Smart Order Routing Case Study

The Concept: Introduction

Development: The Process

Overbond, working in conjunction with trusted partners from both the Buy and Sell side has developed a revolutionary new order routing system, with AI enhanced routing logic that maximizes execution probability and gives the trader full visibility of how the order will be broken down.

Phase 1 Research & Feature Development

1. Research key market indicators
2. Develop and test potential features for use in the model
3. Test features and observe meaningful correlations

Phase 2 Model Training & Fine Tuning

1. AI model pricing

Front-end interface developed to incorporate side by side visualization of the calibrated intra-day COBI pricing model and the Build Plan output by the Smart Order Routing algorithm:

• Intermediate results delivered based on live size/price information, confidence level of the modeled price, liquidity score, timescale and implied firmness
• Features such as Total Market Capacity, Dealer Inventory & Leading Indicators

1. AI model for margin optimization

• Modelling trained on a two-year record of the Buy side firm's historic executions
• Results of AI model output for out of sample

The Model: Key Features

Within the SOR algorithm are a number of features that enable the trader to achieve maximum execution efficiency, these are:

The Model: Key Outputs

Within the SOR algorithm are a number of outputs that enable the trader to visualize the optimal execution routing, these are:

The Implementation: Back-Testing

A back-test was conducted for a sell-side trading desk that trades in Euro and USD. The trading performance of the Overbond model was compared with the record of the trading desk without AI assistance.

The Implementation: User Interface

About Overbond

Overbond is a developer of process-redefining, AI-driven data and analytics and trade automation solutions for the global fixed income markets. Overbond performs market surveillance, data aggregation and normalization, and deep AI quantitative observation on more than 250,000 corporate bonds and fixed income ETFs.

Applying proprietary artificial intelligence to pricing, curve visualization, market liquidity, issuance propensity, new issuance spreads, default risk and automated reporting, Overbond enables trade automation and enhances trade performance and portfolio returns. Clients of Toronto-based Overbond include global investment banks, broker-dealers, institutional investors, corporations and governments across the Americas, Europe and Asia.

For more information, please visit www.overbond.com .