The Karn Group: Real-Time Fixed Income Bidding and Offering through Automation

CIO VendorTheodore Karn, President
Advances by The Karn Group (TKG) now make it possible to automate the complex process of real-time pricing and calculation of bids and offers for the Municipal and Credit Fixed Income bond markets. Over the last ten years, TKG has steadily advanced Fixed Income technology in what is among the most difficult to trade and resistant to automation. Founded by Theodore Karn—a former trader with over a decade of experience in bond derivatives, futures and options—the company has emerged as a major force to reckon in the fixed income trading domain. “We have pioneered real-time pricing of Municipal and Credit Fixed Income bond markets, and offer the only commercially available automated Fixed Income Bidding platform,” says Theodore Karn, President, TKG.

Real-time bidding is dependent on high quality real-time pricing which is a challenge in the Fixed Income marketplace. For example, there are over 1.5 million unique securities that are Municipal Securities Rulemaking Board (MSRB) reportable securities. Most of these securities have limited liquidity with no recent trade histories or quotes. To address this, TKG continually updates a database of over 3 million recent trade reports and prices over 150,000 securities. Illiquid securities are priced on demand using comparable analysis using prices of similar securities. Further, TKG dynamically builds sector indices and provides rich/ cheap analysis.

Many of TKG’s customers are thought leaders in the fixed income trading industry. These customers come up with innovative trading concepts which TKG translates into an operational technology. The company incorporates clients’ revolutionary ideas into the design and development phase of systems development to deliver best-in-class trading solutions. “Whenever we deliver a new product sought by these customers, other players in the industry see the value of those tools and demand similar solutions from us,” mentions Karn.

We have pioneered real-time pricing of Municipal and Credit Fixed Income bond markets, and offer the only commercially available automated Fixed Income Bidding platform

TKG’s auto-bidding platform was originally built to automate bids wanted requests from TMC bonds— the largest Alternative Trading System (ATS) in the municipal bond market. TMC Bonds has an extensive application program interface (API) that enables a feature-rich integration of the TKG auto-bidder and the TMC Bonds trading ATS. The system can also automate the periodic repricing of thousands of inventory securities (offerings). Trades can be reviewed in real-time for best execution both on a pre-trade basis and at the time of execution.

Among the organizations implementing TKG's solutions was a major bank with broker-dealer operations that utilized Bloomberg Trade Order Management Solutions (TOMS). The bank found it challenging to support over 5,000 bidding requests per day. When the bank looked at automation as the solution, TKG was brought onboard to initiate a project that delivered real-time bids automatically to the Bloomberg platform. Through TOMS TKG has the ability to connect with multiple ATS and manage bids wanted requests across the marketplace. Following the success, TKG has received requests for similar solutions from other major market participants.

In the near future, TKG intends to enable real-time pricing solutions for additional asset classes. Karn foresees hybrid trading involving automation platforms and the expertise of traders, as the future of the fixed income domain. To further strengthen its capabilities, TKG is bringing in advanced equity market technology into the fixed income markets. Karn attributes TKG’s success to their customers. “We take pride in being a technology company that grows by building synergistic relations with the nation’s top financial institutions,” concludes Karn.