MSRB annual report reflects tough year for munis

The Municipal Securities Rulemaking Board’s revenues took a hit in 2022, reflecting a tough year for business as underwriting fees fell sharply. 

That’s according to the MSRB’s 2022 Annual Report, which showed the board’s total assets in 2022 drop to $68 million, down from $78.5 million in 2021 and $83.1 million in 2020.

Mark Kim, chief executive officer of the MSRB, said 2022 was a very challenging year and posed a very challenging environment, not just for munis but across all debt and equity markets, while also hitting all-time highs in terms of trade volume. New issuances in the primary market are hitting decade lows while secondary market trading volume has hit all-time highs.

Underwriting fees in 2022 fell to $7.4 million, down from $11 million in 2021 and $14.3 in 2020, which is partially reflective of its temporary fee reductions, accounting for six months of reduced fees in 2021 and 12 months in 2022, or the period from April 1, 2021 to Sept. 30, 2022.

Also a part of the fee reductions were transaction fees, which fell to $9.9 million in 2022, down from $10.5 million in 2021 and $15.8 million in 2020. Technology fees were part of it as well, but rose slightly $4.7 million, up from $4.4 million in 2021 although still down from $6.4 million in 2020.

While the board’s total assets have come down in recent years, its liabilities have continued to climb, reaching $11.5 million in 2022, up from $10.9 million in 2021 and $9.4 million in 2020. The board’s total net assets were $56.5 million in 2022, down from $67.5 million in 2021 and $73.6 million in 2020.

The board’s expenses have stayed fairly consistent year over year, spending $41.5 million in 2022 from $41.1 million in 2021. Those figures are heavily weighed down by what the balance sheet terms market transparency and technology, which cost the board $20.9 million in 2022, alongside its costs for market regulation at $4.28 million, market structure and data at $4.3 million, external relations at $2.8 million, governance and leadership at $4.8 million and finance, human resources and administration at $4.2 million.

But its investments have also increased, namely in technology, which can be measured in its launch of EMMA Labs in 2022 as well as a redesign of the board’s MSRB.org site. Its cash investment in technology and systems and other fixed assets rose to $7.8 million in 2022, up from $4.3 million in 2021 and $2 million in 2020. Other investments include $33.3 million in U.S. Treasury notes and $9.8 million in certificates of deposit.

The report also highlights the other endeavors the board undertook in 2022, including its amendments to Rule G-34 on CUSIP numbers, proposed a standalone rule for solicitor municipal advisors, published a request for comment on draft amendments to Rule G-32 to streamline deadlines for submitting information on Form G-32 and authorized proposed amendments to Rule G-40, among others.

On the technology front, apart from its launch of EMMA Labs and updating its MSRB.org site, the board also continued its multi-year effort to remove unused CUSIP numbers, added another yield curve to EMMA to help better understand the general level of municipal interest rates and added a new issue calendar on EMMA.

“As we look forward to FY 2023, our highest responsibility is to serve the public interest and advance the public’s trust in the MSRB,”  Meredith Hathorn, chair of the MSRB and Mark Kim, chief executive officer said in the report. “We continue to make critical investments in the future of the MSRB and its ability to serve as the principal regulator of the municipal securities market. And we remain inspired by our vision to give America the confidence to invest in its communities.”