On December 13, the Open Finance Network launched. It’s been a long row to hoe. Juan Hernandez, one of the founders, highlights all the details in this Medium post. They are out of Beta and are trading security tokens. They are the first in the US to do this. Juan and the team he has assembled should be very proud of what they have accomplished in the last year. It hasn’t been easy.
You can trade Blockchain Capital security tokens on the OFN network. They will be adding more security tokens in the coming months. They are also looking at other things they can bring to the market to make it more transparent for everyone.
OFN has partnered with top industry players, such as Huobi, the third largest cryptocurrency exchange in the world, as well as Securitize, Atomic Capital, Harbor, Polymath, Securrency, and TokenSoft. This was a pretty big and intricate undertaking.
Of course, OFN had to run through a lot of government hoops at the SEC and FINRA. I think that entrepreneurs often underestimate the time it takes to deal with regulators. Often, the mentality is “go break things”. The problem is when you innovate in capital markets, breaking things can lead to a lot of unintended problems that can do real harm. Juan and Jim worked very closely with the agencies all through the process. They had crack legal counsel from Pat Daugherty at Foley. It’s not easy being first.
When we demutualized at CME, we were first. I can tell you it was a royal pain in the ass. We waited a year and a half for a ruling from the IRS on one issue and spent thousands of dollars on legal counsel and investment banking counsel waiting. Even after we got a ruling, we had a false start and had to redo a piece of the process again. When you are first, everyone on both sides of the table is fighting through the darkness to make sense of it and to come up with an organized template that first principles say “do no harm”. It’s not an easy process at all.
This is pretty big news for Chicago’s entrepreneurial community too. OFN being first, follows in a path of firsts achieved by places like CME, CBOT, and CBOE. The DNA that exists inside OFN is part and parcel of the community that exists in general around the capital markets that thrive in Chicago. The largest crypto traders in the world are based here at places like DRW and Jump. It makes sense that the market is here too.
There is a good community of startup firms taking root in Chicago. Athena Bitcoin, SeedCx, Bitnomial are a few. Kraken and Coinbase are setting up real bases of operations here.
We see big potential for security tokens. Harbor recently issued a security token based on real estate. I think this will happen more and more. OFN originally was going after the listed but non-traded and very illiquid public REIT market. You might have heard of CFX. WLV invested in CFX and then the company pivoted. We worked closely with them on the pivot. OFN hasn’t abandoned this market. But, we think eventually it will change from the way it operates today.
One thing we really liked about OFN’s old business was its focus on bringing transparency to a dark market. I love the ethos the company has about doing that and it transfers to security tokens.
I also think that the old trading community that I came from might find a lot of opportunity trading security tokens on OFN. Because of the nature of trade right now, the market is not based on speed even though it’s an online market. It’s based on tolerance for risk, and the ability to actually make a two sided market. This is similar to the old pit days when a broker would walk in and yell, “What’s here?” and locals would shout out their bid/ask and compete for order flow. People that can make a two sided market will find a lot of opportunity providing liquidity in security tokens.
If you want to work for OFN, they are hiring.