FICC hails RTTM service

Working collaboratively with its affiliate, National Securities Clearing Corporation (NSCC), which operates the netting and settlement services for municipals, and with the Municipal Securities Rulemaking Board (MSRB), FICC's technology platform is now facilitating price reporting for some 30,000 municipal trades a day. FICC's RTTM service began providing support for the MSRB's mandatory 15-minute price reporting requirement for all municipal bond trades on January 31.

FICC's interactive real-time messaging functionality allows broker/dealers to submit municipal trade data to RTTM using a single interactive message that serves two purposes – it forwards the data to the MSRB in real time for price reporting, and it continues to accept data for processing by NSCC. In other words, upon receipt of municipal trade data, RTTM immediately forwards a report of the trade to MSRB, while simultaneously passing the data onward internally for matching, comparison and, ultimately, clearance and settlement of municipal bond trades by NSCC. The combination of interactive messaging and 15-minute reporting gets trades into RTTM closer to trade execution, automatically leading to a higher matching rate for munis.

"This represents a new era for municipal bond trading," said DTCC's Fixed Income General Manager Jeff Ingber. "We're pleased to help NSCC participants meet the challenges of the MSRB's new reporting deadline. It helps the regulators, bolstered by real-time communications capabilities, to bring more efficient pricing and enhanced investor confidence to this $2-trillion marketplace."

SEC Chairman William H. Donaldson characterised the startup on January 31 as an "historic moment for all municipal bond investors" because "for the first time, investors have ready access to real-time price data for municipal securities."

The RTTM service matches and compares trades in corporate and municipal bonds and unit investment trusts (UITs) in real time with an average daily value of $13 billion for some 250 member firms. Once matched by the service, the trades are processed by NSCC for clearance and settlement along with equity trades. NSCC clears and settles most equity and corporate, municipal bond and UIT trading in the U.S., averaging about $400 billion daily.

Since RTTM was implemented for corporate and municipal bonds and UITs in June 2004, DTCC's Fixed Income group has closely coordinated testing with NSCC participants and the MSRB over the last six months to prepare for the 15-minute reporting rule. Prior to January 31, price reporting to the MSRB was accomplished through NSCC in batch mode at end of day. As such, all trade data was made publicly available on a day-after basis. Using RTTM's interactive messaging capabilities, this price data can now be forwarded within seconds on to the MSRB, which performs automated error checking and then electronically disseminates prices, providing near real-time transaction price transparency.

"Our price reporting system is moving a large volume of muni trade data almost instantaneously," said Susan Tysk, DTCC managing director. "I think our collective success was facilitated by the fact that we had a number of months to test and fine-tune the price reporting functionality with our customers and the MSRB."

Tysk reported that feedback on the price reporting capability from NSCC municipal bond customers has been positive.

For instance, Alan Bartlett, director of Customer Trading at Pershing LLC, said, "I have been very impressed with the speed and efficiency of the MSRB Real Time Trade Reporting System working in tandem with the Real-Time Trade Matching system. The systems' turnaround times, providing rapid and complete trade status reporting, are remarkable."

Another customer, John Lynch, executive vice president of Hartfield, Titus & Donnelly, L.L.C., noted the "excellent cooperation between the MSRB, DTCC and the street that resulted in the best example of price transparency in the fixed income market. DTCC and MSRB deserve the highest praise for the extensive work they have done to make this endeavor so successful. I also think that, although The Bond Market Association was not part of the street side development, it has played a pivotal role in making municipal prices available to the public at no cost."

The RTTM implementation for corporate and municipal bonds and UITs marked the last stage of FICC's multi-year effort to bring RTTM to all fixed income products. The DTCC subsidiary rolled out RTTM for U.S. Government securities in 2000, followed by mortgage-backed securities (MBS) in 2002. Today, about 98% of all U.S. Government securities trades representing an average daily value of some $2.4 trillion, and about 87% of MBS trades representing an average daily value of $274 billion, are submitted daily in real time to RTTM.

DTCC is currently working with the National Association of Securities Dealers (NASD) to reduce the current 30-minute reporting time for corporate bond trades to 15 minutes by mid-year 2005. For NSCC participants using RTTM to report to the NASD, this will be accomplished by enhancing the interface between the RTTM service and the NASD's Trade Reporting and Compliance Engine (TRACE).