 million, 529 plan underwriting fees making up $1.5 million, annual and initial fees making up $1.4 million, investment income making up $1.2 million, rule violation and fine revenue consisting of $500,000, and other revenue coming in at $410,000.

Market activity fees for FY 2025 use a five-year historical average, with the underwriting fee rate $0.0297 per every $1,000 par underwritten, the transaction fee being $0.0107 per every $1,000 par transacted and trade count fee being $1.10 per trade.

Every year the amount of actual revenue typically surpasses the allotted budget, with the remainder going to the MSRB's reserves. Changes have been made in recent years to help give some of that back.

"In 2022, MSRB established an annual rate card process for certain fees allowing MSRB to manage reserves more effectively and avoid the buildup of excess reserves above target by returning that excess in the form of lower fees," the budget summary said. "This was in direct response to MSRB stakeholder feedback in comment letters to its annual rate filing. Stakeholders expressed concern over the volatility of fees the annual rate card model creates as a byproduct of managing reserves, further expressing the desire for more stability in fees over time. MSRB is currently engaged in a retrospective review of the annual rate card model and will continue to engage with the industry on this topic."