CHICAGO — After debuting its new 16,000-square-foot trading floor earlier this month, Chicago-based BMO Capital Markets is now looking to fill some of its empty seats with taxable traders and hire additional bankers to generate more product for its desk as the firm seeks to crack the top-10 list of senior managers of municipal offerings.

The push marks the firm's ongoing evolution from a strong player in the bank-qualified, middle-markets business to the ranks of national underwriters that began to take shape following BMO's acquisition of the Chicago-based boutique firm Griffin, Kubik, Stephens & Thompson Inc. in May 2008.

After hiring a handful of senior bankers over the last several years, the firm is looking for at least six additional public bankers to support its general government group and its expansion into the health care, transportation, and public power sectors.

"We are looking for people who can hit the ground running," whether that is in Chicago, Texas, the Northeast, or elsewhere, said Lyle McCoy, head of public finance for BMO's fixed-income group.

The firm also is looking for additional taxable traders, a need driven by the firm's growing Build America Bond business. The firm was quick off the starting line when bonds under the federal stimulus program began selling last spring because of its fortuitous position as a significant manager of taxable municipal debt with a well-established client list of taxable buyers.

The firm sees its opportunity in the BAB program growing if Congress approves President Obama's proposal to extend the program beyond its expiration at the end of the year, but at a lower interest subsidy level, and is actively pursuing prospective buyers.

"With the legislation in place, buyers will see it's a real market," said James Fitzgerald, managing director of sales, trading and underwriting.

"You need a critical mass to make sure the investment in the infrastructure like credit evaluation worth it," added McCoy of the growing buyer interest.

Fitzgerald said he first noticed growing interest in BABs from more diverse buyers about six months ago and sees it growing with insurance companies, banks, money managers, and international investors.

"We are finding more pockets of buyers that see it as a new asset class with attractive spreads to other taxable credits," Fitzgerald said, though international sales require more work educating buyers on municipal credits. "Our job is to broaden the buy side market to get the fairest pricing for our clients."

From the early days of BABs, Wall Street banks pushed the idea that such a new product was best offered through a negotiated sale and with a corporate-like make-whole call provision.

BMO told issuers deals could get done competitively and worked as financial adviser on some.

It also assured issuers seeking to preserve future flexibility with a traditional 10-year call that BMO could place that debt if the issuer was willing to pay what has generally turned out to be roughly 35 to 40 basis points in additional yield. The firm also emphasizes to issuers its relationships with buy-and-hold investors, not ones looking to quickly flip the bonds for a profit.

Any additions to BMO's trading desk would complement the current staff of five traders devoted to taxable products. The firm has a sales force of 32, equally divided between tax-exempt and taxable, and employs about 25 in its public finance group in the Chicago area, New York, and San Francisco.

Since the Griffin Kubik acquisition, the firm has both been bidding on larger competitive deals and sought to graduate from co-manager to senior manager on larger negotiated deals. It has made inroads in the rankings, but faces tough competition from other main street broker-dealers with the same goals following the contraction of Wall Street banks.

The firm ranks 27th as senior manager nationally so far this year, and finished 2009 ranked 18th, up from a 23d place finish in 2008 and 38th in 2007, according to Thomson Reuters.

The firm ranks 12th so far this year in the Midwest and was 11th last year, managing 168 deals valued at nearly $2 billion.

The firm ranks 18th so far this year and ended 2009 in the 11th spot among senior managers of BABs. On taxable bonds overall, the firm ranks 19th so far this year and finished 2009 in 12th place nationally.

BMO is the investment banking arm of the Bank of Montreal. It is better known locally as Harris Bank NA. BMO acquired Harris in 1984 but continues to operate it under the Harris Bank name.

McCoy, a 27-year veteran at BMO who had managed government relations in Canada earlier in his tenure, moved over to manage the public finance group in January 2009, after heading sales on the derivatives desk.

Fitzgerald joined BMO last year. He managed the municipal fixed-income group at Keybanc Capital Markets until 2008 and opened Legg Mason's Chicago office in 1999, where he managed fixed-income operations until the firm's shuttering in 2005. He was a founding partner in Fitzgerald, David & Associates, which was later acquired by Banc One Capital Markets.

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