RLM-Cascade: Response-Level Speculative Decoding for Cost-Efficient LLM API Serving

We present RLM-Cascade, a proxy-layer system that applies speculative decoding at the response level to reduce LLM API costs without requiring model architecture access or a shared vocabulary. A fast, inexpensive draft model generates a candidate response; a capable verify model accepts, enhances, or is bypassed entirely depending on a lightweight complexity router. On a real-world agentic coding workload (Claude Code), RLM-Cascade achieves a draft-use rate of 88.8% across 125 production requests, reducing API cost by 45.8% relative to a direct Opus baseline. Counter-intuitively, the proxy also reduces end-to-end latency: median response time is 2,026 ms versus 3,698 ms for Native Opus -- a 1.83X speedup at p50 -- because the SKIPPED path (DeepSeek only, no Opus call) dominates the workload distribution. Quality matches or exceeds the Opus baseline: 100% pass rate on a 20-task Code/Math/Instruct benchmark versus 95% for Native Opus. We further describe a rule-based complexity router that selects the SKIPPED path for simple agentic turns and a hybrid tool-call strategy that bypasses the speculative pipeline for schema-critical tool-selection turns. RLM-Cascade is deployed in production as an enterprise AI infrastructure component and published as open source with a live metrics dashboard and Prometheus endpoint.

Domain-Adapted Small Language Models with Hybrid Post-Processing: Achieving Cost-Efficient, Low-Latency Multi-Label Structured Prediction via LoRA Fine-Tuning on Scarce Data

Deploying frontier large language models (LLMs) for domain-specific structured evaluation tasks often incurs substantial latency, cost, and data privacy overhead. We present a hybrid framework that combines a fine-tuned small language model (LLaMA 3.1 8B, with only 2.05% trainable parameters via LoRA) and a deterministic rule-based post-processing layer. Trained on just 219 curated examples, the system is applied to multi-label compliance evaluation of conversational transcripts spanning 18 heterogeneous output fields. In blind evaluation on 53 previously unseen production transcripts, it achieves 100% JSON structural validity, 83.0% human-validated overall accuracy, and 100% accuracy on the most critical classification field. The proposed approach formalizes a hybrid neural-symbolic decomposition and introduces targeted hard-negative augmentation to improve performance on critical decision boundaries. Running on a single NVIDIA A100 GPU, inference completes in approximately 2 seconds, which is 2-5x faster than frontier-model APIs. The system costs only $0.013 per evaluation compared with $0.025-$0.055 for proprietary alternatives, resulting in 46-76% cost savings. These results demonstrate that domain-adapted small language models, when combined with deterministic post-processing, can match frontier-model accuracy for structured compliance evaluation while substantially reducing operational cost, latency, and privacy risk. Keywords: small language models, parameter-efficient fine-tuning, LoRA, domain adaptation, hybrid inference, compliance evaluation, structured output.

Beyond Output Matching: Preserving Internal Geometry in NVFP4 LLM Distillatio

Demand for low-precision inference, including NVFP4-based approaches, has grown as large language models are increasingly deployed in latency and cost constrained production environments. Quantization-aware distillation (QAD) helps recover accuracy lost under low bit quantization by training a quantized student to match the output distribution of a frozen higher precision teacher via a KL-divergence loss. In this work, we first provide a representation level diagnosis of QAD: output matching alone can mask internal degradation, because many intermediate activation geometries can yield similar teacher-aligned logits. Using CKA, we show that KL-only QAD can reduce layerwise representational similarity relative to the BF16 teacher, with especially severe drift in RL-post-trained models. This drift correlates with downstream bottlenecks on reasoning and coding tasks, suggesting that low bit recovery requires preserving internal geometry rather than matching outputs alone. Motivated by this finding, we propose \textbf{CKA-QAD}, a CKA-guided representational alignment method for NVFP4 QAD and low bit LLM accuracy recovery. The method adds a lightweight regularizer that preserves internal representational geometry during distillation by aligning layerwise Gram matrices through CKA. Across Nemotron 3 Nano and Qwen3-4B-Thinking-2507, CKA-QAD substantially improves representational alignment and improves downstream reasoning and coding accuracy with modest training overhead. Our findings position CKA-guided representational alignment as a practical complement to output matching for quantized LLM recovery.

Semantic Tool Discovery for Large Language Models: A Vector-Based Approach to MCP Tool Selection

Large Language Models (LLMs) with tool-calling capabilities have demonstrated remarkable potential in executing complex tasks through external tool integration. The Model Context Protocol (MCP) has emerged as a standardized framework for connecting LLMs to diverse toolsets, with individual MCP servers potentially exposing dozens to hundreds of tools. However, current implementations face a critical scalability challenge: providing all available tools to the LLM context results in substantial token overhead, increased costs, reduced accuracy, and context window constraints. We present a semantic tool discovery architecture that addresses these challenges through vector-based retrieval. Our approach indexes MCP tools using dense embeddings that capture semantic relationships between tool capabilities and user intent, dynamically selecting only the most relevant tools (typically 3-5) rather than exposing the entire tool catalog (50-100+). Experimental results demonstrate a 99.6% reduction in tool-related token consumption with a hit rate of 97.1% at K=3 and an MRR of 0.91 on a benchmark of 140 queries across 121 tools from 5 MCP servers, with sub-100ms retrieval latency. Contributions include: (1) a semantic indexing framework for MCP tools, (2) a dynamic tool selection algorithm based on query-tool similarity, (3) comprehensive evaluation demonstrating significant efficiency and accuracy improvements, and (4) extensibility to multi-agent and cross-organizational tool discovery.

NEMO-4-PAYPAL: Leveraging NVIDIA's Nemo Framework for empowering PayPal's Commerce Agent

We present the development and optimization of PayPal's Commerce Agent, powered by NEMO-4-PAYPAL, a multi-agent system designed to revolutionize agentic commerce on the PayPal platform. Through our strategic partnership with NVIDIA, we leveraged the NeMo Framework for LLM model fine-tuning to enhance agent performance. Specifically, we optimized the Search and Discovery agent by replacing our base model with a fine-tuned Nemotron small language model (SLM). We conducted comprehensive experiments using the llama3.1-nemotron-nano-8B-v1 architecture, training LoRA-based models through systematic hyperparameter sweeps across learning rates, optimizers (Adam, AdamW), cosine annealing schedules, and LoRA ranks. Our contributions include: (1) the first application of NVIDIA's NeMo Framework to commerce-specific agent optimization, (2) LLM powered fine-tuning strategy for retrieval-focused commerce tasks, (3) demonstration of significant improvements in latency and cost while maintaining agent quality, and (4) a scalable framework for multi-agent system optimization in production e-commerce environments. Our results demonstrate that the fine-tuned Nemotron SLM effectively resolves the key performance issue in the retrieval component, which represents over 50\% of total agent response time, while maintaining or enhancing overall system performance.