Axis Trading Solutions, Inc. said trading will resume on MuniAxis, under a new partnership with RBC Capital Markets LLC, in the first quarter of this year.
As the sponsoring broker dealer, RBC will act as the counter party and provide clearing and settlement services for all trades occurring on MuniAxis. The trading system was formerly maintained by Lebenthal & Co., which shuttered its municipal underwriting and institutional sales division in 2014 to focus on the retail side of the business.
MuniAxis has been redesigned to encourage better bid participation by introducing a limit-bid process that allows buyers to set a limit and sellers to set a reserve. MuniAxis will also now be open to asset managers and dealers to both buy and sell, according to the release.
"The new MuniAxis platform will deliver a high level of transparency for buyers, enabling them to know where they stand without exposing the bid," said Charlie Moore, chief executive officer of Axis Trading Solutions. "Limit-bidding and reserve-selling give subscribers the tools they need to efficiently participate in the 'auction' process.
The improved MuniAxis platform will be open to sellers from both sides of the market and will allow them to anonymously solicit bids directly from asset managers and dealers. Buyers will be able to match interests and holdings with available bonds and bid directly. MuniAxis offers an alternative to existing blind-bid trading platforms and eliminates the need for participants to approve additional counter parties in order to generate increased exposure and bid participation for their bid-wanted items.
The redesign of the municipal odd-lot trading platform took about six months, said Moore, as the company tried to apply what it learned from the past and also listened to what market participants had been asking them for, such as the limited option, increased transparency and knowing where your bid stands instantaneously after placing it, instead of waiting to find out.
"Every other municipal trading system is a blind bid process where the bidder doesn't know where he stands, you submit a bid and you wait," Moore said in an interview. "You may have been out-bid and had a willingness to go higher, but there is no way for you to know. MuniAxis enables all bidders to know where they stand without exposing the bid to others. We are also changing the bid process in another significant way; we enable you to enter a 'limit' or a maximum on an item, and have the system automatically ratchet your bid up within a range that you define. We are running a process designed to generate better bid participation, so that asset managers and dealers can use both their time and capital efficiently."
Moore said that having a self-clearing broker-dealer was a key ingredient, and RBC Capital Markets shared the same vision that that there is room for an open, more transparent platform.
"While MuniAxis is separate and distinct from our municipal trading and sales operation, we view it as another example of our strong commitment to the U.S. municipal bond market," said Jim Connolly, head of U.S. fixed income operations at RBC. "MuniAxis provides secondary market participants a transformative avenue for buying and selling municipal odd lots. RBC's partnership with MuniAxis represents an enhancement to broader market structure and major step in leveraging technology to improve market efficiencies."
Moore reiterated that better bid participation is the goal and limit-bidding and reserve-selling are the right tools that will enable informed participants to determine fair value.
"The technology exists for buyers and sellers to communicate without talking. Keep in mind that some traders are bidding hundreds of bonds a day, so to have a system in place in which you can set a limit and have it auto-ratchet your bid up by increments, makes you more efficient," he said.
