Dealer groups representing firms of all sizes are urging the Securities and Exchange Commission to adopt the Municipal Securities Rulemaking Board’s 2024 rate card for fear that reverting back to 2023 levels would cause significant disruption.
That’s according to a joint letter signed by the Bond Dealers of America and the Securities Industry and Financial Markets Association, who both filed individual comment letters earlier this month objecting to
“We support the 2024 rate card established in the proposal and we urge the Commission to allow the rate card to take effect without changes,” the letter said. “Indeed, initiating the process of disapproving the 2024 rate card, which would cause fee rates to revert to 2023 levels, could be operationally disruptive for dealers who use automated compliance and bookkeeping systems already loaded with 2024 fee rates established by the rate card embodied in the proposal, which took effect on Jan. 1, 2024.”
The letter goes on to say that further suspension of the 2024 rate card would leave transaction fees in limbo if it’s approved later in the year, making it “unclear whether the 2024 rates would be retroactive to the date of suspension or only effective going forward,” the letter said.
“We have had preliminary conversations with MSRB staff about their budget and fee setting processes and we will continue to press the board on these issues as the MSRB begins work on the 2025 fees and budget,” the groups added. “In the meantime, we ask the SEC to allow the proposal to take effect.”
With the new rate card fee setting process this year came changes in fees, such as a 25% rise in the underwriting fee, 9% rise in the municipal advisor fee, 15% reduction in the board’s transaction fee and 48% reduction in the board’s trade count fee.
In their respective comment letters to the MSRB, both groups criticized the rate card for what they see as a lack of transparency, vague budget commitments and an all together warped process that sets spending plans before revenue for those targets have been met.
BDA expressed concerns over whether the rate of budget increases is sustainable, due to much of the increased fee burden being placed on dealers and not enough on non-dealer municipal advisors. SIFMA also warned that the fees, mixed with the current interest rate environment, amplifies the stress placed on underwriting fees.