Municipal trading volume totals $3.28 trillion in 2011, MSRB says

By Angela McDaniels

Tacoma, Wash., March 7 - Market participants traded $3.28 trillion par amount of municipal securities in 2011, according to the Municipal Securities Rulemaking Board's 2011 Fact Book.

The amount is 12.6% less than the $3.75 trillion volume amount traded in 2010. The total par amount of securities traded has declined in each of the last three years.

Revenue bonds had the highest trading volume at $2.16 trillion, followed by general obligation bonds at $703.91 billion.

The volume of customer-bought transactions was $1.67 trillion. In comparison, the volume was $1.09 trillion for customer-sold transactions and $526.37 billion for inter-dealer transactions.

Total number of trades

The total number of trades in 2011 was 10.39 million, about flat compared to 2010 and 2009.

Revenue bonds were traded in 6.67 million transactions, followed by G.O. bonds in 3.38 million transactions.

By number of trades, the greatest number of transactions were customer bought at 4.95 million. Customer-sold transactions totaled 2.16 million, and inter-dealer transactions totaled 3.28 million.

Time of day

MSRB found that roughly half of the par amount of bonds traded on an average day traded before noon ET in 2011.

The average par amount of bonds traded per day in 2011 was $13.01 billion. Of this, $6.73 billion traded by noon ET. The peak amount was $1.01 billion between 10:45 a.m. ET and 11:00 a.m. ET.

By number of trades, however, only 34.2% of trades were completed by noon ET on an average day, or 14,089 trades out of an average 41,241 trades per day.

The average number of trades climbed during the morning to 1,448 between 11:45 a.m. ET and noon ET, declined to 1,223 by 1:30 p.m. ET and then began climbing again, peaking at 1,524 trades between 3:30 p.m. ET and 3:45 p.m. ET.

The average daily trade size told yet another story. The average trade size peaked early, at $902,858 between 7:45 a.m. ET and 8 a.m. ET. The average trade size then ranged between $475,374 and $677,318 before peaking again at $749,770 between 10:45 a.m. ET and 11 a.m. ET. It then declined for the rest of the day.

Days of the week

The heaviest trading days in 2011 were Wednesday by average number of trades (44,907), Tuesday by average number of unique securities (16,396) and Thursday by average par amount ($16.16 billion).

The lightest trading days were Friday by average number of trades (33,886) and average number of unique securities (12,838) and Monday by average par amount ($9.68 billion).

Daily trading volume

By par amount, the average daily trading volume was heaviest during the first quarter of 2011, at $13.58 billion, and lightest in the fourth quarter, at $12.16 billion.

By number of trades, the average daily trading volume followed a similar pattern. It was heaviest at 47,605 during the first quarter and lightest at 38,232 during the fourth quarter.

By par amount, the average daily trading volume has declined in each of the last four years. It was $26.53 billion in 2007, compared with $13.01 billion in 2011.

The average daily number of trades, however, has increased over that time to 41,241 in 2011 from 36,437 in 2007.

Customer trades distribution

By par amount, 54.4% of trades made in 2011 involved one to five dealers. MSRB said 19.5% of trades involved six to 10 dealers, 9.4% involved 40 or more dealers, 8.8% involved 11 to 20 dealers and 7.9% involved 21 to 40 dealers.

By number of trades, 47% of trades made in 2011 involved one to five dealers, 20.2% involved 40 or more dealers, 12.1% involved six to 10 dealers, 11.1% involved 11 to 20 dealers and 9.6% involved 21 to 40 dealers.

Most active by amount

By par amount, the top five most actively traded securities in 2011 were

• The series A Exxon Mobil project revenue bonds due Aug. 1, 2035 issued by Louisiana's East Baton Rouge Parish Industrial Development Board. Investors traded $19.52 billion principal amount of these bonds in 548 trades;

• The series B Exxon Mobil project revenue bonds due Dec. 1, 2040 issued by the East Baton Rouge Parish Industrial Development Board. Investors traded $16.28 billion principal amount of these bonds in 390 trades;

• The series 2011-12-A-1 revenue anticipation bonds due June 26, 2012 issued by the State of California. Investors traded $11.65 billion principal amount of these bonds in 6,836 trades;

• The series 2010C first subordinated sale tax revenue bonds due Aug. 1, 2041 issued by the Puerto Rico Sales Tax Financing Corp. Investors traded $10.6 billion principal amount of these bonds in 3,568 trades; and

• The series A Chevron project bonds due Dec. 1, 2030 issued by the Mississippi Business Finance Corp. Investors traded $10.02 billion principal amount of these bonds in 474 trades.

Most active by trades

By number of trades, the top five most actively traded securities in 2011 were

• The series 2005 Goldman Sachs headquarters issue of revenue bonds due Oct. 1, 2035 issued by the Liberty New York Development Corp. Investors traded $2.27 billion principal amount of these bonds in 8,371 trades;

• The series 2011-12-A-1 revenue anticipation bonds due June 26, 2012 issued by California. Investors traded $11.65 billion principal amount of these bonds in 6,836 trades;

• The State of Illinois' series 2003 taxable G.O. pension bonds due June 1, 2033. Investors traded $3.99 billion principal amount of these bonds in 5,665 trades;

• The City of Chicago's series C-1 taxable project bonds due Jan. 1, 2035. Investors traded $1.39 billion principal amount of these bonds in 5,659 trades; and

• The series A revenue bonds due Feb. 15, 2047 issued by Hudson Yards Infrastructure Corp. Investors traded $1.31 billion principal amount of these bonds in 5,114 trades.

Data in the Fact Book is based on information submitted to MSRB by municipal securities dealers, issuers and those acting on their behalf. In 2011, MSRB received data on 10.4 million municipal trades, more than 130,000 disclosure documents and nearly 1 million interest rate resets.

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