4.1.3. The Broker’s Broker
A broker’s broker is a municipal bond dealer that specializes in brokering transactions for other municipals dealers. It trades only with other dealers or brokers and never with individual or institutional investors.
Currently, about 20 broker’s brokers add liquidity to the market and facilitate the flow of market information by helping broker-dealers find buyers for their securities in specific market segments. Broker’s brokers work for a fee, and they do not maintain their own inventories.
One way in which the broker’s broker facilitates trading is by arranging auctions for brokers or dealers called bid-wanted procedures.
In a bid-wanted, a dealer asks a broker’s broker to conduct a blind auction on a security it wishes to sell. The broker advertises the bonds to potential bidders through its extensive distribution network, collects the bids as they come in, and repor