The Municipal Securities Rulemaking Board dives into FY 2024 with a new budget of $47 million, a 4.8% increase from the previous year.
The board kicks off the year with a new request for comment on Rule G-12 on uniform practice, a step towards their goal of retiring 20% of their total interpretive guidance, in addition to their previously stated goals of improving data by switching to a one-minute trade reporting window, and continuing updates to their technology platforms.
“This budget really does exemplify that commitment to transparency and accountability,” said Meredith Hathorn, chair of the MSRB’s board of directors, who begins her second term as chair. “We have given everyone the transparency and accountability that our stakeholders have been asking of us.”
Underwriting volume, a key revenue generator for the MSRB, was down 14.6% as of July, reaching $246.1 billion, according to the Securities Industry and Financial Markets Association.
“I think one thing that’s on the mind of all market participants is that the market volume, and underwriting volume in particular is down significantly and that the MSRB is not immune to these market pressures,” said Mark Kim, chief executive officer of the MSRB. “When underwriting volume is down, that means the MSRB’s revenues are down as well.”
Kim pointed out that while this year’s budget represents an increase, inflation still sits at 3.7%,
“We’re basically flat year over year,” Kim said. “The MSRB has to be sensitive to and responsive to these broader economic pressures. It really is, in my mind, part and parcel of being transparent, being accountable and being fiscally responsible.”
The board indicated it will respond to this accordingly.
“The MSRB projects that underwriting fees will increase to reflect less revenue assessed in FY 2023 relative to budget, and that transaction and trade count fees will decrease to reflect more revenue assessed in FY 2023 relative to budget to return the surplus to regulated entities,” the MSRB said.
The board expects to take in 78% of its budgeted revenue from market activity fees, 7% from professional fees, 5% from data subscriber fees, 3% from annual and initial fees, 3% from 529 plan underwriting fees, 2% from investment income, 1% from rule violation fine revenue and 1% from other revenue.
Of the $47 million in the new budget, it will include $14.8 million for market transparency products and services, $12 million for information technology services, $6.4 million for market regulation and market structure, $5.5 million for governance and leadership, $5.4 million for finance, risk, human resources and administration and $2.9 million for external relations.
By category, 60% of the budget goes to personnel, 12% for computer licenses and equipment, cloud service providers and telecommunications, 10% for consultants and professional service fees, 6% for rent, 3% for third-party data services, 2% for board compensation, 2% for corporate insurance and taxes and another 2% for training, office expenses and other, and 1% for legal and audit services.
During its July 2023 board of directors meeting, the board designated an additional $3.5 million of reserves to the Board Designated Systems Modernization Fund, which on top of the $4.3 million anticipated for the fund in the FY 2024 budget, brings the total funding for the systems modernization effort to $21 million.
The board is projecting to end the year near its target of $35 million in reserves, down from its high of $67 million in 2018 following its 18-month, 40% fee reduction that returned $19 million to the industry.