Thomson Reuters Buys Moody's Evaluations Arm

A Thomson Reuters spokesperson confirms that the vendor took over Moody's US municipal bond pricing service last Thursday, Sept. 3. According to the spokesperson, the deal "significantly enhances Thomson Reuters' pricing and content offering, enabling us to launch a proprietary US municipal bond pricing capability," and giving the vendor "full pricing coverage for every major asset class globally."

Sources say that Moody's has been attempting to engineer a divestment for some time, and that the vendor is likely to close down the remaining corporate bond pricing desk sometime in the fourth quarter of this year. Moody's bolstered its existing analytics business with the acquisition of Mergent's Pricing and Evaluation Services fixed income pricing business at the end of 2007 (IMD, Jan. 7, 2008). But sources say that the vendor struggled to compete with larger players like Interactive Data and SIX Telekurs, whereas the business would enable Thomson Reuters to expand its presence in this area.

"The ratings business in general has been very challenging lately, and Moody's may simply want to focus on its core business," one industry source says, while another suggests that clients may have been reluctant to contract with the vendor for only one part of their data needs when they could obtain fuller datasets from other providers.

In contrast, Thomson Reuters officials have stated that evaluated prices represent a huge opportunity for the vendor, and plan to expand this area of its business, including via the recent hires of key staff from JP Morgan's Pricing Direct evaluations unit (IMD, Aug. 31). Commenting on those hires as part of its overall expansion plans, Tim Rice, global head of pricing and reference data at Thomson Reuters, said "We want to take advantage of this huge opportunity now that everyone is looking for independent valuations."

John Jay, senior analyst at Aite Group, says that while municipal securities may not match the size of the asset-backed securities market, they can be more opaque and require a specialized knowledge base.

"Thomson Reuters is rounding out its menu of services for firms that need evaluations, especially those investing in different asset classes" Jay says. "This all plays into a big market opportunity that may not be easy for a new player to enter, but where big players like Thomson Reuters have huge intellectual capital and expertise to draw on."

For example, Interactive Data's Evaluated Services team has "more than 30 years of in-depth industry experience and currently evaluates approximately 2.8 million of these instruments every day," says Mark Hepsworth, president of Institutional Business at the vendor. "The volatile and continually changing market environment has prompted financial institutions to utilize independent evaluations… to an even greater extent in order to meet a variety of recently introduced regulatory requirements."

A Moody's spokesperson did not return calls by press time.

Max Bowie