OpenDoor Trading, a new platform designed to improve liquidity in US Treasuries, has appointed two bond market veterans, John Brynjolfsson and Kenneth deRegt to its board of advisors.
The platform, which was founded in 2015, seeks to address a decades-old market structure that has become ineffective in meeting new challenges created by regulatory changes.
In an attempt to reduce systemic risk, regulators have heaped stringent capital and leverage charges on warehousing risk assets. As a result, dealers have slashed bond inventory and halved the amount of capital allocated to client trading, according to ODT estimates.
The firm notes that bid/offer spreads in off-the-run Treasury securities have widened by 300% in recent years.
In the new liquidity-strapped regime, ODT says that the sell side-driven structure of the past is no longer viable. The firm integrates buyside and dealer firms into an all-to-all session-based protocol that directly connects buyers and sellers. It provides open and equal access without price discrimination, enabling users to source and create liquidity with lower transaction costs.
The platform uses a combination of existing trading protocols that promote mid-market transactions and order flexibility to a broad range of Treasury traders.
The latest appointments reflect the firm’s attempts to expand its market presence among both buyside and sellside firms.
Brynjolfsson spent 20 years at Pimco where he was managing director and portfolio manager, responsible for three of the asset manager’s largest public funds and launched the Real Return fund, which brought in US$80m of third-party assets.
He left the asset manager in 2008 to become chief investment officer at Armored Wolf, a global macro hedge fund that was wound down in 2015 as a result of a five-year commodity bear market.
Brynjolfsson has written several books on the Treasury market and worked with the US Treasury to design the TIPS market in 1996.
DeRegt spent 20 years at Morgan Stanley where he was global head of fixed income sales and trading and chief risk officer. He was responsible for the bank’s government securities business and a range of international businesses.
DeRegt left the US dealer in 2013 to join Canarsie Capital, a hedge fund that collapsed in January 2015 after losing most of its assets, resulting in founder Owen Li pleading guilty to securities fraud.
“For decades, John and Ken have been leading voices in the fixed income space,” said Susan Estes, president and CEO of OpenDoor Trading. “We are eager to have both of their support and guidance as we continue to grow OpenDoor’s market presence and impact.”