MSRB requests info on fee setting process

The Municipal Securities Rulemaking Board has put out a request for information on its rate card fee setting process, further indication that the board is still working through potential modification and upgrades to how it goes about setting and collecting its underwriting, transactions and trade count fees.

This was approved during the board's first quarter meeting of the FY 2025, and follows two separate meetings the board held with stakeholders following the suspension of the rate card in early 2024.

"MSRB's primary objectives in establishing the rate card model has been to increase transparency, maintain an equitable balance of fees among regulated entities and mitigate the impact of market volatility on MSRB's revenues, all while managing the MSRB's reserves to target levels," said MSRB chief executive Mark Kim. "Through our retrospective review of the rate card model and the RFI released today, MSRB looks forward to receiving public comments to help inform improvements to our fee-setting process to responsibly fund the future of regulation, while advancing MSRB's Congressional mandate."

The request asks fourteen different questions that are grouped under specific sections such as market projections, market activity fees, fee distributions, as well as the management of organizational reserves.

The rate card fee setting process uses projected market activity and adjusts the next year's fees to return any excess revenue or recoup any revenue shortfall, inherently resulting in some volatility in fees. The board asks if there are reasonable tolerances, or a reasonable basis for determining such limits on the projections, and whether they should be the same for both fee increases and decreases.

The board also asks what kind of data it should be considering and whether they should be relying solely on historical market activity averages.

The MSRB also asks whether a single fee for dealers would be fairer or more equitable than distinct market fees, and if so, what could be the basis for determining a flat or single firm fee.

The request also contains a distinct section for municipal advisors and asks whether the current annual assessment they're subject to is fair, appropriate and sustainable, and also asks whether the MSRB should be assessing fees from an MA's solicitation activities, among other questions.

Other questions address whether there is another methodology for determining the fair distribution of fees, what regulatory burdens or unintended consequences could be anticipated from a change in the relative share of fees between MAs and dealers as well as whether the MSRB should consider alternatives to returning surplus revenues.

Questions on the request can be directed at Ernie Lanza, chief regulatory and policy officer at the MSRB or Omer Ahmed, chief financial officer.

Michael Decker, senior vice president of public policy and research at the Bond Dealers of America said he plans to respond.

"BDA welcomes the opportunity to provide feedback to the MSRB on its fee setting process, reserve levels, budget and related issues," Decker said. "We plan to provide constructive input which hopefully will lead to a fee structure that meets the Board's needs while being fair for dealers and all stakeholders."

"SIFMA applauds the MSRB for its continuing outreach to the community on its rate card fee-setting process and re-examining the volatility in the MSRB fees in the prior MSRB Rate Card process," said Leslie Norwood, managing director, associate general counsel and head of municipal securities at the Securities Industry and Financial Markets Association. "SIFMA will be reviewing the request for information with its members and plans to comment."

The board will be accepting responses until Jan. 31, 2025.