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Case study - NetExchange
Application of Optimization in an e-market
for Fixed Income Securities (Bond) Trading - NetExchange
Net Exchange, a company spun
out of Caltech, designs, engineers, and constructs custom
electronic marketplaces. Net Exchange was founded on the belief
that there are three elements which, when combined, create
more efficient, more successful e-marketplaces. These three
elements are economics, computer science, and computational
optimization.
The third element-the computational optimization
of Net Exchange's infrastructure is fulfilled with Dash Optimization's
XpressMP software. This technology was recently applied to
an e-market in fixed income securities (bond) trading with
Bond Connect.
Solution
Net Exchange partnered with Bond Connect to create a unique
platform for cost-effective trading. Bond Connect addresses
the inefficiencies of conventional fixed income trading, where
liquidity is constrained by intermediaries, trading costs
are high and pricing is opaque. Institutional participants
use Bond Connect for trading across every segment of the taxable
fixed income market: investment grade and high-yield corporate
bonds, mortgage-backed securities, asset-backed securities,
CMOs, and U.S. Treasuries. Bond Connect enhances the trading
performance of their institutional clients by providing innovative
technology backed by superior service in every phase of the
transaction process.
Bond Connect reduces trading costs by eliminating
the intermediary brokers used in traditional trading to buy
and sell bonds. Instead, Bond Connect anonymously matches
buy and sell bids using a complex algorithm, solved by XpressMP,
in a process that takes less than ten minutes. Once the match
has been made, the traders receive an electronic notification
of the resulting executions. All of this is performed through
Bond Connect's Daily Call Auction.
More specifics and benefits
The Daily Call Auction provides the following:
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Full alternative market that
provides a level playing field for buy and sell-side institutions |
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Complete securities coverage
of all U.S. taxable fixed income classes |
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Liquidity that is optimized
through daily call auction aggregation |
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Low direct fees and reduced
market impact - opportunity for price improvement |
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Anonymity throughout the execution
process |
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Price Discovery optimized through
call auction market mechanism |
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Price Transparency through
post auction price and volume disclosure |
About Net Exchange
Net Exchange creates electronic marketplaces that span across many
diverse industries. Currently Net Exchange is working on projects
in the trucking service industry, the chemical industry, and the
electrical power industry.
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