A new trading platform focused on hard-to-trade segments of one of the most important markets has raised $US10 million from private investors.
OpenDoor Securities will use the funds to improve its connectivity to current customers, according to a statement.
The platform is auction based and is what’s called an all-to-all marketplace for off-the-run Treasurys and Treasury Inflation Protected Securities (TIPS). In plain English, that means the platform hosts auctions for instruments at a particular time.
The startup is trying to tackle challenging trading conditions in what is arguably the world’s most important market. The US government bond market makes up around 30% of the fixed-income market, according to the Securities Industry and Financial Markets Association and American Bankers Association. In a letter to the Securities and Exchange Commission last year, they said the Treasury market is “the most important global benchmark for pricing and hedging spread asset classes and is a key transmission mechanism for US monetary policy.”
However, liquidity in the Treasurys market is divided between on-the-run Treasurys, or the most recently issued bonds and therefore the most liquid, and off-the-run bonds. Off-the-run bonds represent 98% of the total outstanding issuance in the US Treasury market, according to OpenDoor, but account for less than a third of average daily trading volume.
The platform launched April 25, and the firm has seen more than $US60 billion in orders placed since then. The firm has matched “multiple billions in US off-the-run Treasuries and TIPS orders with seamless settlement,” OpenDoor said in a statement.