A#

5943

P&S #:

5513

DATE:

December 2, 2004

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:

CHANGES TO MUNICIPAL BOND “STEP OUT” PROCESSING

The MSRB recently announced its live date for the new Real Time Transaction Reporting System (RTRS) (see MSRB Notice http://www.msrb.org/msrb1/whatsnew/RTRSStartDate.htm).  As indicated in an earlier NSCC notice (A5728, PS#5298 dated December 4, 2003), this implementation requires a modification in the submission of municipal bond “step out” transactions to RTTM. 

In response to the May 23, 2003 MSRB notice pertaining to “step out” transactions, (see MSRB Notice http://www.msrb.org/msrb1/archive/TRSIANotice.htm) NSCC issued a Notice (http://www.ficc.com/cmu/notices/CMU009.03.htm?NS-query=)  which outlined a short-term solution to facilitate the submission of these types of transactions to NSCC for comparison without subjecting these transactions to MSRB reporting.  In order for the MSRB to not include “step out” transactions for price reporting purposes, firms were advised to submit this type of transaction as follows:

Submission Medium

Procedure

Batch Files

Submit a Settlement Type / Special Trade Indicator “B”

RTTM Web

Submit “Step Out” in the Settlement Type / Special Trade Indicator field

Interactive Messages

Submit a Settlement Type / Special Trade Indicator field represented in the SETDET Block with the value “:22F::SETR/GSCC/XLGL”. 

Firms were advised that the above short term solution would cause these transactions to be processed on a trade for trade basis provided that both parties submitted the trade with the same indicator. 

Changes Effective January 10, 2005

With the introduction of the new RTRS system, the MSRB will no longer be reliant upon NSCC’s  end of day batch files for reporting purposes. RTTM will feed interactive messages to the RTRS system to be used by the MSRB for reporting purposes.  Accordingly, the following changes must be made effective with trades submitting on January 10, 2005 and thereafter.

Interactive Message

·        Submit messages as RTTM-Only /DEST01 NSCCTRRS 

·        Cease the submission of a Settlement Type / Special Trade Indicator field represented in the SETDET Block with the value “:22F::SETR/GSCC/XLGL”.  This will allow the trades to now net as opposed to going trade for trade. 

·        Populate the appropriate buyer or seller Contra Trader ID fields on the MT515 as follows: :70C::PACO//GSCC/TDIDSTEP. Utilization of this field (a non-matching, informational only field) will alert your contraparty that the advisory is a step out transaction for internal routing purposes.

RTTM Web

·        Cease using “step out” in the Settlement Type / Special Trade Indicator field. Firms should leave this field blank for these types of transactions. 

·        Firms should submit these trades as “RTTM Only” in the Trade Reporting Indicator Field.

·        Populate the Contraparty Trader ID field with the acronym “STEP”.   Utilization of this field (a non-matching, informational only field) will alert your contraparty that the advisory is a step out transaction for internal routing purposes.

Batch Files

·        Firms using batch files should cease submitting any step out trades via batch

For more information regarding RTTM, please contact your firm’s FICC member services representative, call the CMU-RTTM Hotline (212) 855-7664, or email your questions to CMUhelp@ficc.com.

Sean Delap
Vice President, Product Management