| A# |
5728 |
| P&S #: |
5298 |
| DATE: |
December 4, 2003 |
| TO: |
All Participants |
| ATTENTION: |
MANAGING PARTNER / OFFICER; OPERATIONS PARTNER / OFFICER; DIRECTOR OF OPERATIONS; DATA PROCESSING MANAGER; MANAGER P & S DEPARTMENT; COMPLIANCE OFFICER |
| FROM: | Product Management |
| SUBJECT: | Step Out Transactions |
On May 23, 2003, the MSRB published a notice regarding certain transactions effected by independent investment advisors (IAs), which result in onward deliveries between two dealers. The MSRB has stated that while these transactions are currently submitted to NSCC for comparison and netting benefits, they should not be reported as interdealer trades to the MSRB for price transparency. The MSRB continues to require that these transactions be reported as trades between one dealer and its customer. This notice can be found at http://ww1.msrb.org/msrb1/whatsnew/TRSIANotice.htm.
Since then, the NSCC has been working with the MSRB to find a way to facilitate submission of these types of transactions to NSCC for comparison without subjecting these transactions to MSRB reporting. Through the implementation of RTTM, NSCC will support a solution whereby a participant can utilize interactive messages and web screen entry to designate a transaction for matching and not reporting. Firms can take advantage of this solution when the MSRB accepts these interactive messages from RTTM, in lieu of the current batch interface. (This option will not be available for municipal bond batch input records). Once the MSRB’s Real-time Reporting System (RTRS) is fully operational, these transactions will be permitted to be submitted in a manner that will provide both matching and netting benefits without being sent to the MSRB. Details of how these transactions will be handled via messaging in the RTTM system once RTRS is live will be described separately.
In the interim, while the MSRB continues to receive batch files from the FITS system, NSCC will support the use of special coding via all input media (batch, message and web), which would permit these transactions to be excluded from the current price reporting system. MSRB is also willing to recognize this interim solution.
NSCC has taken into consideration that this interim solution should require minimal changes to the current process as there is an ultimate solution in development. As such, NSCC will permit the use of the special trade indicator field (already reflected on the batch input record) as a means for Participants to highlight these types of transactions for the MSRB. This change becomes effective for input submitted to NSCC beginning January 2, 2004.
Specifically, submissions via batch or web input with a Settlement Type Indicator
“B” will now be recognized by the MSRB for purposes of excluding the transaction
from the interdealer price reporting system. See batch input details below:
| DATATRAK SYSTEM ID |
FIELD |
STEP OUT INDICATOR |
| 17600 (Municipal T Input) 160 character record |
67 |
B = STEP OUT |
| 17607 (Municipal T Input) 80 character record |
67 (Record 1) |
B = STEP OUT |
| 17602 (Municipal As Of Input) 160 character record |
67 |
B = STEP OUT |
| 17603 (Municipal As Of Input) 80 character record |
67 (Record 1) |
B = STEP OUT |
Additionally, transactions designated with a “B” indicator will be processed on a trade for trade basis by NSCC. As with all other special trades, both parties will be required to submit the same indicator symbol in order to compare the transaction. The “B” indicator will appear on existing FITS Contract and Intraday Blotter Print Image and Machine Readable Output. Those firms that will submit via interactive messaging in June, must use the special trade indicator field represented in the SETDET Block with the value “:22F::SETR/GSCC/XLGL”.
Questions on this notice should be directed to your RTTM member services representative, or the undersigned at 212-855-7627.
Sean Delap
Vice President Product Management