MTS Markets International Inc. is the US subsidiary of the MTS Group. In the US corporate bond space they manage an ATS called BondsPro (formerly known as Bonds.com). While a screen-based version of MTS BondsPro has been available for some time, a more recent innovation has been the introduction of an API. Aly Kassam, CEO of Quantitative Support Services, and Andy Webb, founder of Automated Trader magazine, took it for a spin.
MTS BondsPro's API uses FIX 4.4 [1] to enable market participants to create machine to machine interfaces that can be used for a range of trading activities, including submitting bids and offers to the trading platform, obtaining price data, hitting/lifting quotes, retrieving trade execution reports and receiving post-trade STP messages. The platform's use of the FIX protocol opens the door to a wide range of trading and market making activities.
MTS BondsPro requires that all participants are Qualified Institutional Buyers (as defined in Rule 144a of the Securities Act of 1933). As a result, programming and technology resources are unlikely to be an issue for the majority of participants. Having said that, the API's use of FIX and the availability of the popular open source QuickFIX FIX engine means that it is also readily accessible by those with more modest technological budgets. Apart from general efficiency, one interesting possibility is that a combination of MTS BondsPro's API and a suitable analytical/trading application makes a new automated take on existing inter market arbitrage strategies possible.
For instance, many now regard convertible arbitrage as rather played-out because of over-participation. However, another factor in this situation is the low frequency in which convertible arbitrage has historically operated, partly because of the delays inherent in accessing the fixed income leg from voice brokers, which has effectively reduced the strategy's capacity. A combination of the right analytical/trading platform and the MTS BondsPro's API significantly changes this status quo. Intraday convertible arbitrage opportunities inaccessible (even invisible) to those using voice brokers become available, as does any other arbitrage strategy involving a bond leg.
Nevertheless, it is important to stress that this is not an API for high-frequency trading in the sense often applied to futures exchanges (market dynamics in fixed income simply make that impossible). But it is well-suited to "mid-frequency" automated trading, both on just the BondsPro platform and in combination with other markets such as equities. Test procedure For the purposes of this review we opted for the Java version of QuickFIX, QuickFIX/J, though we could just as easily have used the .NET version, QuickFIX/n (although this is less mature technology). Armed with this, we set ourselves the task of building a complete bilateral connection between MTS BondsPro and MATLAB. This would enable sophisticated modelling, testing and potentially also (for lower activity strategies) live trading from within MATLAB.
[1] MTS Bonds.com is also compatible many OMS/EMS systems and third party software vendors. Java code The first stage of the Java coding was to write the data and trade handlers. In the case of the data handler, the initial step was to write a class that implemented the QuickFIX application interface. This guarantees that certain programming methods will be derived and available from the application interface (see Figure 1 for the first few of these methods) .
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