Overbond Ltd., a fixed income analytics solution provider, today announced the launch of COBI-Pricing LIVE, the company’s powerful new real-time AI bond pricing product.
COBI-Pricing LIVE has the capacity to process real-time historical pricing data on coverage of over 30,000 securities with a refresh rate under three seconds, making it the fastest in the industry and the first-to-market offering such technology.
COBI-Pricing LIVE is the newest part of Overbond’s innovative suite of AI algorithms, and fills a gap in the current market by aggregating multiple data sources on the client side across trading venues, data aggregators themselves and fundamental and settlement layer data. Bond markets suffer from illiquidity and non-uniform data sources used to price bonds and build credit curves, and fixed income traders require accurate bond pricing that can measure the liquidity of individual securities and enable automatic execution.
COBI-Pricing LIVE provides this requirement by leveraging the power of AI models that optimize prices for bonds with various liquidity profiles and performing deep historical benchmarking and curve fitting. With the entire market expected to see approximately 40% of trading performed by AI algorithms by 2024, COBI-Pricing LIVE is wellpositioned given its intuitive, customizable nature and the fact that it is designed to help traders make more informed buying and selling decisions.
“Both sell side dealers and buy side asset managers are increasingly relying on AI applications to price fixed income securities in live trading and automate part of their daily workflows,” says Vuk Magdelinic, CEO of Overbond. “However, most of the existing fixed income capital market data sources do not have enough coverage to provide traders with a view of true liquidity and price precision that can be executed automatically.”
The bond market, notes Magdelinic, heavily relies on segregated data disseminated between counterparties, which creates fragmented data sets that do not cover the bulk of over-the-counter traded flows. COBI-Pricing LIVE collates and organizes large volumes of disparate data, including non-traditional data sets such as fundamental and settlement layer data. Using novel AI liquidity scoring, COBI-Pricing LIVE tiers all trades and determines if these qualify for full-automation, trader supervision, or should not be traded at the current time.
How COBI-Pricing LIVE works
The Overbond platform first sources raw live trading and fundamental data from a range of suppliers. These include Refinitiv, S&P Global Market Intelligence, ICE, EDI, Euroclear and FINRA TRACE, among others, as well as major credit agencies. It also collates company-level fundamental data, dealer quotations, internal client executed trade records and investor preferences through feedback.
COBI-Pricing LIVE then utilizes an advanced three phase AI algorithm:
Phase one: Generates pricing curves for a specified list of companies with the highest liquidity profile.
Phase two: Uses a “nearest neighbours” algorithm to find similar bonds and companies to generate pricing curves for illiquid issuers
Phase three: Creates individual ISINs pricing and curves for all illiquid issuers using support vector regression models.
Traders can train and customize models on their internal data to find a competitive edge in the market. The COBI-Pricing LIVE output can also be integrated into a data feed via an API, a desktop side-by-side integration with order-management-system (OMS), or viewed on the Overbond Platform as a downloadable table.
COBI-Pricing LIVE’s Key Benefits for Traders
Built by traders, for traders, COBI-Pricing LIVE is designed to eliminate pain points, streamline and automate the trading process. The product does so through the following:
Uses aggregate historical data from multiple sources.
Optimizes pricing for bonds with varying liquidity profiles.
Enables fully automated bond trading workflow with various curve visualizations and front-end trade analytics tools that are integrated with the trader’s desktop.
Assists dealers in predicting investor behavior with buy/sell indicators and boosting their request-for-quote (RFQ) hit ratio with a pricing feed featuring a margin optimization model add-on.
Assists sell-side credit and rate traders with growing their RFQ response volumes with precision and confidence.
Assists buy-side traders with best-execution calculations and the cost of execution in pre-trade monitoring.
“Counterparties are increasingly adopting quantitative investing and liquidity risk monitoring techniques to automate their trading workflows. This includes the consumption of increasing amounts of alternative data and using new methods of fixed
income pricing analysis such as AI analytics like Overbond’s COBI-Pricing LIVE algorithm,” continued Mr. Magdelinic
