MarketAxess looks to proprietary data and automation with new offerings

Despite “dramatically” low volatility in the second quarter of the year that wasn’t friendly to fixed income and other asset classes, MarketAxess is setting its sights on proprietary data and automation to bring more clients to its platforms.

During the trading technology provider’s Q2 earnings call on June 20, chief executive officer Chris Concannon highlighted his company’s newer offerings as part of its strategy. “The initiatives we launched this quarter will be critical in addressing the recent challenges we have faced in growing our estimated market share in US high grade,” he said.

Earlier this year, MarketAxess launched the Adaptive Auto-X automation tool in pilot. It builds on MarketAxess’ current suite of automation tools like Auto-X, which provides an automatic RFQ (request-for-quote) execution protocol. Adaptive Auto-X will provide algorithmic workflows to access liquidity across multiple trading protocols. The tool allows a client to submit a larger “parent” order which then breaks into “child” orders that can be placed across different protocols. It’s also pegged to the market, which means users can choose their relative price, and it will remain tied to the market and reprice as the market moves throughout the day.

“Our Adaptive Auto-X algorithms allow clients to build customized trading algorithms and enhance workflows to handle larger size trades,” Concannon said. “Adaptive Auto-X also leverages smart order routing, so we can seamlessly link our liquidity pools and help our clients achieve unique execution outcomes.”

He added that the provider currently has eight clients in pilot, with another three lined up. “Some of them are quite large clients—traditional asset managers—and some are a number of smaller hedge funds,” he said. “We have a number of clients begging to be in the pilot, but we’re trying to keep the pilot small at this point.” The tool will remain in pilot for the remainder of the summer with a plan to roll it out through the fall into 2024.

Automation in fixed income appears to be on the rise as more firms take on a data-driven approach to markets. A recent report from Coalition Greenwich that was based on responses from 720 buy-side professionals found that full adoption of AI (artificial intelligence) and ML (machine learning) in the corporate bond market stood at just 21%, with an additional 34% reporting some adoption. Currently 146 active clients are using MarketAxess’ automation tools.

The fixed-income giant is also looking to proprietary data in bolstering its offering. “We are very bullish on the opportunity in the data space,” Concannon said. New data offerings include Tradability, which will predict the number of responses that would be received on a given bond; Matchability, which is designed to predict the likelihood that a specific bond will find a matching buyer or seller; CP+ Responder, which will predict the likelihood of winning an enquiry based on your unique price and size; and CP+ Enquiry which predicts the best price of an enquiry based on client type and bond size.

AI is also in the mix with the newly released AI Dealer Direct data, which leverages artificial intelligence to determine the best counterparty for a specific trade.

Currently these data offerings will be embedded into MarketAxess’ new trading platform, but Concannon signaled the jury is still out on how best to monetize them down the line. “We do believe over time we’ll be able to monetize them into pure datafeeds for our clients to use in their own proprietary platforms.”