A conversation with Zak Lenz, Head of Municipal Securities

Zak Lenz has been with MarketAxess for 17 years, first joining as an Analyst in Client Services during the volatile markets of 2008. Throughout his time at the firm, he has advanced through various roles, including several years on the corporate bond dealer desk where he contributed to IG and HY corporate bonds, US agency, and structured product businesses.

Seeking new challenges, Zak transitioned to the Municipal Securities desk in 2016 and now serves as Head of Municipal Securities. He has seen firsthand significant growth and transformation at MarketAxess, including the recent launch of several new municipal bond products over the past year. As MarketAxess continues to evolve in the electronic trading landscape, Zak's story represents the kind of growth and dedication that has helped shape the company into what it is today.

In fixed income trading, the municipal bond market stands out for its unique characteristics and relationship-driven nature, something that has been a driving force for Zak. When he first joined the muni desk nine years ago, he was surprised at how intricate the market is with a seemingly unlimited number of issuers and counterparties, paired with a staggering number of CUSIPs. He was also enticed by building a business from the ground up and entering a very tight knit community of municipal market participants.

"When we first started, we didn't fully grasp how tight some of these relationships are and how counterparties interact," he admits. "It took a ton of focus to not only get our screens and products right, but, more importantly, to gain people's trust and interest. It has been a very pleasant surprise to not only grow a new business, but make long-lasting friendships in the process."

In his nine years in munis, Zak is in awe of the innovation that has happened during this time. He says that the recent growth of ETFs in the muni space is something that can’t be ignored as they provide unique opportunities and a need for enhanced workflows. The massive growth of Separately Managed Accounts (SMAs) has been another highlight he noted, helping the integration of Auto-X™ in the muni market.

"SMAs have grown to $1.6 trillion now, which is significant growth from only a few years ago," he says. "That part of the market has so much money flowing in and out that they need to move fast, generally dealing with smaller sizes and an overwhelming number of line items,” a part of the market that can instantly benefit from our existing protocols.

The rise of ETFs in the municipal space is another trend influencing MarketAxess's roadmap. "Like SMAs, ETFs are forcing people to need more efficient ways of offloading risk and sourcing bonds. Screens are an efficient way to do that," says Zak.

In the past year, the muni team has been busy innovating to bring clients the best experience when trading munis.

• CP+™ for Munis: At the end of 2024, MarketAxess expanded CP+ to cover municipal bonds. With this integration, MarketAxess clients trading municipal bonds benefit from accurate and unbiased reference pricing for the MSRB-reportable municipal bond universe.

• Portfolio Trading: Earlier in 2024, MarketAxess completed its first-ever portfolio trade for Tax-Exempt Municipal bonds. By making Portfolio Trading available for munis, clients can send lists to multiple counterparties or a single dealer, negotiate price improvements, and trade discreetly on a diversified basket of Tax-Exempt Munis in one singular point of transaction.

• Auto-X RFQ for tax-exempt munis: Auto-X RFQ for Tax-Exempt Munis is a parameter-based automated trading solution for buy-side clients and dealers looking to source liquidity through bid-wanteds and optimize trading. With Auto-X RFQ, clients can engage with a low-touch execution solution on MarketAxess while reducing firm times for liquidity providers.

• Strategic partnerships and acquisitions: To bring greater efficiency to the municipal bond market, MarketAxess partnered with ICE Bonds to connect their respective liquidity networks. MarketAxess also acquired MuniBrokers to connect a broader network of market participants.

Since joining the muni desk, Zak says the biggest hurdle to cross has been the transition from voice to electronic trading and helping clients to realize the efficiencies that e-trading can bring. He says this transition is more of repositioning a mindset than anything.

“We can get all the feedback, build a great tool and present it, but ultimately getting people to move away from one way of doing things to a new way is a big lift and takes time,” says Zak.

But that hasn’t held Zak and the muni team back from innovating and getting in front of clients. He says that despite the slower transition to e-trading, the muni market is ripe for change and most people are embracing this digital revolution.