WR Hambrecht & Co. has rolled out OpenBook, an Internet-based auction platform covering new issues in the investment-grade bond market.
The platform, which is open to both institutional and retail investors, officially went live last week, when Dow Chemical auctioned off a new investment-grade bond.
Through OpenBook, Dow raised roughly $300 million in a two-hour window. J.D. Delafield, senior managing director at WR Hambrecht, says that 57 different bidders participated in that initial auction. "Every time a new order was put in, the whole market saw the size, the price and the time that that order was put in, and that built a demand curve, in real time, in front of everyone," Delafield explains. "It's anonymous, so you don't know who put the order in, but you do know the size and the price."
Essentially, OpenBook enables investors to set the price for new investment-grade bonds. "Investors come into the auction and tell us what prices they're willing to pay for bonds...The only thing the system requires is your willingness to put a price on the quantity of securities you want to own, " says Delafield.
Eventually, WR Hambrecht hopes to perform several OpenBook auctions per day. But right now, the firm is jut trying to find an issuer to participate in its second investment-grade bond auction. At some point in the future, Delafield adds, OpenBook will expand to include coverage of high-yield, convertible and municipal bonds. However, he declines to specify the time he expects that expansion will occur. Prior to launching OpenBook, WR Hambrecht had already rolled out OpenIPO-an auction platform for equity initial public offerings.