Many data analysis services that municipal market participants utilize are not veritably modern. Static trading platforms have fallen behind the methods used to trade other asset classes, which can cause a lack of pre-and post-trading transparency in the market.
As a way to combat the opacity of the market, Municipal Bond Information Services emerged as a consortium of muni market service providers that consolidate data and offer a secondary market overview to retail investors and asset management companies.
"A lot of our customers don't have the tools to keep track of all of the volume," said Ron Valinoti, the founder of Triangle Park Capital Markets Data and Operating Manager of MBIS. "We organize all of the data for them and offer filters to narrow down the transactions. Most of what's put out for the bid doesn't trade. We strive to create pre-trade and post-trade transparency in the marketplace."
Triangle Park Capital Markets Data, a New Hampshire-based pricing, credit, and reference information services firm, was hired by 10 municipal interdealer brokerage firms that make up MBIS to manage the general business operations, sales, marketing, and product development for the company.
MBIS' team consists of 10 individuals spread out across the Northeast region.
Daily secondary trading data is collected from the group of firms and organized by MBIS on a single electronic platform using an algorithmic method developed and managed by GMS Trading Inc., a New York based electronic trading company.
"We aggregate lots of data every day, above and beyond what the Municipal Securities Rulemaking Board can offer," Valinoti said.
According to the press release, MBIS was created a year ago in response to the concerns raised in the Securities and Exchange Commission report on the Municipal Securities Market in July 2012.
"A big part of what we've learned is that the pricing often used in a transaction and the prices used in the statements are third-party prices," said Valinoti. "Those estimated values can be way off. Customers become dissatisfied and file a complaint with regulators."
The SEC was investigating the extent to which dealers using alternative trading systems and broker's brokers were engaged in anti-competitive practices. Among the unlawful practices used are blocking or filtering out competitors from being able to bid on their municipal securities.
Valinoti says that MBIS can protect investors from unfair pricing standards, and give dealers access to previously unavailable data analysis to ensure compliance. There are over 125,000 observations each day.
"Dealers send out thousands of prices," he said. "We can help them avoid down-streaming 20 or 30 customers, because someone mispriced the bonds. On the buy-side, we can help traders validate the prices they need in their portfolio."
MBIS is available on an annual subscription basis and will launch a portfolio function in the next several weeks.
The broker's brokers in the group include: Associated Bond Brokers, Inc.; Butler Muni; Hartfield, Titus & Donnelly; RW Smith and Associates; Regional Brokers, Inc.; Sentinel Brokers Company, Inc.; Stark Municipal Brokers; Tradeweb Markets; Tradition Asiel (North America) Inc.; and Tullett Prebon Financial Services.
