About Trade Prices

• What is a municipal security trade?

  A municipal security trade or transaction is a sale of a bond by one party to another. When a customer purchases a bond from a broker-dealer or bank, that trade is noted on EMMA as "Customer bought." When a customer sells a bond to a broker-dealer or bank, that trade is noted on EMMA as "Customer sold." A sale by a broker-dealer or bank to another broker-dealer or bank is noted on EMMA as an "Inter-dealer Trade."
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• How do I find information about municipal securities trades on EMMA?

  There are two ways to find trade data on EMMA. When you search for information on a specific municipal security, you will ultimately arrive at a Security Detail page. On that page, click on the "Trade Activity" tab to view any trade information available for reportable trades in that security occurring on or after January 31, 2005. You may also find trade data covering all securities trades in the municipal securities market on the "Recent Trades" tab of the Market Activity page. Currently, the Market Activity page provides market-wide trade data only for recent trades - in the future, this page will be expanded to provide search capabilities that will allow users to obtain more robust views of current or historical market-wide trade activity.

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• What information about a municipal securities trade is provided on EMMA?

  The key items of information regarding trades provided on EMMA include the trade price, the resulting yield (if available), the principal amount of the bonds bought or sold in that trade, and whether the trade involved a customer or was between broker-dealers and/or banks.

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• Why is price shown as a percentage, rather than a dollar amount?

  Price is traditionally shown as a percentage of the principal amount of a bond. Thus, if $10,000 in principal amount of a municipal bond is traded and the purchase price of the bond is $10,000, the price is shown as 100%. If the purchaser instead has paid $9,950 for that bond (that is, if the bond is purchased at a "discount"), the price is noted as 99.5%. If the purchaser instead has paid $10,100 for that bond (that is, if the bond is purchased at a "premium"), then the price is noted as 101%.

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• Why is the interest (coupon) rate shown as zero for trades in some securities and left blank for trades in other securities?

  Certain bonds do not pay interest periodically, but instead are sold at a deep discount from par and gain value until they mature. These are called "zero-coupon" or "capital appreciation" bonds. The yield of the transaction is shown, but since there are no periodic interest payments, the interest rate or coupon is zero. Variable rate demand notes, auction rate securities and other types of bonds that do not have a fixed interest rate generally are displayed with a blank in the interest rate field. EMMA users should note that this convention may not have been universally applied for all such securities and therefore it is possible that a variable rate security may sometimes show a zero for interest rate and a zero-coupon bond may sometimes show a blank.

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• Why is the principal amount of some trades shown as "MM+"?

  A trade whose principal value (par value or face value) is 5 million dollars or more is shown as "MM+" for the first week after trade date. Reporting the exact value of these large trades, which typically are done by institutional investors, could reveal the identity of the investor, since some market members may know who owns large blocks of a bond. This could make investors less likely to do large trades, which in turn could adversely affect the liquidity of the bond. After one week, the MM+ indicator is replaced by the exact value of each such trade on EMMA.

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• What is the difference between interest rate and yield?

  The interest rate, or "coupon" rate, of a fixed-rate bond indicates the amount of interest payable on a bond calculated as a percentage of the bond's principal amount. Thus, a $10,000 fixed-rate bond paying interest at 5% would pay $500 in interest each year, usually payable in equal $250 semi-annual payments. This amount does not change, regardless of the price at which the bond may be sold in a trade.

  Yield, on the other hand, takes into account the price at which the bond was purchased in calculating the total potential earnings on an investment in the bond. In the example above, if the price of a trade in that security were 100% (that is, the purchase price of a $10,000 bond is $10,000), then the yield would be 5%, the same as the interest rate. If, however, the bond was traded at a discount (for example, at a price of 99%, or $9,900), the yield would be higher than 5%. The higher yield reflects the fact that, in addition to receiving the 5% interest rate, a customer who retains the bond until maturity or earlier redemption will also receive the $100 difference between the purchase price and the principal amount. If the bond was traded at a premium (for example, at a price of 100.5%, or $10,050), the yield would be lower than 5%. In this case, the lower yield reflects the fact that, although the purchaser will receive the 5% interest rate, he or she will receive $50 less at maturity or earlier redemption than was paid for the bond at the time of purchase. Price and yield are said to vary inversely.

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• How is yield calculated?

  MSRB's rules require a broker-dealer or bank buying or selling a bond to a customer to inform such customer, and to report to the MSRB (which in turn is displayed on EMMA), the "yield to worst," which is the lower of the yield to call or the yield to maturity - the worst yield the customer can expect from the trade, assuming the issuer does not default. This calculation effectively assumes that an issuer will exercise any legal right it has to call a bond prior to maturity, which often will result in a lower calculated yield on the bond than if the bond were to remain outstanding until its scheduled maturity. If, in fact, the bond is not called on the date resulting in the "yield to worst," the actual yield of the trade realized by the customer will be better than the "yield to worst."

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• I am looking at several trades in a bond and the yields of the trades are quite different. Why?

  The yield of a fixed-rate municipal bond varies inversely with the price. In other words, when comparing two trades in a bond that are at different prices, the higher price results in a lower yield and vice versa.

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• I understand that price and yield vary inversely, but why does a small increase in price sometimes result in a very large decrease in yield?

  If a bond's maturity date is close in time to the trade date, the mathematical relation between price and yield will result in small increases in price sometimes resulting in seemingly disproportionately large decreases in yield. The short time to maturity amplifies the effect of a price change upon the yield. Some bonds may be "callable" by the issuer - that is, they could be redeemed before they reach their maturity date. As noted above, MSRB rules require that yield on a trade be calculated based on the "yield to worst," which is the lower of the yield to call or the yield to maturity. Although an investor may believe the bond is unlikely to be called soon, if the issuer has the legal right to call the bond soon after your trade, the reported price and yield may vary as though the bond is going to mature soon. If, in fact, the bond is not called, the actual yield of the trade will be better than the "yield to worst," and the effect of a price change on the actual yield will be smaller.

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• Why is the yield not shown on all trades?

  Typically, EMMA shows the yield on all trades, but there are exceptions. For customer trades, yield is reported by the dealer and for inter-dealer trades, yield is computed by the MSRB. Exceptions from the display of yield on EMMA include bonds that pay variable rates of interest and some trades in fixed-interest bonds conducted during the "new issue" period, when all information needed to compute yield may not yet have been determined.

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• Does the most recent sale (the "last sale") of a bond represent the current value of the bond?

  Many municipal bonds are traded infrequently, and most municipal securities are not traded on a given day. Rather, investors are holding them. Since the most recent sale may have been some time ago and market conditions may have changed since then, the value of a bond may have changed since its last sale.

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• How soon after a trade occurs does information about that trade appear on EMMA?

  Normally, broker-dealers and banks report their trades to the MSRB within fifteen minutes of trade execution, and the trade information appears almost immediately on EMMA. However, various factors may impair this "real-time" transparency. Infrequently, broker-dealers and banks are late in reporting a trade. Also, a small number of securities are permitted to be reported in more than 15 minutes. For example, on the first day of trading of a new issue of municipal securities, a sale by an underwriter of the bonds at the published list offering price, and certain inter-dealer sales by an underwriter at a discount to other broker-dealers or banks participating in the primary distribution of the securities, may be reported at the end of the trading day. Trades in various types of short-term instruments, including variable rate demand notes, auction rate securities and commercial paper, also may be reported at the end of the trading day. Finally, until June 30, 2008, a broker-dealer or bank that is not underwriting a new issue may report trades in a security that such broker-dealer or bank has not recently traded within three hours of trade execution if certain security-related information is not immediately available to such broker-dealer or bank.

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• Can I see the name of a customer or of a broker-dealer or bank that traded a bond?

  No names of parties to a trade are provided on EMMA.

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• Why is trade information for my trade not available on EMMA?

  Assuming you have correctly searched for your security, it is possible that your trade does not appear on EMMA. This might happen if the broker-dealer or bank has not yet reported the trade, either because an exception to the 15-minute rule applies or because of a failure to comply with the reporting requirement. Also, even if the broker-dealer or bank has reported the trade in a timely manner, it may have made an error in how or what it reported on that trade, such as omitting required information. A major error in reporting causes a trade to be rejected from the reporting system until the broker-dealer or bank corrects the trade report, in large measure to ensure that inaccurate price reporting is not disseminated to the public.

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• I think there is a mistake in the information reported about my trade. The information on the screen is different from what is shown on my trade confirmation. Does EMMA screen out mistakes?

  First, you should be sure that the trade you are looking at is your own trade and not a similar one, which can happen with some regularity, especially with new issues. If you have determined that it is in fact your trade, it is possible that the broker-dealer or bank has made an error when reporting the trade to the MSRB. The MSRB's Real-Time Transaction Reporting System screens out obvious errors but relies on the broker-dealer or bank to correctly report all the details of each trade. Finally, the broker-dealer or bank may have reported the trade correctly to the MSRB but made an error on your customer confirmation. Check with your broker-dealer or bank about any discrepancies.

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