The power of data in trading protocol selection

With the launch of various generative AI chatbots, the expectations around AI and its applications have changed. But what about the bond trading world? Can a conventional AI chatbot tell you when to PT or not to PT? No—But the MarketAxess platform can help you decide.

By leveraging our data driven solutions—both on pricing and liquidity metrics—you gain valuable, real-time insights into current market dynamics, giving actionable, tradeable insights into when to PT and when to use another protocol.

The solutions we offer help you choose what the best protocol is to meet your execution objectives. It also guides you to choose the best approach on how to manage your risk—what to trade, when to trade, and how to trade effectively—even if PT is not the best avenue. Our platform does the heavy lifting for you by combining the best-in-class raw data, leveraging our platform and TraX® data with AI-driven metrics like CP+™ and Tradability, to arm you with the tools to achieve the best execution outcome for every trade.

CP+ and CP+ Inquiry are pre-trade TCA indicators informing you of expected costs of trading:

• CP+ is our proprietary AI-powered pricing engine for corporate bonds. It produces an unbiased, two-sided market for more than 33,000 instruments worldwide. With CP+ you know where the market is for a given bond, helping achieve your portfolio construction objectives. CP+ bid-offer spread is a good indicator of the liquidity and market activity on each bond.

• CP+ Inquiry is an expansion of CP+ that is size specific and brings extra granularity to the pre-trade costs of trading, tailored to your sizes. With accurate and real-time data available at both the portfolio and bond level, you can predict and tailor your portfolio trades to your unique specifications.

  • With Relative Liquidity Score, you can stay up-to-date on the liquidity of the bonds in your portfolio and identify illiquid securities. It is calibrated on traded volume in the market and is an indication of market turnover over a period.

  • Tradability adds an order-specific dimension to Relative Liquidity Score when quantifying the liquidity– showing you the depth of liquidity available given the size and direction of your orders. Tradability also informs you of the skew in the market (by looking at the delta between tradability on your side vs the opposite side). It helps you better understand the market’s capacity to fulfil your order. It shows you when the market is right for your PT or whether you’re better off trading this basket as a List.

  • Finally, compare your order size with the traded volume in TraX to obtain a pre-trade estimate of your market’s impact.

With our comprehensive data suite, you have pre-trade estimates of your costs, an overview of the distribution of liquidity allowing you to adjust your list where required by removing or adding bonds. Our data solutions can also be used pre-trade, during the trade, and post-trade to drill into your execution outcomes. Understanding your TCA is key to refining what to trade as well as how and when to trade it.

While the PT is still live, our Outlier Analysis tab on the platform allows clients to visualize the pricing performance line by line. It automatically filters on bonds which are priced further away from CP+. Clients can make decisions efficiently as we created this quick feedback loop on dealer pricing which is highly pertinent for large PT lists. You can also filter the less liquid bond based on our metrics to view the pricing outcomes on those specific items.

For post-trade analysis, we produce a TCA report after the trade is done so that you can conduct deep analysis and look at your PT performance under various criteria. The TCA also allows clients to compare PT execution from 1 trade to another.

With AI-powered analytics at your fingertips—coupled with best-in-class market data and liquidity—there is no better place to trade. Think of it as a one-stop shop for optimal protocol selection.

Continue reading on this topic:

Pre- and post-trade TCA: Why does it matter – Risk.net