Relief For The Digital Data-Starved $3.9 Trillion Municipal Bond Market

Like a bug trapped in amber, crucial financial information on thousands of bonds in multi-billion-dollar municipal bond mutual fund portfolios held by millions of shareholders is in a similar fossilized state, embedded in decades-old technology.

The municipal bond market is a $3.9 trillion capital market without digital financial data.

Financial Reporting: Digitized and Machine-Readable

The Financial Data Transparency Act (S. 4295 – “FDTA”), pending before the Senate, offers a readily available solution to free that information, making it widely available and usable. In doing so, FDTA expands the adoption of machine-readable, digitized financial reporting. Wholly based on existing information that is already required, collected, and making it available to anyone for free, this legislation is potentially transformative for the $3.9 trillion municipal bond market. It ushers in access to and transparency in government financial reporting that, while standard for public companies in the U.S. and the rest of the world, is unprecedented in the public sector.

All of these are why the co-sponsors of the legislation, U.S. Senators Mark R. Warner (D-VA) and Mike Crapo (R-ID) introduced the bill. FTDA provides “greater transparency and usability for investors and consumers, along with streamlined data submissions and compliance for our regulated institutions,” offered Senator Warner. Senator Crapo noted the bill would be an important step forward in “making financial data used by federal regulators more accessible and accessible to the American public” as well as “improving government transparency and accountability.”

Machine-readable, digitized, standardized, transparency, accountability. All very technical and aspirational, but what does this mean practically for investors and regulators?

It means all the financial information available from cities and towns and authorities—assets, debts, tax and fee revenues, cash flows, and so forth—can be easily downloaded or uploaded into a spreadsheet and treated just like any other bunch of numbers. It means it can be readily categorized, analyzed, tracked, charted, graphed, and the dozens of other things you do with financial information to better understand what it means. That’s just for starters.