Platform Profile: OpenBondX04.06.2016
Alistair Brown is co-founder and CEO of OpenBondX.
1. Assess the state of your corporate bond trading platform – what were the primary milestones/accomplishments over the past year?
Preparing for launch in U.S. corporate bond trading for both High-Yield and Investment-Grade, OpenBondX offers a more efficient way for investors to electronically access liquidity, price improvement and reliable trade execution:
• Our “all-to-all” anonymous trading platform enables any institution that wants to buy or sell to interact anonymously with anyone else. For example, buy-side firms can trade with other buy-side firms, with sell-side firms and with dealers.
• OpenBondX (OBX) has engineered a new protocol with hidden limit pricing, called RFFQ (Request for Firm Quote). Our RFFQ order type eliminates price leakage and enables price improvement.
• Full anonymity from trading through settlement protects the identity and privacy of all OBX participants.
2. What end-user/buy-side challenges are you addressing, and how?
The existing RFQ model exposes such information as when institutional firms are buying or selling a specific name and at what price. This can lead to higher costs for larger trades or illiquid bonds and even expose proprietary strategies. Our exclusive RFFQ with anonymous matching functionality prevents such exposure.
The platform is specifically engineered to prevent ‘gaming’ and ‘fishing’, which are especially prevalent in today’s electronic High-Yield markets.
Another challenge we address is the ongoing quest for liquidity in a fragmented market. OBX participants gain equal access to a centralized marketplace with new and unique liquidity providers.
3. What are your key current initiatives?
We’re rolling out an innovative pricing model that incentivizes all participants. In particular, we expect our rebate pricing for High-Yield trading to attract active ETF component participants who desire firm, automated trading with ultra-low pricing.
4. How would you characterize the future of the corporate bond trading platform business (broadly), and your business specifically?
Regulatory changes and advances in technology have driven the electronification of corporate bond trading and engendered the rise of alternative trading systems (ATS). While the percentage of corporate bonds traded electronically is relatively small (~20% for IG, 6% HY), year-over-year growth is in the triple digits. Also, while there has been resistance by some major bond trading platforms to connect to ATSs, we expect that end-user demand will force change. And with the largest rise in trading volumes via all-to-all platforms, the future looks bright for OpenBondX.
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