In other news, ICE expands wireless efforts, Crypto assets might hurt U.S. markets, and RedBlack has a new customer in Colorado.
Overbond Adds A.I.-Based Functions to Trading Engine
Overbond, a vendor focused on automation for credit trading, reports that it has added an artificial intelligence-based margin optimization function to its automated trading system to help sell-side, fixed income desks “optimize their hit ratio and increase the profitability of automated fixed income trading,” officials say.
Currently, automated fixed income workflows help traders “discover price and liquidity, but often required trader intervention to ensure trades adhered to the desired trade margins of the desk,” according to Overbond. “This need for human intervention created a workflow bottleneck and prevented full automation for many trades.”
Overbond officials say that they have fixed this problem “by fully automating the margin-optimization function … Traders can now train Overbond’s automated system to optimize their hit ratio according to the desired trading parameters of the desk,” according to vendor officials. The new optimization function “increases the number of trade inquiries that traders can respond to without trader intervention.”
The Overbond margin optimization model “incorporates variables that give insight into security, issuer and macro-level market risk and ensure that the automated margin is sensitive to intra-day risk movements,” officials say. “This data is collected from data vendors such as TRACE and includes bond-specific data such as coupon and amount outstanding, issuer-specific data such as quote counts and the volatility of the mid-price for the issuer, and sector-specific data such as the volatility of the bid-ask spread.”
Accounting for trade size as part of full automation for trading is “an important factor in pricing and determining the desired margin,” officials say. “To address this, the Overbond margin model estimates the total market capacity per bond, which the model then uses to isolate the margin sensitivity to trade size.”
Market risk and capacity can be calculated “from data available to all market participants, but desks gain their competitive advantage through the unique parameters they use to make their trading profitable,” officials say. “Any fully automated trading system must incorporate these parameters, so Overbond integrates desk-specific execution records into its analytics, allowing automated trading to adhere to the desk’s execution style, bias and margin approach.”
ICE Grows Wireless Efforts in Bergamo, Frankfurt & London
Intercontinental Exchange, Inc. (ICE), an exchanges company and owner of NYSE, has announced that it will be offering more market data and private bandwidth services via wireless links to customers in Bergamo, Italy, Frankfurt, London, and within the London metro area, officials say.
With Euronext in mind, the effort is intended to provide customers in trading hubs across the U.K. and other parts of Europe with more low-latency performance and connectivity solutions, officials say.
“Following Euronext’s migration to Bergamo, ICE is planning to expand its wireless network and will connect markets in London and Frankfurt to the new Euronext location,” officials say. “Similarly, ICE plans to add the new London Stock Exchange data center in the London Docklands to its wireless portfolio when it goes live next year.”
This expansion of offerings demonstrates ICE’s determination “to include data centers that are important to the trading landscape in its portfolio of services and provide customers with local and cross-border connectivity between major trading hubs,” officials say.
“ICE’s expanded wireless capabilities in Europe highlight our commitment to our customers and the industry to connect to the new data centers in Bergamo and London,” says Margaret Niche, head of ICE Global Network, in a prepared statement.”
ICE launched an ultra-low latency wireless offering in April 2021 for the London Metro and Frankfurt markets, officials say. “The solution uses purpose built wireless infrastructure in Europe to help customers meet the increasing demands they face. ICE’s wireless offering comprises private bandwidth along with market data using ICE’s proprietary protocol, which is engineered for easy integration and includes a comprehensive fiber backup.”
Crypto Assets Could Disrupt U.S. Financial System: Report
Janet Yellen
Crypto-asset activities could be risky “to the stability of the U.S. financial system” and need regulation, including enforcement of existing laws, according to a new report from the Financial Stability Oversight Council, part of the Treasury Department.
The just-released “Report on Digital Asset Financial Stability Risks and Regulation,” reviews the financial stability risks and regulatory gaps that are posed by types of digital assets and provides recommendations to address such risks, officials say. The report is in response to an executive order from the Biden White House.
“This report provides a strong foundation for policymakers as we work to mitigate the financial stability risks of digital assets while realizing the potential benefits of innovation,” says Secretary of the Treasury Janet L. Yellen, in a prepared statement.
“The report concludes that crypto-asset activities could pose risks to the stability of the U.S. financial system and emphasizes the importance of appropriate regulation, including enforcement of existing laws. It is vital that government stakeholders collectively work to make progress on these recommendations,” Yellen says. The full report can be found here: https://bit.ly/3M8Ktup
Colorado Firm Adopts RedBlack for Rebalancing & Trading
Registered investment advisor Obermeyer Wood Investment Counsel has implemented a portfolio rebalancing and trading platform, dubbed RedBlack, from vendor intelliflo, to improve the efficiency of its trading efforts for clints, officials say.
Obermeyer, based in Aspen and Denver, Colo., “previously relied on legacy processes to manage rebalancing but decided to implement intelliflo’s RedBlack,” officials say.
“At Obermeyer Wood, we understand the importance of leveraging technology to operate as efficiently as possible. RedBlack allows us to execute trading and rebalancing quickly and accurately, improving productivity and helping us avoid potential mistakes. The solution has strongly supported our growth and positions us well for future scale,” says Roger Hennefeld, vice president, trading and investments for Obermeyer Wood, in a prepared statement. The firm has approximately $2 billion in assets under management (AUM).
The RedBlack system offers “rebalancing and trading capabilities with portfolio monitoring, pre-trade and post-trade compliance, and order management,” officials say.
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