Knight Capital Group Inc., a discount broker-dealer for investment advisers, has launched an electronic platform that it hopes will appeal to investors in the municipal market.
Founded in 1995, the Jersey City, N.J.-based financial services firm provides trade-execution services across multiple asset classes to buy-side and sell-side firms.
The platform is run by the newly created Knight Advisor Services, which was started by five traders hired from Morgan Stanley Smith Barney in November. They offer clients access to municipals, investment-grade corporates, certificates of deposit, and other fixed-income securities via a network of 2,300 institutional clients.
Expanding into the muni market reflects the broader growth Knight has seen in recent years.
In 2008 the firm acquired Libertas Partners, a boutique institutional fixed-income broker-dealer that offers high-yield, distressed debt execution. It launched BondPoint, a desktop program allowing point-and-click trading, the same year.
“They’ve got something on the institutional side and something on the electronic side — our group was brought over to complement the space in between that,” said John Browning, an assistant vice president who oversees business development for Knight Advisor Services.
“We’re trying to bridge that gap between retail and institutional,” he said. “We find that the investment adviser community is a very underserved market.”
The target market for the new electronic platform, which was launched last week, includes members of the broader wealth-management community seeking access to state-specific munis and investment-grade corporates. It doesn’t matter to Knight Capital whether they’re trading five bonds from a desktop or five million bonds with an institutional desk.
The firm earns its revenue from a fee embedded within the price of each asset. There is no subscription cost or minimum number of trades.
Browning said muni investment activity has been damped by the modest yields now available. That market reality does not impact their business plan.
“A lot of guys are in cash — they’re not putting money to work,” Browning said. “That’s okay with us. I don’t care if you trade every single day or once every other month. We just want to be that destination for liquidity, whatever it is and wherever you’re looking.”
Browning’s colleagues at Knight Advisor Services are Joshua Zucker, who leads credit trading and sales; Bohn Vergari, a director of registered investment adviser sales who helped launch the municipal dealer sales group at Morgan Stanley Smith Barney; Joseph Miller, vice president of credit sales; and Patrick Moore, a vice president with a focus on broker-dealer sales.
The group hopes to offer credit-specific research on municipals in the coming months, particularly as taxable Build America Bonds have opened the market to foreign investors and crossover buyers.
“We’re seeing buying interest from European pensions funds — so we’ll have to start doing, you know, sovereign spreads of Wisconsin debt versus Spain or versus Portugal,” Browning said. “That’s really opening up the buying market, and we want to be able to deliver that to the investment adviser with color, with content, [and] with execution, rather than leaving it up to them to source and network 12 different players to get that answer.”
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