How Advancing Technology is Empowering Bond Trading

How Advancing Technology is Empowering Bond Trading

By Capital Markets CIO Outlook | Thursday, December 05, 2019

Bond TradingAs more bond traders reap the benefits of technologies, emerging platforms will be launched with further sources of liquidity.

FREMONT, CA: Fixed-income securities like corporate bonds, government bonds, preferred company stocks, and certificates of deposit can diversify an investor’s portfolio as they reduce the overall risk of asset allocation or investment strategy weighted heavily in the stock market. Investors tend to rely on fixed asset class more during economic downtime. Given the importance of bond trading, emerging technologies are enabling efficiencies that allow bond managers to transform the st

Fixed Income Trading

ate of their investment operations.

Bond trading is now starting to catch up.  Automation plays a crucial role in improving several processes in the fixed income cycle. The worker employed in a middle-and-back-office process has many repetitive, routine tasks. RPA automates exception handling to create and send alerts based on exception criteria. It also eliminates the need to feed data to systems manually. RPA also improves process quality and processing volume by reducing the potential for human error.

Innovations within fixed-income markets are made with the help of Artificial Intelligence (AI) and machine learning. AI algorithms can be used to analyze and identify trends within data sets. Algorithms can do this far quicker than humans, regardless of their experience or knowledge of the markets. This analysis allows a bond trader to identify changes in bond price and security and make qualified decisions. Technology can also save time and give previously unknown sources of liquidity for bond traders. Apart from the above, the sentiment analysis of news stories about bonds is increasingly implemented. Machine learning is applied to rate to each story about a bond, and an end score can then be given to each bond. Traders can then use this data to analyze how bonds are likely to fare before the markets even open.

Developments in technology are thus poised to dramatically change the bond trading landscape over the next few years.

See Also: Top Artificial Intelligence Solution Companies

Weekly Brief