[Federal Register Volume 87, Number 152 (Tuesday, August 9, 2022)]
[Notices]
[Pages 48530-48546]
[FR Doc No: 2022-17002]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95417; File No. SR-MSRB-2022-06]

Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Amend Certain Rates of Assessment for Rate Card Fees Under
MSRB Rules A-11 and A-13, Institute an Annual Rate Card Process for
Future Rate Amendments, and Provide for Certain Technical Amendments to
MSRB Rules A-11, A-12, and A-13

August 3, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on July 29, 2022, the Municipal Securities
Rulemaking Board (``MSRB'' or ``Board'') filed with the Securities

and Exchange Commission (``SEC'' or ``Commission'') the proposed rule
change as described in Items I, II, and III below, which Items have
been prepared by the MSRB. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change to amend:
    (i) Rule A-11, on assessments for municipal advisor professionals,
to modify the rate of assessment for the annual professional fee for
each person associated with a municipal advisory firm who is qualified
as a municipal advisor representative in accordance with Rule G-3, on
professional qualification requirements, and for whom the municipal
advisory firm has an active Form MA-I on file with the Commission as of
January 31st of each year (each individual being a ``covered
professional'' and such fee amount on each covered professional the
``Municipal Advisor Professional Fee''); \3\
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    \3\ ``Form MA-I: Information Regarding Natural Persons Who
Engage in Municipal Advisory Activities,'' is an SEC form that must
be completed and filed by a municipal advisory firm with respect to
each natural person associated with the firm and engaged in
municipal advisory activities on the firm's behalf, including
employees of the firm. Independent contractors are included in the
definition of ``employee'' for these purposes. A natural person
doing business as a sole proprietor must complete and file Form MA-I
in addition to Form MA. Form MA-I is also used to amend a previously
submitted form, including in such cases where an individual is no
longer an associated person of the municipal advisory firm or no
longer engages in municipal advisory activities on the firm's
behalf. See ``Instructions for the Form MA Series,'' available at
https://www.sec.gov/about/forms/formmadata.pdf. For purposes of Rule
A-11 and the calculation of the Municipal Advisor Professional Fee,
if a firm has filed an amendment to indicate that an individual is
no longer an associated person of the municipal advisory firm or no
longer engages in municipal advisory activities on its behalf, then
that individual's Form MA-I would not be deemed as active for
purposes of the Municipal Advisor Professional Fee and would not be
counted in the January 31st calculation regarding the assessment of
the Municipal Advisor Professional Fee.
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    (ii) Rule A-13, on underwriting and transaction assessments for
brokers, dealers, and municipal securities dealers (collectively,
``dealers''), to modify the rate of assessments on dealers for certain
underwriting, transaction, and trade count fees \4\ (collectively, the
``Market Activity Fees'' and, such Market Activity Fees together with
the Municipal Advisor Professional Fee, the ``Rate Card Fees''); \5\
and
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    \4\ As further described herein, the proposed rule change would
provide a technical amendment to Rule A-13 to change the terminology
for this fee from ``technology fee'' to ``trade count fee.'' To
avoid confusion, the proposed rule change utilizes the amended name
except as context requires for clarity, such as describing this
specific technical amendment and providing certain historical
revenue data in Exhibit 3(a). See discussion infra entitled
``Technical Amendments to Rule A-13 and Related Cross-References.''
    \5\ Underwriting assessments charged pursuant to Rule A-
13(c)(ii) to certain dealers acting as underwriters of municipal
fund securities are not included in the Market Activity Fees that
would be amended by this proposed rule change.
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    (iii) Rule A-11, Rule A-12, on registration, and Rule A-13 to
provide greater regulatory clarity for the assessment of fees on
municipal securities brokers, municipal securities dealers, and
municipal advisors (collectively, ``MSRB regulated entities'') under
these rules.
    The proposed amendments to the rates of assessment of the Rate Card
Fees are referred to as the ``Rate Card Amendments.'' The Rate Card
Amendments would establish the Rate Card Fees in accordance with the
following table.

------------------------------------------------------------------------
                                            Basis          Proposed rate
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Underwriting Fee..................  Per $1,000 Par               $0.0297
                                     Underwritten.
Transaction Fee...................  Per $1,000 Par                0.0107
                                     Transacted.
Trade Count Fee...................  Per Trade...........            1.10
Municipal Advisor Professional Fee  Per Covered                    1,060
                                     Professional.
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    The proposed technical amendments to Rule A-11, Rule A-12, and Rule
A-13 are referred to as the ``Technical Amendments.'' The Rate Card
Amendments and the Technical Amendments together are referred to as the
``proposed rule change.''
    The MSRB has designated the proposed rule change for immediate
effectiveness.\6\ The Rate Card Amendments and the Technical Amendments
are designated to have an operative date of October 1, 2022. The Board
currently anticipates the amended Rate Card Fees proposed by the Rate
Card Amendments to be operative for a period of fifteen months from
October 1, 2022 to December 31, 2023. In addition, any further
amendments to the Rate Card Fees would be established in accordance
with the MSRB's annual rate process consistent with the Board's funding
policy that will be effective October 1, 2022, currently available at
https://msrb.org/About-MSRB/Financial-and-Other-Information/Financial-Policies/Future-Funding-Policy (hereinafter, the ``revised funding
policy). In addition, any such amendments to the Rate Card Fees would
be filed with the Commission pursuant to the provisions of Section
19(b)(1) of the Exchange Act.\7\
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    \6\ The MSRB has designated the Rate Card Amendments as
establishing or changing a due, fee, or other change under Section
19(b)(3)(A)(ii) of the Act (15 U.S.C. 78s(b)(3)(A)(ii)) and Rule
19b-4(f)(2) (17 CFR 240.19b-4(f)(2)) thereunder. The MSRB has
designated the Technical Amendments as being immediately effective
upon filing pursuant to Section 19(b)(3)(A)(iii) of the Exchange Act
(15 U.S.C. 78s(b)(3)(A)(iii)) and Rule 19b-(f)(6) (17 CFR 240.19b-
4(f)(6)) thereunder.
    \7\ See discussion infra under ``Proposed Annual Rate Card
Approach.'' As further described therein, the Board presently
anticipates filing proposed rule changes with the Commission to
amend the rates of assessment of the Rate Card Fees on an annual
basis going forward, as applicable. Accordingly, to the extent
warranted, the first set of such amendments would be filed with the
Commission prior to or in the last quarter of calendar year 2023 to
become operative on January 1, 2024.
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    The text of the proposed rule change is available on the MSRB's
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2022-Filings.aspx, at the MSRB's principal office, and at the Commission's
Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the MSRB included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The MSRB has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the Rate Card Amendments is to amend the rate of
assessment for the Board's Rate Card Fees effective on October 1, 2022.
The description of the Rate Card Amendments provides transparency
regarding the internal process for how the Board, if warranted, would
amend such fees on an annual basis going forward. Specifically, the
Board will conduct an annual review of the Rate Card Fees and, if the
Board determines an adjustment is necessary or appropriate to defray
the costs and expenses of operating and administering the Board, the
Board will file a proposed rule change with the Commission in the last
quarter of the calendar year to effectuate a new ``Annual Rate Card''
for the next calendar year.\8\ The MSRB anticipates that any such
proposed rule change would be filed to be effective as of January 1 of
each calendar year and operative until December 31 for that year.\9\ In
addition to the proposed Rate Card Amendments, the proposed rule change
also proposes the Technical Amendments to Rule A-11, Rule A-12, and
Rule A-13 to provide greater regulatory clarity for the assessment of
fees on MSRB regulated entities under these rules.
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    \8\ See Section 15B(b)(2)(J) of the Act (15 U.S.C. 78o-
4(b)(2)(J)).
    \9\ Unlike any future amendments, the Rate Card Amendments for
Fiscal Year 2023 are expected to be effective for a 15-month period
from October 1, 2022 to December 31, 2023.
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Purpose and Description of the Rate Card Amendments
    As a self-regulatory organization, the Board discharges its
statutory mandate under the Exchange Act by establishing rules for
regulated entities, enhancing the transparency of the municipal
securities market through technology systems, and publicly
disseminating data about the municipal securities market. Consistent
with the Exchange Act, the Board funds its activities primarily through
the assessment of fees and charges on regulated entities as is
necessary or appropriate to defray the costs and expenses of operating
and administering the Board.\10\ The Board, which, consistent with the
Exchange Act, consists of a majority of public members as well as
members who are associated with and representative of regulated
entities, including municipal advisors and dealers,\11\ directs and
oversees the MSRB's budgeting process to ensure that fees that fund the
budget are fair and equitable and independently manages and monitors
its financial position on an ongoing basis to ensure that the
organization has sufficient revenue and organizational reserves to
maintain its operations in accordance with the Act,\12\ without
interruption, even in economic downturns and other unforeseen
circumstances.
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    \10\ See Section 15B(b)(2)(J) of the Act (15 U.S.C. 78o-
4(b)(2)(J)).
    \11\ See Section 15B(b)(1) of the Act; MSRB Rule A-3.
    \12\ Id.
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Current Fee Structure
    The Board has previously established, and currently applies, the
following fee assessments on regulated entities to ensure the MSRB's
ongoing operations (the ``current fee structure''): \13\
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    \13\ The Market Activity Fees listed do not indicate the current
temporary fee reductions that expire on September 30, 2022. See Rule
A-13(h) (specifying a temporary underwriting assessment of .00165%
($0.0165 per $1,000) of the par value; a temporary transaction
assessment of .0006% ($0.006 per $1,000) of the par value; and a
temporary technology assessment of $0.60 per transaction); see also
Exchange Act Release No. 91247 (Mar. 3, 2021), 86 FR 13593 (Mar. 9,
2021) File No. SR-MSRB-2021-02 (hereinafter, ``2021 Temporary Fee
Reduction''). Consistent with the language of the 2021 Temporary Fee
Reduction, these reduced fee rates will expire on September 30,
2022; and the related rule text would be deleted effective as of
October 1, 2022 by operation of the Technical Amendments proposed
herein.
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    (i) Municipal Advisor Professional Fee: A fee of $1,000 for each
covered professional as of January 31 of each year; \14\
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    \14\ Current Rule A-11(a)(i).
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    (ii) Initial Registration Fee: A $1,000 one-time registration fee
to be paid by each dealer to register with the MSRB before engaging in
municipal securities activities and by each municipal advisor to
register with the MSRB before engaging in municipal advisory
activities; \15\
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    \15\ Rule A-12(b). Initial registration assessments charged
pursuant to Rule A-12(b) are not included in the Rate Card Fees that
would be amended by this proposed rule change. Given that the amount
of the initial registration fee historically has been set with the
intention of defraying a significant portion of the administrative
and operational costs associated with the processing of a regulated
entity's initial registration, the Board determined that, at this
time, it was not beneficial or necessary to incrementally adjust
such fees each year through an annual rate setting process. See
Exchange Act Release No. 75751 (Aug. 24, 2015), 80 FR 52352 (Aug.
28, 2015) File No. SR-MSRB-2015-08 (stating the initial registration
fee is to help defray a significant portion of the administrative
and operational costs associated with processing an initial
registration). See also discussion infra under ``Board Review of the
Current Fee Structure'' and ``Proposed Annual Rate Card Approach.''
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    (iii) Annual Registration Fee: A $1,000 annual fee to be paid by
each dealer and municipal advisor registered with the MSRB; \16\
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    \16\ Rule A-12(c). Annual registration assessments charged
pursuant to Rule A-12(c) are not included in the Rate Card Fees that
would be amended by this proposed rule change. Given that the rate
of assessment for the annual registration fee is intended to serve
as a fixed, baseline contribution from all registered regulated
entities, irrespective of a regulated entity's actual total market
activities, the Board determined that, at this time, it was not
beneficial or appropriate to incrementally adjust such fees each
year through an annual rate setting process. See also discussion
infra under ``Board Review of the Current Fee Structure'' and
``Proposed Annual Rate Card Approach.''
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    (iv) Late Fee: A $25 monthly late fee and a late fee on the overdue
balance (computed according to the prime rate) until paid on balances
not paid within 30 days of the invoice date by the dealer or municipal
advisor; \17\
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    \17\ Rule A-11(b) and Rule A-12(d). As discussed herein, the
Technical Amendments would remove the current reference in Rule A-
12(d) to late fees for payments due pursuant to Rule A-13 and
incorporate this concept into Rule A-13. See Rule A-12(d) (``Any
broker, dealer, municipal securities dealer or municipal advisor
that fails to pay any fee assessed under this rule or Rule A-13
within 30 days of the invoice date shall pay a monthly late fee of
$25 and a late fee on the overdue balance, computed according to the
Prime Rate, as provided for in the MSRB Registration Manual, until
paid.'' (emphasis added)).
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    (v) Underwriting Fee: A fee amount of $.0275 per $1,000 of the par
value paid by a dealer on all municipal securities purchased from an
issuer by or through such dealer, whether acting as principal or agent
as part of a primary offering (the ``Underwriting Fee''); \18\
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    \18\ Current Rule A-13(c)(i).
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    (vi) Municipal Funds Underwriting Fee: A fee amount of $.005 per
$1,000 of the total aggregate assets for the reporting period (i.e.,
the 529 savings plan fee on underwriters), in the case of an
underwriter (as defined in Rule G-45) of a primary offering of certain
municipal fund securities; \19\
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    \19\ Current Rule A-13(c)(ii). Assessments charged pursuant to
Rule A-13(c)(ii) related to certain municipal fund securities are
not included in the Rate Card Fees that would be amended by this
proposed rule change. The basis upon which the municipal funds
underwriting fee is assessed (i.e., the total aggregate assets for
the reporting period) is not subject to the same type of volatility
as the Market Activity Fees, but instead is expected to generally
continue to grow over time. For example, municipal funds
underwriting fee revenue amounted to approximately $1,332,000 in
Fiscal Year 2021, approximately $1,167,000 in Fiscal Year 2020, and
approximately $991,000 in Fiscal Year 2019. See MSRB 2021 Annual
Report, available at https://www.msrb.org/-/media/Files/Resources/MSRB-2021-Annual-Report.ashx?. As a result, the Board determined
that, at this time, it was not beneficial or necessary to
incrementally adjust the rate of assessment each year through an
annual rate setting process. See discussion infra under ``Board
Review of the Current Fee Structure'' and ``Proposed Annual Rate
Card Approach.''
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    (vii) Transaction Fee: A fee amount of .001% ($.01 per $1,000) of
the total par value to be paid by a dealer, except in

limited circumstances, for inter-dealer sales and customer sales
reported to the MSRB pursuant to Rule G-14(b), on transaction reporting
requirements (the ``Transaction Fee''); \20\
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    \20\ Rule A-13(d)(i) (transaction fee on inter-dealer sales) and
Rule A-13(d)(ii) (transaction fee on customer sales).
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    (viii) Technology Fee: \21\ A fee of $1.00 paid per transaction by
a dealer for each inter-dealer sale and for each sale to customers
reported to the MSRB pursuant to Rule G-14(b) (the ``Trade Count
Fee''); \22\ and
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    \21\ As further described herein, the proposed rule change would
provide a technical amendment to this provision of Rule A-13 to
rename this fee to the ``trade count fee.''
    \22\ Rule A-13(d)(vi).
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    (ix) Examination Fee: A $150 test development fee assessed per
candidate for each MSRB examination.\23\
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    \23\ Rule A-16. Assessments charged pursuant to Rule A-16
related to such examination fees are not included in the Rate Card
Fees that would be amended by this proposed rule change. Given that
the rate of assessment for the examination fee historically has been
set with the intention of defraying a portion of the overall costs
of the MSRB's professional qualification and testing program, the
Board determined that, at this time, it was not beneficial or
necessary to incrementally adjust the rate of assessment of such fee
each year through an annual rate setting process. See Exchange Act
Release No. 85135 (Feb. 14, 2019), 84 FR 5513 (Feb. 21, 2019) File
No. SR-MSRB-2019-02 (stating the examination fee is intended to
partially offset the overall program costs to the MSRB of its
professional qualification and testing program). See also discussion
infra under ``Board Review of the Current Fee Structure'' and
``Proposed Annual Rate Card Approach.''
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    In addition to these fees assessed on regulated entities, the Board
also receives revenues from certain other sources, such as investment
income, regulatory fine sharing,\24\ and MSRB data subscription
fees.\25\ These revenue sources contribute a much smaller portion to
the overall MSRB funding.\26\
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    \24\ Fine revenue became a revenue source as first provided in
2010 under the Dodd-Frank Wall Street Reform and Consumer Protection
Act (the ``Dodd-Frank Act''). See 15 U.S.C. 78o-4(c)(9).
    \25\ The MSRB charges data subscription service fees for
subscribers, including regulated entities and non-regulated
entities, seeking direct electronic delivery of municipal trade data
and disclosure documents associated with municipal bond issues. This
information is also available without direct electronic delivery on
the MSRB's Electronic Municipal Market Access (``EMMA'') website
without charge.
    \26\ For example, fine-sharing revenue amounted to approximately
0.9% of the MSRB's overall revenue in Fiscal Year 2021 (or
approximately $322,000), 3.3% in Fiscal Year 2020 (or approximately
$1.5 million), and 0.4% (or approximately $151,000) in Fiscal Year
2019. See MSRB 2021 Annual Report, available at https://www.msrb.org/-/media/Files/Resources/MSRB-2021-Annual-Report.ashx?.
Given that this revenue is collected by FINRA and the SEC for
violations of MSRB rules and the fact that the Board does not set
the rates of assessment for the collection of such fines, the Board
does not believe that it is appropriate to separately consider fine-
sharing revenue for potential rebates to regulated entities by
operation of the proposed Annual Rate Cards and the annual rate
setting process.
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Board Review of the Current Fee Structure
    Early in Fiscal Year 2021, the Board determined that it should
review the current fee structure in relation to the MSRB's long term
financial position and near-term anticipated funding needs (the ``Fee
Review''). Through its Fee Review, the Board sought to identify
potential improvements to the MSRB's current fee structure that would:
(i) maintain a fair and equitable balance of reasonable fees and
charges among regulated entities; \27\ (ii) mitigate the impact of
market volatility on the amount of fee revenue actually paid each year
\28\ and, correspondingly, facilitate the Board's ability to manage the
amount held by the MSRB in organizational reserves year-to-year; \29\
and (iii) prudently fund the MSRB's anticipated near-term operating
expenses.\30\
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    \27\ While engaging in the Fee Review, and consistent with the
MSRB's funding policy, the Board considered how potential
modifications to the current fee structure would impact the
diversity of the MSRB's funding sources. See MSRB's funding policy,
available at https://www.msrb.org/About-MSRB/Financial-and-Other-Information/Financial-Policies/Funding-Policy (hereinafter, the
``current funding policy''). Both the current funding policy and the
revised funding policy, effective October 1, 2022, available at
https://msrb.org/About-MSRB/Financial-and-Other-Information/Financial-Policies/Future-Funding-Policy, state that the ``MSRB
strives to diversify funding sources among regulated entities and
other entities that fund MSRB services in a manner that ensures
long-term sustainability, seeking to achieve an equitable balance
among regulated entities and a fair allocation of the costs of
systems and services among other users and regulated entities to the
extent allowed by law.''
    \28\ Market Activity Fees are driven by market dynamics and are
inherently unpredictable. Because of this unpredictability, the
amount of Market Activity Fees collected by the MSRB has often
exceeded the amount budgeted in recent fiscal years. The MSRB's
Financial Statements for recent fiscal years are available at http://msrb.org/About-MSRB/Financial-and-Other-Information/Annual-Reports.aspx. See Exhibit 3(a), ``Chart 2--Historical Budget vs.
Actual Revenue for the Rate Card Fees'' and ``Chart 4--Rate Card
Fees: Historical Activity Volume Variance Budget to Actual.''
    \29\ The Board established a reserves target to ensure that the
organization maintains a prudent level of financial resources to
fund operations and ensure the long-term financial sustainability of
the organization, taking into consideration a range of reasonably
foreseeable market conditions for a dynamic market and expected
expenditures over a three-year time horizon. The reserves target is
determined after conducting a detailed and comprehensive analysis of
the liquidity needs in four categories: (1) working capital, (2)
risk reserves, (3) strategic investment reserves, and (4) regulatory
reserves. See MSRB funding policies (link at note 27 supra) (these
four categories are identified in the discussion under ``Reserve
Considerations''). The Board reviews and adjusts the reserves target
on an annual basis to ensure that it remains appropriately aligned
with the organization's needs. See MSRB Fiscal Year 2022 Budget for
a further discussion of the MSRB's budget and reserves, available at
https://www.msrb.org/-/media/Files/Resources/MSRB-FY-2022-Budget-Summary.ashx?.
    \30\ See, e.g., Exhibit 3(a), ``Chart 8--Historical Actual
Expenses,'' ``Chart 10--Historical and Projected Revenue without
Rate Card Model Compared to Historical and Pro Forma Expenses,''
``Chart 11--Historical and Projected Revenue with Rate Card Model
Compared to Historical and Pro Forma Expenses.''
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    Maintaining a Fair and Equitable Balance of Fees. As part of its
Fee Review, the Board evaluated the MSRB's current fee structure to
determine whether the fees and charges assessed upon regulated entities
remain reasonable, fair, and equitable. Among other factors considered
during the Fee Review, the Board: (i) analyzed publicly available data
on the revenue models of dealers and municipal advisors across
geographic areas; \31\ (ii) examined MSRB expense allocations to inform
its understanding of how much of the MSRB's expense budget relates to
various activities; \32\ (iii) evaluated historical budgeted revenue
versus actual revenues generated for the existing fee categories; \33\
(iv) gauged the MSRB's fee distribution across varying business models
of dealer and municipal advisory firms; \34\ and (v) deliberated upon
feedback from stakeholder discussions and prior written comments on the
topic of the MSRB's fees and expenses.\35\
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    \31\ The Board considered market data from various external and
internal sources, such as the Texas Bond Review Board State and
Local Annual Reports (http://www.brb.state.tx.us/publications.aspx),
the California State Treasurer's Office--California Debt and
Investment Advisory Commission (CDIAC) (https://data.debtwatch.treasurer.ca.gov/Government/CDA-All-Data/yng6-vaxy),
primary market data included in official statements and other
offering documents, and trading and other secondary market data. See
also, e.g., the MSRB's published Fact Books, which provide various
historical data sets related to market activities, such as the
distribution of municipal trades by dealers, available at https://www.msrb.org/Market-Transparency/Market-Data-Publications/MSRB-Fact-Book.aspx.
    \32\ See, e.g., Exhibit 3(a), ``Chart 9--Historical Budgeted
Expense by Function.''
    \33\ See Exhibit 3(a), ``Chart 1--Historical Revenue Variances:
Budget vs. Actual'' and ``Chart 2--Historical Budget vs. Actual
Revenue for the Rate Card Fees.''
    \34\ As non-exhaustive examples, the Board considered fee
distribution across the business models of: (i) small, medium, and
large firms, (ii) dually registered firms versus firms registered
only as dealers or municipal advisors, and (iii) firms that engage
in underwriting activities versus secondary market activities. See
also Exhibit 3(a), ``Chart 14--Distribution of Registrants by Range
of Total Fees Assessed Under Current Fee Structure Compared to
Projected Distribution Under the Rate Card Model (Exclusive of Late
Fees and Examination Fees).''
    \35\ See, e.g., MSRB Notice 2020-19: ``MSRB Requests Input on
Strategic Goals and Priorities'' (Dec. 7, 2020), available at
https://msrb.org/-/media/Files/Regulatory-Notices/RFCs/2020-19.ashx??n=1, and related stakeholder comments (hereinafter, the
``Stakeholder Comments to the MSRB's Strategic Priorities''),
available at https://msrb.org/Rules-and-Interpretations/Regulatory-Notices/2020/2020-19?c=1. See also, e.g., comments provided on
Exchange Act Release No. 87075 (Sep. 24, 2019), 84 FR 51698 (Sep.
30, 2019) File No. SR-MSRB-2019-11, available at https://www.sec.gov/comments/sr-msrb-2019-11/srmsrb201911.htm, and comments
provided on Exchange Act Release No. 81264 (July 31, 2017), 82 FR
36472 (Aug. 4, 2017) File No. SR-MSRB-2017-05, available at https://www.sec.gov/comments/sr-msrb-2017-05/msrb201705.htm.

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    Based on these factors considered, the Board found that the current
fee structure--including the basis on which fees are assessed and the
relative contribution of revenue from each of the current fees assessed
on regulated entities--overall remains reasonable, fair, and equitable.
As the MSRB has previously noted, it is impractical for a regulatory
organization to specifically apportion the costs and benefits of
rulemaking, systems development, operational and administrative
activities between regulated entities with the constraint of
determining whether such activities bear a close relationship to the
level of funding obtained from dealers and municipal advisors at a
particular point in time.\36\ The Act does not impose such a
requirement; rather, the Act requires that the Board's rules provide
that each regulated entity ``shall pay to the Board such reasonable
fees and charges as may be necessary or appropriate to defray the costs
and expenses of operating and administering the Board.'' \37\
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    \36\ See Letter from Gail Marshall, Associate General Counsel--
Enforcement Coordination, MSRB, to Secretary, SEC dated Sept. 30,
2015, available at, https://www.sec.gov/comments/sr-msrb-2015-08/msrb201508-4.pdf.
    \37\ Section 15B(b)(2)(J) of the Act.
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    The MSRB must be adequately funded to undertake rulemaking,
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in municipal securities and municipal financial products,
to remove impediments to and perfect the mechanism of a free and open
market in municipal securities and municipal financial products, and,
in general, to protect investors, municipal entities, obligated
persons, and the public interest.\38\ In addition, given that numerous
operations and services are executed with the intent to protect
investors, municipal issuers, and obligated persons and provide market
transparency to facilitate a fair and efficient market, there is not an
exact correlation between revenue streams and expenses.\39\ The Board
seeks to establish a reasonable fee structure that ensures long-term
sustainability and continues to believe that its overall fee structure
is reasonable, achieves general equity across its regulated entities,
and correlates fees with those firm components that drive the MSRB's
regulatory costs to the extent feasible. However, as further discussed
below, the Board has determined that the current fee structure could be
improved with certain process changes and is proposing rule amendments
to address the challenges associated with (i) the revenue impact of
market volatility and (ii) the MSRB's anticipated near-term funding
needs.
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    \38\ Section 15B(b)(2)(C) of the Act.
    \39\ For example, municipal trade data and issuers' disclosure
documents associated with bond issuances are available on EMMA for
free to all market participants, including investors and issuers,
who do not contribute to the MSRB's revenue.
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    Mitigating the Impact of Market Volatility. As part of the Fee
Review, the Board analyzed the historical revenue generated under the
MSRB's current fee structure as compared to the historical amounts
budgeted over the same fiscal years.\40\ While the various fees paid by
regulated entities have, in some recent fiscal years, marginally
exceeded or underperformed their budgeted amounts, the Board found that
the amount of the three Market Activity Fees collected have often
exceeded their annual budget targets by more than marginal amounts.\41\
The Board also found that the recurring variances between budgeted
amounts and actual amounts of the Market Activity Fees collected,
resulting from the inherent imprecision associated with budgeting
future market volumes related to underwriting and trading activity that
exists within the overall dynamic of the municipal securities market,
directly contributed to the periodic build-up of excess reserves and,
consequently, precipitated the need for the MSRB to use rebates or
temporary fee reductions as a mechanism to rightsize organizational
reserve positions back to the Board's target.\42\ Based on these causal
links between fluctuations in market activity year-to-year, variances
in the amount of Market Activity Fees actually collected versus
budgeted amounts, and the need for rebates or temporary fee reductions
to rightsize organizational reserves, the Board prioritized the
identification of alternative fee approaches that would better mitigate
the impact of the inevitable, year-to-year fluctuations in activity in
the municipal securities market and, as a result, provide more
certainty to regulated entities.
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    \40\ See, e.g., Exhibit 3(a), ``Chart 1--Historical Revenue
Variances: Budget vs. Actual'' and ``Chart 2--Historical Budget vs.
Actual Revenue for the Rate Card Fees.''
    \41\ See Exhibit 3(a), ``Chart 1--Historical Revenue Variances:
Budget vs. Actual,'' ``Chart 2--Historical Budget vs. Actual Revenue
for the Rate Card Fees,'' and ``Chart 4--Rate Card Fees: Historical
Activity Volume Variance Budget to Actual.'' Relatedly, the Board
determined that such recurring variances could not be fully
addressed with further refinements to the MSRB's budgeting process;
rather, the variances were inherent to the imprecision associated
with budgeting future market volumes related to underwriting and
trading activity that exists within the overall dynamic of the
municipal securities market.
    \42\ Compare, e.g., Exhibit 3(a), ``Chart 2--Historical Budget
vs. Actual Revenue for the Rate Card Fees,'' Chart 5--Historical
Effective Fee Rate Changes'' and ``Chart 12--Total Reserves vs.
Target: Historical and Projected without Rate Card Model.''
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    After considering alternatives, the Board first determined that the
Municipal Advisor Professional Fee and the current set of Market
Activity Fees--i.e., Underwriting Fees, Transaction Fees, and Trade
Count Fees--remain the most reasonable and practical mechanisms for
assessing fees on regulated entities and so should not be replaced with
alternative fee mechanisms. The Board came to this determination
primarily because it continues to believe that the respective
mechanisms for assessing the Municipal Advisor Professional Fee and the
Market Activity Fees remain superior to potential alternatives--some of
which may require establishing significantly more burdensome
recordkeeping and reporting requirements to achieve comparatively
greater precision in the alignment of the total amount of the fees
assessed on a given firm with such firm's total regulated activities;
\43\ and, therefore, these fee mechanisms remain the best option among
alternatives to ensure that the amount of the Municipal Advisor
Professional Fees and Market Activity Fees paid by a given firm is both
(i) appropriately balanced to the burdens and benefits of the MSRB's
regulatory and transparency activities, and also (ii) generally
proportional to the differing resources devoted to the regulation of
firms with different business models and differing degrees of
complexity.\44\ These existing fee

methods also have the advantage of being established mechanisms for
assessing fees on regulated entities; and, in this regard, the Board
believes that maintaining this current set of fee methods is more
advantageous than other alternatives because firms already understand
and have embedded such assessments into their business operations.
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    \43\ See also related discussion infra under ``Self-Regulatory
Organization's Statement on Burden on Competition--Baseline and
Reasonable Alternative Approaches.''
    \44\ The Board considers the distribution of its fees among
regulated entities of differing sizes, complexities, and business
models and strives for proportionality in the distribution of fees
as much as feasible within the broader set of considerations
described in its funding policy. See, e.g., related discussion supra
under ``Board Review of the Current Fee Structure--Maintaining a
Fair and Equitable Balance of Fees'' and Exhibit 3(a), ``Chart 14--
Distribution of Registrants by Range of Total Fees Assessed Under
Current Fee Structure Compared to Projected Distribution Under the
Rate Card Model (Exclusive of Late Fees and Examination Fees).'' See
also Release No. 34-87075 (Sep. 24, 2019), 84 FR 51698 (Sep. 30,
2019) File No. SR-MSRB-2019-11 (providing for increases to the
Municipal Advisor Professional Fee and discussing the superiority of
maintaining the Municipal Advisor Professional Fee in light of
possible alternatives that would require creating a novel and,
therefore, likely more burdensome reporting requirement).
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    While the Board determined that the mechanisms for assessing the
Municipal Advisor Professional Fee and the Market Activity Fees should
not be replaced, the Board also determined it would be beneficial to
refine its approach to review and amend these fee rates for each
calendar year on an annual basis going forward. Specifically, to avoid
the MSRB accumulating excess reserves through the collection of fee
revenue above budgeted amounts over multiple fiscal years and then
utilizing short-term fee reductions to return the excess revenues to
the regulated entities who paid the fees, the Board is proposing to
review and incrementally refine the rates of assessment for each of
these fees each year.
    This revised approach would more closely align the rates of
assessment for the Municipal Advisor Professional Fee and the Market
Activity Fees to the MSRB's annual revenue requirements, including by
factoring revenue surpluses and shortfalls against budgeted amounts for
each of these fees from the prior year directly into the annual rate
calculation process. As further described in the section below entitled
``Proposed Annual Rate Card Approach,'' the Board's proposed approach
would (i) better mitigate the impact of market volatility on the MSRB's
revenue structure (and, consequently, better mitigate the impact of
market volatility on the MSRB's organizational reserves), and (ii)
maintain rates within a reasonably predictable range that, while
subject to more incremental changes each year, would provide regulated
entities a comparably more stable fee structure over the long term than
the MSRB's current fee structure.\45\
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    \45\ See related discussion infra under ``Proposed Annual Rate
Card Approach--Limitations on Rate Changes to Promote Predictability
and Stability'' (discussing various limitations on future increases
of the Rate Card Fees). See also Exhibit 3(a), ``Chart 5--Historical
Effective Fee Rate Changes.''
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    Funding the MSRB's Anticipated Near-Term Operating Expenses. In
addition to analyzing the impact of variable market activity as part of
its Fee Review, the Board also analyzed the MSRB's current budget
projections for Fiscal Year 2023 and the anticipated funding needs in
the near term beyond Fiscal Year 2023.\46\ Specific to the projections
for Fiscal Year 2023, the MSRB's pro forma estimate currently
anticipates an operating deficit for the twelve-month period, based on
preliminary projected expenses and projected revenue under the current
fee structure (and without the proposed Rate Card Amendments). Beyond
Fiscal Year 2023, the Board assumed at least modest expense growth in
the near-term fiscal years in line with the MSRB's ten-year compound
annual growth rate,\47\ particularly in consideration of the current
impacts of inflation and other key expenses associated with modernizing
and operating the MSRB's technology systems. Based on these budgetary
expectations, the Board analyzed options for how expense control and
additional revenue generation could address both the projected
operating deficit for Fiscal Year 2023 and the likelihood of expense
growth in future near-term fiscal years.
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    \46\ Specific to the scope of the Board's near-term funding
analysis, the Board considered various funding scenarios for Fiscal
Year 2023 through Fiscal Year 2025. See, e.g., Exhibit 3(a), ``Chart
8--Historical Actual Expenses'' (showing a ten-year historical
compound annual growth rate of 4.2%), ``Chart 10--Historical and
Projected Revenue without Rate Card Model Compared to Historical and
Pro Forma Expenses,'' ``Chart 11--Historical and Projected Revenue
with Rate Card Model Compared to Historical and Pro Forma
Expenses.''
    \47\ See Exhibit 3(a), ``Chart 8--Historical Actual Expenses.''
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    In terms of expense control, the MSRB remains committed to
responsibly managing expenses and aligning its resources to the
fulfillment of the Board's statutory mandate.\48\ Accordingly, the
Board reviewed anticipated expenses against various factors, including
(i) the MSRB's ``Strategic Plan--Fiscal Years 2022-2025;'' \49\ (ii)
actual historical expenses versus budgeted expenses for certain
activities; \50\ and (iii) stakeholder feedback and comments.\51\ Based
on these and other aspects of its Fee Review, the Board determined that
the MSRB's Strategic Plan should serve as the main budgetary guidepost
for how the MSRB allocates its limited resources and resolves competing
fiscal priorities, particularly because various stakeholders provided
significant written input regarding the Strategic Plan.\52\
Consequently, the Board determined that the MSRB's expenditures in
Fiscal Year 2023 and future near-term fiscal years generally should
align with the expenses necessary to discharge its statutory mandate in
accordance with the Strategic Plan.\53\ As a result, at least modest
expense growth, in line with the MSRB's ten-year compound annual growth
rate,\54\ is assumed given various considerations, including the
current Strategic Plan's emphasis on the modernization of the MSRB's
technology systems and the MSRB's ongoing efforts to advance the
quality, accessibility, security, and value of the MSRB's market data
for all participants in the municipal securities market. The Board will
continue to actively monitor and manage its financial position to
ensure prudent expense alignment to the MSRB's statutory mandate and
the corresponding objectives of the MSRB's Strategic Plan.
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    \48\ See, e.g., ``Controlling Expenses'' in MSRB Fiscal Year
2022 Budget at page 12 and related discussion, available at https://msrb.org/-/media/Files/Resources/MSRB-FY-2022-Budget-Summary.ashx?.
See also Exhibit 3(a), ``Chart 6--Historical Expense Variances:
Budget vs. Actual.''
    \49\ The MSRB's Strategic Plan--Fiscal Years 2022-25 is
available at https://msrb.org/-/media/Files/Resources/MSRB-Strategic-Plan-2022-2025.ashx? (the ``Strategic Plan'').
    \50\ See Exhibit 3(a), ``Chart 6--Historical Expense Variances:
Budget vs. Actual'' and ``Chart 9--Historical Budgeted Expense by
Function.''
    \51\ See, e.g., Stakeholder Comments to the MSRB's Strategic
Priorities (link at note 34 supra).
    \52\ Id.
    \53\ The MSRB notes that its anticipated expenditures for the
near-term fiscal years beyond Fiscal Year 2023 are subject to
greater uncertainty caused by the higher potential for changing
circumstances and, correspondingly, its budgetary assumptions for
these years are also less certain.
    \54\ See Exhibit 3(a), ``Chart 8--Historical Actual Expenses.''
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    In terms of revenue, the Board determined that the current fee
structure should be amended to increase total revenue and, thereby,
reduce the likelihood of a near-term operating deficit for Fiscal Year
2023.\55\ The Board is proposing to raise this additional revenue in
accordance with a new rate setting approach as described in the
following section entitled ``Proposed Annual Rate Card Approach.'' The
Board considered comments from regulated entities about the
consequences associated with the MSRB collecting more fee revenue than
needed

and with the MSRB maintaining organizational reserves in excess of what
is required.\56\ In response to such concerns, the Board has undertaken
significant efforts to determine the level of organizational reserves
needed and, correspondingly, refined and reduced its organizational
reserves target.\57\ To bring the MSRB's excess organizational reserves
in-line with this refined target, the Board has intentionally budgeted
operating deficits in recent fiscal years, primarily by temporarily
reducing certain fees on regulated entities and, thereby, collecting
less revenue as a result of those fee reductions.\58\ At the same time,
the Board has designated funds from the MSRB's organizational reserves
for necessary multiyear systems modernization initiatives, which has
further aligned organizational reserves to target.\59\ As a result of
these efforts, the MSRB's organizational reserves presently are on
track to be aligned with the Board's reserves target for Fiscal Year
2023, which is $37.7 million.\60\ In this way, while the Board
determined that additional funding is needed for Fiscal Year 2023, the
Board also determined that such funding would be best obtained through
an increase in fees as opposed to the further drawing down of
organizational reserves below target.\61\
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    \55\ See Exhibit 3(a), ``Chart 10--Historical and Projected
Revenue without Rate Card Model Compared to Historical and Pro Forma
Expenses'' and ``Chart 11--Historical and Projected Revenue with
Rate Card Model Compared to Historical and Pro Forma Expenses.''
    \56\ See, e.g., letter from Mike Nicholas, Chief Executive
Officer, Bond Dealers of America (``BDA''), (Jan. 11, 2021)
(hereinafter, the ``BDA Comment Letter'') (responding to the MSRB's
Request for Input on Strategic Goals and Priorities and stating
``[w]e strongly urge the Board to take a comprehensive look at its
finances with the goal of once and for all establishing a funding
mechanism that fairly allocates the MSRB's expenses among regulated
entities and does not assess the industry for more money than the
MSRB needs''), available at https://www.msrb.org/rfc/2020-19/Dbamerica.pdf.
    \57\ See Exhibit 3(a), ``Chart 12--Total Reserves vs. Target:
Historical and Projected without Rate Card Model'' and ``Chart 13--
Total Reserves vs. Target: Historical and Projected with Rate Card
Model.''
    \58\ See the 2021 Temporary Fee Reduction (citation and link at
note 12 supra); Exchange Act Release No. 85400 (Mar. 22, 2019), 84
FR 11841 (Mar. 28, 2019) File No. SR-MSRB-2019-06 (providing for a
temporary fee reduction); and Exchange Act Release No. 83713 (July
26, 2018), 83 FR 37538 (Aug. 1, 2018) File No. SR-MSRB-2018-06
(providing for a temporary fee reduction). See also Exhibit 3(a),
``Chart 1--Historical Revenue Variances: Budget vs. Actual,''
``Chart 2--Historical Budget vs. Actual Revenue for the Rate Card
Fees,'' ``Chart 5--Historical Effective Fee Rate Changes,'' and
``Chart 7--Historical Budgeted Revenue and Budgeted Expense.''
    \59\ See the MSRB's Fiscal Year 2022 Budget, at page 13
(discussing the MSRB's system modernizations investments), available
at https://msrb.org/-/media/Files/Resources/MSRB-FY-2022-Budget-Summary.ashx?. See also, e.g., the MSRB's 2021 Annual Report, at
page 2 (link at note 25 supra); the MSRB's 2020 Annual Report, at
page 35 (discussing certain modernization investment efforts),
available at https://msrb.org/-/media/Files/Resources/MSRB-2020-Annual-Report.ashx?; and the MSRB's 2019 Annual Report, at page 11
(discussing the MSRB's cloud investments), available at https://msrb.org/-/media/Files/Resources/MSRB-2019-Annual-Report.ashx?.
    \60\ See Exhibit 3(a), ``Chart 13--Total Reserves vs. Target:
Historical and Projected with Rate Card Model.''
    \61\ See Exhibit 3(a), ``Chart 10--Historical and Projected
Revenue without Rate Card Model Compared to Historical and Pro Forma
Expenses,'' ``Chart 11--Historical and Projected Revenue with Rate
Card Model Compared to Historical and Pro Forma Expenses,'' and
``Chart 12--Total Reserves vs. Target: Historical and Projected
without Rate Card Model,'' and ``Chart 13--Total Reserves vs.
Target: Historical and Projected with Rate Card Model.''
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Proposed Annual Rate Card Approach
    Consistent with the Board's analysis and conclusions discussed
above, the Board proposes to amend the Municipal Advisor Professional
Fee assessed pursuant to Rule A-11 and the Market Activity Fees
assessed pursuant to Rule A-13 (i.e., the Rate Card Fees). Underlying
the proposed textual amendments to Rule A-11 and Rule A-13 is a revised
fee approach to better mitigate the impact of market volatility on the
MSRB's revenue structure and organizational reserves levels and
maintain rates within a reasonably predictable range that, while
subject to more incremental changes each year, would provide regulated
entities a comparably more stable fee structure over the long term than
the MSRB's current fee structure. The Board anticipates reviewing the
Rate Card Fees each year and, as may be necessary, modifying them
through the filing of a proposed rule change with the Commission. When
necessary, these proposed rule changes will establish an Annual Rate
Card with amended rates of assessment for each of the four fees on
regulated entities that make up the Rate Card Fees (i.e., Underwriting
Fees, Transaction Fees, Trade Count Fees, and Municipal Advisor
Professional Fees). Subsequent to the Annual Rate Card described in
this proposed rule change,\62\ the Board anticipates that any future
proposed rule change enumerating the Annual Rate Cards to be effective
as of January 1st of each calendar year beginning with January 1,
2024.\63\
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    \62\ Because of the expiration of the 2021 Temporary Fee
Reduction on September 30, 2022, the proposed rule change's Annual
Rate Card for Fiscal Year 2023 and the first quarter of Fiscal Year
2024 will become effective on October 1, 2022, and, in this way, is
intended to be operative for a fifteen-month period running from
October 1, 2022, to December 31, 2023.
    \63\ As the proposed rule change is structured, a given Annual
Rate Card would remain effective and operative until a subsequent
proposed rule change amending such rates is filed, effective, and
operative. As stated, the MSRB anticipates that subsequent Annual
Rate Cards for future years will be filed with the Commission
through a proposed rule change and the MSRB would seek to have such
rates operative for twelve months running from January 1 to December
31 (i.e., a calendar-year basis). In order to execute the Annual
Rate Card Process, the MSRB determined to establish the Annual Rate
Card on a calendar-year basis. This allows the MSRB to determine any
prior fiscal year variances and return excess revenue or assess
revenue shortfalls through the new Rate Card Fees. Nevertheless, as
changing fiscal circumstances may warrant, the MSRB will retain the
flexibility to amend the rates of assessment specified by a given
Annual Rate Card under this modified approach in accordance with
applicable statutory requirements governing any such proposed rule
change.
---------------------------------------------------------------------------

    The Annual Rate Card approach conducted by the Board is expected to
ensure the MSRB's financial model remains sustainable, while (i)
adequately funding future MSRB expenses and also (ii) providing a
greater degree of flexibility than the MSRB's current fee structure to
mitigate the impact of market volatility (and effectively manage
organizational reserve levels). The Annual Rate Card approach differs
from the MSRB's current approach by instituting a framework that can
result in more frequent, but also more incremental adjustments, to the
four fees that generate the vast majority of the MSRB's annual revenue.
The increased frequency of the MSRB's amendments to the Rate Card Fees
is meant to avoid the accumulation of excess reserves resulting from
additional revenue collected due to market volatility as compared to
budget expectations and, thereby, the need for rate amendments in the
form of more significant, ad hoc temporary fee reductions or
rebates.\64\ To ensure that the Board's adjustments to the Annual Rate
Card will remain incremental, the Board is proposing certain maximum
caps on the amount of such year-to-year increases, as discussed below
under the section entitled ``Limitations on Rate Changes to Promote
Predictability and Stability.'' \65\
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    \64\ The proposed rule change would not amend the underlying
activities that are the subject of such assessments. In other words,
the respective volumes of underwriting and transaction activities of
a dealer firm would continue to serve as the basis upon which Market
Activity Fees are assessed under Rule A-13; and the number of
covered professionals associated with a municipal advisory firm
would continue to serve as the basis upon which the rate of the
Municipal Advisor Professional Fee is assessed under Rule A-11.
Other fees assessed on regulated entities--specifically, the initial
registration fee, annual registration fee, late fee, municipal funds
underwriting fee, and examination fees--will be unchanged.
    \65\ If the proposed rule change becomes operative on October 1,
2022, the MSRB's revised funding policy, which reflects this Annual
Rate Card approach, will likewise become operative. There are
maximum caps incorporated into the Annual Rate Card Process (as
defined infra) and specifically provided for under Supplementary
Material .01 of the proposed amendments to Rule A-11 and Rule A-13.
See related discussion infra under ``Limitations on Rate Changes to
Promote Predictability and Stability.''

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    Objectives of the Annual Rate Card. Adjustments to the Annual Rate
Card will be used to revise the Rate Card Fees to annual levels that
the MSRB anticipates will be sufficient to: (i) cover anticipated
expenses for the related fiscal year; \66\ (ii) maintain target
contribution balances between fees on regulated entities in line with
recent historical precedents; \67\ (iii) address any prior-year
variance between the amounts of each of the Rate Card Fees actually
collected versus budget (i.e., ``Rate Card Fee Variances''); \68\ and
(iv) address any variance between the amount of the Board's
organizational reserves versus the Board's target (i.e., ``Reserves
Variances'').\69\ Fee rates may increase year-to-year, subject to
certain limitations discussed in additional detail below, or decrease
from year-to-year, as needed to meet these objectives.
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    \66\ As noted, the MSRB anticipates that, subsequent to the
Annual Rate Card proposed herein and currently anticipated to be
operative for the fifteen months from October 1, 2022 to December
31, 2023, future Annual Rate Cards would become effective, after
such submission to the Commission pursuant to the provisions of
Section 19(b)(1) of the Exchange Act, on January 1, while the MSRB
fiscal year would start on the prior October 1. See also Exhibit
3(a), ``Chart 11--Historical and Projected Revenue with Rate Card
Model Compared to Historical and Pro Forma Expenses.''
    \67\ That is, this factor is intended to maintain a
proportionate percentage amount of the MSRB's anticipated expenses
for the fiscal year among each of the Market Activity Fees and the
Municipal Advisor Professional Fee. The Rate Card Fees proposed in
this filing were established based on the following target
contribution balances: Underwriting Fee 37%, Transaction Fee 39%,
Trade Count Fee 16%, Municipal Advisor Professional Fee 8%. See,
e.g., Exhibit 3(a), ``Chart 3--Historical Actual Revenue for the
Rate Card Fees as a Percentage of the Total Rate Card Fee Revenue''
and ``Chart 14--Distribution of Registrants by Range of Total Fees
Assessed Under Current Fee Structure Compared to Projected
Distribution Under the Rate Card Model (Exclusive of Late Fees and
Examination Fees)'' (reflecting that the distribution of registrants
by range of total fees assessed under the current fee structure are
currently anticipated to be relatively stable if the proposed Rate
Card Amendments are implemented).
    \68\ A positive variance may occur, for example, when the actual
revenue from Rate Card Fees collected for a fiscal year exceeds
budgeted amounts (a ``Positive Rate Card Fee Variance''). See, e.g.,
Exhibit 3(a), ``Chart 2--Historical Budget vs. Actual Revenue for
the Rate Card Fees,'' at Fiscal Year 2020 (reflecting the actual
revenue generated from the Underwriting Fee and Transaction Fee
exceeding budget). A negative variance may occur, for example, when
the actual revenue from Rate Card Fees collected for a fiscal year
is below budgeted amounts (a ``Negative Rate Card Fee Variance'').
See, e.g., Exhibit 3(a), ``Chart 2--Historical Budget vs. Actual
Revenue for the Rate Card Fees,'' at Fiscal Year 2020 (reflecting
the actual revenue generated from the Technology Fee below budget).
    \69\ A positive variance above the reserves target may occur,
for example, due to actual expense savings, actual revenue above
budget from sources other than Rate Card Fees, or the Board's
determination to decrease the reserves target in light of revised
organizational needs (a ``Positive Reserves Variance''). See, e.g.,
Exhibit 3(a), ``Chart 12--Total Reserves vs. Target: Historical and
Projected without Rate Card Model,'' at Fiscal Year 2021 (reflecting
actual reserves exceeding target). A negative variance below the
reserves target may occur, for example, due to an increase in actual
expenses, shortfall in revenue from sources other than Rate Card
Fees, or the Board's determination to increase the reserves target
in light of revised organizational needs (a ``Negative Reserves
Variance''). See, e.g., Exhibit 3(a), ``Chart 12--Total Reserves vs.
Target: Historical and Projected without Rate Card Model,'' at
Fiscal Year 2011 (reflecting actual reserves below target).
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    Process for Setting the Annual Rate Card. The Board will develop an
Annual Rate Card for future fiscal years through a uniform process
consistent with the objectives discussed above (the ``Annual Rate Card
Process'').\70\ The Annual Rate Card Process is intended to establish a
fee structure that is more transparent and predictable for the MSRB's
stakeholders while also retaining the Board's ability to flexibly react
to changing circumstances when establishing reasonable fees on
regulated entities. The Annual Rate Card Process will consist of the
activities below.
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    \70\ The amended Annual Rate Cards resulting from the Annual
Rate Card Process will be filed with the Commission as proposed rule
changes consistent with the Act.
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    Development of the Fiscal Year Operational Funding Level.
Consistent with its existing budgeting process, the Board will approve
the annual expense budget and, thereby, establish the baseline revenue
that the organization will need to operate for that fiscal year (i.e.,
the ``Operational Funding Level''). As previously discussed, the MSRB
anticipates the Operational Funding Level in the near-term fiscal years
to align with the discharge of the Board's statutory mandate and
corresponding initiatives outlined in the MSRB's current Strategic
Plan. Once the Board sets the Operational Funding Level, any Reserves
Variances may further adjust the amount of the Operational Funding
Level, as discussed below.
    Reconciliation of Any Material Reserves Variances. If there are
material Reserves Variances in future fiscal years, the amount of such
Reserves Variances will be considered and may be added to or subtracted
from the Operational Funding Level to develop a final ``Budgeted
Revenue Target'' for a given fiscal year. For example, if there is a
Negative Reserves Variance, the Board may determine, in accordance with
the its revised funding policy, that some or all of the reserves
shortfall may be incorporated into the total revenue that needs to be
collected for that fiscal year.\71\ Conversely, if there is a material
Positive Reserves Variance, the Board may determine, in accordance with
its revised funding policy, that some or all of the excess may offset
an amount of the total revenue that needs to be collected for that
fiscal year.\72\
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    \71\ Stated differently, the Board may decide that some or all
of such a Negative Reserves Variance amount may be added to that
fiscal year's Operational Funding Level when determining the
cumulative Budgeted Revenue Target for that fiscal year. Notably,
the Board would have the flexibility to close the Negative Reserves
Variance (i.e., increase reserves funding to reach the target) over
a period of multiple fiscal years, rather than all in one fiscal
year, and so could determine to only address some of the Negative
Reserves Variance in a given fiscal year. For example, if the
Operational Funding Level was determined to be $45 million and there
was a Negative Reserves Variance of $1 million (i.e., actual
reserves were under target by $1 million), then the Board could seek
to resolve that difference by increasing the target amount of
revenue to be generated from the applicable Annual Rate Card by $1
million and set a final Budgeted Revenue Target of $46 million.
Alternatively, the Board may determine to seek to resolve the $1
million difference over the course of two Annual Rate Cards and set
the final Budgeted Revenue Target for the first of those two Annual
Rate Cards at, for example, $45.5 million.
    \72\ Stated differently, the Board may decide that some or all
of such a Positive Reserves Variance amount may be subtracted from
that fiscal year's Operational Funding Level to determine the
Budgeted Revenue Target for that fiscal year. As discussed in the
immediately prior footnote, the Board would have the flexibility to
close the Positive Reserves Variance (i.e., decrease reserves
funding to target) over a period of multiple fiscal years, rather
than all in one fiscal year, and so could determine to only address
some of the Positive Reserves Variance in a given fiscal year. For
example, if the Operational Funding Level was determined to be $45
million and there was a Positive Reserves Variance of $1 million
(i.e., actual reserves were over target by $1 million), then the
Board could seek to resolve that variance by decreasing the target
amount of revenue to be generated from the applicable Annual Rate
Card by $1 million and set a final Budgeted Revenue Target of $44
million. Alternatively, the Board may determine to seek to resolve
the $1 million variance over the course of two Annual Rate Cards and
set the final Budgeted Revenue Target for the first of those two
Annual Rate Cards at, for example $44.5 million.
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    Incorporation of Other Anticipated Revenue. Revenue from sources
other than the Rate Card Fees (e.g., annual and initial fees, data
subscriptions, municipal fund underwriting fees and fine revenue), will
be forecasted, and that estimate will be credited against the Budgeted
Revenue Target. The amount remaining after these revenue estimates are
incorporated will be the remaining revenue amount that will determine
the total amount of funding needed to be generated from the Rate Card
Fees (the ``Rate Card Funding Amount'').
    Reconciliation of Any Rate Card Fee Variances from the Prior Fiscal
Year. Each of the four Rate Card Fees will be responsible for a
proportionate amount of the overall Rate Card Funding Amount (each a
``Proportional Contribution Amount''). The MSRB will maintain a fair
and equitable balance of

the Proportional Contribution Amounts in line with recent historical
precedents.\73\ Specifically, for the Rate Card Fees proposed in this
filing intended to be operative beginning on October 1, 2023, the Rate
Card Funding Amount was allocated as follows to determine the
Proportional Contribution Amount for each of the Rate Card Fees:
Underwriting Fee 37%, Transaction Fee 39%, Trade Count Fee 16%,
Municipal Advisor Professional Fee 8%.\74\ Beginning with the Annual
Rate Card for Fiscal Year 2024, any Rate Card Fee Variances between the
budget and actual results of the Rate Card Fees for the prior fiscal
year will be added to (or subtracted from) the Proportional
Contribution Amount (``Final Contribution Amount'').\75\ For example,
if new issuance underwriting volume were to exceed the budgeted amount
in Fiscal Year 2023, resulting in a Positive Rate Card Fee Variance for
that fee, the Proportional Contribution Amount for the Underwriting Fee
would be adjusted downward sufficient to offset the excess Underwriting
Fee revenue collected (and vice versa). In this way, Rate Card Fee
Variances related to a specific Rate Card Fee will only impact the
Proportional Contribution Amount for that specific fee.
---------------------------------------------------------------------------

    \73\ The Board will consider whether contribution targets should
be revisited when setting rates each year. However, to maintain
fairness and equity in fees, the Board intends contribution targets
to be relatively stable over time, unless there is a durable,
material shift in market structure or circumstances that would
indicate that the expectations for the relative contributions from
one or more fees are no longer reasonable or appropriate. See
Exhibit 3(a), ``Chart 3--Historical Actual Revenue for the Rate Card
Fees as a Percentage of the Total Rate Card Fee Revenue'' and also
``Chart 14--Distribution of Registrants by Range of Total Fees
Assessed Under Current Fee Structure Compared to Projected
Distribution Under the Rate Card Model.''
    \74\ These contribution targets were determined based on the
distribution of revenue assessed over the past two fiscal years
(Fiscal Year 2020 and Fiscal Year 2021), calculated to adjust for
the impact of the temporary fee reduction on Market Activity Fees in
place for the second half of Fiscal Year 2021 and calculated as if
the current Municipal Advisor Professional Fee rate of $1,000 per
covered professional had been in place in Fiscal Year 2020 (rather
than the interim rate of $750 in place for that fiscal year),
rounded to the nearest whole percent.
    \75\ More specifically, a Negative Rate Card Fee Variance will
increase the rate of assessment for a Rate Card Fee by increasing
its Final Contribution Amount. A Positive Rate Card Fee Variance
will reduce the rate of assessment for a Rate Card Fee by reducing
its Final Contribution Amount. See note 63 supra and related
discussion regarding Rate Card Fee Variances.
---------------------------------------------------------------------------

    Forecast of Expected Activity and Setting the Annual Rate Card. The
MSRB will use the best available information to set expected volume of
activity for the coming fiscal year. Based on the anticipated volume of
activity, the MSRB will calculate rates of assessment for each of the
Rate Card Fees to generate their respective Final Contribution Amounts.
    Limitations on Rate Changes to Promote Predictability and
Stability. To alleviate the potential for greater uncertainty among
regulated entities regarding the variability of the Rate Card Fees
under this revised approach, the Board has also established certain
limitations on fee increases from year-to-year to promote greater
predictability and stability.\76\
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    \76\ If the full amount of a Negative Rate Card Fee Variance
cannot be recaptured in a single year due to these limitations, the
remaining amount of such variance will carry over into the
calculation of the Rate Card Funding Amount for the following fiscal
year(s) and, all else being equal, increase the rate of assessment
for such Rate Card Fee as described above. Conversely, there are no
limits on potential decreases to the rates of assessment for the
Rate Card Fees that may result from Positive Rate Card Fee Variances
and, if warranted, Positive Reserves Variances.
---------------------------------------------------------------------------

    10% Maximum Cap on Targeted Revenue. The first limitation is a 10%
cap on the maximum increase in the targeted revenue for a Rate Card Fee
based on the highest amount of such targeted revenue in the previous
two annual rate cards.\77\ This cap is intended to limit large
increases in the rate of assessment for the Rate Card Fees to ensure
that fee increases remain incremental and, accordingly, regulated
entities have the time to operationalize such increases into their
business models.
---------------------------------------------------------------------------

    \77\ Note that the 10% revenue cap is based on targeted revenue
dollars. The underlying market activity volume will likely vary
based on projected market conditions for the respective fiscal year.
For illustrative purposes only, if the target revenue for one of the
Rate Card Fees in Year 1 is $13,000,000, the maximum target revenue
in Year 2 would be $14,300,000. In addition, if target revenue
decreased in Year 2 to $12,000,000--such as to return excess revenue
collected in Year 1--then the cap for Year 3 would be calculated
based on the higher revenue target in the year prior to the decrease
(i.e., the higher prior revenue level in Year 1, which is
$13,000,000 in this example).
---------------------------------------------------------------------------

    25% Maximum Cap on Assessment Rate Increases. The second limitation
is a 25% cap on the maximum increase in the assessment rate for a Rate
Card Fee based on the highest assessment rate in the previous two
annual rate cards.\78\ This secondary cap is intended to limit large
increases in rates of assessment for the Rate Card Fees in instances
where expected volume decreases significantly from the prior year.\79\
---------------------------------------------------------------------------

    \78\ For illustrative purposes only, if the Trade Count Fee is
set at $1.10 in Year 1, the maximum rate in Year 2 would be $1.38
under the 25% maximum cap on assessment rate increases. In addition,
if the assessment rate decreased in Year 2 to $1.05--such as to
return excess revenue collected in Year 1--then the cap for Year 3
would be calculated based on the higher assessment rate in the year
prior to the decrease (i.e., the higher prior assessment rate in
Year 1, which is $1.10 in this example).
    \79\ Because the rates of assessment for Rate Card Fees are
based on both the targeted revenue for the Rate Card Fee and the
underlying volume or activity level on which the fee is assessed,
the rates themselves are subject to a potentially higher level of
variability than the underlying targeted revenue intended to be
generated by each fee. As the Annual Rate Card Process returns any
Positive Rate Card Fee Variances in the subsequent year,
outperforming volume in one year cannot be used to buffer under-
performing volume in another year. The 10% maximum cap on targeted
revenue is intended to be the primary limitation on revenue
increases. The 25% maximum cap on assessment rate increases is
intended to be a supplemental limitation that balances the potential
impact of rate changes driven by underlying volume changes while
retaining the MSRB's ability to assess and collect sufficient
revenue to fund the organization's expenses. As an example, if the
targeted revenue for the Municipal Advisor Professional Fee was
$3,000,000 in Year 1 and the estimated number of covered
professionals was 3,000, the Municipal Advisor Professional Fee in
Year 1 would be $1,000 per covered professional. In Year 2, the
targeted revenue for the Municipal Advisor Professional Fee would be
no more than $3,300,000, a 10% increase. If the estimated number of
covered professionals in Year 2 remained at 3,000, then the
Municipal Advisor Professional Fee for Year 2 would be no more than
$1,100 per covered professional, also a 10% increase. If instead,
the estimated number of covered professionals in Year 2 dropped to
2,500, the Municipal Advisor Professional Fee for Year 2 would be
limited to $1,250, a 25% increase. In this scenario, to the extent
that the 25% maximum cap on the assessment rate increase results in
less revenue collected from the Municipal Advisor Professional Fee
in Year 2 than targeted, the amount of the Negative Rate Card Fee
Variance for the Municipal Advisor Professional Fee would be
incorporated into the Annual Rate Card Process in Year 3, again
subject to the maximum caps on target revenue and assessment rate
increase.
---------------------------------------------------------------------------

    If the proposed rule change becomes operative on October 1, 2022,
the new funding policy, available at https://msrb.org/About-MSRB/Financial-and-Other-Information/Financial-Policies/Future-Funding-Policy, which reflects the Annual Rate Card Process, including the
Maximum Cap on Targeted Revenue and the Maximum Cap on Assessment Rate
Increases, will likewise become operative.
    If the Annual Rate Card Process becomes operative, any future
proposed amendment to the rates of assessment for the Rate Card Fees
that would exceed the Maximum Cap on Targeted Revenue or the Maximum
Cap on Assessment Rate Increases would be addressed in the
corresponding proposed rule change that would be filed with the
Commission pursuant to the provisions of Section 19(b)(1) of the
Exchange Act.
Proposed Rate Card Amendments
    The proposed Rate Card Amendments are designed to promote the
collection of reasonable fees and charges from MSRB regulated entities
as are necessary or appropriate to defray the

costs and expenses of operating and administering the Board.\80\ The
Board believes that the Annual Rate Card Process enables it to consider
the necessary factors and to sufficiently deliberate on those factors
in order to arrive at reasonable fees and charges as may be necessary
or appropriate to defray the costs and expenses of operating and
administering the Board. Accordingly, among the other reasons discussed
herein, the Board believes that the proposed rule change achieves
reasonable fees and charges consistent with the Act because the Rate
Card Amendments adhered to the Annual Rate Card Process. Specifically,
the Board (i) developed the Operational Funding Level for Fiscal Year
2023 based on existing pro forma estimates, (ii) incorporated other
anticipated revenue into its funding analysis, and (iii) forecasted
expected volume activity to appropriately set the rates of assessment
for each of the Rate Card Fees, all as further described above.
---------------------------------------------------------------------------

    \80\ See Section 15B(b)(2)(J) of the Act (15 U.S.C. 78o-
4(b)(2)(J)).
---------------------------------------------------------------------------

    Proposed Annual Rate Card. The Rate Card Amendments would establish
the Municipal Advisor Professional Fee specified in Rule A-11 and the
Market Activity Fees specified in Rule A-13 in accordance with the
chart below.
---------------------------------------------------------------------------

    \81\ The Rate Card Fees listed do not indicate the current
temporary fee reductions for the Market Activity Fees that expire on
September 30, 2022. See Rule A-13(h) and the 2021 Temporary Fee
Reduction (citation and description at note 12 supra).

----------------------------------------------------------------------------------------------------------------
                                                                                Current rate
                                                              Basis                    \81\        Proposed rate
----------------------------------------------------------------------------------------------------------------
Underwriting Fee..............................  Per $1,000 Par Underwritten.....         $0.0275         $0.0297
Transaction Fee...............................  Per $1,000 Par Transacted.......          0.0100          0.0107
Trade Count Fee...............................  Per Trade.......................            1.00            1.10
Municipal Advisor Professional Fee............  Per Covered Professional........           1,000           1,060
----------------------------------------------------------------------------------------------------------------

    These revised rates would become effective on October 1, 2022 and
are expected to apply to activities occurring through December 31,
2023. The Board anticipates amending the rates of assessment specified
in this proposed Annual Rate Card with a subsequent rule filing with
the Commission that would become effective as of January 1, 2024.\82\
---------------------------------------------------------------------------

    \82\ The Rate Card Amendments are intended to revise the rates
of assessment for the Market Activity Fees prior to the expiration
of the 2021 Temporary Fee Reduction on October 1, 2022.
---------------------------------------------------------------------------

Purpose and Description of the Technical Amendments
    Consistent with the Board's Fee Review, the MSRB identified
instances across Rule A-11, Rule A-12, and Rule A-13 where amendments
would improve the clarity of application of these MSRB rules.
Specifically, the MSRB determined that Rule A-11, Rule A-12, and Rule
A-13 could benefit from: (i) the creation of defined terms for existing
concepts that would help streamline the rule text and improve
readability; (ii) the clarification of existing terms and concepts
through the consolidation of previously published regulatory guidance
into the proposed rule change and the direct incorporation of cross-
referenced definitions from other MSRB rules into the proposed rule
change; and (iii) the deletion of obsolete rule language to streamline
the rule text and avoid the potential for regulatory confusion as to
why such obsolete language continues to be incorporated into MSRB
rules. Accordingly, the proposed rule change would also amend Rule A-
11, Rule A-12, and Rule A-13 with certain technical, non-substantive
amendments.
Technical Amendments to Rule A-11
    The proposed Technical Amendments would amend Rule A-11 to (i)
create a separately defined term for the concept of a ``covered
professional;'' (ii) reformat the applicable subsections of Rule A-11
with the appropriate subsection designations and update the applicable
cross-references in the rule text; and (iii) directly incorporate the
definition for ``Prime Rate'' into the text of the rule. Importantly,
the proposed definition for the new term ``covered professional'' is
intended to be non-substantive and to match the existing rule text and
understanding of the descriptive phrase in Rule A-11 regarding a
``person associated with the municipal advisor who is qualified as a
municipal advisor representative in accordance with Rule G-3 and for
whom the municipal advisor has on file with the Commission a Form MA-I
as of January 31 of each year.'' The proposed amendment would also
incorporate the concept of an ``active'' Form MA-I to make expressly
clear the existing application of Rule A-11 that, if a firm has filed
an amendment to indicate that an individual is no longer an associated
person of the municipal advisory firm or no longer engages in municipal
advisory activities on its behalf, then that individual's Form MA-I
would not be deemed as active for purposes of the Municipal Advisor
Professional Fee and would not be counted in the January 31st
calculation regarding the assessment of the Municipal Advisor
Professional Fee. In this way, the proposed amendments are intended to
define the same category of associated persons as the existing text of
the rule and, all else being equal, would not capture any greater or
fewer individuals in its scope. Consequently, the proposed defined term
for a covered professional would not change the MSRB's current method
for calculating and applying the amount of the Municipal Advisor
Professional Fee under Rule A-11. The proposed amendment is merely
intended to provide greater regulatory clarity for the application of
Rule A-11. Therefore, the MSRB believes it is a technical, clarifying
amendment to the rule text that would improve its readability and would
not modify any existing regulatory burdens or obligations, nor create
any new regulatory burdens or obligations.
    Consistent with separately defining the term ``covered
professional,'' the proposed rule change would also reformat the
applicable subsections of Rule A-11 with the appropriate subsection
designations and update the applicable cross-references in the rule
text. These related amendments are merely intended to provide internal
consistency to Rule A-11 in light of the other amendments and,
therefore, the MSRB believes they are technical, non-substantive
amendments.
    Lastly, the proposed Technical Amendments to Rule A-11 would strike
the current reference to the MSRB Registration Manual from current
subsection (b) and directly incorporate the definition for ``Prime
Rate'' in Supplementary Material .02. The new definition provided in
Supplementary Material .02 would match the existing definition provided
in the MSRB Registration Manual, stating that ``. . . the Prime Rate is
the annual rate of the commercial prime rate of interest as last
published in The Wall Street Journal

prior to the date such charge is computed.'' Given that this proposed
definition is the same as the one currently provided in the MSRB
Registration Manual, the MSRB believes this amendment is a technical,
clarifying amendment to the rule text that would improve regulatory
understanding of Rule A-11 and would not modify any existing regulatory
burdens or obligations, nor create any new regulatory burdens or
obligations. Moreover, the MSRB believes that moving this language
directly into Rule A-11 consolidates the operative regulatory text and,
thereby, is likely to lead to less regulatory confusion for regulated
entities, who would no longer have to separately reference Rule A-11
and the MSRB Registration Manual.
Technical Amendments to Rule A-12
    The proposed Technical Amendments would amend Rule A-12 to (i)
eliminate its existing reference to Rule A-13 regarding the imposition
of late fees under Rule A-13; (ii) delete the now obsolete language in
Supplementary Material .01 regarding the temporary suspension of late
fees from March 1, 2020 to July 1, 2020; and (iii) directly incorporate
the definition for ``Prime Rate'' into the text of the rule. In terms
of deleting the reference to the imposition of late fees owed pursuant
to Rule A-13, the MSRB believes that regulatory clarity would be
improved if this fee concept was deleted from Rule A-12 and
incorporated directly into Rule A-13. The proposed amendment to Rule A-
13 that would incorporate this concept in an amendment to that rule
text and, thereby, retain this fee concept in the MSRB's fee structure
is discussed in the following section. Notably, the deletion of this
fee concept in Rule A-12 and its incorporation in Rule A-13 would not
change the MSRB's current method for calculating and applying the
amount of such late fees; and, therefore, the MSRB believes it is a
technical, clarifying amendment to the rule text that improves its
readability and does not modify any existing regulatory burdens or
obligations, nor create any new regulatory burdens or obligations.
    In terms of deleting the language in Supplementary Material .01 of
Rule A-12, the language is no longer operative at this time and,
therefore, the MSRB believes that deleting it from the rule text would
improve the clarity of the application of Rule A-12. Specifically, the
deletion of the text of Supplementary Material .01 from Rule A-12 would
help streamline the rule text and reduce the potential for regulatory
confusion as to why it continues to be included in the text of the
rule.
    In addition, the proposed Technical Amendments to Rule A-12 would
strike the reference to the MSRB Registration Manual from subsection
(d) and directly incorporate the definition for ``Prime Rate'' in
Supplementary Material .01. The new definition provided in
Supplementary Material .01 would match the existing definition provided
for in the MSRB Registration Manual, stating that ``. . . the Prime
Rate is the annual rate of the commercial prime rate of interest as
last published in The Wall Street Journal prior to the date such charge
is computed.'' Given that this proposed definition is the same as the
one currently provided in the MSRB Registration Manual, the MSRB
believes this amendment is a technical, clarifying amendment to the
rule text that would improve regulatory understanding of Rule A-12 and
would not modify any existing regulatory burdens or obligations, nor
create any new regulatory burdens or obligations. Moreover, the MSRB
believes that moving this language directly into Rule A-12 consolidates
the operative regulatory text and, thereby, is likely to lead to less
regulatory confusion for regulated entities, who would no longer have
to separately reference Rule A-12 and the MSRB Registration Manual.
Technical Amendments to Rule A-13
    The proposed Technical Amendments would amend Rule A-13 to: (i)
reformat and clarify the definition of ``primary offering'' consistent
with the historical understanding and current application of Rule A-13;
(ii) further clarify that certain transactions in municipal securities
must meet the definition of a ``variable rate demand obligation'' or
``VRDO'' under Rule G-34, on CUSIP numbers, new issue, and market
information requirements, in order to be exempt from Transaction Fees
pursuant to Rule A-13(d)(iii)(c)'s subsection identifying
``Transactions Not Subject to Transaction Fee;'' \83\ (iii) uniformly
revise Rule A-13's references to the term ``technology fee'' to ``trade
count fee;'' (iv) incorporate the existing concept regarding the
imposition of late fees into the rule text (which concept currently
exists in Rule A-12, but is being deleted from Rule A-12 as part of the
proposed amendments, as discussed above); (v) delete the language that
would become obsolete on September 30, 2022 regarding the temporary fee
reduction of the Market Activity Fees for activities occurring between
April 1, 2021 through September 30, 2022; (vi) delete the now obsolete
language in Supplementary .01 regarding the waiving of certain
assessments for transactions with the Municipal Liquidity Facility
established by the Federal Reserve Board of Governors; (vii) directly
incorporate the definition for ``Prime Rate'' into the text of the
rule; and (viii) correct an inaccurate cross-reference in the
definition of ``commercial paper''.
---------------------------------------------------------------------------

    \83\ This language is currently found in subsection (d)(iii)(c)
of Rule A-13 and the proposed rule change would not amend its
location.
---------------------------------------------------------------------------

    The proposed Technical Amendments regarding the definition of
primary offering for purposes of Rule A-13 would reformat the existing
definition to the first subsection of the rule, as well as incorporate
clarifying revisions expressly codifying the existing application of
Rule A-13 to private placements.\84\ Specifically, the proposed
amendment would incorporate text expressly stating that, consistent
with the definition for the same term found in Rule 15c2-12(f)(7) under
the Act,\85\ certain circumstances where a dealer acts as an agent for
an issuer to arrange the placement of a new issue of municipal
securities would be included in the definitional scope of a ``primary
offering'' under Rule A-13. Accordingly, the MSRB believes that these
amendments are technical, clarifying modifications to the rule text
that (i) would improve the readability of Rule A-13 and facilitate
greater regulatory clarity regarding the current application of the
Underwriting Fee and (ii) would not modify any existing regulatory
burdens or obligations, nor create any new regulatory burdens or
obligations.
---------------------------------------------------------------------------

    \84\ Since the inception of the Underwriting Fee, the
application of Rule A-13 has encompassed those primary offerings
where a municipal securities dealer acts agent for the issuer
arranging the direct placement of new issue municipal securities
with institutional customers or individuals. See ``Underwriting
assessment: application to private placements'' (Feb. 22, 1982),
available at https://msrb.org/Rules-and-Interpretations/MSRB-Rules/Administrative/Rule-A-13?tab=2. Given this amendment to Rule A-13,
the February 22, 1982 guidance will be removed from the MSRB rule
book as of the operative date of the Technical Amendments and will
be archived by relocating it to a dedicated MSRB Archived
Interpretive Guidance page at: www.msrb.org/Rules-andInterpretations/Archived-Guidance-Rule-Book-Review.aspx. The
guidance will be clearly labeled with its date of archival and can
be accessed for its historical value.
    \85\ 17 CFR 240.15c2-12(f)(7) (stating that the term ``primary
offering'' means ``an offering of municipal securities directly or
indirectly by or on behalf of an issuer of such securities'').
---------------------------------------------------------------------------

    In addition, the proposed Technical Amendments to Rule A-13 would
clarify that only transactions in municipal securities that meet the
definition of a ``variable rate demand

obligation'' under Rule G-34 are exempt from Transaction Fees pursuant
to Rule A-13's language regarding ``Transactions Not Subject to
Transaction Fee.'' Specifically, the current definitional language in
that subsection of Rule A-13 does not precisely match the corresponding
definition in Rule G-34.\86\ Yet, the MSRB's internal billing process
currently relies on reports made pursuant to Rule G-34's Short-term
Obligation Rate Transparency System and, thereby, Rule G-34's variable
rate demand obligation definition, to identify such transactions that
should not be billed under Rule A-13. To avoid the possibility of any
potential unintended consequences resulting from the differences
between the definition currently stated in Rule A-13 versus the
variable rate demand obligation definition in Rule G-34 that is
currently utilized for purposes of the MSRB's internal billing logic,
the proposed rule change would amend Rule A-13 to expressly cross-
reference Rule G-34(e)(viii) and expressly restate the variable rate
demand obligation definition directly in the text of Rule A-13. The
MSRB believes that the proposed amendments to expressly incorporate
Rule G-34's variable rate demand obligation definition into Rule A-13
will improve regulatory clarity for regulated entities regarding the
MSRB's billing process and which transactions are exempt from certain
fees. In this way, the proposed definition is intended to define the
same category of activity and instruments as the existing text of the
rule and, all else being equal, would not capture any greater or fewer
transactions than the current application of the Rule A-13.
---------------------------------------------------------------------------

    \86\ See Rule G-34(e)(viii) (``The term `variable rate demand
obligation' shall mean securities in which the interest rate resets
on a periodic basis with a frequency of up to and including every
nine months, where an investor has the option to put the issue back
to the trustee, tender agent or other agent of the issuer or
obligated person at any time, typically within a notification
period, and a broker, dealer or municipal securities dealer acts as
a remarketing agent responsible for reselling to new investors
securities that have been tendered for purchase by a holder.'')
---------------------------------------------------------------------------

    As previously mentioned above, the proposed Technical Amendments
would uniformly revise Rule A-13's references to the term ``technology
fee'' to the term ``trade count fee.'' The MSRB believes that this non-
substantive change is warranted because the use of the phrase
``technology fee'' is outdated. The MSRB believes ``trade count'' fee
is a better descriptor because the revenue generated from this fee is
not strictly used for technology expenses but is aggregated with the
other fee revenue the MSRB collects and utilized for the most
appropriate organizational uses.\87\ Accordingly, the MSRB believes
that the term ``trade count fee'' is a more accurate descriptor and,
thereby, less likely to lead to regulatory confusion about this fee.
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    \87\ See Exchange Act Release No. 75751 (Aug. 24, 2015), 80 FR
52352 (Aug. 28, 2015) File No. SR-MSRB-2015-08, at 52355 (discussing
the fact that the revenue from the technology fee will no longer be
designated exclusively for capitalized hardware and software
expense).
---------------------------------------------------------------------------

    Consistent with Technical Amendments to Rule A-11 and Rule A-12,
the proposed Technical Amendments to Rule A-13 would also copy language
into new Rule A-13(g) incorporating the existing concept currently
articulated in current Rule A-12(d) regarding the imposition of late
fees on the fees assessed pursuant to Rule A-13. As noted above,
currently, the operative rule text for this late fee concept is
provided for in Rule A-12(d), and the proposed rule change would delete
this language from Rule A-12(d) specific to Rule A-13's fees.
Importantly, the incorporation of this language directly into new Rule
A-13(g) would not change the MSRB's current method for calculating and
applying the amount of such late fees; and, therefore, the MSRB
believes it is a technical, clarifying amendment to the rule text that
improves the readability of both Rule A-12 and also Rule A-13 and would
not modify any existing regulatory burdens or obligations, nor create
any new regulatory burdens or obligations. The MSRB believes that
moving this language into Rule A-13 consolidates the operative
regulatory text and, thereby, is likely to lead to less regulatory
confusion for regulated entities, who would no longer have to
separately reference Rule A-12 to identify that such late fees were
applicable to the fees assessed pursuant to Rule A-13.
    Relatedly, and similar to the proposed amendments to Rule A-11 and
Rule A-12 on the same topic of late fees, the proposed Technical
Amendments to Rule A-13 would also directly incorporate the definition
for ``Prime Rate'' in new Supplementary Material .02. This definition
provided in Supplementary Material .02 would match the current
definition provided in the MSRB Registration Manual, stating that ``. .
. the Prime Rate is the annual rate of the commercial prime rate of
interest as last published in The Wall Street Journal prior to the date
such charge is computed.'' Given that this proposed definition is the
same as the one currently provided for in the MSRB Registration Manual,
the MSRB believes this amendment is a technical, clarifying amendment
to the rule text that would improve regulatory understanding of Rule A-
13 and would not modify any existing regulatory burdens or obligations,
nor create any new regulatory burdens or obligations.
    In addition, the proposed Technical Amendments to Rule A-13 would
delete the language that would become obsolete on September 30, 2022,
regarding the temporary fee reduction of the Market Activity Fees for
those activities occurring between April 1, 2021 through September 30,
2022. Given the MSRB's proposed effective date for this proposed rule
change, the MSRB believes that this deletion would improve regulatory
clarity for regulated entities because this language would no longer be
operative as of October 1, 2022, and, therefore, its continued
inclusion in the rule text may cause regulatory confusion. Similarly,
the proposed Technical Amendments would delete the now obsolete
language in Supplementary .01 of Rule A-13 regarding the waiving of
certain assessments for transactions with the Municipal Liquidity
Facility (the ``MLF'') established by the Federal Reserve Board of
Governors. Given that the MLF and the language used to reference it
here is no longer operative, the MSRB believes that this deletion would
improve regulatory clarity for regulated entities.
    Lastly, consistent with all the other proposed Technical Amendments
to Rule A-13, the proposed rule change would also reformat the
applicable subsections of Rule A-13 with the appropriate subsection
designation and update the applicable cross-references in the rule
text, including correcting the inaccurate cross reference in the
definition of ``commercial paper'' from G-32(d) to G-32(c). These
related amendments are merely intended to provide internal consistency
to Rule A-13 in light of the other amendments and, therefore, the MSRB
believes they are technical, non-substantive amendments.
2. Statutory Basis
Statutory Basis for the Rate Card Amendments
    The MSRB believes that the proposed Rate Card Amendments are
consistent with Section 15B(b)(2)(J) of the Act,\88\ which states that
the MSRB's rules shall provide that each municipal securities broker,
municipal securities dealer, and municipal advisor shall pay to the
Board such reasonable fees and charges

as may be necessary or appropriate to defray the costs and expenses of
operating and administering the Board.\89\ Such rules must specify the
amount of such fees and charges, which may include charges for failure
to submit to the Board, or to any information system operated by the
Board, within the prescribed timeframes, any items of information or
documents required to be submitted under any rule issued by the
Board.\90\
---------------------------------------------------------------------------

    \88\ 15 U.S.C. 78o-4(b)(2)(J).
    \89\ Id.
    \90\ Id.
---------------------------------------------------------------------------

    The MSRB believes that the Rate Card Amendments provide for
reasonable fees and charges to be paid by regulated entities. Moreover,
the MSRB believes that the Rate Card Amendments are necessary and
appropriate to fund the operation and administration of the Board and,
thereby, satisfy the requirements of Section 15B(b)(2)(J) \91\ through
the achievement of a reasonable fee structure that ensures (i) an
equitable balance of necessary and appropriate fees among regulated
entities and (ii) a fair allocation of the burden of defraying the
costs and expenses of the MSRB.\92\ Specifically, the Board believes
that the Rate Card Amendments will achieve reasonable fees on regulated
entities \93\ that (i) are necessary and appropriate to sustain the
operation and administration of the Board by defraying the MSRB's
anticipated Fiscal Year 2023 operating and administrative expenses;
\94\ (ii) reasonably and appropriately allocate fees among firms by
equitably distributing fees in accordance with each individual firm's
overall market activities; \95\ and (iii) reasonably and appropriately
adjust for the annual fluctuations in the volume of market activity as
compared to budget expectation by incorporating the actual amounts of
Market Activity Fees collected as compared to budget into this and
future rate-setting processes.\96\ As a result, the MSRB believes that
the proposed rule change satisfies the applicable requirements of
Section 15B(b)(2)(J) of the Act,\97\ and the Board has developed a
reasonable and appropriate fee mechanism that will sufficiently fund
future expenses and better manage reserves at appropriate levels.\98\
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    \91\ Id.
    \92\ See, e.g., Exhibit 3(a), ``Chart 14--Distribution of
Registrants by Range of Total Fees Assessed Under Current Fee
Structure Compared to Projected Distribution Under the Rate Card
Model (Exclusive of Late Fees and Examination Fees).''
    \93\ In addition to the following citations within this sentence
in support of the reasonability of the Rate Card Amendments, see
also related discussion supra under ``Board Review of the Current
Fee Structure--Maintaining a Fair and Equitable Balance of Fees,--
Mitigating the Impact of Market Volatility, and--Funding the MSRB's
Anticipated Near-Term Operating Expenses'' and ``Proposed Rate Card
Amendments.'' See also related discussion infra under ``Self-
Regulatory Organization's Statement on Burden on Competition.''
    \94\ See Exhibit 3(a), ``Chart 10--Historical and Projected
Revenue without Rate Card Model Compared to Historical and Pro Forma
Expenses'' and ``Chart 11--Historical and Projected Revenue with
Rate Card Model Compared to Historical and Pro Forma Expenses.''
    \95\ See related discussion supra under section entitled ``Board
Review of the Current Fee Structure--Mitigating the Impact of Market
Volatility.'' See also Exhibit 3(a), ``Chart 14--Distribution of
Registrants by Range of Total Fees Assessed Under Current Fee
Structure Compared to Projected Distribution Under the Rate Card
Model (Exclusive of Late Fees and Examination Fees)'' (reflecting
that the distribution of registrants by range of total fees assessed
under the current fee structure are currently anticipated to be
relatively stable if the proposed Rate Card Amendments are
implemented).
    \96\ See related discussion supra under section entitled ``Board
Review of the Current Fee Structure--Mitigating the Impact of Market
Volatility.'' See also Exhibit 3(a), ``Chart 2--Historical Budget
vs. Actual Revenue for the Rate Card Fees'' and ``Chart 4--Rate Card
Fees: Historical Activity Volume Variance Budget to Actual.''
    \97\ 15 U.S.C. 78o-4(b)(2)(J).
    \98\ See also related discussion supra under ``Board Review of
the Current Fee Structure--Maintaining a Fair and Equitable Balance
of Fees,--Mitigating the Impact of Market Volatility, and--Funding
the MSRB's Anticipated Near-Term Operating Expenses'' and ``Proposed
Rate Card Amendments.'' See also related discussion infra under
``Self-Regulatory Organization's Statement on Burden on
Competition.''
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Statutory Basis for the Technical Amendments
    The MSRB believes that the proposed Technical Amendments are
consistent with Section 15B(b)(2)(C) of the Act,\99\ which states that
the MSRB's rules shall be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in municipal
securities and municipal financial products, to remove impediments to
and perfect the mechanism of a free and open market in municipal
securities and municipal financial products, and, in general, to
protect investors, municipal entities, obligated persons, and the
public interest.\100\
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    \99\ 15 U.S.C. 78o-4(b)(2)(C).
    \100\ Id.
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    The MSRB believes that the Technical Amendments would promote just
and equitable principles of trade by ensuring that existing rule
provisions are accurate and understandable by: (i) creating newly
defined terms for existing concepts that will help streamline the rule
text and improve its readability; (ii) clarifying the application of
existing terms and concepts through the consolidation of previously
published regulatory guidance into the proposed rule change and the
direct incorporation of cross-referenced definitions from other MSRB
rules into the proposed rule change; and (iii) deleting obsolete rule
language to streamline the rule text and avoid the potential for
regulatory confusion as to why such language continues to be
incorporated into MSRB rules. While the Technical Amendments would
affect rules applicable to MSRB regulated entities, the amendments are
meant to clarify Rule A-11, Rule A-12, and Rule A-13, respectively, and
would not (i) modify any existing regulatory burdens or obligations,
(ii) create any new regulatory burdens or obligations, or (iii) affect
the registration status of any persons under MSRB rules.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Exchange Act requires that MSRB rules
not be designed to impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Exchange Act.\101\
The MSRB has considered the economic impact of the proposed rule
change, including a comparison to reasonable alternative regulatory
approaches.\102\
---------------------------------------------------------------------------

    \101\ Id.
    \102\ Id.
---------------------------------------------------------------------------

    The Annual Rate Card Process proposed by the Rate Card Amendments
is intended to introduce a new fee structure that would (i) better
mitigate the impact of market volatility on the MSRB's revenue
structure (and, consequently, also better mitigate the impact of market
volatility on the MSRB's organizational reserves), and (ii) maintain
rates within a reasonably predictable range that, while subject to more
incremental changes each year, would be comparably more stable over the
long term than the MSRB's current fee structure.\103\ Furthermore, the
Annual Rate Card process applies equally to all those MSRB regulated
entities who may pay dealer Market Activity Fees and/or the Municipal
Advisor Professional Fees. Accordingly, the MSRB believes that the
proposed Annual Rate Card Process would not have an impact on
competition and,

consequently, would not impose any burden on competition, relieve a
burden on competition, nor promote competition. The MSRB therefore
believes the Annual Rate Card Process would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Exchange Act.
---------------------------------------------------------------------------

    \103\ See related discussion supra under ``Board Review of the
Current Fee Structure--Mitigating the Impact of Market Volatility''
and ``Proposed Annual Rate Card Approach--Limitations on Rate
Changes to Promote Predictability and Stability'' (discussing
various limitations on future increases of the Rate Card Fees). See
also Exhibit 3(a), ``Chart 5--Historical Effective Fee Rate
Changes.''
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    The increase in the rates of assessment for the Rate Card Fees
proposed by the Rate Card Amendments (i.e., the Underwriting Fee,
Transaction Fee, Trade Count Fee, and Municipal Advisor Professional
Fee) are necessary and appropriate to cover the currently anticipated
operating deficit for Fiscal Year 2023, which would have occurred even
with the current fee structure, to ensure prudent funding for the
operation and administration of the Board. Moreover, the Board's Rate
Card Amendments apply equally to each MSRB regulated entity who may pay
the Rate Card Fees and, thereby, equitably and non-discriminatorily
distribute the fee burden across all MSRB regulated entities who
participate in the municipal securities market. In this way, no firm
would be unduly burdened as compared to another firm. In particular,
smaller municipal advisory firms would continue to pay less Municipal
Advisor Professional Fees than larger municipal advisory firms, and,
therefore, the Rate Card Fees proposed by the Rate Card Amendments are
not unduly burdensome, comparatively, between small municipal advisory
firms and large municipal advisory firms. Because the Rate Card Fees
proposed by the Rate Card Amendments would equitably and non-
discriminately distribute the fee burden across all MSRB regulated
entities, the MSRB believes that the Rate Card Fees proposed by the
Rate Card Amendments would not have an impact on competition and,
consequently, would not impose any burden on competition, relieve a
burden on competition, nor promote competition. Accordingly, the MSRB
believes the Rate Card Fees proposed by the Rate Card Amendments would
not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Exchange Act.
    The Board determined it was necessary and appropriate to conduct a
comprehensive review of the MSRB's overall fee structure to devise a
methodology that reasonably and appropriately defrays the costs and
expenses associated with operating and administering the Board, with a
goal of arriving at a longer-term solution for MSRB's revenue
generation process that continues to ensure a sustainable financial
position. The current fee structure has a semipermanent fixed rate of
assessment for each of the above categories. Under the proposed Annual
Rate Card Process, categories of fees assessed for regulated entities
would remain the same. However, the Board proposes using an annual
rate-setting method to recalculate fee rates every year for each
category based on factors described herein.\104\
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    \104\ The SEC and FINRA use this approach for some fees. See SEC
Section 31 rate fees: https://www.sec.gov/divisions/marketreg/sec31feesbasicinfo.htm; see also FINRA Trading Activity Fee (TAF)
https://www.finra.org/rules-guidance/guidance/trading-activity-fee.
---------------------------------------------------------------------------

    With the proposed Annual Rate Card Process, the Board is adopting a
programmatic methodology for assessing the fees in each category. While
the current categories of fees divided amongst regulated entities would
not change (i.e., the Underwriting Fee, Transaction Fee, Trade Count
Fee, and Municipal Advisor Professional Fee) in the proposed Annual
Rate Card Process, the proportional share of each category would vary
less over the long term than under the current fee structure and would
be consistent with the average shares paid by each category of fees in
recent fiscal years.\105\ The proposed Annual Rate Card Process allows
the Board to review a change in budgeted expenses compared to the prior
year and compare it to the projected market activities for each
category of fees in the upcoming year. Any over/under assessment in the
prior year within each class of fee payer would be factored into any
change in the fee rate for the subsequent year. Fee rates would be
established prior to or in the fourth quarter of each calendar year to
be effective on the following January 1 and would last until December
31. However, for Fiscal Year 2023, the first year of adoption, the
effective date would start from October 1, 2022 and end on December 31,
2023 for a fifteen-month period. Following the inaugural fifteen-month
Annual Rate Card proposed by the Rate Card Amendments, in subsequent
years, the fee rates for each category would be adjusted on a calendar
year basis starting in January to compensate for any over/under
assessment in the prior fiscal year, in addition to accommodating any
change in other considerations (e.g., change in annual expenses, change
in projected market volume, prior year revenue variances as compared to
budget, change in reserve target and certain limitations on fee
increases).
---------------------------------------------------------------------------

    \105\ See Exhibit 3(a), ``Chart 3--Historical Actual Revenue for
the Rate Card Fees as a Percentage of the Total Rate Card Fee
Revenue,'' ``Chart 4--Rate Card Fees: Historical Activity Volume
Variance Budget to Actual,'' ``Chart 5--Historical Effective Fee
Rate Changes,'' and ``Chart 14--Distribution of Registrants by Range
of Total Fees Assessed Under Current Fee Structure Compared to
Projected Distribution Under the Rate Card Model (Exclusive of Late
Fees and Examination Fees)'' (reflecting that the distribution of
registrants by range of total fees assessed under the current fee
structure are currently anticipated to be relatively stable if the
proposed Rate Card Amendments are implemented). As to how the
proportion was devised, in addition to the costs of regulatory
activities, the cost of servicing each category of fees is also a
consideration, as it costs the MSRB significantly more to collect
and disseminate trading data for transparency purposes than
municipal advisory firm professional data. It should be noted that
all regulated entities benefit from this publicly available
transparency information.
---------------------------------------------------------------------------

    For Fiscal Year 2023, the Board is also projecting a revenue/
expense imbalance (i.e., an operating deficit) without a change in the
current fee structure.\106\ In the past, excess organizational reserves
buffered budget deficits (though the budgeted deficits were typically
not realized due to excess revenue collected versus budget or expense
savings, unless intended deficits due to rebates or temporary fee
reductions); however, now that the excess reserves are being eliminated
because of the Fiscal Year 2021 Temporary Fee Reduction, any deficit
would require a fee increase in Fiscal Year 2023 to cover the gap and
maintain a balance between revenues and expenses, regardless of the fee
structure used. Therefore, the proposed rule change also includes a
rate increase for the Underwriting Fee, Transaction Fee, Trade Count
Fee, and Municipal Advisor Professional Fee for the Annual Rate Card
proposed by the Rate Card Amendments. It should be noted that the Board
last raised the rate for the Transaction Fee and technology fee in
Fiscal Year 2011 when the technology fee was first imposed, and last
raised the rate for the Underwriting Fee more than 20 years ago.\107\
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    \106\ See Exhibit 3(a), ``Chart 10--Historical and Projected
Revenue without Rate Card Model Compared to Historical and Pro Forma
Expenses.''
    \107\ The Municipal advisory firm professional fee was raised
three times since inception in Fiscal Year 2014 (Fiscal Year 2018,
Fiscal Year 2020, and Fiscal Year 2021).
---------------------------------------------------------------------------

Necessity of the Rate Card Amendments
    The Board believes Rate Card Amendments are necessary and
appropriate to:
    (i) maintain a fair and equitable balance of reasonable fees and
charges among regulated entities; \108\
---------------------------------------------------------------------------

    \108\ See discussion supra under ``Statutory Basis for the Rate
Card Amendments'' near notes 87 and 88.
---------------------------------------------------------------------------

    (ii) better mitigate fee assessment volatility based on Market
Activity

Fees,\109\ which has contributed to the growth of the MSRB's excess
reserves; \110\ and
---------------------------------------------------------------------------

    \109\ See related discussions supra under sections entitled
``Board Review of the Current Fee Structure--Mitigating the Impact
of Market Volatility'' and ``Proposed Annual Rate Card Approach--
Limitations on Rate Changes to Promote Predictability and
Stability.'' See also Exhibit 3(a), ``Chart 2--Historical Budget vs.
Actual Revenue for the Rate Card Fees,'' ``Chart 4--Rate Card Fees:
Historical Activity Volume Variance Budget to Actual,'' and ``Chart
5--Historical Effective Fee Rate Changes.''
    \110\ Id.
---------------------------------------------------------------------------

    (iii) ensure a prudent long-term approach to organizational funding
that addresses projected structural operating deficits under the
current fee structure in near-term fiscal years.\111\
---------------------------------------------------------------------------

    \111\ See, Exhibit 3(a), ``Chart 8--Historical Actual Expenses''
(showing a ten-year historical compound annual growth rate of
4.2%),''Chart 10--Historical and Projected Revenue without Rate Card
Model Compared to Historical and Pro Forma Expenses,'' ``Chart 11--
Historical and Projected Revenue with Rate Card Model Compared to
Historical and Pro Forma Expenses,'' ``Chart 12--Total Reserves vs.
Target: Historical and Projected without Rate Card Model,'' and
``Chart 13--Total Reserves vs. Target: Historical and Projected with
Rate Card Model.''
---------------------------------------------------------------------------

    Because market events, when combined with the current fee
structure, partially contributed to the excess reserves in recent
years, the Board believes it is reasonable and appropriate to adopt a
new approach to reduce the variability over time in fee assessments and
mitigate the impact of market volatility over time by adjusting for
budget surpluses or shortfalls annually, therefore providing a better
mechanism for effectively managing fee rates and reserve levels.\112\
In the recent past, higher-than-expected new issue and secondary market
volumes caused fees assessed from dealers to exceed budgets and,
combined with lower-than-expected expenses, led to increases in
reserves that necessitated rebates or temporary fee reductions to
manage reserve levels. To reduce excess reserves, the Board instituted
ad hoc rebates in Fiscal Year 2014 and Fiscal Year 2016 and temporary
fee reductions via filings with the Commission for Fiscal Year 2019 and
for Fiscal Year 2021 and Fiscal Year 2022 to reduce the excess
reserves.\113\ As a result, there has been volatility in fee
collections (since these are market-based fees) and MSRB's reserve
levels in recent years.\114\ The same dynamics could also exist if
actual new issue and secondary market activities fail to meet projected
volumes, resulting in a revenue shortfall, which would prompt new
filings to increase rate assessments to close the gap.
---------------------------------------------------------------------------

    \112\ See related discussion supra under section entitled
``Board Review of the Current Fee Structure--Mitigating the Impact
of Market Volatility.'' See also Exhibit 3(a), ``Chart 1--Historical
Revenue Variances: Budget vs. Actual,'' ``Chart 2--Historical Budget
vs. Actual Revenue for the Rate Card Fees,'' and ``Chart 4--Rate
Card Fees: Historical Activity Volume Variance Budget to Actual.''
    \113\ The 2021 Temporary Fee Reduction is the MSRB's largest
temporary fee reduction, which was initiated during Fiscal Year 2021
and is expected to last until September 30, 2022. Link to the 2021
Temporary Fee Reduction and related citations supra at note 12. The
MSRB also filed for a separate temporary fee reduction during Fiscal
Year 2019. See Exchange Act Release No. 85400 (Mar. 22, 2019), 84 FR
11841 (Mar. 28, 2019) File No. SR-MSRB-2019-06.
    \114\ See Stakeholder Comments to the MSRB's Strategic
Priorities (link at note 34 supra). Specifically, one commenter
asked the MSRB to better address the volatility in revenues and the
corresponding excess in MSRB organizational reserves. See, e.g., BDA
Comment Letter, at p. 3-4 (link and citation at note 51).
---------------------------------------------------------------------------

    Without devising a new fee approach, it is likely the MSRB would
again be forced to deal with large reserve excesses or shortfalls on an
ad hoc basis in the future, which would not be a sustainable path going
forward.\115\ Specifically, the proposed Annual Rate Card Process would
(i) better mitigate the impact of market volatility on the MSRB's
revenue structure (and, consequently, also better mitigate the impact
of market volatility on the MSRB's organizational reserves), and (ii)
maintain rates within a reasonably predictable range that, while
subject to more incremental changes each year, would be comparably more
stable over the long term than the MSRB's current fee structure.\116\
In this way, the Annual Rate Process is intended to establish a fee
framework that is more transparent and predictable for the MSRB's
stakeholders that would mitigate market volatility over time, while
also retaining the Board's ability to flexibly react to changing
circumstances year-to-year when establishing reasonable fees on
regulated entities.\117\
---------------------------------------------------------------------------

    \115\ See related discussion supra under section entitled
``Board Review of the Current Fee Structure--Mitigating the Impact
of Market Volatility.'' See also Exhibit 3(a), ``Chart 1--Historical
Revenue Variances: Budget vs. Actual,'' ``Chart 2--Historical Budget
vs. Actual Revenue for the Rate Card Fees,'' and ``Chart 4--Rate
Card Fees: Historical Activity Volume Variance Budget to Actual.''
    \116\ See related discussion supra under ``Proposed Annual Rate
Card Approach--Limitations on Rate Changes to Promote Predictability