WASHINGTON ― Real-time disclosure of the credit ratings on debt in the $3.7 trillion U.S. municipal bond market will be available in coming months, the board that collects market data said on Monday.
But the ratings will initially come from only one agency.
“We expect that will launch before the end of this year and will be a great furtherance of our mission to provide critical information to investors,” Municipal Securities Rulemaking Chairman Alan Polsky said in a call with reporters.
Along with writing the rules for the market, the board collects and posts disclosures and trading information for free on its website known as EMMA.
A little more than a year ago, the board announced that it would also make credit rating agencies’ assessments available on the site. At the time, it had hoped for all three rating agencies, or Nationally Recognized Statistical Rating Organizations, to participate. But only one, Fitch Ratings, has confirmed involvement.
“We will launch with one rating agency, possibly two, and we have received inquiries from actually other NRSROs,” MSRB Executive Director Lynnette Kelly Hotchkiss told the call. “They’ll go into the normal development cycle, so it’ll be a year or another amount of time before the second phase of that projects gets launched.”
There are two other major rating agencies beside Fitch — Standard & Poor’s Ratings Services and Moody’s Investors Service.
The board’s technology staff has labored all year to devise the best method for posting ratings immediately, Polsky said.
“The ratings need to be updated, available, accurate, real-time,” he said. “There’s a fair amount of testing that goes on to make certain that that process has the integrity, has what we need in order to be of the best use to investors.”
The board, made up of bankers, broker-dealers, advisers and issuers, has become a more centralized force in the municipal bond market. It is seeking to post large amounts of information about the debt that cities, counties, states and authorities use to finance their capital works as the federal government expands its responsibilities.
The financial reform law passed last summer, known as Dodd-Frank for its congressional authors, put municipal advisers under the board’s realm of rulemaking. Since then, the market has wrestled with exactly who can be considered an adviser. The Securities and Exchange Commission, which enforces the rules the board writes, is formulating a definition.
“Specifically, because of the market expertise of the MSRB board, we’re putting together a list of traditional activities of municipal advisers and we’ll be sending that to the SEC early this week,” Hotchkiss said. “The thinking is that that will help the SEC as they look at professionals in this market and whether or not they are providing what are traditional municipal adviser activities.”