Municipal Underwriters Get Set For September Deadlines
Two important deadlines are on the horizon for municipal underwriters as they gear up to transition to DTCC’s new underwriting system including the New Issue Information Dissemination Service (NIIDS).
The first deadline, set by DTCC, is September 2, 2008, when all municipal underwriters must begin using the new underwriting system instead of PUND, WUN or the paper questionnaire. The second deadline, authorized by the Municipal Securities Rulemaking Board (MSRB) and approved by the Securities and Exchange Commission, is September 30, 2008, when the underwriters must begin disseminating new municipal issuance information using NIIDS.
Streamlining the process
Called the Underwriting SOURCE (Securities Origination Underwriting & Reliable Corporate Actions Environment), the new system will streamline the process by which underwriters submit new-issue eligibility requests to The Depository Trust Company (DTC), a DTCC subsidiary. NIIDS will disseminate information on new municipal bond issues in real time to the industry.
DTC launched SOURCE on May 5 to give underwriters time to start using the new system. This optional period provided firms with the choice of using the existing underwriting system and current applications or SOURCE.
“We encourage underwriters to start using SOURCE and NIIDS as soon as possible,” said Denise Russo, DTCC director, Product Management, Asset Services. “This will help ensure a smooth transition when the deadlines arrive.”
Russo also explained that during the optional period, submitting new information to DTC and disseminating it to the industry through NIIDS are two very different and distinct processes. “A firm can input the new deal information into SOURCE and choose not to disseminate the information out to the street,” she said.
Incentive fees
Underwriters submitting new-issue information to DTC will be required to send all the information required for DTC eligibility as of September 2, 2008, but they will not be required to disseminate the information until the September 30 MSRB deadline.
As an incentive for underwriters to use SOURCE during the optional period, DTC will apply the new reduced underwriting fees, whereas issues submitted via current applications will continue to be charged existing fees.
Underwriters that choose to use SOURCE during the optional period must be registered for the new system and have completed the necessary testing requirements with DTC.
The next phase of the redesign covering corporate issues is underway with a target production date of Q2 2009. @
[For more information on the underwriting system or NIIDS, contact Denise Russo at drusso@dtcc.com or 212.855.3731.]