This article was written by Rob Simek, Head of Business, Real Time Pricing, and David Krein, Head of Central Pricing Research, CTO Office, at Bloomberg.
Intraday pricing in fixed income is particularly challenging as information is fragmented, requiring investors and traders to review multiple market observations from disparate sources. For bonds with reasonable liquidity, this might require navigating across different screens to distill indicative dealer quotes, live executable prices, and consolidated trade reports, all of which continue moving in real-time.
For less liquid and illiquid bonds, the search can be far more challenging. Information is likely to be thinner and aged, and requires looking at adjacent bonds and market betas (such as indexes and ETFs) to establish reasonable pricing guideposts. Of course, this is for a single bond and does not easily scale for portfolios or lists that might run into the tens or hundreds of bonds.
To streamline access to this information, Bloomberg recently launched IBVAL Front Office, an intraday pricing solution that uses a machine learning model designed to handle the intricacies of consuming billions of ticks of market data to produce frequent pricing for real-time trading decisions. IBVAL was carefully built to address both usability and accuracy considerations so firms can operate faster in increasingly automated fixed income markets, instead of spending time wrangling pricing from disparate sources.
Access at every point
When the fixed income trading community starts their day, many start it on the Bloomberg Terminal. To ensure IBVAL neatly fits into credit traders daily workflows, traders only need to load a security on the Terminal then select IBVL PCS as their preferred pricing source to view current and historical price ticks. As fast as every 15 seconds, traders can view current pricing on nearly 30,000 TRACE eligible USD, high yield and investment grade corporate securities, and can see a new bond issue minutes after the security is available for secondary trading. IBVAL is constantly innovating and will continue to expand coverage to include EMEA, APAC and emerging markets.
IBVAL is also available via Bloomberg’s real-time market data feed, B-PIPE, so clients can readily integrate intraday pricing data into their trading desk or across their enterprise. To round out all access points, IBVAL pricing is accessible through Bloomberg AIM, a leading buy-side order and investment management technology solution, ETOMS, an EMS that provides sell-side fixed income firms with connectivity to electronic markets and trading tools, as well as trading solutions and automation tools, like Rule Builder (RBLD).
Intrepid quality
When it comes to ensuring accuracy, IBVAL pricing is systematically streamed throughout the day to address outliers, spikes, drifts, and jumps in price, ensuring high-quality results that support real-time trading needs. IBVAL takes into account a tremendously high volume of data that ticks throughout the trading day. Developing the solution required years of work by Bloomberg’s engineers and financial experts as they sought the most effective way to sort and manage this data, and train a machine learning model to accurately analyze it all.
The ML model was deliberately selected to contain different market regimes so it could learn the relationship between highly specific data sources, and is re-trained frequently to learn new relationships. The result is an intraday solution carefully designed to handle billions of data points to output rapid, reliable pricing.
The unique pricing insights IBVAL provides and are already driving innovation in portfolio trading and ETFs, algorithmic pricing, and automation. However, while IBVAL was designed for today’s expectations, it will only continue to evolve and grow in the months and years to come.
Bloomberg
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