Wouldn’t DCM Pricing Automation result in Homogenisation?

When prospective clients hear Bond Origination Technologies (Bots) automates new issue pricing, we sometimes get the question: won’t all Bots users send out the same pricing?

The answer is no, because that’s not what we mean by automate, we are not a data source for new issue pricing. Bots always took the view that there are too many variables involved in determining new issue pricing and human judgement is needed. Which comps to factor in, market tone, recent supply, the issuer’s strategy are obvious ones, but there are many more and it varies issuer by issuer.

What we mean by automate is, once all this judgement is made by a user, you don’t necessarily need to revise your methodology every time, it can be re-used. And you shouldn’t have to spend unreasonable amounts of time collating the relevant market data that informs your view on pricing. But this won’t result in identical pricing across Bots users, there are far too many permutations.

The way we see it, worrying about homogeneity as a result of a dedicated 3rd-party tool like Bots is like shunning high street fashion for fear everyone you encounter will be dressed identically – there is too much choice for that to happen.

Furthermore, many take the view that regular new issue pricing itself isn’t much of a differentiator anyway. That’s not to say that issuers don’t value this service - it’s critical for them to have a continuous view of where they can fund across the board - but the banks that outperform do so by being comprehensive and consistent, not different. Bots transforms DCM franchises’ ability to provide this service, and this is happening now!

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