Traders speaks with Jim Kwiatkowski, CEO of LTX, a Broadridge Company that won Best in AI (Artificial Intelligence) at the 2023 Markets Choice Awards.
Please tell us about LTX and your capabilities.
LTX is a fixed income e-trading and analytics platform that is majority owned by Broadridge. We’ve combined patented artificial intelligence with enhanced execution capabilities to improve liquidity and efficiency in the credit market. Our mission is to use data to enable customers to discover trading opportunities more easily and benefit from more electronic trading.
The first component of our AI offering is our Liquidity Cloud®, an anonymous repository of real-time indications of interest that provides unique pre-trade information. A neural network identifies Cloud Matches, indications of natural contra liquidity for a given bond. Cloud Match Scores measure the strength of the match in terms of price and size.
When there is no contra-interest for a particular CUSIP in the Liquidity Cloud at a particular time, our patent pending Similar Bonds functionality identifies alternate bonds based upon a user’s criteria (sector, coupon, maturity, credit, etc.) that have real-time contra-interest.
Our recently enhanced Dealer Selection Score uses AI to optimize dealer selection. Depending on the execution protocol, our Dealer Selection Scores either connect the buy-side with a natural real-time counterparty based on dealer’s axes and/or interest within the dealer’s client network or, in the absence of immediate liquidity, helps optimize the number of dealers that an RFQ is sent to. In the latter case, analysis is done on the dealer’s current and historical Liquidity Cloud inputs on the target bond, current and historical similar inputs, and platform behavior.
In addition to providing AI-driven pre-trade information, our core offering includes our innovative trade execution protocols which facilitate block trading and price improvement.
How are disruptive technologies, presumably AI and/or blockchain, impacting capital markets? And what is your outlook in this area?
Disruptive technologies like AI have the potential to transform capital markets. In the case of the corporate bond market, approximately 40% of the US market (investment grade) trades electronically compared to other asset classes where 80-90% trade electronically. There is a significant opportunity for the adoption of AI and data-driven capabilities to drive transparency and electronification in relatively opaque markets. As data continues to be made available, liquidity discovery, price discovery, counterparty selection and other critical trading decisions can all be assisted with AI-based analytics.
How can market participants prepare for the future with AI?
To prepare for the growing role that AI is likely to play in financial markets, it is crucial for firms to evaluate the potential to leverage new technologies, enhance data management, and commit to continuous learning. Of equal importance is prioritizing information security. As a Broadridge Company, we are proud to be a trusted partner to the fixed income community and feel that we are uniquely positioned to provide trusted, AI-driven credit trading solutions.
What are your current initiatives at LTX?
To complement our next-generation RFX protocol, we’re offering a data-enhanced version of the industry-standard RFQ. In conjunction with our AI-powered Dealer Selection Score, we have already heard strong positive feedback from customers for its benefits around reducing information leakage and executing larger size trades.
What can we expect from LTX in the near future?
In the coming months we’ll be releasing exciting enhancements that further our mission to help our clients trade smarter. We’re working on an exciting project to make our similar bonds functionality more accessible and actionable. Soon, we’ll also be announcing an innovation we’ve developed to help solve challenges our clients face around information leakage and trading large blocks electronically.
