Generative AI is coming for bond trading, but a massive hurdle still stands in the way of the market digitizing

Generative AI is coming for bond trading, but a massive hurdle still stands in the way of the market digitizing
Mark Lennihan/AP
  • LTX, a marketplace for trading corporate bonds, just launched an AI-powered tool for traders.
  • BondGPT enables traders to ask questions about identifying corporate bonds on its marketplace.

Corporate bond trading has entered its ChatGPT era.

LTX, a corporate bond trading platform owned by Broadridge, Wall Street's omnipresent behind-the-scenes provider, launched a chatbot specifically geared toward answering bond-related questions.

BondGPT, which is powered by, you guessed it, OpenAI GPT-4, serves as a personal assistant of sorts for all things bonds, per the release of the news.

With a prompt of "Ask me anything about bonds!" (how fun!) users can inquire with BondGPT about anything from "Which IG utility bonds mature between 2025 and 2035?" to "What telecom bonds have the highest liquidity in the past 30 days?"

Generative AI is coming for bond trading, but a massive hurdle still stands in the way of the market digitizing
A sample of the type of questions users can ask BondGPT.Broadridge

Perhaps this doesn't sound all that groundbreaking. ChatGPT, after all, has permeated seemingly every corner of the world, including Wall Street.


But consider the stakes. While they are often discussed in tandem, bonds and stocks are traded very differently. The equities market has undergone a massive technology evolution over the past few decades whereby the vast majority of trading is now done almost entirely electronically and by algorithms.

Most corporate bonds, meanwhile, are still largely traded over the phone. While progress has been made in trading smaller, highly liquid bonds electronically, there is still a long way to go.

Naturally, that type of market dislocation has led plenty of firms pushing into the space. Marketplaces for trading bonds like MarketAxess, Tradeweb, and Bloomberg have doubled down on efforts to make trading electronic. And tech-savvy trading firms like Jane Street and Millennium have also entered the fray.

Which brings us back to LTX and BondGPT. When LTX launched in June 2020, it was pitched as an "AI-driven corporate bond trading" aimed at getting more bonds traded electronically. BondGPT seems a natural extension of that.

All these efforts make sense. For better or for worse, technology tends to streamline workflows and makes things more efficient. Why keep doing something manually when you could automate it and not lose any of the quality or value it provides? (There are definitely some caveats here, like, journalism!)


The hurdle for the bond market is how top heavy it is. A handful of the biggest banks handle a significant amount of trading volume. That gives them an incredible amount of information, which isn't readily available to everyone else. That's a valuable position to be in, and one they aren't going to give up so easily.

That's not to say that banks are looking to keep the bond markets in the Stone Age. Over the years, they've rolled out features and tools to address their client technology-driven needs.

But in many ways, the stock market doesn't represent so much an end goal as a nightmare situation for banks. The market structure there has put the power back in the hands of the trading venues, who are able to charge considerable fees for the data they collect from trading activity on their platforms.

As a result, it seems the only true progress made in the bond market will be at the whim of the big banks.