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The Municipal Securities Rulemaking Board, or MSRB, urged expansion of the exemption for governmental obligations in the proposed Volcker Rule because the MSRB is concerned that a significant class of municipal securities would be excluded from the exemption, resulting in a “bifurcation” of the municipal securities market without benefiting the soundness of the banking system.

The MSRB urged the federal agencies proposing the Volcker Rule to broaden the “governmental obligations” exemption from the proposed rule’s restriction on proprietary trading to include all “municipal securities” as defined in the Securities Exchange Act of 1934.  The MSRB feels strongly that this change is needed to avoid a bifurcation of the municipal securities market that will, in the MSRB’s view, achieve no meaningful additional benefit to the safety and soundness of the banking system. 

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