Recently-launched electronic bond-trading venue OpenBondX, LLC (www.openbondx.com) is implementing an innovative pricing strategy that previously has helped transform other markets.
A twist on the “Maker-taker” rebate pricing model that propelled the successful electronification of markets in other asset classes, OpenBondX (OBX) will incentivize initiators of order flow with rebates that are built into the trade’s settlement. Dealers whose streaming prices result in executed trades on OpenBondX are also eligible for rebates.
Currently live with high-yield and investment-grade U.S. corporate bonds, the OBX Alternative Trading System (ATS) now offers the following rebate/fee structure for liquidity providers and seekers:
- Order initiators of an RFFQ® (Request for Firm Quote®) will be rebated 2 basis points of the notional value per trade (or $200 per million).
- Order responders will be charged only 2.5 basis points of the notional value per trade (or $250 per million).
- Post trade, the rebate or fee is applied to the net settlement value, i.e., the initiators’ cost is adjusted by the rebate of $200 per million dollars and the responders’ cost is adjusted by the fee of $250 per million dollars.
- No additional ticket, transactional or monthly terminal access fees are incurred. This is less than half the typical pricing at electronic venues.
- As OpenBondX is an “all-to-all” platform (open to both buy- and sell-side traders), any subscriber can earn rebates by initiating an RFFQ. And access to the platform is free for all.
OBX believes its economic incentives will attract additional liquidity, order flow and new participants.
“Now subscribers can significantly reduce their trading costs and even earn rebates,” states CEO Alistair Brown. “For example, initiators of RFFQs resulting in trades of just $5MM notional per day earn a rebate of $1,000, which is $250,000 annualized,” he explains.
Electronic trading is gaining traction in the U.S. corporate bond market as investors seek liquidity amid a pullback from the biggest dealers of the debt. While this has prompted new electronic entrants to the market to try to fill the perceived liquidity void, OBX asserts its platform is now the most competitive and advantageous for all participants.
“OpenBondX is the only all-to-all bond trading platform that offers the hybrid RFFQ® order protocol, no platform fees, and low, transparent transaction pricing,” states Brown. “If you’re looking for liquidity, why not route to the destination that actually pays you to route there?”
