Inside EMMA

By Megan L. Thomas
June 30, 2009 02:35 PM

EMMA, the new Electronic Municipal Market Access system, offers a shot of sunshine into the municipal bonds market. Created by the Municipal Securities Rulemaking Board, EMMA is an educational resource and research center that allows the public to navigate the inner-workings of bonds.

EMMA is a search engine for municipal bonds the way EDGAR is for public companies. Through the site, you can search for official statements, munis, disclosure information for 529 college savings plans, and other municipal securities issued since 1990.

We talked with Ernesto Lanza, general counsel for MSRB, for more details on EMMA, which will officially launch July 1.

Q: What was the thought process behind creating EMMA?

A: EMMA started out from a pretty narrow perspective in that we wanted to move the disclosure practices in municipal securities market, which has for years and years and years been very paper-based, based on moving papers from here to there, and having documents available only to a narrow group of people i.e. the actual investors in securities.

We wanted to move it into at least the 20th century, if not the 21st century, where we could have electronic communication, immediate access by investors to documents, and to really cut the connection with the need to move so much paper around and the associated time and money with doing that.

Q: Can you talk about the education section?

A:  There’s some baseline information so you can understand what is a bond, how does it work, what are the different types of bonds out in the marketplace, how are they sold, how are they bought.

There have been some types of securities that have made the headlines in the last couple years like auction rate securities, there’s a section talking about that. There’s a section talking about variable rate demand obligations, which are other securities that up until recently have been primarily institutional investments but more and more independent investors have gotten into.

There’s a glossary of terms, which is the most comprehensive there is for the muni marketplace. There’s frequently asked questions that walk you through the types of information on the Web site to explain what that information is useful for.

If you read through the whole thing, you’ll get a very good sense of the marketplace...the goal here is to provide even-handed information that gives people a good background so they’ll understand the information they’re reading.

Q: Why do you think disclosure and transparency in the municipal securities market is important?

A: Unlike a car, where you can look at it and get in the car and drive it around and see if it performs to your liking or disliking, securities are things that exist in concept.

So to understand what it is that you’re going to put your money into and how it’s going to perform you need to understand the terms of securities, you have to understand something about the issuer, whether they’re going to be good to pay up when the time comes, you have to understand when it’s time for you to sell your bond or get it redeemed how that process work.

Over the life of the time you’re holding the bonds, you want to know if that issuer is continuing to perform the way they have…it’s just key to understand the value of your holdings.

Q: Why did MSRB tailor EMMA for non-professional investors?

A: “The reality is most of the information here has been available in some form or another to professionals; broker dealers, mutual funds, other institutional investors have been able to get a lot of this information through proprietary information vendors, through subscription or otherwise.

It’s a pretty expensive proposition that makes sense to the professionals that use it day in, day out in their business, but a lot of this information has been extremely difficult for individual mom-and-pop vendors or small institutions to get a hold of at a reasonable cost.

So the goal was to build this site as a place where those folks can come to and get this information for free and have it organized in a way that would make sense to them, that would give them all the information about a particular security in one spot, that would provide them with an education center that explains why this particular document is important, what they should look for in these documents, give them links other site like other regulators…and put it all in one place so they can understand what these documents are trying to tell them. Because they’re long documents, they’re complicated documents…you want to explain to people why it is you should bother to read these things and if you don’t have all the time in the world what pieces are important for you to look at.

Q: What kind of details can EMMA users find on the financial condition of bond issuers:

A: You get some information when the bonds are first issued and you get some information down the road years afterwards. Some of the information you’re going to be able to find are things like audited financial statements of the issuer, often times going several years as well.

Depending on the particular reason for the issuance of bonds, you may get information about the operation of a particular project. Let’s say for example you were looking at a county’s water and sewer system, it will provide a significant amount of information about the operations of that system and the metrics around that operation and some textual description of the system. It might describe future development plans, future plans for issuance of new bonds.

For general governmental bonds, like if a state wants to issue bonds to build lots of roads and office buildings and stuff like that, you’ll often times get some very general information about the state. You might have discussions of the top ten 10 or top 50 or top 100 tax payers, you might have a list of the biggest businesses, you might get a sense of new businesses coming into town, you might get basic economic information like unemployment information. You’ll have the breakdown of basic government expenditures and revenues. It really is across the board.

Q: Do you think this site will create greater accountability of bond issuers?

A: Issuers have always, we believe or hope, felt accountability to their bond holders in terms of meeting their obligation to pay in the bonds and to meet the terms of the bonds and to provide basic disclosure.

The sunshine of this Web site and the fact that you see things side by side will provide a lot more emphasis for those issuers who haven’t been quite as activist or quite as energetic in their disclosure to look and see what other issuers of their type are doing and to see where they can improve, where they can be more timely, where they can give more complete information. So I think there will be a significant force to move disclosure to be more and more in depth and more and more timely over time.

I think issuers are aware that this is a very public venue, that before, the documents were technically public but were not that easy to get a hold of and now they’re extraordinarily easy to a hold of, and so they realize they’re being watched very closely by anyone anywhere.

EMMA Highlights:

• A comprehensive education section explaining municipal securities, how to read securities documents, the risks of the investments and more.


• A glossary of municipal security terms.


• Frequently Ask Questions on how to use EMMA, features of municipal securities, how to read documents related to the securities and other information.


• A section of related links full of more informational and educational resources.


• A search engine for munis and 529 plans and an advanced search where you can look up the official statements by CUSIP, issuer name, issue Description/Obligor, or state.


• Official statements of muni securities detailing the terms of the munis and the projects they fund.


• Continuing disclosure statements showing the financial condition of the issuer as it changes over time.


• A section showing real-time and past muni bond trading.


• Daily trade summary by trade type.

Other coverage of the EMMA launch:

Meet Emma
MSRB Begins All-Electronic Municipal Bond Disclosure
EMMA: Electronic Municipal Market Access is Launched Today
MSRB readies new muni disclosure system

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Copyright © 2009 Donald W. Reynolds National Center for Business Journalism