The intellectual property of Katana, which provides trade ideas to bond investors, has been put up for sale by Hilco Streambank. Developed in-house at ING, Katana was a project devised to assist portfolio managers and traders with day-to-day decision making. Driven by machine learning technology, Katana’s adaptive approach to bond market trends use big data to provide positioning insights to professional traders and portfolio managers.
Having proven effective during the preliminary stages, the pre-trade analytics tool advanced from prototype to market-ready in just over a year, and in light of its success, in 2019, ING decided to launch Katana as a standalone business.
Katana monitors the relative credit spread for traditionally paired bonds using data and machine learning to provide insight into bonds’ relative value by tracking market behaviour. There are two main processes involved in the model, one that identifies relevant pairs and secondly, one that identifies dislocations and predicts compressions.
When a divergence emerges in bonds that have historically seen paired trends, Katana will advise that a swap is made to the cheaper offering to capitalise on the correction from the depressed bond price. Katana is reported to predict market compression with around 90% accuracy.
The platform uses similarity factors such as currency, country of risk, credit rating, and sector to identify the pairing of bonds to provide a single similarity score. The bonds are given a present z-score to describe their current disparity, compared to historical data for these pairings. An algorithm is then used to predict the likelihood of compression in the bond pairs spread. The platform also includes a set of filters to help users navigate the opportunity space efficiently.
Currently it looks at opportunities from screening nearly 200 million bond pairings from North America, Europe and emerging markets.
Users include ING, PGGM and Pinebridge Investments. It was also made available via Bloomberg in May 2021.
The platform’s architecture enables it to be a serverless solution through its use of open source and cloud-based technologies. It currently includes:
• The platform infrastructure in Google Cloud fully developed in-house.
• A bespoke interface designed in-house.
• Data science research & development for the model is available including unpublished documentation.
• Software documentation is available describing the technical and operational design aspects of the offering.
• Lists of source coding and software licences is available.
Trademarks, website and content are also included within the sale. Interested parties will need to contact Hilco in writing by 26 November 2021 at 4pm GMT.
Katana CEO, Santiago Braje, could not be reached for comment.
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