The MuniCenter has adjusted its online fixed-income trading system to offer greater portfolio management capability in an effort to beef up its buy-side business, the company’s fastest growing segment.
“The enhancements were driven by customer feedback from our buy-side clients,” said Tom Vales, chief executive officer at the MuniCenter, which was created in 2000 by a consortium of firms including Citigroup Inc., Lehman Brothers, Merrill Lynch & Co., and Morgan Stanley. “This is one of our first new products that was tailored for the buy-side, which last year was the fastest growing part of our overall business.”
In 2005, overall par volume on the MuniCenter grew 29% from 2004, according to the company. The company’s growth coincided with the market’s 13.4% increase in issuance to about $408.2 billion in 2005 from about $360 billion in 2004, according to Thomson Financial.
More tellingly, however, was the growth of its buy-side par volume, which the company said grew by 335%.
Portfolio managers who trade on the MuniCenter platform can now view and manage multiple portfolios simultaneously, whereas in the past, they could only view one portfolio at a time and were required to open each portfolio separately. According to Vales, the changes should allow portfolio managers greater flexibility and functionality when using the platform.
“Let’s say you are managing a high-yield fund, a high-grade fund, a New York fund, and a California fund,” he said. “Before you only had one blotter to manage all those positions. With the new additions, you can now view simultaneously as many different portfolios as you want.”
According to Vales, the new enhancements also allow users to better monitor their positions. For example, a separate blotter, or screen, has been created to allow portfolio managers and sell-side traders to see all the activity for selected securities on the MuniCenter’s marketplace for bids and offerings for matching items without having to trade a position. Users can add to certain positions, or they can simply use the information to establish a value for a specific bond or get a better understanding of the market for a particular security.
“Most people were putting positions on our offer blotter to offer them out in the marketplace. But many were using the offer blotter not specifically to trade a position, but to see if there were any matchers in the marketplace, and maybe they would add to the position,” Vales said. “So what we did was create this separate group of tools that allows the user to view all the activity in the marketplace on matching bonds without initiating a position.”
The changes and volume increases in the MuniCenter’s platform underscore a broader trend in the fixed-income world: electronic trading is increasingly taking hold. A recent survey conducted by The Bond Market Association found three quarters of all fixed-income trading platforms reported increases in overall volume from 2004 to 2005. A quarter of those reporting an increase said volume rose by more than 20%.
“It took a little longer for electronic trading to catch on with the buy-side firms, but it is becoming firmly entrenched as they realize the benefits,” said Michael Decker, senior vice president for research and public policy at The Bond Market Association. According to Decker, many electronic trading platforms offer value-added services to their clients, such as clearing and settlement functions.
“Instead of calling four or five brokers to get a quote, its all right there,” he said. “And many electronic platforms offer seamless integration between the front-end trading platform and the back-office trade processing systems, which could really appeal to the buy-side.”
