From the Bond Buyer - Pittsburgh, PA (December 6, 1999)

by Jennifer Karchmer

For the first time, institutional buyers and sellers of municipal bonds will meet next week over the Internet in secondary market trading through a Web site powered by the Pittsburgh-based online bond bidding service MuniAuction.

From the Bond Buyer - Pittsburgh, PA (December 6, 1999)

by Jennifer Karchmer

For the first time, institutional buyers and sellers of municipal bonds will meet next week over the Internet in secondary market trading through a Web site powered by the Pittsburgh-based online bond bidding service MuniAuction. Participants will log onto the Web site for the maiden event Dec. 15. The company has limited the number of sellers to seven for this particular auction. As of Friday, 40 potential buyers had registered to trade up to 30 securities totaling $50 million, according to MuniAuction president Myles Harrington.

Zions First National Bank will act as clearing agent for the half-hour auction. Bond sellers will pay Zions a service fee, which has yet to be determined, Harrington said.

Participants, both traditional broker-dealers and institutional investors, will remain anonymous throughout the auction and afterward when the results will be posted on the Web site.

"The purpose of this is to confirm that there is a demand for this kind of a product," Harrington said.

Next week's auction will act as a warm-up for MuniAuction's twice-daily trading, which it plans to conduct by the end of first-quarter 2000 with a volume of up to $250 million a day, he said.

The logistics of the Dec. 15 event resemble MuniAuction's Nov. 9 sale, in which Pittsburgh sold $56 million in bonds directly to portfolio managers and broker dealers. In the secondary market auction, sellers putting bonds out for bid will contact MuniAuction the morning of the auction to list an inventory.

MuniAuction recommends that sellers put up plain-vanilla general obligation bonds and recognizable names, although the only restriction placed on the sale is that bond blocks must be larger than $1 million.

Following investor feedback from the recent Pittsburgh sale, MuniAuction is considering instituting a rule which extends the auction by two minutes if the last best bid is received during the final two minutes of the sale. Typically, the majority of bids are received in the last few minutes of an auction, Harrington explained. The rule would give participants the time to react to a winning bid that arrives just before the auction close.

Market players view the upcoming exchange as an alternative to the Standard & Poor's Blue List, a daily record of dealer offerings, and to Bloomberg LP's Pick system, a site where subscribers post bid-wanteds. Other electronic systems, such as Bondtrac, are sprouting up all over the Internet as venues for sellers to list bond inventories online. Unlike these systems, though, MuniAuction will actually execute trades.

"It's an opportunity to add liquidity to the market," said Doug Revello, a product manager with MuniAuction.

Some say electronic secondary market trading is a natural progression for the tax-exempt world.

"We firmly believe the Internet and electronic means of distribution is where technology is taking us, and that it's important to be involved and up on the curve on any efforts in that direction," said Vanguard Group senior portfolio manager Reid Smith, who participated in last month's Pittsburgh sale over the Internet.

Other investors are still wary of online trading.

Thomas Doe, president of the research firm Municipal Market Advisors in Boston, said technological innovation threatens jobs, whether it occurs in the bond market or in other industries. But electronic trading in the secondary market makes sense, he said, especially following the recent Pittsburgh sale.

John Mousseau, director of municipal bond management at Lord, Abbett & Co., said the service that brokers provide would be compromised as buyers are given the opportunity to bypass middlemen through online trading.

"In terms of having assistance through a dealer, he would be bidding and checking the curve and checking other similar credits and where [the bonds] are trading," Mousseau said. "Is that worth a commission? I frankly think it is." Mousseau said he had not been approached to participate in next week's auction.

Interdealers Chapdelaine & Co., J.F. Hartfield & Co., and Municipal Partners Inc. declined to comment on the upcoming trading event. J.J. Kenny Drake Inc. did not return calls.

Skeptics say electronic municipal bond trading may have difficulty getting off the ground.

Tommy Hannon, vice president and chief operating officer of Bondtrac, said its longevity is in the hands of the sell-side being willing "to put their offerings out there in a real-time fashion."

Mike Olander, municipal applications manager for Bloomberg, agreed, adding that the technology is in place, but buyers are looking for a green light.

"The muni market is poised to do online trading, but a lot of it is how quickly the people in the community accept the technology," he said. "It is there to move forward."

From the Bond Buyer - Pittsburgh, PA (November 10, 1999)

by Jennifer Karchmer and David Hoffman

The first test of institutional investors' appetite for buying municipal bonds directly from their issuers - yesterday's $56.9 million Pittsburgh general obligation bond sale - produced mixed results.

From the Bond Buyer - Pittsburgh, PA (November 10, 1999)

by Jennifer Karchmer and David Hoffman

The first test of institutional investors' appetite for buying municipal bonds directly from their issuers - yesterday's $56.9 million Pittsburgh general obligation bond sale - produced mixed results.

Traditional broker-dealers provided more than three times as many bids than investors, and captured most of the maturities. However, the middle of the curve was the domain of the direct buyers. Three institutional investors bought the 2014 through 2017 maturities, with a single bidder buying both the 2013 and 2014 pieces. Meanwhile, the 2015 maturity received seven bids from investors and only six from broker-dealers.

Overall, the investors captured 28% of the volume in the deal, while five broker-dealers combined to buy the remaining 19 maturities. The city only accepted bids for individual maturities, rather than also soliciting offers for the entire deal. All the maturities were insured by the Financial Guaranty Insurance Co.

Only four maturities received no investor bids. Pittsburgh and MuniAuction Inc., which conducted the sale using a private-label Web site it set up for the city, declined to identify any of the bidders, citing concerns that the institutional investors who bid would harm their relationships with broker-dealers.

The successful placement of some of the maturities directly with investors defuses for now the question of whether institutions were ready to compete with broker-dealers for a new issue.

Out of a total of 195 bids, broker-dealers submitted 155 and investors submitted 40, according to MuniAuction. The overall true interest cost for the deal was 5.8256%, with yields ranging from 4.399% in 2002 to 5.960% in 2020. The final maturity, in 2024, carried a 5.943% yield.

Most important, according to Harrington, was the breadth of the turnout - the average number of bids per maturity was 8.86.

"The fact that [institutional investors] are here is important," said MuniAuction President Myles Harrington.

But while Harrington claimed the sale had been a success, reaction from those in the municipal community was mixed. There were irregularities that appeared in the latter maturities, giving the deal's yield curve an erratic appearance that some said was inefficient and costly to the issuer.

Donald Currie, a vice president with PNC Capital Markets, was one of the broker-dealers who won a portion of the deal. Currie said PNC submitted the winning bid on the 2006 maturity.

While the yield curve was uneven, the results appeared better then previous maturity-by- maturity sales conducted by Pittsburgh, Currie said. The most glaring inconsistency, however, was a bid with a purchase yield of 5.17% originally submitted for the 2014 maturity. It looked as if someone paid too much for it, he said.

Harrington, however, said that bid had been submitted in error by a broker-dealer, and despite telling investors earlier that they would not be able to take their bids back, he allowed the firm to withdraw the bid, which allowed an institutional investor to win the maturity. "It was obvious it was a human error," Harrington said.

The ratio of successful investor bids to broker-dealer offers was expected by market participants.

"To me that says that [the sale] really didn't go that great," said B. Clark Stamper, of Stamper Capital & Investments Inc. "It must have come cheap enough for the brokers to buy it and think they could sell it for a profit. Whether [Pittsburgh] really saved that much money or not is debatable."

Jane Trust, a portfolio manager with Legg Mason Wood Walker Inc., said she was not surprised that the number of maturities won by broker-dealers outnumbered those won by institutional investors. While the number of institutional investors who actually submitted bids just edged out the number of broker-dealers, there were many on the institutional side who decided to go through a broker-dealer.

"I think for many people on the buy side there remains a real question about secondary market liquidity, and I think people are sort of still trying to sort all of that through," Trust said.

Another thing financial observers are watching is whether maturity-by-maturity bond sales actually save the issuer any money, or just drive up issuance costs. David Anderson, a managing director with Merrill Lynch & Co., said yesterday's sale proves that it just drives up the cost.

If an all-or-nothing bid had been allowed, a broker-dealer would have submitted a bid that would not show any irregularities in the yield curve, Anderson said. The broker- dealer would have eaten the cost of unwanted maturities that came yesterday with slightly higher yields, thus giving the issuer greater savings, he said.

Statistics did show that yesterday's sale of a $170 million insured Philadelphia School District deal came at lower yields than the Pittsburgh deal. A leading broker-dealer who didn't bid on the Pittsburgh deal said Pittsburgh usually would trade better than the Philadelphia deal, but the maturity-by-maturity bidding structure hurt the sale. The Philadelphia deal was underwritten by RRZ Capital Markets.

But Ellen McClean, Pittsburgh's finance director, said she was confident the competitiveness benefited the city, and observers watched the TIC drop during the half- hour auction.

"We have not had this level of bidding in a competitive environment to drive down the cost of borrowing," McClean said.

From the Bond Buyer - Atlanta, GA (October 12, 1999)

by Robert Whalen and David Hoffman

Pittsburgh may again rattle the status quo in the municipal bond market, this time by offering institutional investors the option to bid directly via the Internet on the city's upcoming $55 million general obligation bond sale.

From the Bond Buyer - Atlanta, GA (October 12, 1999)

by Robert Whalen and David Hoffman

Pittsburgh may again rattle the status quo in the municipal bond market, this time by offering institutional investors the option to bid directly via the Internet on the city's upcoming $55 million general obligation bond sale.

Over the weekend, Mayor Tom Murphy and City Controller Tom Flaherty mailed a "survey" letter to more than 700 investors to determine the level of buy-side interest in bidding directly on the bonds, scheduled to be sold Nov. 9, said Myles Harrington, president of Grant Street Advisors, Pittsburgh's financial adviser.

Murphy said it made sense to survey potential investors before proceeding with the deal.

"This is a significant change in the culture of this business," Murphy said. "By doing this we wanted to be sure our potential customers are willing to go along with this."

Market sources could not be reached yesterday for comment on Pittsburgh's plans. The municipal bond market was closed in honor of Columbus Day.

Bids on the issue's individual maturities will be accepted through the city's private- label Web site - www.PGHauction.com, powered by software from MuniAuction Inc., Harrington's Internet bond-bidding company - and will be open to the broker-dealer community too. Institutional investors must pre-register to bid on the issue.

Unlike previous Internet sales, all bidders would remain anonymous during and after the auction, Harrington said. This would allow institutional investors to bid with their broker-dealer of choice or to bypass the underwriter without jeopardizing relationships and secondary market liquidity, he said.

Pittsburgh, aware of many investors' wish to foster continued dealer relationships, will permit any institutional investor that snares some paper on its own to "designate a broker-dealer to receive a commission as either a reward for service or research provided in the past or as a sort of advance compensation for secondary market support," Harrington said.

As in all of its competitive deals, Pittsburgh will retain the right to reject any and all bids, Harrington said.

Murphy - who championed the first Internet bond sale in November 1997 - has received many telephone calls from institutional investors requesting this sort of opportunity, which he hopes will lower borrowing costs, Harrington said.

The city has saved about $6 million during its last seven Internet sales, which totaled $708 million , Murphy said. These savings came despite the leeriness of some in the financial community, he said.

"All along the way we have faced significant resistance," Murphy said. "People said it's going to cost you a lot more money and it's not worth it. The end result was it worked and we saved money. It encourages us to keep going."

According to Harrington, investors covet this type of auction because it affords the chance to select maturities and to retain the option of whether or not to seek insurance. Pittsburgh is planning to solicit bond insurance for the upcoming sale on a maturity-by-maturity basis, he said, adding that the enhancement premium will be listed on the Web site during the auction.

"There are some very sophisticated investors out there, they've got their own research teams and credit analysts, and they rarely get to bid on paper without insurance. This will allow them to compete with the monoline insurers for that extra yield," Harrington said.

Pittsburgh has secured a commitment from an underwriting firm to act as a clearing agent for the investor bids. Harrington declined to name the firm, but said that in exchange for a fee significantly less than a dollar per bond, the firm will handle the processing of regulatory fees and filings to the Municipal Securities Rulemaking Board, the National Association of Securities Dealers, and Depository Trust Co. That underwriter will be the purchaser of record in the competitive deal, allowing the investor to remain anonymous.

In another Steel City twist, Pittsburgh will permit institutional investors who have bid directly on its paper to use its private-label site to post and auction off bonds in the secondary market after the sale, Harrington said. This will allow investors to get secondary paper directly. In theory, there may be a fixed date and time - perhaps monthly or weekly - in which investors can post and sell bonds via the Internet, he added.

From SmartMoney.com

by Gregory Zuckerman

Pittsburgh, PA (October 12, 1999) The City of Pittsburgh, in a novel tack, is aiming to cut out Wall Street middlemen in marketing its municipal bonds.

From SmartMoney.com

by Gregory Zuckerman

The City of Pittsburgh, in a novel tack, is aiming to cut out Wall Street middlemen in marketing its municipal bonds.

Monday, the city set plans to sell $55 million of bonds directly to investors over the Internet, a move that could put a scare into Wall Street dealers and encourage other issuers, including U.S. companies, to appeal directly to investors when issuing bonds.

So far, the Internet has had much more of an impact on stocks than on bonds. Online trading represents as much as 16% of daily stock trades, and there already are efforts, led by W.R. Hambrecht & Co., to help companies issue stock online directly to investors, although the activity has not been heavy. In comparison, online bond trading represents just 2% of daily bond transactions.

Traditionally, municipal-bond issuers turned to Wall Street firms and banks to sell municipal debt. They would either pick a firm to buy their entire lot of bonds or conduct a competition, or "beauty contest," among brokerage firms eager to buy the bonds. The securities firms and banks would then re-offer the bonds to investors large and small, pocketing a fee between what they paid for the bonds and what they sold them for. It has never been industry practice for issuers to target investors on their own (except in certain private placements).

Now, the Pittsburgh move is shaking things up. In early November, the city will conduct an online auction of its bonds with the help of an upstart company called MuniAuction Inc. of Pittsburgh. While Wall Street dealers will be allowed to participate, the city is sending letters to more than 750 institutional investors, encouraging their participation.

The city's hope: to attract more buyers by appealing directly to investors over the Internet, paying a lower yield on its bonds and saving money in the process. The city also hopes to save money by eliminating the commission paid to Wall Street firms, as well as stoke more aggressive investor interest by using an open, online forum.

"That's why eBay has been so successful, creating an auction in which the ultimate buyer and seller meet online," says Myles Harrington, co-founder of MuniAuction. There are no plans yet to allow individual investors to bid at the auction, Mr. Harrington says.

The relationship between Wall Street dealers and municipalities has long been controversial. In recent years, the Securities and Exchange Commission has issued rules restricting "pay-to-play" practices, in which brokerage firms made campaign contributions to public officers as a way of influencing their choice of bond underwriter.

It is that give-and-take that partly influenced Pittsburgh's move. Working with brokerage firms and banks means "giving work to your new best friends, and that just didn't seem the most efficient" way to sell bonds, says Mayor Tom Murphy. Pittsburgh previously conducted six online auctions of its bonds, using MuniAuction, but investors weren't allowed to participate in those auctions.

Mr. Murphy says the city's efforts have caused an outcry on Wall Street. In the past, "Merrill Lynch threatened to boycott the sale and even the secondary market, and local banks discouraged us" from pursuing the online sales, the mayor says.

Merrill denies Mr. Murphy's assertions. "After our initial concerns were addressed, we participated in the auction and actively supported the bonds in the aftermarket," a Merrill spokesman says.

Dealers typically receive about $1 million on a $55 million municipal-bond transaction. Though that is small change for Wall Street securities firms and banks, it adds up: Merrill completed 302 municipalbond underwritings last year, according to Thomson Financial Securities Data.

At the same time, MuniAuction and Pittsburgh have a close relationship. In 1994 and 1995, MuniAuction's Mr. Harrington donated a total of $5,000 to Mr. Murphy's mayoral campaign. Mr. Murphy later asked Mr. Harrington, who was a financial adviser to the city at that time, not to make any more donations because he wanted to avoid the appearance of impropriety, Mr. Harrington says. Meanwhile, the city of Pittsburgh is considering making an investment in MuniAuction, Mr. Murphy says.

MuniAuction isn't the only firm looking to develop ways for bond investors to buy securities directly from issuers. Intervest Financial Services Inc., begun by online bond pioneer Larry Fondren, says it has begun auctions of corporate bonds on the Internet for institutional investors. (Mr. Fondren declined to name the participating issuers.)

For all the fanfare, however, it isn't clear whether the efforts to appeal directly to investors will work or even save the issuer money. That is largely because the role of Wall Street firms remains crucial in the bond market, even more so than in the stock market.

For one thing, bond prices are often hard to come by -- unlike stocks -- requiring investors to turn to Wall Street firms for accurate quotes. And large investors often rely on Wall Street traders to provide "liquidity," or ease of trading, by making a market in bonds they issue. Investors may not be willing to risk that relationship by bidding for bonds directly over the Internet. The result, some say: Online issuers could be forced to actually pay a higher yield to entice investors.

Moreover, individual investors are more important than ever in the munibond world. This is because bond mutual funds are shrinking and insurance companies increasingly are turning to other higher-yielding bonds, notes George Friedlander, an analyst at Salomon Smith Barney. Because Wall Street firms have a network of brokers to contact individual investors, they are in prime position to make a bond issue a success, he says.

Thomas Kenny, who runs the biggest muni-bond mutual fund group at Franklin Templeton Group, says he for one won't be participating in the Pittsburgh auction. "I'll monitor it, but it's not yet clear if either issuers or investors will make out better," he says.

Meanwhile, there have been other harbingers of potential shifts in the bond market. Last week, the State of Ohio's Treasurer's office held an auction to solicit bids from Ohio banks seeking $42 million in state deposits. States traditionally have taken bids from a handful of banks.

The auction, through BidOhio, a private-label Internet site created by MuniAuction, resulted in bids to provide certificates of deposit to the state at higher rates than were previously available, according to Mr. Harrington of MuniAuction.

From the Bond Buyer - Chicago, IL (September 28, 1999)

by Mary Wisniewski

The Ohio Treasurer's office next week will usher in a new era of electronic bidding when it becomes the first issuer to use its own private-label Web site to conduct an online auction of state investment dollars.

From the Bond Buyer - Chicago, IL (September 28, 1999)

by Mary Wisniewski

The Ohio Treasurer's office next week will usher in a new era of electronic bidding when it becomes the first issuer to use its own private-label Web site to conduct an online auction of state investment dollars.

State treasury officials have no plans at this time to use the private Web site, the first established for an issuer, to take competitive bids on its debt, but that could be the next step. "We're going to wait and see how this works," said Treasury spokesman Tim Clark.

And while the state has no immediate plans to use the site for bond sales, two other municipal issuers are planning to establish similar sites for their bond deals soon after Ohio.

The state will use its Web site, www.BidOhio.com, to take bids on its interim funds from banks via the Internet. The site was designed by MuniAuction and marks a new venture for the Pittsburgh-based financial advisory firm that has completed several such sites for financial advisers.

Ohio Treasurer Joseph Deters said that he believed BidOhio will result in a higher, more competitive yield on the Treasury's interim funds. "We conservatively estimate increased earnings for Ohio taxpayers in the range of $500,000 annually," Deters said in a statement released Monday.

"The primary advantage is this introduces direct competition where there was none before," said Myles Harrington, MuniAuction's president.

The effect a proliferation of such issuer sites could have on relationships between issuers and their advisers was uncertain. Financial advisers asked about the issue said they don't believe the Web sites pose a threat to their business with issuers.

"It's just one very small part of the process, taking bids on a deal," said one financial adviser. "They will still need investment advisers and financial advisers for assistance in structuring."

Harrington did not name the issuers, but said neither they nor the Ohio Treasurer's office use independent financial advisers, "so it's not like some financial adviser is losing an opportunity here."

In general though, market players said that issuers stand to benefit from the Web sites.

"It has the potential to be a good program and make things easier with electronic bidding," said Martin Vogtsberger, vice president and manager of public finance at Fifth Third/The Ohio Co..

"I would imagine that for the larger issuers it's a good idea because then they have greater access and control," one financial adviser said. "But I'm not sure it will be used far and wide."

Issuers wanting a private Web site pay an up-front fee for customized development and training and an ongoing fee for service. Harrington said MuniAuction is still negotiating with Ohio on its fees.

Ohio's first online auction will offer $42.5 million in interim treasury funds to be used to purchase six-month certificates of deposit in amounts up to $5 million, with a minimum bid of $100,000. Online auctions will be held each month.

Deters said he decided to use BidOhio after finding that several programs involving interim Treasury funds were either underused or not getting the best return on the dollar.

"The chief problem was that the bidding process in use was not competitive," Deters said. "Banks would place minimum bids with the knowledge that, regardless of their offer, each would receive part of the month's deposit."

Deters also complained that the old system, dependent on banks submitting bids by fax or hand-delivery, was cumbersome, inefficient and impractical for some banks.

From the Bond Buyer - Atlanta, GA (May 18, 1999)

by Robert Whalen

Even as the ink dried on a second private-label agreement with a financial advisory firm, MuniAuction Inc. was closing a separate deal with a Washington, D.C.-based investment group -- selling a minority stake in the company for $6 million.

From the Bond Buyer - Atlanta, GA (May 18, 1999)

by Robert Whalen

Even as the ink dried on a second private-label agreement with a financial advisory firm, MuniAuction Inc. was closing a separate deal with a Washington, D.C.-based investment group -- selling a minority stake in the company for $6 million.

The cash fronted by the Carlyle Group -- which manages approximately $3.5 billion of capital -- will allow the Internet-based auction site to further its scope of services, according to MuniAuction president Myles Harrington.

"Now we'll have the capital that we need to expand our activities ... well beyond the core product," Harrington said.

The latest development to be offered, he said, will be the electronic auction of guaranteed investment contracts worth roughly $500 million. Harrington declined to identify the issuer but said the GICs will likely be bid upon within the next 30 days.

While some in the market may have expected MuniAuction to wane in the presence of competing services offered by Bloomberg LP and Thomson Financial, Harrington's small business has thrived.

For example, Chicago-based financial adviser Speer Financial Inc. last week became the second such firm to launch its own auction site thanks to MuniAuction's technology.

According to David Phillips, a senior vice president with Speer, his firm is going to "test" the product with a triad of Illinois deals coming to market within the next month.

Phillips said a bank qualified deal for the Glenview Park District selling Thursday will mark the first time an Illinois issuer uses an electronic sale. The private-label site -- at www.speerauction.com -- will similarly sell a small St. Charles Park District deal June 8, as well as a $26 million school sale for the Batavia School District.

"We'll dip our toe in the water, but not try to present options that are onerous -- or not well-received -- by the market. We're looking to offer new technology, not new methodology," Phillips said, emphasizing that the bonds will also be sold through the traditional all-or-none format.

Phillips said his firm is exploring electronic bidding as a natural progression of the business. A financial adviser's decision to sign a private-label agreement raises the benchmark for the competition was not a concern, Phillips added. A private label allows a financial adviser to personalize a bond auction Web site.

Harrington said the latest developments have made the prospect of offering stock a very attractive possibility.

"Now that we have some professional money, the likelihood of such a thing is pretty high," he said.

From the Bond Buyer - Atlanta, GA (April 13, 1999)

by Robert Whalen

The Tennessee Local Development Authority is breaking new ground by electronically selling $33 million of bond anticipation notes next week.

From the Bond Buyer - Atlanta, GA (April 13, 1999)

by Robert Whalen

The Tennessee Local Development Authority is breaking new ground by electronically selling $33 million of bond anticipation notes next week.

The Ban deal, scheduled for April 22, marks the first time short-term tax- exempt debt securities will be electronically sold. Bids will be accepted through Internet-based MuniAuction Inc. Hand-delivered bids will also be accepted, but faxed bids will not.

The sale is part of the state's typical note issuance for various construction projects, and the debt will be converted into long-term bonds when building is completed, said the state's financial adviser Marlin Mosby, a managing director with Public Financial Management Inc.

According to Mosby, the finance team initially wanted to use Thomson Financial's PARITY system, but that service isn't currently programmed to accommodate a note sale. An official at Thomson confirmed that their system is unable to take note sales, but it plans to offer that option soon. Thomson is the parent company of The Bond Buyer.

The deal could also have been sold using PFM Auction, a private-label electronic bidding Web site licensed by MuniAuction. However, the Internet- bidding firm wanted to retain Tennessee as one of its larger repeat clients, Mosby said. The state has used MuniAuction for two previous bond sales, he indicated.

Because note deals commonly draw scores of bidders, traditional delivery creates more paper work than a bond sale, said Myles Harrington, president of MuniAuction.

On a good day, an issuer can wade through the bids and declare the winner, or winners, in approximately thirty minutes, Harrington pointed out. By using an electronic system, that determination is made in seconds, he said.

He hopes this sale will demonstrate his system's versatility and catch the attention of other active note issuers. While using his Internet-based system should increase accessibility to the market, the largest benefit will likely be on the administrative front, he said.

Harrington is looking to add another feather to his cap Wednesday when his system -- along with PARITY -- is used to take bids on a New York City deal. He said the city sought his system because it wants to test the unorthodox maturity-by-maturity bidding option.

From The Bond Buyer - Harrisburg, PA (March 31, 1999)

by Ivan Cintron

Public Financial Management Inc. completed the first competitive bond sale over its new private-label Web site last Thursday, attracting several out- of-state bidders, according to sources involved with the deal.

From The Bond Buyer - Harrisburg, PA (March 31, 1999)

by Ivan Cintron

Public Financial Management Inc. completed the first competitive bond sale over its new private-label Web site last Thursday, attracting several out- of-state bidders, according to sources involved with the deal.

The sale of $10 million of general obligation bonds by Monroeville, Pa., through the site, located at www.PFMauction.com and powered by MuniAuction Inc. software, attracted 11 underwriters, who submitted 55 bids for the issue's 13 maturities. Out of these bids, 11 were all-or-none and 44 were for individual maturities. Maturity-by-maturity bidding is a hallmark of Pittsburgh-based MuniAuction's electronic system.

Nike Securities, based in Lisle, Ill., submitted the winning bid, capturing the entire issue with a true interest cost of 4.3452%. Pittsburgh-based Mellon Bank submitted the cover bid with a TIC of 4.3478%.

Parties involved with the sale were upbeat about the results.

"It went very well," said Brett Matteo, a managing director in PFM's Harrisburg, Pa., office.

"In theory, the more bidders, the more competition, the lower the TIC. The more competition, the better it is for our clients," says PFM's Brett Matteo.

"One of the definite advantages of this format is that we can get the bids from the typical competitors -- in this case, Pennsylvania firms," said David Hasenkopf, a marketing official with MuniAuction. "At the same time, it was a much easier way for firms outside the immediate region to participate."

Hasenkopf also pointed out that the fact the sale was conducted on PFM's site helped the Monroeville bonds lure underwriters from outside the state.

"I think that it did help. PFM carries a brand name that's known nationally," he said. "Partnering with them definitely adds to the breadth of the participation."

But Matteo contended that despite the electronic bidding aspect, this sale had about the same number of dealers from the region and outside the state vying for the bonds as in other, similar Pennsylvania competitive deals.

He added, however, that as more issuers use the site, a larger number of firms could compete for deals sold by PFM's clients through its site.

"That's certainly our hope, that's our intent," he said. "In theory, the more bidders, the more competition, the lower the TIC. The more competition, the better it is for our clients."

In addition to Nike Securities, some of the other out-of-state firms participating in the auction were: Corby Northbridge Securities Inc. in Boston; Griffin, Kubik, Stephens & Thompson Inc. in Chicago; State Street Bank & Trust in Boston; and Zions Bank in Salt Lake City.

Underwriters said the sale process for the most part went smoothly.

"My initial impression of the site was that it was so user-friendly and it was so easy that I thought I must be doing something incorrect," joked Francine Russell, vice president in the underwriting department of Nike Securities.

Russell said using the site was quick and simple, and there were no delays in getting information about the bonds or submitting bids.

MuniAuction and a couple of financial advisers have confirmed the company is in discussions to establish similar sites with other FAs.