But that doesn’t mean it can’t be done, and this year, OpenDoor, a Jersey City-based US treasuries trading platform, has shown the way. According to OpenDoor, the US treasury market is facing a “liquidity imbalance”: The six on-the-run (most recently issued) treasuries account for less than 2 percent of the total $14 trillion of outstanding supply, although they represent 69 percent of the total trading volume. Meanwhile, off-the-run issues (those securities issued before the most recent issue) comprise the remaining 98 percent of the market, illustrating the dearth of liquidity. The OpenDoor platform, the first session-based, all-to-all, anonymous trading platform for treasuries, was designed to address this issue. It has just over $5 trillion in engaged assets under management (as of February 2017) with another $15+ trillion in its pipeline to be activated imminently.
The platform is structured to partner with primary dealers for clearing and settlement, a prerequisite for onboarding central banks that hold around half of all outstanding securities. Unlike the majority of request-for-quote systems, single-dealer platforms and central limit order books, OpenDoor directly connects buyers with sellers, providing open and equal access with no price discrimination. Prices for institutional investors, traders and dealers are improved through trades mainly transacted at mid-market levels, while the platform’s internal trading protocols ensure no information leakage.
The platform is available to sell-side firms that are Fixed Income Clearing Corp. netting members, allowing end-users to continue settling trades with their choice of sponsor. They incur no costs to access the platform, but instead pay a volume-based transaction cost included in the clearing price of the transaction. OpenDoor, whose clients include central banks, hedge funds, pension funds, sovereign wealth funds, mutual funds, primary dealers, asset managers and trading firms, plans to expand its reach outside of the US and into other European and Asian markets during 2018.
Previous recipients of this category include Green Key Technologies in 2015, while R3 was last year’s recipient.
Bryan Cross, who heads UBS Asset Management's QED group, joins to discuss alternative data and AI.Subscribe to Weekly Wrap emails
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