OpenBook: Overview

How It Works

The auctions are open but anonymous and occur in a defined time window. Bonds are awarded to winning bidders at the clearing spread – the lowest spread over a selected benchmark Treasury security at which there is enough demand to sell all the bonds offered. Investors bid within the min/max spread set by the issuer before the auction. A time stamp on bids is used to award bonds to bidders tied at the clearing spread in the order they were received.

Each investor gets a time stamp when its initial bid is confirmed and accepted. These bids are shared anonymously with all auction participants on a real-time basis. Investors can improve their initial bids and retain their time stamps as long as the improvement is within a specified protected spread range, as set before the auction. These improved final bids are non-public and are automatically entered at the end of the auction. Investors can always move their bids outside the protected spread range and receive new time stamps.

OpenBook is an Internet-based process for auctioning corporate bonds to investors on the Web. Benefits to participants:

• Transparency. OpenBook reveals a real-time, fully visible demand curve for a bond issue as it unfolds, resulting in improved distribution and enhanced liquidity.
  
  
• Bookbuilding. OpenBook is an interactive bookbuilder that gives priority to investors who bid early while leaving the flexibility to place a final, undisclosed bid.
  
  
• Access. OpenBook results in access to bonds, not allocation, with early market orders receiving highest priority for full bond awards.

OpenBook creates a transparent new issue market, offers all bidders equal access to securities, and gives both investors and issuers a “seat on the syndicate desk.”