Overbond launches real-time AI bond pricing trading product

Dan Barnes
Vuk Magdelinic, CEO, Overbond.

Fixed income analytics provider, Overbond, has launched COBI-Pricing LIVE, a new real-time AI bond pricing product. COBI-Pricing LIVE is designed 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 suite of AI algorithms, and is targeting 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. It uses AI models that optimise prices for bonds via various liquidity profiles and perform historical benchmarking and curve fitting.

“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 AI liquidity scoring, COBI-Pricing LIVE tiers trades and determines if these qualify for full-automation, trader supervision, or should not be traded at the current time.

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 uses an a 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 customise models on their internal data. 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.

“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,” said Magdelinic.

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