Association for Public Policy Analysis & Management

The municipal bond market is often characterized as opaque and illiquid. This reputation is in part due to the lack of a municipal securities exchange that centralizes information and that falls within the regulatory purview of a single agency. Instead, the municipal market depends on a complex system of market participants that are regulated by a network of federal and self-governing organizations.  The goal of this paper is to map out this network and define the architectural structure of municipal securities regulation. To this end, each market participant is identified and their role in the regulatory structure is discussed; we then identify the intersections and regulatory overlap across agencies to examine both the direct and indirect regulatory policies that shape the market. By establishing the important players and their roles, we can more clearly identify the policies that affect state and local government issuers, financial intermediaries, and municipal securities investors.  A map of the regulatory network connections will allow policy makers to more accurately identify unintended consequences of regulating any single market participant.