Muni Dealers Consortium in Cautious Online Venture

The newest entrant to the realm of online bond trading -- and it's a biggie -- is one that individual investors will never see, even if it plays a role in their transactions.

Goldman Sachs (GS Quote), PaineWebber (PWJ Quote) and Bear Stearns (BSC Quote) are set today to announce the formation of MuniGroup.com. The consortium's technology, its founders say, will create a marketplace for the buying and selling of municipal bonds by individual investors, through their brokers -- full-service, discount or online. The creation of a marketplace should lead to more favorable pricing of muni bonds for individuals, MuniGroup.com officials say.

Here's what MuniGroup.com says it intends to do: launch Web-based software that will allow any broker-dealer that chooses to participate to display its inventory with live, executable prices to other participating broker-dealers.

The upshot? In a traditional muni bond transaction by an individual, the individual calls his broker and gives him some parameters. For example, maybe the investor wants a New York investment-grade zero-coupon bond due in 18 years. The broker checks to see if his firm has such a bond in stock. If not, the trading desk goes looking for one, using the phone. ...