Quotes from the news wire:
The traditional model of principal trading by the dealer community as the sole source of liquidity has been materially impacted by increasingly stringent regulations creating balance-sheet constraints and decaying returns, technology can provide us with alternative places to unlock this liquidity. The industry is looking for new ways to deal with these challenges.
Liquidity in the Treasury market is now bifurcated; there remains ample liquidity for the six benchmark bonds but rapidly declining liquidity in the hundreds of off the runs, the Treasury market needs a fully functioning curve to retain its position as a rates standard. Without a standard, you run the risk of further decrease in activity and liquidity.
One of the key objectives of post-crisis regulation was to reduce the risk of banks that were 'too big to fail', but the unintended consequence has produced quite the opposite. We have actually seen an increase in risk concentration among the top firms, the dealer community as a whole is struggling with this transition and we believe OpenDoor has created a model where we can serve clients as both principal and agent which helps to re-liquify the off-the-run market and preserve those deep and valuable relationships.
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