LONDON, Sept 15 (IFR) - OpenDoor Securities, a start-up
platform for off-the-run Treasury and TIPS notes, has hired
Michael Paulus as a senior managing director ahead of the
platform's launch later this year.
Paulus brings 34 years of Treasury experience, having held
positions in the US Treasury and the Federal Reserve Bank of New
York and more recently a series of posts in global banks.
The platform provider, which recently closed a US$10m
funding round, aims to address the severe dearth of liquidity in
off-the-run Treasury notes. The latest hire comes as the firm
prepares to test its technology with a growing list of clients.
According to OpenDoor CEO, Susan Estes, launch is slated for
later this year, though the firm could extend that timeline to
avoid going live during the quiet holiday season.
"The technology piece is nearly complete. We will begin our
beta testing in the form of mock auctions in the coming weeks"
Estes told IFR.
"Presently we have docs in place with a number of
sponsor-dealers, central banks, investment funds, pension funds
and mutual funds, with many more in the queue. Our focus is on
achieving critical mass at launch."
Liquidity in off-the-run-Treasuries has been decimated by
Basel III capital rules that have caused banks to step back from
market making activities as well as monetary easing measures
that have seen central banks lock up vast quantities of
high-rated government debt.
The Federal Reserve is currently sitting on US$2.4trn of
Treasury securities - more than 18% of total outstanding. In
some off-the-run securities, that is as high as 70%, effectively
shutting down opportunities in some parts of the curve.
"OpenDoor has been designed to help restore liquidity to
off-the-run Treasuries and TIPS. We see ourselves as part of a
broader solution," said Estes. "Our trading protocols encourage
larger block trading, which is nearly impossible to execute
reasonably within today's existing market structure."
According to Estes, the problem has become more acute in the
last two years. Off-the-run securities currently account for
just 31% of Treasury trading compared to 40% two years ago.
"The loss of liquidity in off-the-runs, which represents 98%
of outstanding notional issuance, is being played out in wider
bid-offer spreads and increased execution costs for
institutional investors which are then down-streamed to the
individual," said Estes.
"When a large mutual fund or pension fund incurs higher
execution costs, it is the individual investor or retiree that
ultimately pays the price in lower returns."
The new venue offers session-based all-to-all trading that
sees dealers sponsor clients onto the platform, where they can
In his new role, Paulus will be responsible for
strengthening relationships with central banks and expanding the
platform's reach to new participants.
Although focusing on public and private sector clients
globally, he will have a particular focus on Asia. Paulus will
also work with regulatory institutions globally to discuss
liquidity challenges in the Treasury market and He will report
directly to Rob Grillo, president of OpenDoor Securities.
Paulus was most recently head of public sector for JP Morgan
in Hong Kong where he was responsible for creating the bank's
public sector group across the Asia Pacific region. Prior to
that he held positions at HSBC and Citigroup.
In 2000 he was appointed by President Clinton as the deputy
assistant secretary for federal finance at the US Treasury
Department. His responsibilities included managing the debt of
the US government as well as advising senior members of the
administration, and Treasury officials, on financial market
He began his career at the New York Fed as an economist and
subsequently became chief dealer of the foreign exchange desk.
"The US Treasury market faces some of the largest pain
points of any sector in finance right now, and OpenDoor has
developed a solution that will adequately tackle these issues
and balance a market that has been bifurcated for years. I am
very excited to join Susan and the strong team she has already
put together," said Paulus, in a statement.
OpenDoor has also hired Matt Corsaro as a director of sales.
Corsaro joins from Tradeweb, where he managed MBS and US
Treasury relationships. He also held trading roles at Bear
Stearns and Prudential.
Kam Hing Wong has been appointed as vice president for STP &
trade support. Most recently he supported Deutsche Bank's future
& option FIX execution offering, where he was responsible for
client connectivity, support and certification, and system
(Reporting by Helen Bartholomew)