LiquidityEdge, the electronic US Treasuries trading venue acquired by MarketAxess, has licensed Mosaic Smart Data to provide analytics as fixed income data becomes increasingly important.

LiquidityEdge was established in 2015 to offer a bespoke electronic trading ecosystem for US treasuries and records daily volumes of more than $25bn.

We’re pleased to announce that we’re partnering with @MosaicSmartData to power our data analytics across our innovative all-to-all marketplace.

Click here to learn more: https://t.co/uY6vmuaKaQ#dataanalytics #datascience #AI #ML #bonds #USTreasuries #Fixedincome pic.twitter.com/2oNhsFC6ok

— LiquidityEdge (@LiquidityEdge) September 26, 2019

Matthew Hodgson, chief executive and founder of Mosaic Smart Data told Markets Media: “LiquidityEdge grabbed market share with leading-edge technology and that aligns with our philosophy.”

MarketAxess, the electronic fixed income venue provider, announced the purchase of LiquidityEdge last month. LiquidityEdge allows liquidity providers to create different streams after analysing consumer flow so they can facilitate trading.

Nichola Hunter, chief executive officer of LiquidityEdge, told Markets Media last month: “As a result, every consumer has their own custom order book. They get connected to the appropriate liquidity provider and have the best experience in a relationship-based bespoke electronic model.”

Hodgson explained that in fixed income, currency and commodities customers may currently get trading analytics on a monthly, or more likely, a quarterly basis.

“This is long after the fact and not in real-time,” he added. “Our analytics empower users by giving them information they have never had and shifts the paradigm.”

MSX, Mosaic’s platform, can generate real-time analytics on any set of fixed income, currencies and commodities from both voice and electronic trading. Hodgson launched the company after finding it impossible to get a consolidated view of data on all trades with one client across all products in his previous roles at Deutsche Bank and Solomon Brothers.

Mosaic Smart Data will provide LiquidityEdge with a suite of analytics to monitor and compare liquidity, aid understanding of transaction flow and participant behaviour, and calculate transaction cost and market impact. Machine learning is used detect unusual activity and allowing preventative action to be taken.

The MSX platform will be cloud deployed and fully managed by Mosaic Smart Data with access by LiquidityEdge under a software-as-a-service agreement. LiquidityEdge will initially use the analytics internally but Hodgson said they will be provided to the venue’s clients in later phases.

Analytics drive institutional trading

Fixed income analytics have become increasingly important according to Greenwich Associates. The consultancy said in a report this month that US fixed income dealers are investing heavily to meet changing investor demand for electronic trading.

*New* Analytics, Algos and AI Begin to Drive Institutional Trading Flows https://t.co/8J0CElyJ2r via @GreenwichAssoc by #LaurenAnderson, #AndyAwad, #JamesBorger, #FrankFeenstra, #DavidStryker pic.twitter.com/IVK2fAxykm

— Greenwich Associates (@GreenwichAssoc) September 18, 2019

One credit investor said in the report that it was important for dealers’ electronic capabilities to enable liquidity to be more accessible: “It’s going to be those that are most empowered to leverage their technological capabilities. The easier the sell side makes it for us to interact with their liquidity, the more liquidity we’re going to take from them, basically.”

Frank Feenstra, managing director at Greenwich Associates, said in a statement that electronic trading in fixed income increased year over year.

“Numerous factors are contributing to this growth, including the ongoing increase in exchange-traded fund trading volumes as well as more odd-lot trading resulting from the broader trend toward index investing,” he added.

Rates investors in the study want dealers who can provide electronic execution across a broad and growing range of products. Credit investors want dealers to improve their execution capabilities, including tighter pricing, quicker response times and effective algo trading.

“Meanwhile, a number of dealers are developing their own systems to compete with third-party platforms that have dominated the market, using APIs to create seamless trading infrastructures and to offer streaming prices to clients,” said the report.

Greenwich continued that some of the platforms are responding to this dealer initiative by aggregating streaming prices on their platform in a bid to remain the electronic execution channel of choice.

Hunter said in a statement: “The MSX platform harnesses the power of our order book to deliver finely grained analysis and actionable insights delivering performance improvements for LiquidityEdge and our users.”

Hodgson said this was the first use of Mosaic Smart Data by an interdealer liquidity venue but other announcements are in the pipeline. He added that another priority for the firm is to continue to deploy MSX in foreign exchange.

“The pain point in foreign exchange is to get a consolidated view across all channels,” Hodgson said.  “We are in discussions with settlement and clearing houses so the market will start to see patterns which are currently invisible.”