Greater Transparency On Muni Trades Causing Wall Street Firms To Back Away From The Muni Markets, Diminishing Liquidity At A Time Of Increasing Demand

The Municipal Securities Rulemaking Board (MSRB) began demanding that municipal securities be traded in real time. Before the 2005 ruling, traders had 24 hours to post pricing on trades.
These observations are initial findings from a report that will be made public next month. But a report issued by the Federal Reserve in March also showed that Wall Street firms had cut inventories of municipal securities by 21% last year.
The pullback could affect liquidity in the municipal securities market. With demand rising from the new tax laws, municipals could become expensive even while interest rates remain low. So there are multiple factors to be considered as investors contemplate how to prepare for the tax hike.


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