Overbond releases AI-driven margin optimisation tool

Dan Barnes

Overbond has released an artificial intelligence (AI) powered margin optimisation add-on that integrates with its existing suite of AI-driven fixed income analytics. Sell-side traders using the add-on can potentially optimise their hit ratio and Overbond reports can triple the number of request-for-quotes (RFQs) they are able to profitably respond to with full or partial automation.

Vuk Magdelinic, CEO of Overbond said, “It is difficult for sell-side fixed income desks to be profitable in this environment, so trade automation has become the industry standard. Traders are realising that they can gain a competitive edge by augmenting their trading with AI. Of course, achieving an optimal hit ratio is a key part of maximizing P&L. With Overbond’s AI-driven margin optimisation add-on, sell-side desks can respond to up to three times the volume of RFQs without incurring negative margin on those trades.”

Overbond’s margin optimisation add-on captures various margin optimisation measures and converts them to a unified all-optimised distance. To train the model to the risk tolerance and execution style of the desk it is designed to calculate this optimised distance for all prior categories of RFQs processed by the desk, such as those that are accepted, rejected, covered and traded-away. Using this information, it minimises the distance-to-cover at the point of execution of all new RFQs, based on the best executable price according to Overbond’s pricing model, COBI-Pricing LIVE.

COBI-Pricing LIVE reportedly has a refresh rate of less than three seconds, which the firm claims enables sell-side trading desks to fully automate 30% of their RFQs and execute an additional 20% with trader supervision. COBI-Pricing LIVE has been built to support traders in the automation of trade flow, to mitigate liquidity risk, improve price monitoring and reporting, and increase response rates by 80% to 120% more RFQs. With the margin optimisation add-on, Overbond expects that traders will be able maintain an optimal hit ratio and increase desk P&L.

©Markets Media Europe, 2021