November 2024
Fixed Income Monthly Report
Chris Edmonds
President, Fixed Income & Data Services
ICE
It’s the data, stupid: a foundation for robust AI models
In the aftermath of the U.S. Presidential election, there are plenty of questions about the interpretation of polling data. Yet the ‘known unknowns’ like voter turnout means the ability of this data to predict a specific result will likely remain limited.
It’s a very different data story in financial markets. In fixed income, an explosion in available data means market participants are challenged to analyze vast amounts of information in near real time. It’s a task that exceeds human capabilities, where tools like artificial intelligence could be transformative - picture huge advances in algorithmic trading, risk management, or automating best trade execution. Whether applications like this are realized remains to be seen. But we know one thing for certain: AI financial models need a ton of data to learn.
For many market participants, ICE’s evaluated pricing and reference data is appealing not just for its quality and coverage, but because we are an independent source. Importantly, our approach combines both system and human analyses, so we never rely on black box models. Our fixed income offering includes analytics that add supplementary information around the price of a security, providing color to help support fixed income trading through various market conditions. These analytics include Liquidity Indicators, Size-Adjusted Pricing, Best Execution, Transaction Cost Analysis, Continuous Market Depth Indicators and Market Sentiment - tools which help frame out the market and characteristics of a bond, so users can be more precise with how orders are executed, and better identify trading risks and opportunities.
In addition to supporting client AI models, we’re using AI to advance fixed income markets. Here, we’re focused on three areas: improving data precision, timeliness, and helping to scale efficiencies. For example, using AI to extract data directly from documents presents huge gains in all these areas. Already, the attributes of new issue bonds and mortgage documents can be extracted with straight through processing and delivered to client workflows. In another use case, we apply machine learning to deliver spatial precision in assessing physical climate risk for any patch of dirt across the U.S. and globally. In each of these scenarios, the fat finger phenomenon of human error is removed, and the speed of work increases significantly.
AI presents huge potential for financial markets. But it remains a nascent technology, one which needs to be vetted to deliver customer value, tested, and built upon using a sound foundation of data. At ICE, we’re making significant investments to help clients build that foundation - and I’m excited to watch the innovation that follows.
Luminaries to gather for annual fixed income event
Join us for the annual ICE Fixed Income Forum at the New York Stock Exchange on November 21, 2024. This year's forum will bring together experts from across the markets to tackle the challenges and innovations in fixed income, including insights on pricing, climate impact, wealth management, and mortgage markets.
Timely price updates for bond markets
The dominance of the principal-based trading model is fading in favor of electronic trading venues and riskless principal trading. ICE is helping clients adjust to this dynamic by combining system and human analyses to provide a continuous independent stream of evaluations (ICE Continuous Evaluated Pricing™) that process and incorporate market data throughout the day.
Custom index tool demonstration
As demand for custom index strategies grows, ICE’s web-based Custom Index Tool allows users to prototype and share custom indices, perform historical research and analyze data. In addition, users have nuanced control over rebalancing, universe selection, weighting, and the treatment of corporate actions and filters.
ICE and Dun & Bradstreet to launch climate data and analytics
ICE recently announced plans to launch a new climate risk data offering for privately held companies globally. The service will be designed to provide transition risk data, including Greenhouse Gas Scope 1, 2 and 3, and physical risk data on tens of millions of public and private companies - one of the broadest climate data offerings available.
Fixed Income in Focus
In the latest episode of Fixed Income in Focus, BNY's Brian Ruane discusses the implications of SEC rules about US Treasury clearing that will take effect in 2026. What are the benefits for market clearing, default management, and client balance sheets?
Newsletter archive
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Trading analytics available from ICE Data Pricing & Reference Data are a point in time output and as such dependent on and take into account the information available to ICE Data Pricing & Reference Data at the time of calculation. ICE Data Pricing & Reference Data does not have access to all relevant trade-related data or dealer quotes, and the utility of the output may diminish depending upon amount of available data underlying the analysis. The inputs utilized in each of the trading analytics services described herein depend on the methodologies employed by each such service and may not be the same as the inputs used in the other trading analytics services. There are many methodologies (including computer-based analytical modelling) available to calculate and determine information such as Trading Analytics described herein. ICE Data Pricing & Reference Data’s trading analytics may not generate results that correlate to actual outcomes, and/or actual behavior of the market, such as with regard to the purchase and sale of instruments. There may be errors or defects in ICE Data Pricing & Reference Data’s software, databases, or methodologies that may cause resultant data to be inappropriate for use for certain purposes or use cases, and/or within certain applications. Certain historical data may be subject to periodic updates over time due to recalibration processes, including, without limitation enhancement of ICE Data Pricing & Reference Data’s models and increased coverage of instruments. Although ICE Data Pricing & Reference Data may elect to update the data it uses from time to time, it has no obligation to do so.
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Fixed Income
Manage risk, uncover opportunities, and make informed decisions in real-time with ICE’s end-to-end fixed income solutions. Reimagine your fixed income workflow from price transparency & discovery and efficient execution through to performance analysis.