Benzinga - by Renato Capelj, Benzinga Staff Writer.
While higher interest rates make bonds appealing, navigating the buying process may be challenging, especially for inexperienced retail investors.
OpenYield emerges as a better way to capitalize on high interest rates. Founded by CEO Jonathan Birnbaum and CTO Hilton Lipschitz, this fixed-income trading platform caters to the resurgent interest in bond investments. It uses recent market structure innovations, including algorithm-enhancing liquidity, to facilitate easier access and trading.
"The existing product experiences leave much to be desired because of underinvestment in the past decade," Birnbaum shared. "We've built a modern marketplace that provides an equity-like trading experience for bonds. We source liquidity directly from algorithms, with 100% live, firm, and instant execution with no minimums, bundled connectivity, and analytics."
Story Behind Thesis: Before OpenYield, the MIT alumnus began his career at Morgan Stanley as a sell-side fixed-income trader and electronic trading product developer. Birnbaum later advanced to chief operating officer and left for the buy-side, moving to Bridgewater Associates to oversee their fixed-income execution.
Ultimately, these experiences fueled Birnbaum’s venture into fintech, including roles at SoFi and Domain Money before OpenYield.
"OpenYield combines all my perspectives from the sell-side, buy-side, and retail brokerage. I thought there was a compelling opportunity to launch a new bond marketplace focused on retail distribution."
The Early Challenges: One of the biggest challenges was finding a technology-focused co-founder, Birnbaum added, noting Lipschitz, who understood the shortcomings of trading venues, was vital to making OpenYield a reality.
"Initial problems also included resolving the cultural dilemma of getting both makers and takers on a platform who care about one another and to create the positive flywheel."
This resonated with forward-thinking market participants, including Flow Traders, TD Securities Automated Trading, and retail brokerages.
"Once we had them, approaching others and selling the idea became easier."
The Existing Players: Incumbents include Tradeweb Markets Inc's (NASDAQ:TW) Tradeweb Direct, Intercontinental Exchange Inc's (NYSE:ICE) TMC Bonds, and BondPoint. Although they dominate, the technology is outdated.
"Our unique point of difference is the protocol. We're 100% live, with no last-look type of liquidity," Birnbaum said. "We also have no minimums. So much fixed income is governed by minimum size and trying to get transactions done. We optimize, focusing on unit economics and small-size trades."
Eyeing The Future: OpenYield is a technology-centric business with lower costs than others. Birnbaum explained that most of the money goes to investing in highly automated technology, compared to traditional costs of operations and sales.
"I've been at the seats at both Bridgewater and Morgan Stanley, turning away other founders with new platforms like OpenYield. So, building a rock-solid thesis was important, and we did that by researching and interviewing market participants," the CEO added. "I hope to see lots of trades flowing through the system, demonstrating we are providing the most value back to these entities for winning their flow. Fixed income is a fractured market, and having a venue that starts to eke out more and more of a market is important."
The key to OpenYield's success is encouraging participation in fixed income globally through the right technology and partners invested in the outcome to make that a reality.
"We're mission-driven about making an asset class cheaper and easier to access, and we view what we're doing as part of laying the groundwork for capital markets infrastructure modernization."
Now Read: Fed Keeps Interest Rates Steady, Announces Slower-Than-Expected Pace Of Balance Sheet Runoff
For more on OpenYield, click here.
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