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Trade US Municipal Bonds
US residents can trade municipal bonds in TWS
Add muni bond market data to your trading page
- In the Underlying field,
enter the municipality name, for example Boston.
- From the list of results, uncheck
all asset types except munis.
- Select the muni bond(s) from the remaining
results and click OK.
- The muni data is added to your trading
window.
Add
the Company Name field
to your page layout to see the municipality name. The Underlying field
only displays the CUSIP.
Trade muni bonds
- Click the Ask to create a BUY
order; click the Bid to create a SELL order.
- Click “T” to transmit the order.
- In the Comparable Bonds screen, submit
an RFQ, compare your bond to others that are comparable, and transmit
your order.
Notes on Comparable Bonds
MSRB Rule G-18 requires each broker, dealer and municipal
securities dealer, when executing a transaction in municipal securities
for or on behalf of a customer, to make a reasonable effort to obtain
a price for the customer that is fair and reasonable in relation to prevailing
market conditions. Since IB customers enter orders to buy and sell municipal
bonds into an automated system, the system is designed to provide the
relevant information regarding each security that a customer is considering
trading.
IB's Best Execution policy is designed to attempt to get
two or more quotes for each customer transaction. Because the municipal
securities market may be extremely illiquid, two quotes may not be available
for a specific security and the currently available quotes may not reflect
the best possible price. Therefore, in addition to providing the customer
with quotes and comparable prices for the specific bond chosen by the
customer, IB provides quotes and prices for comparable bonds as a comparison
and also provides a facility to place a request for a quote (RFQ) on a
specific bond that the customer selects. After reviewing and evaluating
the prices for comparable securities, in addition to the specific security
that they have requested, customers can transmit an order for the municipal
bond of their choice.
To qualify as “comparable” to your target bond for price
comparison, a bond must meet all of the following criteria:
- It must have the same organization type,
bond type, debt class and rating as the target bond.
- It must have identical watch list status
as the target bond (either “none”, or “marked for upgrade” or “marked
for downgrade”).
- The difference between the target bond's coupon
rate and the associated bond's rate must be 50 basis points or less.
- The difference in maturity date between the target
bond and the associated bond must be one year or less.
