[17795]
July 21, 2004
TO: FIXED-INCOME ADVISORY COMMITTEE No. 10-04
MONEY MARKET FUNDS ADVISORY COMMITTEE No. 12-04
RE: SEC STAFF REPORT ON TRANSACTIONS IN MUNICIPAL SECURITIES
The Securities and Exchange Commission’s Office of Municipal Securities (Division of
Market Regulation) and Office of Economic Analysis have completed a study of transactions in
municipal securities and have issued a report summarizing their findings.1 The report covers
transactions in municipal securities from November 1, 1999 through October 31, 2000. Among
other things, the report provides important statistical information related to the size and
characteristics of the municipal securities market, the types of securities traded, the dealers and
other contra-parties involved in the distribution process, and the various attributes of the
municipal securities distributed.
The report makes the following findings:
As of November 5, 2000, there were about 51,000 issuers with outstanding municipal
securities.
Over 1,600 dealers traded municipal securities with customers.
The median size of all municipal securities trades was $30,000.
Most transaction activity was in a relatively small number of securities and in the
securities of a relatively small number of issuers.
The median estimated spread on a customer trade in fixed coupon municipal securities –
or the cost of purchasing and then selling a security – was 1.66% of the principal amount
traded.
1 See SEC Report on Transactions in Municipal Securities, July 1, 2004, which is available from the SEC’s website at
http://www.sec.gov/news/studies/munireport2004.pdf. The SEC notes that the report is a byproduct of the
transaction reporting requirement of the rules promulgated by the Municipal Securities Rulemaking Board –
particularly MSRB Rule G-14, which requires municipal securities dealers to report to the MSRB information on their
trades with other dealers and with customers. The report, however, provides no recommendations or conclusions
regarding the staff’s findings.
2
Different customers purchasing (or selling) the same amount of the same fixed coupon
security on the same day frequently paid (or were paid) substantially different prices.
Recently offered fixed coupon securities were much more likely to trade than were
seasoned fixed coupon securities.
Large municipal securities had higher turnover rates than small securities.
Barry E. Simmons
Associate Counsel