A Direct Match Redux


After shuttering its doors after its clearing partner stepped away at the 11th hour in August, alternative trading system Direct Match has joined fellow fixed-income ATS OpenBondX in an all-stock deal and plans to begin trading US Treasuries in March 2017, a year after its planned initial launch.

Under the terms of the agreement, Alistair Brown remains CEO of OpenBondX and Direct Match CEO Jim Greco takes on the new role of head of rates and CTO of the new organization. Former Direct Edge CEO William O’Brien, who joined Direct Match as executive chairman in April 2016, will remain executive chairman of the combined firm.

The ATS operator expects to maintain the OpenBondX brand for all-to-all trading in corporate bonds using its request-for-firm-quote trading protocol. Although similar to a typical RFQ, traders using an ‘RFFQ’ enter the corporate bonds which they want to trade along with their desired order size and how long to display the request. However, traders also enter a non-displayed limit price for their order. Other OpenBondX traders may respond to the displayed RFFQ before it expires with their own quotes, with each having their own non-displayed limit price. Once the quote expires, OpenBondX runs a price-size-time priority match to resolve the trade.

OpenBondX also will use Direct Match’s central limit order book to trade on-the-run treasuries using a price-time priority, according to Greco.

Jim Greco, OpenBondX

Jim Greco, OpenBondX

“I’m sure that we will go through a large branding exercise in six months to figure out this thing,” he told Markets Media.

In the meantime, the firms will work out of Direct Match’s Lower Manhattan office on 26 Broadway while consolidating its presence in Equinix’s NY4 data center in Secaucus, NJ.

OpenBondX eventually plans to adopt the Direct Match matching engine, to support its RFFQ trading methodology while Direct Match’s CLOB will use OpenBondX’s middle- and back-office systems, such as risk and client management platforms, as well as its clearing relationship with Wedbush, according to Greco.

“That will take a few months, but over time everything will be running on a single technology platform,” he added.

Greco also expects that it will take a little time to move existing Direct Match clients to the new firm.

“Direct Match has 23 accounts ready to go live, and OpenBondX has about the same trading on its platform,” he noted. “It’s a good mixture of clients with not that much overlap.”


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