Settlement and Trading of Municipal Securities
Chapters in this video
- 0:00 Meet Carla and Hector: two customer profiles
- 1:25 Three layers of MSRB suitability
- 2:01 Low tax brackets and the tax-exempt trap
- 2:45 Private activity bonds and AMT
- 3:33 15-minute RTRS reporting and EMMA transparency
- 4:56 T+1, cash, and when-issued settlement
- 6:19 Good delivery and the $5,000 denomination rule
- 7:06 Rapid-fire exam recap
What this video covers
- Why a low-tax-bracket customer often gets a better after-tax return from a taxable bond than from a tax-exempt municipal bond
- Why private activity bonds and the Alternative Minimum Tax (AMT) are a toxic combination that strips the tax exemption
- The three MSRB suitability components (reasonable-basis, customer-specific, quantitative) and how they map to Regulation Best Interest (Reg BI)
- The 15-minute reporting window to the Real-Time Transaction Reporting System (RTRS), for both dealer-to-dealer and dealer-to-customer trades
- Why the Electronic Municipal Market Access (EMMA) site is for transparency only and cannot be used to execute trades
- Regular way T+1, same-day cash settlement, and when-issued (WI) trades with a to-be-determined settlement date
- Good delivery: $5,000 standard denomination, $1,000 or $5,000 minimums, and registered bonds in multiples of $1,000 par
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