Eugene Grinberg, Solve Advisors Co-Founder and CEO, tells The DESK how the firm’s acquisition of Advantage Data and Best Credit Data will support better decision-making through the trade workflow.
What is the scale of Solve Advisors’ data offering today?
Solve specialises in aggregating observable bids, offers, and price talk from daily chatter between fixed income trading counterparties. We do this across six asset classes: securitised products; corporates; syndicated bank loans; US municipal bonds; credit default swaps (CDSs) and then we have most recently added convertible bonds. The sheer number of quotes that we are able to collect on a daily basis is typically upwards of 10 million a day. This is driven by our deep expertise in Natural Language Processing and the ability to extract quotes from highly conversational exchanges between traders.
The quotes come from a wide variety of contributors, from both the buy side and the sell side.
How are your services used in comparison to publicly available data?
We work with a variety of clients that include buy side, sell side as well as pricing services and accounting firms that have needs around price transparency and liquidity aggregation. Solving these challenges is critical since many securities trade sparingly, sometimes weekly, monthly or even less frequently. For instance, if you look at how many corporate bond trades are reported to FINRA in the US [for the TRACE post-trade tape] the typical number of securities reported on a daily basis is 5,000 to 6,000. At Solve, we are seeing upwards of 40,000 securities quoted in the corporate bond asset class alone on a daily basis, with between 8 to 10 million individual quotes. So our clients are seeing ten times the activity that is reported to TRACE which gives them a tangible competitive edge.
Our data is also real-time while TRACE reports within a window of many minutes.
Does that create a broad buy side audience?
Yes, while our solution is designed for all sides of the market, we do work quite extensively on the buy side. The buy side definitionally has access to more data than the sell side. Especially if you are a top tier investment manager, everyone on the sell side wants to cover you. The challenge is that a lot of the data the buy side is receiving is highly unstructured. They are seeing thousands of daily messages across Bloomberg terminals, corporate mailboxes, large attachments with dealer inventories and one- and two-way markets. It’s next to impossible for the buy side to absorb this amount of data, which is all piecemeal, and comes across in different formats.
As a result, the buy side has access to lots of information that it cannot use in real time. Some of our clients are seeing 50,000 messages a day and it doesn’t matter how many juniors you have on the desk, you can’t copy and paste fast enough and aggregate that information. So, what we have done at Solve is help the buy side tap into all these different information channels and deliver the aggregated data in real-time. From large, Tier 1 asset managers to systematic market makers and algo strategies, investment managers are highly dependent on real time and accurate data. Solve is also collecting contributed pricing data from the larger ecosystem that our clients can access in addition to what they already see directly.
The sell side needs to make markets and service clients, but risks doing that in the blind if they don’t know what the rest of the street is doing. Our data democratises that playing field and gives everyone access to unparalleled price transparency.
Our third cohort of users are the pricing services, accounting firms and fund administrators that play a major role in this space, but traditionally have even less information. Since they are not privy to the chatter between the buy side and the sell side, the data that we are collecting is invaluable for this third cohort.
How do the recent acquisitions support clients in achieving their goals?
What Solve has done well since we launched the company in 2011, is to bring price transparency to fixed income markets, by aggregating the many millions of bids, offers and prices flowing between the buy side and the sell side. Our solutions incorporate Natural Language Processing, machine learning, artificial intelligence as we are parsing messages that flow between trading counterparties. As our data sets and asset class coverage have grown, it has become clear that the sheer volume of data while being incredibly useful for some clients, is almost too overwhelming for others. We have had to invest more time and energy into building better tools where this data can be absorbed, and summarised.
Connecting the dots for clients requires us to create better relative value, workflows, analytics, and visualisation tools. Advantage Data has built some really wonderful tools exactly around that. Our goal is to integrate the Solve Advisors product, SolveQuotes, with Advantage Data’s Workstation which will allow us to serve our combined customers better and provide more customised solutions to suit their specific needs.
What does that mean for new offerings?
Some clients want data and some clients want answers. A composite price is more valuable for some firms versus the 500 individual quotes that Solve is able to source for a given security. Advantage Data has done well in boiling it down to a singular consensus price and built interesting visualisation tools around it. Combining both capabilities, having this extremely unique dataset of high quality real-time observable pricing, and then having tools that summarise the data, identify relative value and create some interesting visualisations, is extremely powerful. Our new combined offerings will continue to build on both of these themes. That’s why we are extremely excited to announce this acquisition.
Will you develop tailored products?
Our strategy is not to be overly prescriptive but to stay super flexible, listen to our clients, make sure that we continue evolving our workflow tools for various use cases. We also have a variety of data feeds for firms that want data to flow into internal proprietary systems, as well as a number of really interesting integration partnerships that allow clients to consume Solve data in other tools that they depend on.
If you are looking at the trade lifecycle do you expect this to be used primarily pre trade, at trade or post trade?
We have clients using our data in all three areas. In pre-trade, information is king. Having better, or at least equal, data to the other side that you are facing is a material advantage. If you look at the entire trade lifecycle, firms are utilising our data for liquidity analysis, for surveillance, for best execution, transaction cost analysis and so on.
How will this acquisition affect investors and market fairness?
Information disparity is still very much a thing in fixed income and over-the-counter markets. That’s really something we have been looking to address from day one. The more we can democratise this information and make it available to all sides of the market, I think it’s overwhelmingly positive for investors. Price transparency means that everyone plays by the rules.
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