Quantifi, a leading provider of risk, analytics and trading solutions, has published a whitepaper that explores the factors driving the trend for electronic trading and how data science and machine learning is automating the market-making decision process.
The credit market is undergoing a fundamental shift in the way trades are executed. Until around 20 years ago, most trades were conducted over the phone. With the arrival of the internet came the development of electronic trading. More recently, we are seeing advances in algorithmic trading where algorithms and computers place orders on both client and dealer sides. We have also witnessed the development of systematic market makers, where computers respond to clients with prices. All these factors give rise to the next generation of trade automation that seeks to reduce human involvement in the market-making process and replace or augment it with artificial intelligence (AI) and machine learning (ML) techniques.
“The electronification of fixed income trading has opened up new possibilities for all market participants. The adoption of algorithmic trading, systematic market-making strategies and advanced trading protocols requires firms to embrace new technologies. Integrating ML and/or AI tools into the trade automation process is emerging as a clear trend,” comments Alexei Tchernitser, Director Analytics Solutions, Quantifi.
Faster moving and complex markets have increased the demand for sophisticated credit analytics and risk management solutions. Traders expect pricing models, including those for structured products, to be fast and match the market. They need tools that provide intra-day sensitivities and what-if analysis. Risk managers require additional stress capabilities and the ability to calculate both trade and portfolio level pricing and risk in real time. Quantifi is the recognised market leader for credit analytics and risk management and offers the most comprehensive credit product coverage available.
“The fixed income market is slowly but surely moving towards automation, and new technology is reconfiguring the operating landscape. Fast, accurate analytics is a prerequisite for any automated bond trading or market-making platform,” comments Rohan Douglas CEO, Quantifi. “Many banks and buy-side firms are replacing outdated infrastructure that can no longer support business innovation and growth. These firms are turning to fintech providers like Quantifi, which specialise in delivering sophisticated model libraries and pricing frameworks built on modern technology,” continues Rohan.
