IMD & IRD Awards 2023: Best AI/machine learning data initiative—MarketAxess

Overview

Composite+ is MarketAxess’ AI-powered reference bond pricing engine. It solves the difficulties of accessing and defining pricing information in illiquid markets by providing accurate and transparent bond pricing in real time.

The solution

Composite+ updates every 15 to 60 seconds and generates over 30 million prices per day by combining Finra’s Trade Reporting and Compliance Engine (Trace) and Trax data with proprietary MarketAxess platform data and advanced AI technology. It covers 100% of the global bond market. Composite+ seeks to produce an unbiased, two-sided price by calibrating to dealer-to-client transactions, bringing pricing continuity to otherwise opaque markets. It supports pre-trade price discovery, transaction costs estimations, algorithmic price making, portfolio trading, session matching, auto-quoting, and auto-execution capabilities. Clients can access the pricing engine through MarketAxess’ platform, via API, or via Microsoft Excel add-in function.

Secret sauce

Composite+ provides accurate and reliable bond pricing information. By leveraging its range of data, Composite+ offers predictive modeling and insights to provide optimum pricing accuracy and help drive strategy. It prices even the most illiquid bonds, helping traders get a single price on a basket of bonds, and helping portfolio managers assess the cost of taking a position in a bond, to support index formation and portfolio construction. The aggregate of data, speed, and flexibility of this tool gives users an edge in the increasingly competitive marketplace.

Recent milestones

• Composite+ has extended its product coverage in emerging and local markets and US rates and has expanded access to proprietary data and increased accuracy.
• Enhancements over the last year have helped expand pricing beyond 90% of most liquid bonds so that it now consistently prices over 250,000 bonds, covering 100% of eligible trade activity across the covered global, corporate, and emerging bond markets.

Future objectives

• Expanding Composite+ market coverage into local markets and municipals
• The firm is projecting considerable growth from new tools that are fed from the Composite+ datafeed, such as Composite+ Responder, which helps traders respond to requests for quotes (RFQs) by offering pre-trade analytics with more than 300 scenarios per bond. New offerings such as TRSY Composite+, Muni Composite+, Loan Data, and Repo Data are also set to drive growth during 2023.
• Composite+ will be the backbone of MarketAxess’ new algorithmic workflow, Adaptive Auto-X, which allows clients to systematically access broader liquidity across multiple trading protocols.

Why they won

MarketAxess wins the best AI/machine learning data initiative on the back of its Composite+ bond pricing tool designed specifically for the credit and rates markets. Extrapolating consistent and accurate prices in these markets is a challenge for all capital markets firms due to the over-the-counter trading model used to trade the vast majority of securities constituting these two asset classes. This challenge is even more acute when it comes to thinly traded securities. Composite+ addresses this challenge by producing two-sided (bid and ask) prices based on dealer-to-client transactions, which provides much-needed transparency in what are traditionally opaque markets.