MuniLand

Alternative trading system BondDesk up for sale

Reuters reported this week that the retail focused corporate and municipal bond trading platform BondDesk is up for sale:

Institutional fixed-income trading platform providers Tradeweb and MarketAxess are among three bidders for BondDesk Group LLC in a deal that is expected to be valued up to $200 million, two sources familiar with the situation told Reuters this week.

Disclosure: Thomson Reuters is the majority owner of Tradeweb.

BondDesk was founded in 1999 by Charles Almond who, with Paine Webber (which became UBS), formed the first bond aggregation platform for odd-lot or retail sized trades.

Some big banks bought into BondDesk and eventually the firm had substantial inventory listings and order flow from its owner dealers. The platform worked effectively to distribute dealer inventory to regional broker dealers, smaller shops and investment advisors.

BondDesk was plagued with a series of upper management changes before and after Almond sold the company to private equity firm Advent in 2006. The most promising president seemed to be former Bloomberg superstar Kim Bang, who left BondDesk after one year. Bang had the most interesting vision for the firm that I have heard:

Make way for new muniland disclosure and market structure

The SEC released its long-awaited report on muniland disclosure and price transparency yesterday. Ten years from now, every retail investor will want to say a word of thanks to Commissioner Elisse Walter, even if only half her recommendations on transparency and investor protection are implemented. Unfortunately, her term as SEC commissioner expires June 5, 2013, which leaves her less than a year to get the ball rolling on her proposals.

The report is composed of two primary areas: The first part concerns better disclosures by municipal bond issuers about their finances, and the second addresses the market structure for trading municipal bonds. It’s the second part that contains the really game-changing parts of the report.

On disclosure, the report recommends institutional changes, such as the requirement that muniland participants adopt the standards of the Government Accounting Standards Board and make timely and audited financial disclosures. The report recommends that conduit borrowers (think non-public entities like non-profit hospitals and private colleges) be subject to the same registration and disclosure standards as corporate securities and barred from using exemptions that municipal issuers rely on. Conduit issuers happen to have the highest incidence of defaults, and investors need the greatest level of disclosure for these securities.

What is retail trading?

Bonddesk, an alternative trading system, has published an excellent report on what types of  muni bonds retail is trading.

Contrary to common wisdom revenue bonds, those NOT backed by taxing authority, were the clear winners as they captured 63% of retail trades.

Average yields in April are shown for bonds maturing in 10 years. (See the report for more yield data.)

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