Trade US Municipal Bonds

Instructions

US residents can trade municipal bonds in TWS.

Add Municipal Bond Market Data to your Trading Page

  1. In the Underlying field, enter the municipality name, for example Boston.

  2. From the list of results, uncheck all asset types except munis.

  3. Select the muni bond(s) from the remaining results and click OK.

    The municipal bond market data in TWS.

  4. The muni data is added to your trading window.

    Note: Add the Company Name field to your page layout to see the municipality name. The Underlying field only displays the CUSIP.

Trade Municipal Bonds

  1. Click the Ask to create a BUY order; click the Bid to create a SELL order.

  2. Click “T” to transmit the order.

  3. 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 client, to make a reasonable effort to obtain a price for the client that is fair and reasonable in relation to prevailing market conditions. Since IBKR clients 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 client is considering trading.

The order confirmation in TWS.

IBKR's Best Execution policy is designed to attempt to get two or more quotes for each client 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 client with quotes and comparable prices for the specific bond chosen by the client, we provide 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 client selects. After reviewing and evaluating the prices for comparable securities, in addition to the specific security that they have requested, clients 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.

 

Additional Resources