Gregory P. Knapp, head of sales and trading in Dillon, Read & Co.'s municipal finance department, is relinquishing his post. His responsibilities will be assumed by Kenneth Schmidt, head of public finance.

In a telephone interview last week, Schmidt said Knapp may remain at the firm in an as-yet unspecified advisory capacity.

"It would be improper to report that Greg is leaving or retiring," said Schmidt. "We're trying to work something out where he will remain with the company, but at this point he may or may not be leaving."

Knapp did not return phone calls for comment.

Meanwhile, Peter R. Taylor is said to have left the firm's municipal trading desk.

It's unclear whether Taylor's departure was voluntary, but it comes at a time when layoffs are sweeping the industry.

With the number of new municipal issues and refundings projected to decline further in 1995, many municipal finance departments are looking at ways to cut costs and maintain market share.

Last week, PaineWebber fired as many as 16 bankers to make room for Kidder, Peabody & Co. executives. The week before that, Goldman, Sachs & Co., experiencing one of its most dismal years since 1990, let go 900 employees.

"It hasn't been a great year for the bond market," said one municipal bond executive.

Dillon Read ranks 14th among the nation's municipal bond underwriters as of September, and has been careful in its approach to business. This year it opened a sales and trading office in Boston, and it plans to "expand selectively," according to Schmidt.

"It's all a juggling act," said one executive at a rival firm. "Do you add people, cut people, open new offices in strategic areas? Only time will tell if these decisions have the desired effect."

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