Jim Tovey, CEO and co-founder of LTX, said the technology being rolled out by the AI-powered corporate bond trading platform is becoming more valuable in an environment of rising prices.
Jim Toffey, LTX
In April 2022, financial technology provider Broadridge Financial Solutions formed a new buy-side advisory group for LTX, the artificial intelligence-based electronic trading platform it launched in June 2020. The advisory group consists of major credit traders in LTX client firms including: These include AllianceBernstein, American Century Investments, BlackRock, Invesco, MetLife Investment Management, PIMCO and PineBridge Investments.
Tom McClintick, Head of Emerging Markets and High Return Trading at MetLife Investment Management, said in a statement: “Best execution is a priority, especially given current liquidity conditions. LTX is innovating in data science and a new trading protocol, and I look forward to advising on continued development for the platform”.
LTX set out to work with the buy side about three years ago to find a solution that could improve price discovery and best execution for the part of the market that the RFQ could not reach. The ability to accumulate liquidity has been stressed by the buying side, Tuvey said.
In 1997, Toffey founded the online marketplace Tradeweb Markets and submitted RFQs to the marketplace for quotes and credit. He said RFQ did a good job with smaller trades ranging from $1 million to $2 million across rates and credit, but the majority of fixed income deals were still done over the phone.
“Establishing a protocol to allow multiple buyers of a larger block of bonds is an important underlying structural capability in the market,” Toffey said. “The second thing is that you need a mechanism around price discovery that the RFP doesn’t fit in.”
For example, if there are four participants tied up in an RFQ, there is no tie-breaking ability. LTX combines artificial intelligence with RFX, a next-generation protocol, to help pool liquidity and improve efficiency and execution for corporate bond market participants.
He added, “It reminds me of RFQ being introduced to the market years ago, and everyone said this is really natural and self-evident and I can’t believe no one has done this before.” “That’s what people say when they see this.”
The latest LTX working paper outlines how we use AI to effectively discover liquidity in the US corporate bond market and help our clients #TradeSmarter. #money markets https://t.co/DsCQt3gGQZ pic.twitter.com/Yefcz8g4Lg
– LTX, Broadridge Corporation (LTXtrading) December 10, 2021
Toffey said that more than 20 traders and 50 asset managers have joined the LTX platform and he expects that number to double. The number of RFX sessions has increased steadily since January 2021 and the total bonds offered on the platform are over $4 billion.
“The The buy side has made it very loud and clear that they don’t want to create another platform that non-intermediate merchants and Broadridge are in a unique position to have because we are the back office of many banks and we can build on the role we already have,” he said. “Our theme is to trade smarter.”
Artificial intelligence allows traders to find natural counterparts for trading by providing a ranking and a profile in seconds. Traders can give permission to allow Broadridge to use their data for artificial intelligence to deliver those recommendations back to salespeople and traders. The technology also provides a real-time liquidity score to help participants assess the potential for competition in a trade.
“The innovation that got the buy side excited is that we are creating an anonymous cloud that provides signals if there is a natural interest of the counterparty in the bond,” Toffey added. “It’s about understanding liquidity, helping merchants find and getting to know their natural counterparties, and then creating a more flexible protocol to allow the parties to transact together, and we’re rolling that out now.”
For example, in March of this year, LTX was integrated with Charles River’s Order and Fulfillment Management System (OEMS).
“Enabling the buy and sell side to trade smarter is a really important endeavor and building the network requires a lot of time, effort and investment,” Toffey said. “You need a large liquidity pool that we have built and invested in.”
automation
In credit markets, features that allow workflow automation are second in importance to order management, according to a survey by Coalition Greenwich.
Source: Greenwich Coalition
The consulting firm said in a report: “While a significant focus has been placed on the actual implementation electron of fixed income products over the past decade, the 1920s show a strong focus on digitization on a larger scale. This means that even dedicated and illiquid products have a trajectory Towards Automation — A strict contract of e-commerce expectations, with many writing off such products as “impossible” to convert to electronic.”
The lack of integration with downstream operational processes and data aggregation and normalization causes the greatest frustration among study participants.
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