The online market for municipal bond shoppers is expanding.
Mitre Media plans the beta launch of a web-based tool designed to connect buyers and sellers of municipal securities in February. The "Marketplace" tool will reside on Mitre's existing domain, municipalbonds.com, a CUSIP-searchable website that provides analytics, research, and data on municipal securities.
"It's a platform in terms of a marketplace to add liquidity and sync buyers and sellers within that marketplace," said Tom Hendrickson, founder and chief executive officer of Edmonton, Alberta-based Mitre, an operator of targeted online financial websites that opened in 2012.
It will be the second debut in recent months of an online venture aimed at linking buyers and sellers of municipal bonds. New York City-based broker-dealer Lebenthal & Co. LLC in August introduced its newly formed broker-dealer, MuniAxis Lebenthal LLC, to create the first municipal bond platform to boost liquidity and distribution of odd-lots via the domain muniaxis.com.
Hendrickson is relying on the existing web traffic on municipalbonds.com, which Mitre acquired a year ago, to boost usage of the Marketplace component, and set it apart from broker-dealers who are promoting similar e-commerce platforms.
"The difference is that municipalbonds.com comes up first in search results for one million CUSIPs," he said. "We reach retail in a way that would cost $200,000 per month for anyone else, which is a huge barrier to entry" for establishing online platforms such as this one, he said.
The new tool, he said, will complement the existing municipalbonds.com site, which offers real-time updates, MSRB trade data, average bond yields by state, as well as price history, education, and research.
"We are looking to solve the problems underlying the market — better transparency, liquidity, pricing, and disclosure," Hendrickson said.
"We have tens of thousands of buyers and sellers that come to municipalbonds.com on a monthly basis, and through surveys and customer support initiatives, it has been communicated to us that this would have some pretty high value," he added.
Like traditional online auction sites, the Marketplace tool will allow investors, financial advisors, or registered investment advisors to post merchandise — in this case bonds by CUSIP or quantity in a list that gets circulated a few times a day to a network of dealers, Hendrickson said. Users have the option of being public or remaining anonymous.
The Lebenthal MuniAxis online trading platform employs an open-auction bidding process to buy and sell municipal secondary market securities in denominations of less than $1 million. Buyers who bid and sellers who solicit remain anonymous and are able to complete their transactions directly on the site through a single counterparty — similar to the format of traditional online auction sites where buyers bid on electronics, furniture and toys.
However, unlike users of MuniAxis and standard auction sites, users of the Marketplace tool must conduct the sales transactions outside of the site.
But, Hendrickson doesn't view that as a barrier to demand for the new product. "The connection is the value," he said.
He said he would explore the possibility of partnering with broker-dealers to broaden transaction capabilities in the future.
In the meantime, he believes the initial connection between buyer and seller will enhance time and efficiency for both parties, especially since the vast majority of investors, financial advisors, and registered investment advisors do not have access to the Bloomberg MBWD bid-wanted system.
"Knowing who and how to contact them, and that you don't have a broker-dealer calling around, gives you a captive buyer at a specific price ready to go," he aid. "eBay brought efficiency to those wanting to sell their couches, and this is the same concept," Hendrickson added. "It's the eBay for municipals bonds."
Besides tapping into existing users, Hendrickson also hopes to gain support for the cyber venture through the uptick in participation from hedge funds seeking profit from recent price discrepancies. "Now that hedge funds are involved, we think it's an opportunity to add a premium tier to the Marketplace," he said.
Hendrickson also believes the virtual community is "underserved" when it comes to municipal bonds and said the new Marketplace tool will establish a growing online avenue for buyers and sellers. "We are making a connection to a fairly opaque market right now," he said.
Elsewhere in cyberspace, existing platforms are dedicated to municipal bond investors seeking data and education about the asset class.
Among the larger sites is www.emma.msrb.org, the Electronic Municipal Market Access system, known as EMMA, which is an official repository for official statements, trade data, disclosures, and education on virtually all municipal bonds.
"This is an additional layer of information beyond the headline quotes you get from the MSRB," Hendrickson said of the new cyber platform.
He said the new product is not regulated by the MSRB or the Financial Industry Regulatory Agency, and municipalbonds.com does not earn a bid-asked spread on transactions.
The new tool will be free to users during the launch, according to Hendrickson. "As the Marketplace grows and the networking effect takes hold, it will mold into a paid service on a subscription basis," he said.