WASHINGTON - Concerned about "pricing disparities" in the municipal market, the MSRB is preparing to issue a notice that both interprets its fair-pricing rules and solicits comments on new guidance for complying with those in transactions when there is no readily available prevailing market price.

Municipal Securities Rulemaking Board officials disclosed the notice, which is to be issued in June, as well as a notice on real-time price reporting that the board plans to release later this month, during a telephone briefing with reporters yesterday.

During the briefing, Hill Feinberg, the MSRB's chairman who is also chairman and chief executive officer of First Southwest Co., and Christopher Taylor, the board's executive director, detailed the results of the board's three-day meeting last week at the MSRB's offices in Alexandria, Va.

Feinberg also said that the board continues to be concerned that political contributions are "playing an inappropriate role" in the municipal market and that this will be "the major topic of discussion" at the board's next meeting, which is to be held July 9 through July 11 in Jackson Hole, Wyo.

The two MSRB officials declined to detail the reasons for the fair-pricing notice, other than to say it was prompted by concerns about pricing disparities. "The regulators, in reviewing price reporting, have seen some disparity in the pricing ,and we're trying to look at it and make sure that the dealer community comes up with their ideas of how to comply with the rules that we need to have," Feinberg said.

"We are seeing things that cause us concern" such as "wide pricing disparities," Taylor said, adding, "I'm not going to go further than that."

The notice is expected to deal with three MSRB rules that focus or touch on pricing. The rules are G-30 on prices and commissions, G-18 on the execution of transactions, and G- 17 on fair dealing. G-30 and G-18 generally state that muni brokers and dealers should set prices that are "fair and reasonable." G-17 states that muni brokers and dealers "shall deal fairly with all persons and shall not engage in any deceptive, dishonest, or unfair practice."

"This goes right to the heart of what the MSRB is all about: writing rules to protect investors, and fair pricing is right up there on the top of the list," Taylor told the reporters.

Some market participants were surprised that the board plans to delve into issues relating to prevailing market prices. The Securities and Exchange Commission and the National Association of Securities Dealers have for years been at loggerheads over how to determine prevailing market prices and other pricing issues. As a result, they have been unable to agree on markup rules for debt transactions.

Taylor claimed after the briefing that these are different issues, but conceded they both "involve fair pricing."

The board's plans come after some market participants recently raised concerns about the volatility of pricing of tobacco bonds after court actions sparked a great deal of trading in the market. It also comes as Kevin Olson, the sponsor of a Web site on muni securities pricing, has been issuing daily reports summarizing the muni bond trades that have the widest spreads. Recently, Olson discovered that 1,681 munis were traded at negative yields in 2002. The NASD also has brought a few enforcement cases charging broker-dealers with unfair markups and markdowns.

The trade data used by the NASD and Olson - which is also available to the public on The Bond Market Association's Web site, investinginbonds.com - comes from the MSRB's transaction-reporting program. The board has been giving regulators pricing information from dealer muni trades with other dealers and customers since 1998. Some, but not, of that information is publicly available. In a proposal pending at the SEC, the board wants to report pricing and other trade data available from all municipal securities trades on a next-day basis. But TBMA is opposed to the idea until there is a study of whether next-day reporting would hurt liquidity in the muni market.

Feinberg and Taylor said that the board also plans to soon issue a notice proposing how pricing and other data will be collected from dealers for the real-time trade reporting system that the MSRB plans to put in place by mid-2004. Dealers will be required to report the trade information to the Fixed Income Clearing Corp., a subsidiary of the Depository Trust and Clearing Corp., within 15 minutes of a trade's occurrence. The MSRB will release the information at some point during the same day.

TBMA has also opposed the MSRB's moving to a real-time reporting system until liquidity concerns are studied. Feinberg acknowledged the group's complaints, but said that real- time reporting "has been encouraged and in some ways demanded by the regulatory bodies."

Taylor said the board will have a real-time reporting system up and running and providing information to regulators by mid-2004.

"No one's suggesting that we shouldn't collect the information; there seems to be an issue about dissemination," he said. "The question is, once we collect the data, how do we put it out, and that's what this notice will go to." One of the issues the board wants to raise is whether it should decline to specify the size of any trade over $1 million, Taylor said.

Feinberg said the MSRB plans to hold a series of public meetings on the notice in New York and Chicago. Both he and Taylor urged the industry to comment on the proposals.

The board also remains upset that some dealers and their employees may be trying to circumvent Rule G-37 by funneling political contributions to issuer officials through state and local political parties, Feinberg said. In addition, it is worried that market participants not covered by G-37, such as independent financial advisers and swap or guaranteed investment contract providers, may be making contributions to issuer officials in return for business, he added.

"We've seen some of the media reports that are out. It does concern us, we continue to evaluate it, and will look at it further in later meetings," Feinberg said.