This session was recorded in NYC on October 22nd, 2019 and can be viewed here: https://youtu.be/UXTgjjOSfnI When two worlds collide: Machine Learning in the Corporate Bond Market Pricing in the corporate bond market is challenging because of its massive and opaque nature. At MarketAxess, we use Machine Learning along with our market microstructure expertise to come up with the most accurate and consistent price. Bio: Julien Alexandre is a Senior Research Analyst at MarketAxess after joining the firm in 2015. Mr. Alexandre is responsible for leading the development of Composite+, MarketAxess’ award-winning A.I.-powered pricing engine. Composite+ accurately predicts two-way prices for more than 24,000 fixed income securities by leveraging data from a variety of global sources including TRACE, Trax and the MarketAxess trading platform. Composite+ is integrated throughout the MarketAxess trading platform, including as a reference price for auto-execution capabilities, Open Trading pricing provision and transaction cost analysis reporting. Prior to joining MarketAxess, Mr. Alexandre was on the Algorithmic Trading Research team at ITG as a Quantitative Analyst, where he worked on the company’s equity algorithmic dark pool aggregator. Mr. Alexandre holds a master’s degree in financial engineering from Columbia University and a Masters in Engineering from the Ecole Centrale, Paris.

1. Machine Learning in the Corporate
Bond Market
Julien Alexandre
Senior Research Analyst
MarketAxess

2. WHEN TWO WORLDS COLLIDE
Machine Learning in the Corporate Bond Market
JULIEN ALEXANDRE

3. MarketAxess.com | ©2019 MarketAxess Holdings Inc. (the “Company”). MarketAxess, the MarketAxess logo, Open Trading, Trax, and “Now you’re in the market” are
trademarks of the Company. MarketAxess Corporation is a member of FINRA and SIPC. MarketAxess Europe Limited and MarketAxess Capital Limited are authorised and
regulated by the UK Financial Conduct Authority. MarketAxess Singapore Pte. Limited is recognised by the Monetary Authority of Singapore. This information is not
intended to represent an offer or solicitation of any financial instrument. Proprietary and confidential information of the Company—all forms of copying prohibited.
Bond market 101: the corporate bond market is massive and opaque
Trading Venue
Size &
Fragmentation
Turnover
Share of e-trading
1. Source: NYSE and NASDAQ
2. Source: Bank of International Settlements

4. MarketAxess.com | ©2019 MarketAxess Holdings Inc. (the “Company”). MarketAxess, the MarketAxess logo, Open Trading, Trax, and “Now you’re in the market” are
trademarks of the Company. MarketAxess Corporation is a member of FINRA and SIPC. MarketAxess Europe Limited and MarketAxess Capital Limited are authorised and
regulated by the UK Financial Conduct Authority. MarketAxess Singapore Pte. Limited is recognised by the Monetary Authority of Singapore. This information is not
intended to represent an offer or solicitation of any financial instrument. Proprietary and confidential information of the Company—all forms of copying prohibited.
MarketAxess is at the heart of market infrastructure supporting
the entire corporate bond trade lifecycle 4
Open Trading™
All-to-all
All market participants can
be both liquidity maker and
taker.
Voice
One to few
An investor seeks prices
from a few dealers over
the phone, often taking
hours to complete.
Electronic
One to many
An expanded liquidity pool
leads to greater efficiency
Bonds trade over
the counter
22,000 corporate
bonds outstanding
in the US
Price Takers Price Makers
Pricing corporate
bonds is difficult+ =
Few bonds
trade
everyday
+

5. MarketAxess.com | ©2019 MarketAxess Holdings Inc. (the “Company”). MarketAxess, the MarketAxess logo, Open Trading, Trax, and “Now you’re in the market” are
trademarks of the Company. MarketAxess Corporation is a member of FINRA and SIPC. MarketAxess Europe Limited and MarketAxess Capital Limited are authorised and
regulated by the UK Financial Conduct Authority. MarketAxess Singapore Pte. Limited is recognised by the Monetary Authority of Singapore. This information is not
intended to represent an offer or solicitation of any financial instrument. Proprietary and confidential information of the Company—all forms of copying prohibited.
It’s a data-driven world… even in the opaque corporate
bond market

6. MarketAxess.com | ©2019 MarketAxess Holdings Inc. (the “Company”). MarketAxess, the MarketAxess logo, Open Trading, Trax, and “Now you’re in the market” are
trademarks of the Company. MarketAxess Corporation is a member of FINRA and SIPC. MarketAxess Europe Limited and MarketAxess Capital Limited are authorised and
regulated by the UK Financial Conduct Authority. MarketAxess Singapore Pte. Limited is recognised by the Monetary Authority of Singapore. This information is not
intended to represent an offer or solicitation of any financial instrument. Proprietary and confidential information of the Company—all forms of copying prohibited.
Composite+™ applies AI to obtain the most consistent and
accurate prices
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SOLUTION
• Composite+ aggregates diverse but well-understood
data points
• Into well-defined and consistent prices
• By solving a supervised Machine Learning model
CHALLENGE
• There are more than 22,000 bonds outstanding in
the US alone, most of which don’t trade every day
• At time t, a bond doesn’t have a price but
multitudes of prices.
• Example: size impact
$99.96
$99.97
$99.98
$99.99
$100.00
$100.01
$100.02
$100.03
$100.04
$100.05
$10k -
$50k
$50k -
$100k
$100k -
$150k
$150k -
$250k
$250k -
$500k
$500k -
$1MM
$1MM -
$3MM
$3MM -
$5MM
>$5MM
Trade Size
Price variation by size for a baseline price of $100
1 bond at 1 point in time
FEATURE
ENGINEERING
Diverse
but
well-understood
data points
PREDICT
TRADE PRICE
CALIBRATION
FILTER THE
TRAINING DATA

7. MarketAxess.com | ©2019 MarketAxess Holdings Inc. (the “Company”). MarketAxess, the MarketAxess logo, Open Trading, Trax, and “Now you’re in the market” are
trademarks of the Company. MarketAxess Corporation is a member of FINRA and SIPC. MarketAxess Europe Limited and MarketAxess Capital Limited are authorised and
regulated by the UK Financial Conduct Authority. MarketAxess Singapore Pte. Limited is recognised by the Monetary Authority of Singapore. This information is not
intended to represent an offer or solicitation of any financial instrument. Proprietary and confidential information of the Company—all forms of copying prohibited. 7
Composite+ transforms low quality data points into high
quality market data to drive automation and efficiency
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Trade Tapes
TRACE/Trax
All sizes
All sides
MarketAxess
Trading Platform
RFQ data
Streaming
Prices
From Banks
Transaction cost
analysis
Automated
Trading
Price discovery
Market-making
Inputs Applications

8. MarketAxess.com | ©2019 MarketAxess Holdings Inc. (the “Company”). MarketAxess, the MarketAxess logo, Open Trading, Trax, and “Now you’re in the market” are
trademarks of the Company. MarketAxess Corporation is a member of FINRA and SIPC. MarketAxess Europe Limited and MarketAxess Capital Limited are authorised and
regulated by the UK Financial Conduct Authority. MarketAxess Singapore Pte. Limited is recognised by the Monetary Authority of Singapore. This information is not
intended to represent an offer or solicitation of any financial instrument. Proprietary and confidential information of the Company—all forms of copying prohibited. 8
JOIN US! Let’s continue to change the face of electronic bond
trading together