Capital Market Exchange (CMX) has built the investment industry's first analytic product to use market perspectives to price bonds.
The size of the global stock is estimated to be close to $40 trillion. The value of assets outstanding in the global credit market is north of $90 trillion, or 2.5 times that of the stock market. Bonds are also more complex financial instruments than stocks, often necessitating more research into the unique differences. Asset managers have historically relied on rating agencies such as Standard & Poor or Moody's to assist with the valuation of bonds, often at their peril.
Even with all the technological advances in financial services and demand for bonds, most trading takes place through a middle man. Reported prices are often stale, include a transaction cost and, more critically, often do not reflect the underlying credit quality of the issuer. Price discovery before the trade and after is hampered. For these reasons plus a few others, understanding the value of a bond is very difficult.
To overcome these limitations, CMX regularly analyzes the sentiment of Chief Investment Officers, Portfolio Managers and Credit Analysts actively investing in the bond market to provide investors a market-based price. CMX's analytics routinely aggregate and incorporate market-identified factors to provide asset managers a dynamic approach to identify investment opportunities in the $6 trillion global corporate bond market today. CMX is differentiated specifically by its quantification of investors' expectations of emerging risks. The firm's analytics are designed to rigorously test unstructured, investor-generated inputs to generate a forward-looking, market consensus spread (i.e., price). The outputs are highly predictive and provide investment teams an advantage in anticipating downside risks.
Over the long term, CMX will create the new standard for bond valuation. The systematic analysis of emerging risk factors will create much needed price transparency in the bond market as well as facilitate trading and reduce transaction costs. CMX is currently extending its analytics from Investment Grade to High Yield bonds.
The company looks to engage forward-thinking bond investors. For more information, email Sarah Biller, President.
Sarah Biller is president of Capital Market Exchange, a Boston-based company specializing in bond valuation.
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