New Underwriting System Is Set to Launch
DTCC’s new underwriting system, including the New Issue Information Dissemination Service (NIIDS), will launch May 5, 2008. Municipal underwriters will have the option to begin using the system after they have completed their testing requirements or continue using current applications until August 29, 2008. The launch is subject to regulatory approval.
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. The new NIIDS service will disseminate information on new municipal bond issues in real time to the industry. (Corporate issues are scheduled to transition in the fourth quarter.)
MSRB extends deadline
Rollout of the system, originally scheduled for April, was pushed back one month after the Municipal Securities Rulemaking Board (MSRB), which establishes rules for the municipal bond industry, postponed mandating the use of NIIDS by municipal underwriters.
The postponement for three months was based on comment letters received from industry organizations, including The Securities Industry and Financial Markets Association (SIFMA) and the Regional Municipal Operations Association (RMOA) seeking the extension due to tight testing timeframes and the stresses of the unusual market conditions. Now the MSRB deadline to make NIIDS mandatory is September 30, 2008, subject to regulatory approval.
Four-month window
All underwriters have had the opportunity to begin testing SOURCE since March and DTC chose to launch the system in May. “Our goal is to give municipal underwriters four additional months to gain experience in using the new system, learning to submit new deal information, as well as use NIIDS to disseminate information on municipal securities,” said Denise Russo, DTCC director, Product Management.
During the optional period through August 29, 2008, underwriters can choose to input their new municipal issues through SOURCE and whether to disseminate information through NIIDS. “Submitting new information and disseminating it through NIIDS are two distinct and separate processes,” explained Russo.
Underwriters electing not to use the system during the optional period can continue to use current applications including PUND, WUN and the paper questionnaire for all municipal issues. Underwriters choosing to use the SOURCE must be registered for the new system and have successfully tested with DTC.
Reduced fees
Russo said underwriters using the SOURCE during the optional period will be able to take advantage of reduced underwriting fees. Existing fee schedules will apply to issues submitted via current applications.
“We encourage underwriters to submit their new underwriting deals into production through SOURCE during this optional period so they become more familiar with the new system,” said Russo. “This will help ensure a smooth transition to DTC’s new eligibility requirements, effective September 2, 2008, and the MSRB proposed rule change effective September 30, 2008.” @
[For more information on the new underwriting system or for questions on registration, training and testing, contact Denise Russo at drusso@dtcc.com or 212.855.3731.]