FINANCIAL SERVICES
H2O.ai Empowers MarketAxess to Innovate in Capital Markets
24K corporate bonds scored in real-time globally
Reduced model scoring errors on average by $.66 per bond
MarketAxess is the operator of a leading electronic trading platform for fixed-income securities and the provider of market data and post-trade services for the global fixed income markets. MarketAxess’ Composite+, powered by H2O open source, delivers greater insight and price discovery in real-time, globally, for over 24,000 corporate bonds. Composite+ has won several awards for its use of AI including the Risk Markets Technology Award for Electronic Trading Support Product of the Year and the Waters Technology American Financial Technology Award for Best Artificial Intelligence Technology Initiative. MarketAxess is transforming itself to become an AI company in capital markets with H2O.ai.
Challenges
The lack of liquidity in bond markets has traditionally made predicting bond prices challenging. In order to provide higher transparency and find the most consistent and accurate prices to help traders become more confident as price makers, MarketAxess relied on machine learning to develop Composite+, a proprietary algorithmic pricing engine for corporate bonds that leverages a range of proprietary and industry data sources, with updates up to every 15 seconds.
H2O is an integral part of Composite+ pricing engine and provides some of the fundamental machine learning that makes our algorithms run better and to fulfill our clients' critical liquidity needs with more accurate and timely pricing data within the MarketAxess electronic trading workflow.
David Krein, Global Head of Research at MarketAxess
Solution
Powered by H2O Driverless AI and H2O-3, Composite+ applies artificial intelligence (AI) and machine learning to predict accurate two-way reference prices for more than 24,000 bonds globally. When the most proximate signals are missing, the Composite+ algorithm can still learn to triangulate less predictive features successively. Composite+ is designed to support a variety of trading functions such as pre-trade price discovery, liquidity provision, transaction cost analysis, auto-execution, and crossing. The pricing engine is seamlessly incorporated into all aspects of MarketAxess’ trading workflow, including within its all-to-all Open Trading™ marketplace and request for quote (RFQ) inquiry screens. It is also integrated into the company’s BondTicker® and Axess All® web-based data platforms.
Results
H2O-3 empowered Composite+ to transform low-quality data points into high-quality market data to drive automation and efficiency. The solution that the MarketAxess team has developed over the years offers key benefits to their business:
- At Scale : MarketAxess is able to reprice and track over 24,000 bonds globally.
- High Speed : With Composite+, bonds are repriced at near-time speed (24,000 bonds repriced every 15 seconds)
- Composite+ : increased the accuracy of pricing accuracy prediction and reduced model scoring errors on average by $.66 per bond.
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