By Flora McFarlane.
Trumid has announced the launch of its new service, the Fair Value Model Price (FVMP), for continuous bond pricing which produces a price for around 22,000 corporate bonds every five minutes from multiple data sources.
Through providing a continuous source of pre-trade transparency, Trumid is hoping that the new platform will increase trader confidence, ultimately improving liquidity.
A product of Trumid Labs, the FVMP has been in a beta testing phase for nine months, with reports on the performance of the model available on the company’s website for the past three months of back-testing, as well as an opportunity to test the model out.
Speaking to The DESK, Jason Quinn, head of product development, outlined the approach of the regularized next trade metric (RNTM), in which the venue provider can use the continuous data to view specific types of trades, compare it to the TRACE print, and apply it to observations of overall absolute error.
The data on specific types of trades, which Trumid has chosen as dealer-to-dealer trades of over US$1 million, is divided into liquidity measures, to provide information on performance of the platform.
“Even if you don’t want to use the FVMP model, we’ve made a step forward into showing how products like these should be assessed,” says Quinn.
He also states that anyone interested can use the model to view the fair value of corporate bonds at the time. Discussing the potential uses for the model in light of the changing regulatory environment, Quinn says that a reliable objective and continuous bond pricing source is important to Trumid and its clients, regardless of what he describes as the ‘fluid’ regulatory backdrop.
“You’re going to need some measure of where a bond might trade, and it will apply in some way but the landscape will continue to change,” he says.
Another possibility for the service, Quinn says, is in the provision of market intelligence, which could see data produced on the biggest winners and losers in the marketplace, which would enable clients to understand what is happening in the market. If the demand is there, clients may be able to integrate the FVMP model using both platform integration and market data integration.