Libre Capital is excited to offer Libre USD I Money Market A1 (LUMA) for STEP to bring institutional grade RWAs on-chain
TrueFi and Adapt3r Digital are thrilled to present our STEP application to bring tfBILL and its ecosystem to Arbitrum!
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STEP Proposal Application from Securitize Markets, LLC (as distributor of BlackRock USD Institutional Digital Liquidity Fund Ltd. (“BUIDL” or the “Fund”) and on behalf of Blackrock)
Franklin Templeton Digital Assets is excited to present our STEP Application to the Arbitrum DAO!
We are happy to answer any questions about our application, please reach out to FTDigitalAssets@franklintempleton.com.
D2 Finance is excited to participate in the STEP program.
We look forward to collaborating with Arbitrum through our Digital Assets Hedge Fund. To bring a robust suite of institutional-grade managed strategies designed to maximize returns by balancing risk and reward efficiently, drawing on our team’s deep expertise in hedge fund management and derivatives.
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HELIX is excited to submit our proposal for the Arbitrum STEP program!
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OpenTrade is thrilled to throw our hat in the ring for the STEP program
Name: Open Trade Technology Ltd
Address (Headquarters): Unit 12 Greenway Farm Bath Road
City, State, Postal Code: Wick Bristol, BS30 5Rl
Country: United Kingdom
Website: https://www.open-trade.io/
Primary contact Name: Jeffrey Handler
Title: Co-Founder, Chief Commercial Officer
Country: United Kingdom
Email:jeff@open-trade.io
Telegram: @coolguychill
Key Information
Expected Yield: 4.75-4.95% APY, net of fees, as of 2 May 2024
Expected Maturity: 1-28 Days
Underlying asset: US 1 Month Treasury Bill
Minimum/Maximum transaction size: $10 USDC/USD minimum | N/A maximum
Current AUM for product: $11,446,076 as of 3 May 2024
Current AUM for issuer: $11,446,076
Volume of transactions LTM: Approximately $11,450,000 USDC (including both deposits and withdrawals)
Source of first-loss capital: Not applicable; lenders have secured interest in the underlying collateral.
Basics and background
- How will this investment improve Arbitrum’s RWA ecosystem?
OpenTrade’s platform would unlock a new RWA ecosystem on Arbitrum with the following improvements:
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White label Yield Products that can be deployed by existing Arbitrum projects: By enabling third parties like exchanges, FinTechs, wallets, and custodians to offer institutional-grade yield products backed by RWAs, OpenTrade would contribute to enhancing the overall quality and reliability of financial products available on Arbitrum. This would attract more institutional investors who seek secure, compliant, and scalable investment opportunities, and allow existing companies and users to take advantage of these RWA-backed yield products without ever having to off-ramp USDC or move to a different chain.
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Diversification of Investment Portfolios: The introduction of RWA-backed yield products allows investors to build diversified portfolios directly within the Arbitrum ecosystem. This diversification is crucial for risk management and provides more options for yield-seeking behavior, broadening the appeal of Arbitrum to a wider investor base.
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Innovation in Collateral and Financial Markets: Providing builders with new forms of composable digital collateral can lead to the creation of innovative financial instruments and markets. This development supports Arbitrum’s positioning as a cutting-edge platform for financial technology.
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Robust Legal and Regulatory Framework: The secure, time-tested, bankruptcy-remote legal and regulatory framework that OpenTrade operates under, managed by regulated investment firms, adds a layer of security and trust. This framework is essential for protecting investments and ensuring compliance, making the Arbitrum ecosystem more robust and resilient.
- Identify key management personnel and individual experience. Also include third parties utilized for managing assets and their qualifications.
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Dave Sutter, Co-Founder and CEO
Dave is an experienced fintech entrepreneur and executive who pioneered the application of blockchain and crypto in financial services and markets, starting in his dorm room in 2013 working on the first bitcoin wallet in the iOS app store. Most recently, Dave served as Head of Network Strategy for Centre, a joint venture between Circle and Coinbase that governs USDC. Before that, he served as Chief Product Officer at the Marco Polo Network, the largest blockchain-based b2b network. Over his career, Dave has worked with many of the world’s largest financial institutions, technology providers, and corporations on building and scaling market leading blockchain-based applications and networks for payments, trade and supply chain finance, treasury management, and transaction banking. -
Jeff Handler, Co-Founder and Chief Commercial Officer
Jeff has spent his entire career in commercial roles for the financial technology industry, specialising in blockchain technology implementations in supply chain finance, payments, and identity. His experience spans across technology startups and consulting firms, including Netki, the Marco Polo Network, Centre, and PwC. Most recently Jeff served as the Solutions Architect for Centre, a joint venture between Circle and Coinbase that governs USDC. Before that he served as the VP of Business Innovation and Global Head of Special Projects at the Marco Polo Network, where he worked on sales and implementation for several large credit facilities with multinational corporations and their supply chains. -
Tom Niermann, Co-Founder and CTO
Tom is an experienced entrepreneur, executive, and engineering leader who brings a deep understanding of technology and extensive experience in building secure enterprise systems in highly regulated industries. Tom has previously led engineering teams at Google, Meta and a range of successful startups. Most recently, Tom was Software Engineering Leadership at Meta where he led a high performing team on Meta’s business products. Before that, He was VP of Product and Engineering at Omniscience, where he built an AI and Machine Learning product for the banking and insurance industries. Tom has a PhD in Computer Engineering from the University of Illinois and currently resides in Silicon Valley California US. -
Maxime de Guillebon, Chief Operating Officer
Maxime de Guillebon is a seasoned executive with over 19 years of experience in the financial services industry, with a focus on digital asset products and innovation. He previously worked at Ripple, served as the Head of Digital Asset Product at BNY Mellon and launched Zodia Custody, a subsidiary of Standard Chartered and Northern Trust and a leading provider of cryptoasset custody solutions for institutional investors. Maxime has also held leadership positions at Standard Chartered Bank in Vietnam, Singapore, Dubai, and London, where he was instrumental in promoting digital innovation within the bank and investing in disruptive technologies. He is a graduate of SKEMA Business School and Coventry University. Maxime’s blend of digital asset leadership and global banking expertise positions him as a key player in the evolving financial services industry.
Service Providers
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Reed Smith LLP: Reed Smith is lead counsel to OpenTrade, responsible for developing and maintaining the legal and regulatory framework underpinning the Treasury Management Product. Reed Smith LLP is a global law firm with more than 1,500 lawyers in 30 offices throughout the United States, Europe, the Middle East and Asia, and has deep expertise in structuring RWA-backed investment products for Web3 organizations.
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Investment Advisor: Five Sigma Finance Ltd. (“Five Sigma”) is a London-based asset management & advisory firm with over $2 billion AUMA. Five Sigma was spun out of a larger firm, AgFe, by OpenTrade co-founder, Michele Bisceglia, to serve as OpenTrade’s dedicated asset management partner, and equips OpenTrade with a dedicated team of experienced professionals that manage the day to day operations of OpenTrade SPC and its segregated portfolios, including its trading activity and the purchase and sale of loan collateral, managing the underlying portfolio of real world financial assets, maintaining cash flow models, and assisting in the processing of fund transfers, loan draws, and loan repayments. Five Sigma is an appointed representative of Capricorn Fund Managers, which is authorised and regulated by the Financial Conduct Authority (FCA).
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Security Trustee: Vantru serves as the Security Trustee, which via the Security Trust Deed holds a fully perfected security interest in the underlying loan collateral and the secured accounts containing loan collateral on behalf of Lenders. In the event of a default, Lenders can instruct the Security Trustee to take ownership of secured accounts and loan collateral held within them to be liquidated or held to maturity so as to repay loans in default, pursuant to the Security Trust Deed executed between OpenTrade SPC and Mulvaney Corporate Services and as referenced in the Master Lending Agreement signed between OpenTrade SPC and Lenders.
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Circle Internet Financial LLC: Circle serves as the custodian for the USDC OpenTrade SPC receives from loans and provides OpenTrade SPC the ability to mint and redeem USDC.
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Broker / Dealer(s): Regulated broker/dealers that OpenTrade SPC executes trades through for the purchase and sale of loan collateral, being US Treasury Bills for this product.
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Cash Management Bank(s): Regulated financial institutions that provide USD bank accounts to OpenTrade SPC. These USD accounts are used to mint and redeem USDC for USD and vice versa.
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Custodian(s): A regulated custodian where the loan collateral for this product is held. USD and US Treasury Bills are held in accounts governed by the FCA’s CASS regulations . The principal objective of the FCA’s CASS Rules is to keep Client Assets safe in the event of a firm’s failure. A fundamental requirement of the CASS Rules is that firms must keep client money separate from firm money in segregated client money bank accounts and register custody assets appropriately.
- Describe any previous work by the entity or its officers/key contributors similar to that requested. References are encouraged.
Described above
- Has your entity or its officers/key contributors been subject to an enforcement action, criminal action, or defaulted on legal or financial obligations? Please describe the circumstances if so.
Not applicable
- Describe any conflicts of interest for your entity and key personnel.
Not applicable
- Insurance coverages, guarantees, and backstops Name of insurer or guarantor Per incident coverage Aggregate coverage
Not applicable; lenders have direct secured interest in the underlying collateral.
- Historical tracking error in your proposed product, or similar to that being proposed Product 2024 YTD 2023 2022 2021
Not applicable
- Brief reason for above tracking error
Not applicable
- Please describe any experience your firm has in working with decentralized organizational structures
OpenTrade was built to integrate seamlessly with the Web 3 ecosystems, which form the backbone of DAOs. This ensures that our solutions can be adapted to the unique frameworks used by DAOs to govern themselves.
OpenTrade is deeply committed to the development of open source software that is critical to decentralized finance that we have co-developed a blockchain protocol which is a fork of Perimiter, an open source blockchain protocol co-developed by Circle Research, a division of Circle, to support USDC lending markets and applications. The protocol is largely built on composable, open-source standards, including ERC-20, ERC-4626, and Verite.
The fork of the Perimeter protocol that OpenTrade runs on is developed and maintained by Open Trade Technology Ltd.
In addition to this open source primitive, OpenTrade operates under a robust, time-tested legal and regulatory framework that has been developed with the counsel of Reed Smith, who has deep expertise in catering to the unique requirements for Web3 native entities like DAOs. Our commitment to working to meet these unique requirements while maintaining a highly secure off-chain operating model and supporting legal structure makes us an ideal partner for Web3 organizations now and moving forwards.
- What is your entity’s current assets under management, assets held in trust, total value locked, or equivalent metric for your legal structuring?
OpenTrade AUM: $11,446,076
- How many of these assets held are present on Arbitrum One, if any?
We are on Ethereum currently but are seeking low cost chains to expand to service our clients. If selected to participate in the STEP program, OpenTrade would launch its products on Arbirtrum One.
Plan design
- Please describe your proposed product, including a description of the underlying assets and, if more than one asset, the proposed allocation among assets and general investment guidelines. Where appropriate, include targeted maturity mix and credit quality. Attach supplementary documents as appropriate.
We want to offer Arbitrum the ability to invest in two of our on-chain Treasury Bill backed yield products, as detailed below.
Flexible Term U.S. Treasury Bill Vault
Objectives and Investment Strategy
The objective of the Flexible USDC Vault is to enable holders of USD Coin (“USDC”), a stablecoin issued by Circle Internet Financial, LLC (“USDC”), to lend USDC against collateral consisting exclusively of US Treasury Bills, USD, and USDC and earn returns close to the US federal funds rate.
Key Product Details
- Lenders enter into open-ended, secured loans with OpenTrade SPC (the Borrower) with US Treasury Bills, USD, and USDC serving as the only acceptable form of collateral.
- The Borrower is a bankruptcy remote SPV managed by an FCA regulated investment firm, Five Sigma Finance Ltd. The Borrower is restricted to using loan proceeds solely for the purchase of eligible loan collateral.
- The portfolio of Loan Collateral consists of 4-Week US Treasury Bills and maintains a weighted average maturity of less than 14 days.
- Loans are made in USDC to the Borrower through the OpenTrade Platform. Loans are open-ended and will pay a variable rate of interest (“ Loan Fee Rate”) over the term of the loan. The Loan Fee Rate is the US Treasury Bill Discount Rate less Fees.
- Loans between Lenders and the Borrower are governed by the Master Lending Agreement, which is executed between the Borrower and Lender during onboarding.
- The proceeds of the loans will be converted to USD via Circle Internet Financial LLC and then used to purchase eligible loan collateral.
- The principal and interest on the loan(s) will compound and automatically be rolled over every day.
- Lenders are permitted to request termination of their loan(s) at anytime, at part or in whole, and the Borrower will liquidate the loan collateral and repay the lender.
More Information of the Flexible Term USDC Vault can be found here.
Fixed Term U.S. Treasury Bill Vault
Objectives and Investment Strategy
The objective of OpenTrade’s Fixed Term USDC Vault is to enable holders of USD Coin (“USDC”), a stablecoin issued by Circle Internet Financial, LLC (“USDC”), to lend USDC against collateral consisting exclusively of US Treasury Bills, USD, and USDC and earn returns close to the US federal funds rate.
Key Product Details
- Lenders enter into short-term secured loans with OpenTrade SPC (the Borrower) with US Treasury Bills, USD, and USDC serving as the only acceptable form of collateral.
- The Borrower is a bankruptcy remote SPV advised by an FCA regulated investment firm, Five Sigma Finance Ltd. The Borrower is restricted to using loan proceeds solely for the purchase of eligible loan collateral.
- Loans are made in USDC to the Borrower through the OpenTrade Platform. Loans have tenors of 28-days and will pay a fixed rate of interest (“Confirmed Loan Fee Rate”) over the term of the loan.
- Loans between Lenders and the Borrower are governed by the Master Lending Agreement, which is executed between the Borrower and Lender during onboarding.
- The proceeds of the loans will be converted to USD via Circle Internet Financial LLC and then used to purchase eligible loan collateral, with eligible loan collateral being US Treasury Bills.
- The principal and interest on the loan(s) will compound and automatically be rolled over into a new 28-day secured loan with the same collateral type. Lenders can request rollover termination for a part or all of their loan and receive USDC back at maturity.
- Lenders are permitted to request early termination of their loan(s) at anytime, at part or in whole, and the Borrower will liquidate the loan collateral and deliver back to the Lender the net sale proceeds of the underlying collateral in USDC less an early withdrawal fee
- The Borrower takes no directional risk on the underlying price of the collateral and its assets and liabilities are always matched 1-to-1.
More Information of the Fixed Term USDC Vault can be found here.
- Do investors have any shareholder, investor, creditor or similar rights?
Yes, investors have rights of a debtholder pursuant to the Master Lending Agreement governing the secured lending between Lenders and Borrowers on the OpenTrade Platform.
Investors are always fully secured throughout the entire transaction lifecycle, and all assets (USD and other eligible loan collateral detailed above) are held in segregated accounts, for the benefit of investors.
- Describe the legal and contractual structuring for your product including regulatory bodies overseeing your business and the product and identifying all legal jurisdictions interacting with your product. Attach supplementary documents as appropriate.
The legal structure for OpenTrade’s Treasury Management Product is secured lending to a bankruptcy remote Cayman Segregated Portfolio Company (SPC), OpenTrade SPC, which is operated by an independent board of directors and an FCA regulated investment firm.
OpenTrade’s Master Lending Agreement (MLA) is a master agreement governing secured lending between Lenders and Borrowers on the OpenTrade Platform, which governs lending activity made through the OpenTrade Platform.
The MLA is an umbrella agreement that defines lending mechanics, rights and obligations of the parties, roles and responsibilities of the parties, definitions, and more.
Each individual Loan made under the MLA is documented via a Loan Confirmation which is a legally binding agreement specifying the amount and key terms of the loan.
The OpenTrade MLA has been adapted for digital asset lending from the Global Master Securities Lending Agreement (GMLSA), a widely used standard legal framework published and maintained by the International Securities Lending Association (ISLA).
- Would Arbitrum’s assets be bankruptcy remote from your own entity and its officers/key contributors? If so, please explain the legal and contractual basis. On a confidential, non-reliance basis, provide any third party legal opinions to support the conclusions.
Currently, all loans made via the OpenTrade Treasury Management Product are made to a single Borrower, OpenTrade SPC, a segregated portfolio company registered in the Cayman Islands.
OpenTrade SPC has been designed to be “bankruptcy remote” meaning its assets would not form part of the bankruptcy estate of any other entity involved in supporting the OpenTrade Platform.
This is to ensure that loan collateral is protected and, in an extreme case, can be recovered by Lenders as secured creditors of the Borrower in a default event.
All loans made via the OpenTrade Treasury Management Product are fully collateralized with eligible loan collateral (US Treasury Bills, USD, and USDC). A Security Trustee holds a security interest on behalf of Lenders in all collateral and the accounts in which collateral is held pursuant to a Security Trust Deed.
- How are Arbitrum’s assets protected vis-a-vis the bankruptcy of the brokerage or applicable financial institution (e.g., bank deposit insurance, securities insurance, etc.)?
OpenTrade SPC is a bankruptcy-remote vehicle, which provides legal and financial isolation from the parent company. This structure ensures a direct secured interest in the underlying collateral assets, safeguarding them in the event that the parent company encounters financial difficulties.
The collateral assets are held in OpenTrade SPC’s account with Intesa Sanpaolo, a global systemically important bank (GSIB) which is governed by the Basel Committee on Banking Supervision given that the bank is critical to ensuring global financial stability. OpenTrade utilises financial institutions like Intessa Sanpaolo to ensure collateral assets are securely segregated from the custodian’s own assets.
OpenTrade’s transactional flow for purchasing and liquidating collateral assets has limited exposure to bank deposits as cash is held temporarily to fulfil the transaction. Much of the investment’s lifecycle is with the custodian which has stringent regulations for the segregation of client assets.
- Does the Issuer issue more than one asset? If so, what is the priority relationship between different asset classes?
Yes, OpenTrade also offers a similar tokenized yield vault structure for Euro-denominated yields backed by sovereign bonds. These vaults are in a separate Segregated Portfolio under the OpenTrade SPC.
We are also able to offer bespoke products backed by a number of different asset classes based on demand.
Below is the current selection of eligible loan collateral for the vault structures.
- Provide a detailed cash flow diagram that shows the flow of funds from ARB/Fiat conversion, investment in underlying asset, payment of expenses, sale of underlying asset, and repayment (Fiat/ARB conversion), including the counterparties and legal jurisdictions involved.
Making a deposit into a Flexible Term USD Vault is a simple process. After you’ve been onboarded, the steps are as follows (note this is via the web app; it can be automated via integration to the smart contracts):
- Connect your whitelisted wallet
- Select the Flexible Term USD Vault
- Click “Invest”
- Input an amount you’d like to lend and click “Approve Spending Cap”
- Approve the spending cap in your wallet
- Confirm the amount and click “Invest”
- USDC will be transferred from your wallet & you will receive vault tokens at the current exchange rate.
- The transfer will show as “Pending Advance” until the Advance Processing Time lapses, after which time it will begin accruing interest.
Making a withdrawal is equally simple:
- Connect your whitelisted wallet to the OpenTrade app
- Select the Flexible Term USD Vault
- Click “Withdraw”
- Input the amount you’d like to withdraw
- Click “Submit Withdrawal Request”
- Approve in your wallet
- After the Withdrawal Processing Time, USDC will automatically be sent back to your wallet and the corresponding amount of tokens will be burned.
OpenTrade’s dedicated investment advisory partner, Five Sigma Finance Ltd, engages in trading activity including the purchase and sale of loan collateral to ensure all loans are fully backed with eligible collateral and that withdrawal requests are processed according to the Lender’s instructions.
The purchase and sale of loan collateral is done through a network of regulated financial institutions and broker/dealers based in the United Kingdom and Switzerland. OpenTrade SPC pays a fee to the financial institutions and broker/dealers based on the amount of collateral purchased and sold through them.
- Describe anticipated tax consequences (if any) in transacting on the underlying and/or receipt of yield.
The Cayman Islands do not impose direct taxes such as income tax, capital gains tax, or corporation tax. As such, Lenders does not incur tax liabilities in the Cayman Islands. Furthermore, there is no withholding tax on payments made to overseas parties, which is relevant for interest payments or similar obligations to non-resident lenders. The tax consequences for Arbitrum would be dependent on your specific facts and circumstances which we do not have knowledge of at this time, so we will need to work through this with you during implementation.
- Describe the process and expected timeline for liquidation of assets, if given instructions to do so by Arbitrum governance.
Lenders are permitted to request early termination of their loan(s) at any time via an Early Withdrawal Request made through the Platform. Loans can be terminated early in part or in whole.
Fixed Term Vault: Upon receipt of a valid Early Withdrawal Request, the Borrower will liquidate the loan collateral proportionate to the amount of the loan to be terminated and deliver back to the Lender USDC equal to the net sale proceeds of the underlying collateral less an Early Withdrawal Request Fee, including principal and interest accrued to date within 2 business days.
Flexible Term Vault: Withdrawal requests can be made any time and are due to be repaid after the completion of the Withdrawal Processing Time, which is 2 business days.
Instant Liquidity is available through one of our market making partners. This would be a bespoke liquidity facility for Arbitrum that can be implemented working with you.
- What amount of first-loss equity will Sponsor provide to ensure over-collateralization, how is the first-loss equity denominated, and what is the source of capital?
The Sponsor provides a 2-5% over collateralization buffer. The source of funds is from the Sponsor’s own treasury.
- Describe the liquidity and stability of the proposed underlying assets, including anticipated settlement times from the sale of the underlying to the repayment of ARB.
US Treasuries are highly regarded as the most liquid assets in the world due to its backing by full faith and credit of the US government. US Treasuries are the most traded securities with a deep and active market with around $25 trillion of outstanding securities and a daily trading volume of under $1 trillion. The liquidity of these assets result in spreads no more than a few basis points. The underlying US Treasuries may be easily sold during market hours, enabling T+0 settlement for investors, such as the OpenTrade SPC.
- If relying on the blockchain for any of the transactional flows, please describe any blockchain derived risks and mitigations.
OpenTrade operates a fork of Perimeter Protocol, a stablecoin lending protocol developed by Circle Research. The transactional flow that is on-chain is the transfer of USDC for deposits and withdrawals. All aspects of the buying and selling of the loan collateral is off-chain. This page links to all of the live contracts.
A cyber exploit of the OpenTrade platform may result in a loss of funds and subsequent default by the Borrower for part or all of its loans.
Mitigant: USDC is only held on-chain for the minimal amount of time required to process loans and is quickly moved in and out custody of Circle Internet Financial for minting and redeeming USDC. Multi-signature wallets are used to process any on-chain transactions. Multiple approvals across OpenTrade SPC, Open Trade Technology Ltd, and Five Sigma are required to approve both on and off-chain transactions. For the majority of the lifetime of a given loan, funds are held in US Treasury Bills with a regulated custodian, which have a very low risk of theft or loss due to their nature.
- Does the product rely on any derivative product (swaps,OTC agreements?
No it does not.
- List all the third party counterparties linked to your assets including and not restricted to prime broker if any, custodian, reporting agent, banks for derivatives or loans and provide primary contact details for the third party counterparties
Five Sigma Finance Ltd. (“Five Sigma”) is the investment advisor that manages the trading activities of the OpenTrade SPCFive Sigma is a London-based, FCA regulated investment firm with over $2B AUMA. They are responsible for managing the day to day operations of the SPV and its segregated portfolios, including advising on trading activity and the acquisition and sale of collateral, managing the underlying portfolio of real world financial assets, cash flow models, and assisting in the processing of loan draws and loan repayments. Five Sigma is an appointed representative of Capricorn Fund Managers, which is authorised and regulated by the Financial Conduct Authority (FCA).
Security Trustee: Vantru serves as the Security Trustee, which via the Security Trust Deed holds a fully perfected security interest in the underlying loan collateral and the secured accounts containing loan collateral on behalf of Lenders. In the event of a default, Lenders can instruct the Security Trustee to take ownership of secured accounts and loan collateral held within them to be liquidated or held to maturity so as to repay loans in default, pursuant to the Security Trust Deed executed between OpenTrade SPC and Mulvaney Corporate Services and as referenced in the Master Lending Agreement signed between OpenTrade SPC and Lenders.
Circle Internet Financial LLC: Circle serves as the custodian for the USDC OpenTrade SPC receives from loans and provides OpenTrade SPC the ability to mint and redeem USDC.
Broker / Dealer(s): Regulated broker/dealers that OpenTrade SPC executes trades through for the purchase and sale of loan collateral, being US Treasury Bills for this product.
Cash Management Bank(s): Regulated financial institutions like Intessa San Paolo that provide USD bank accounts to OpenTrade SPC. These USD accounts are used to mint and redeem USDC for USD and vice versa.
Custodian(s): A regulated custodian where the loan collateral for this product is held. USD and US Treasury Bills are held in accounts governed by the FCA’s CASS regulations . The principal objective of the FCA’s CASS Rules is to keep Client Assets safe in the event of a firm’s failure. A fundamental requirement of the CASS Rules is that firms must keep client money separate from firm money in segregated client money bank accounts and register custody assets appropriately.
Reed Smith LLP: Reed Smith is lead counsel to OpenTrade, responsible for developing and maintaining the legal and regulatory framework underpinning the Treasury Management Product. Reed Smith LLP is a global law firm with more than 1,500 lawyers in 30 offices throughout the United States, Europe, the Middle East and Asia.
Kroll: Kroll is the developer of OpenTrade’s KYC/AML framework and provides outsourced due diligence and compliance services, ensuring that KYC/AML activities are performed to a high standard during onboarding and on a continuous basis. Kroll is the leading independent provider of Financial and Risk Advisory services. It was established in 1932 and is headquartered in New York City.
- Can you explain how is risk management (inv and operational) being done? Can you provide a copy of your risk management policy?
Financial and operational risk management is managed by FCA regulated asset manager Five Sigma, who has several decades experience managing client money for credit and fixed income products.
Technology risk management is handled by Open Trade Technology Ltd. Industry standard cyber risk management policies and procedures are practiced, including MFA, separation of duties, frequent cyber security audits.
Performance reporting
- What are your proposed performance benchmarks? If this is substantially different from the underlying assets, please explain why.
The performance benchmark is the 4-Week Treasury Bills rate. The benchmark rate referenced is an index rate published by a trusted source that tracks the “risk free” rate of return / cost of overnight lending secured by US Treasury securities.
- Describe the content, format, preparation process, and cadence of performance reports. This should include proof of reserves, if appropriate. Please include a sample report.
The Daily Treasury Bill Rates is the reference benchmark published by the Federal Reserve Bank of New York.
- Who provides the performance reports in respect of the underlying assets?
Federal Reserve Bank of New York
- Describe any formal audit process and timing of such audits.
The Federal Reserve Bank of New York is part of the US Federal Reserve System. As such, its data is regarded as highly authoritative and reliable. The production and publication of these rates are under stringent regulatory oversight, ensuring they meet the highest standards of accuracy and transparency.
Pricing
- Provide a copy of your standard contract, or one similar to what is being proposed here.
To be shared privately with the Foundation on request
- Fee summary: Inclusive of the full scope of services requested. Product Fee schedule If asset based Fee calculation for our plan if asset based Annual fee if flat fee Any other fees (including redemption or minting fees)
OpenTrade does not charge a performance or management fee. Our fee structure deducts a Platform Fee which covers ongoing costs of developing and maintaining the platform and legal framework, including technology development, code audits, legal fees, accounting and audit fees, compliance costs, among others.
There is also a fee towards the investment advisor for advising the Borrower in the acquisition and ongoing management of loan collateral and its segregated port.
Total Fees
Fixed Term Vault: 0.30% per annum
Flexible Term Vault: 0.50% per annum
Minting: No Fee
Redemption: No Fee
Investments are made via USDC through the white label solutions the end customer uses which would result in very low gas fees on Arbitrum.
- Describe frequency of fee payment and its position vis-a-vis payment priority compared with other expenses (i.e., cash waterfall)
Lenders do not pay fees directly. Fees are deducted from the gross yield of the underlying. Lenders receive the gross yield less Fees.
Smart Contract/Architecture
- How many audits have you had and name of auditors? Please provide a copy of reports.
OtterSec Audit
2. Is the project permissioned? If so how are you managing user identities? Any blacklisting/whitelisting features?
Yes, only whitelisted addresses are able to deposit and withdraw from OpenTrade vaults. Notwithstanding passing KYC/AML/CFT checks and sanctions screening, OpenTrade clients must be high-net worth individuals, companies, professional clients, sophisticated investors, accredited investors, or the equivalent in the jurisdiction in which they reside and/or operate. Retail users are not eligible for onboarding to OpenTrade.
- Is the product present on several chains? Are there any cross chain interactions?
OpenTrade is currently deployed on Ethereum but is exploring other chains to deploy these RWA yield vaults on. We can and will deploy on Arbitrum if selected.
- Are the RWA tokens being used in any other protocols? Please describe the various components of the ecosystem
Vault tokens are transferable between white listed addresses. We are working with several credit marketplaces and dApps on integrations. Synthetic and wrapped products can be built on OpenTrade vault tokens permissionlessly.
- How are trusted roles/admins managed in the system? Which aspects of the solution require trust from users?
Trust is primarily required in Open Trade Technology Ltd, OpenTrade SPC, and Five Sigma Finance Ltd. Roles are distributed across these three entities whereby no one single entity can perform any action involving investor funds or any other action with a potential financial impact. Collusion between an FCA regulated asset manager, CIMA regulated fiduciary directors, and Open Trade Technology Ltd. would be required to take any action resulting in loss or theft of user funds.
- Is there any custom logic required for your RWA token? If so please give any details.
There is no custom logic required for these RWA tokens as they are compliant to ERC-4626 and ERC-20 standards.
It’s really detailed. Thank you for your patience, your work