Evaluated Pricing Poised For Breakout

User demands, rather than regulatory spurs, fueling improvements in evaluation offering


Evaluated pricing providers see their customers' calls for more accurate and transparent data as a greater incentive than regulatory initiatives

Looking at the broad sweep of what Inside Reference Data has followed in the development of evaluated pricing over the past couple years, what had been embryonic about these offerings appears ready to start developing.

The foundations of concern about the value of evaluated prices, namely getting views into how they are sourced and making the process of evaluation transparent, appear to have solidified, according to professionals in the field who spoke on our July 14 webcast.

Daniel Johnson, head of valuation at Wells Fargo Global Fund Services in London, said that for 98% of the evaluated pricing data coming from providers, transparency is sufficient. The demand for greater transparency only happens when the data users are looking for requires a deeper dive into pricing numbers.

Firms' ability to assess how many sources they need on evaluated prices, and how sources compare, appears to have matured. Johnson observed that for securities with thin markets, some prices may be picked up by one provider but not another, depending on methodologies, and providers' strengths can vary by asset class, country or region.

Providers, for their part, are aware of these demands, as Thomson Reuters' Jayme Fagas said—users seek a "consolidated way to compare and contrast different data sources and sets," which is something her company is trying to address. S&P's Greg Carlin expects firms to use at least two providers, measuring them against each other.

On this basis, it's easier to understand why these professionals don't give all the credit for the progress of evaluated pricing to regulators' efforts to set standards for sourcing, whether through the Alternative Investment Fund Managers Directive (AIFMD) in Europe or the international IFRS 13 standard.

"We certainly have seen more firms interested in valuations pre- and post-trade—all the way from the trading desk back to portfolio pricing," said Carlin.

Johnson emphasized that professionals should remember that it's the service providers who supply evaluated pricing data, not regulators. Providers have been driven to offer data that covers more asset classes, and prices derived from comparison of multiple suppliers' information—all due to user demand.

Since firms have a better sense of what they want, and are communicating that more directly, the transparency and sourcing, and more importantly, the accuracy and quality of evaluated pricing data, is going to see an exponential increase.

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