Capital constraints caused by the credit crunch are leading many investment and commercial banks to make tough choices about where they want to put risk capital to work. That's evident in the municipal market, where some firms are pricing bonds to sell in the primary and keeping fewer securities on their own books. As a result, they are turning to the electronic trading platforms to provide inventory.

"The street is clearly taking on less inventory," said Tom Vales, chief executive officer of MuniCenter LLC, an online trading platform. "The [trading platforms] are providing surrogate inventory for the street."

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