OpenDoor Securities has launched a trading platform focussed on the less liquid segments of the US Treasury bond market. Nearly three dozen firms representing more than US$5 trillion of AUM and six sponsor-dealers are already onboarded to participate.
The client base includes central banks, hedge funds, pension funds, sovereign wealth funds, mutual funds, insurance companies, primary dealers, asset managers and trading firms.
The platform provides an all-to-all marketplace for market participants looking for liquidity in off-the-run Treasuries (OFTRs) and Treasury Inflation Protected Securities (TIPS), typically less-liquid markets in Treasuries. These securities represent 98% of the US$13.8 trillion of total outstanding issuance in the US Treasury market, yet account for less than 32% of average daily trading volume, according to OpenDoor’s estimates.
Susan Estes, CEO of OpenDoor, and former global head of Treasury trading at Morgan Stanley and Deutsche Bank, says, “The Treasury market remains bifurcated between the six benchmark issues and the remaining three-hundred plus off-the-runs. As a result, real-money accounts continue to experience increased transaction costs in their core bond holdings through ever widening bid-offer spreads.
In addition to the current participants and the six sponsor-dealers, firms representing another US$16 trillion of AUM, as well as five additional sponsor-dealers, are reportedly preparing to join the platform by the end of Q2 2017.
“Liquidity conditions remain challenging across many asset classes, even in the off-the-run segments of liquid markets such as US Treasuries,” says Barry Cohen, head of Rates Sales Americas at Société Générale. “As an active primary dealer and market maker in US Treasuries, Société Générale actively seeks out opportunities to improve the liquidity we can provide to our customers. We absolutely believe that the OpenDoor platform represents an innovative way to utilise technology to achieve added liquidity in the off-the-run and less liquid corners of the Treasuries market. Being involved on day one shows our commitment to the US markets, our customers, and our partnership with the team at OpenDoor.”
“We’re excited to work with OpenDoor as a Sponsor,” said Charlie Comiskey, head of US Rates Trading at Bank of Nova Scotia, a primary dealer. “OpenDoor’s platform increases the pool of liquidity for the entire market. Scotia acts as a riskless principal, allowing our customers to leverage our clearing infrastructure in an anonymous marketplace. We in turn, also transact anonymously for our principal business. It is a win-win.”
The OpenDoor platform provides traders and institutions anonymous, session-based trading through a dealer-sponsored model to minimise information leakage. Sponsored dealers are investment banks that act as clearing counterparties on all trades for buy-side participants, as buy-side firms are now allowed by the SEC to trade directly with each other. The first auction took place at 11am EST on Tuesday, April 25, 2017.
OpenDoor plans to expand its client base further outside of the US over the next year, into other products and into other major markets across Europe and Asia. It offers free access to its browser-based platform.