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Municipal Bond Regulator To Set New Rules On Best Pricing

The Municipal Securities Rulemaking Board (MMSR) will propose new rules requiring dealers to seek best pricing on state and local government bond trades.

* MSRB will propose so-called best execution rules for first time in muni market, modeled on similar rules applying to equities.

* The proposed best-execution rule would be harmonized with the Financial Industry Regulatory Authority's best execution rule for the equity and corporate fixed income markets but be tailored to the characteristics of the municipal securities market.

* New regulation would be more specific than current muni rules covering fair dealing.

* Rules are aimed at instilling confidence in trade among individual investors. "A best-ex rule is a key step to complement dealers' current obligations to achieve a price that is fair and reasonable," says Chairman Daniel Heimowitz.

The MSRB has historically been slow in proposing rules that protect the retail investor, especially from price gauging by unscrupulous dealers. The above rule proposal, while not complete in my opinion, is a much needed step towards remediating that situation.