Automated inter-dealer brokerage

  • CASE STUDY
  • 01/01/2018
A Rainbird-powered automated trading tool is expected to reduce commissions by more than 50%.

AiX approached Rainbird with an aim to transform the Inter Dealer Brokerage market by making trading simpler, more efficient, and more transparent.

The project brings progress to a market in which the big three firms have acquired their competitors rather than innovating to gain competitive advantage, which has led to outdated practices that are both expensive and unfit for purpose.

The big three trading firms have acquired their competitors rather than innovating to gain competitive advantage, which has led to outdated practices that are both expensive and unfit for purpose

The problem
Inter-Dealer Brokerages (IDBs) allow large-volume traders to transact, but the billion-dollar market is outdated:

•      the services are notoriously slow, unreliable and expensive.
•      calculating and executing multiple deals requires substantial time and manpower.
•      new exchanges, tokens, cryptocurrencies, and platforms all need to be incorporated into the way deals are made.

In response to these challenges, AiX approached Rainbird to create a virtual broker that would increase productivity and transparency, and in doing so eliminate the errors, abuse and criminality that plagues financial markets that rely on human brokers.

The solution
The Rainbird-powered solution is an IDB virtual assistant, which offers traders the same quality of experience as a human broker would, but with much higher productivity and better outcomes.

To achieve this, the Rainbird team sat down with AiX to capture their trading expertise, building a Rainbird knowledge map with an understanding of concepts such as volatility and liquidity and their influence on pricing. Using this knowledge, Rainbird is able to review trade offerings and check them against the market to ensure that users do not waste time with unrealistic offers. Similarly, Rainbird checks responses from other traders to ensure their viability.

To compare trade offerings, Rainbird makes an API call to external data sources to retrieve the necessary information, and applies its trading concepts to calculate which recommendation to provide to the trader via an intelligent chatbot.

The outcome
When securing deals using AiX:

•      the response time for trading clients is more rapid, delivering more efficient trade confirmations.
•      the Rainbird chatbot engages in multiple marketplace conversations simultaneously in a way that a human broker never could, enabling trading to operate at enterprise scale.
•      brokers are freed up to focus on client relationships, while still maintaining close control over the Rainbird-powered automated trading.
•      the errors, abuse and criminality that plagues financial markets that rely on human brokers are eliminated.

Rainbird’s ability to explain its own actions, and provide an audit trail, is particularly important to the AiX project, as automated decisions in a closely regulated industry such as stock trading must be transparent.

Rainbird has signed an agreement for an exclusive license with AIX. In a market in which the top three players have annual revenues in excess of $6.5bn, this new tool is expected to attract approximately 75% of IDB revenues, while reducing commission by more than 50%.

AI-brokered trading with AiX is now underway – a world-first for the trading market.