BUY-SIDE TECHNOLOGY AWARDS: Best buy-side pricing/valuation service: Markit

Richard Earl and Kevin Borrett, Markit

As regulatory and investor pressure for investment managers to provide greater transparency mounts, firms’ valuation processes have become especially crucial as a way to demonstrate sound operational practices.

Markit, the juggernaut of the pricing technology and service arena, takes this year’s best pricing award, not only for what it currently provides its clients, but also for its ability to react swiftly to regulatory and market conditions placing new direct and indirect valuation requirements upon asset managers and their counterparties.

In response to regulations targeting improved pricing of over-the-counter (OTC) derivatives, Markit has emphasized the levels of independence, transparency and liquidity associated with the services it provides. The vendor, which relies on multiple pricing sources in order to minimize the potential for bias or errors, maintains full transparency regarding its data sources and valuation methodologies, and provides in-depth composite measures to indicate how certain or uncertain an instrument’s valuation is.

Markit’s ability to provide independent pricing data for myriad instruments—credit default swaps (CDSs), loan credit default swaps (LCDSs), fixed-income and convertible bonds, asset-backed securities, leveraged loans and equities—remains impressive as well as difficult to replicate, either on a proprietary basis or using other third-party providers. The vendor develops consensus prices using books-of-record data from more than 70 market-makers across the globe, and just as importantly, has established robust data-cleansing controls to minimize stale or inconsistent pricing information from its platform. “Depth and breadth” may fast be becoming a cliché in financial technology parlance, but in Markit’s case it holds true. —SE

Markit is the leading pricing and valuations provider of OTC derivatives and is now the de facto market standard. It constantly expands its coverage area across the different OTC products.

“Markit focused much of 2010 on expanding our independent valuations services to cover asset classes where clients face new challenges: asset-backed securities, commodities, structured notes and illiquid-debt securities. We are pleased to be recognized by Buy-Side Technology for these new services and our consistent approach that emphasizes transparency, observable data, liquidity measurement and a rigorous methodology that allows investors themselves to interrogate the valuations process and results. A heightened awareness of the impact that reductions in liquidity and price source availability, however temporary, can have on net-asset value (NAV) has led firms to turn to Markit for the quality of data, transparency and independence we offer, as well as the benefits of using one provider across multiple asset classes. On behalf of the firm and all the professionals within our business, I am delighted to be recognized as the best pricing and valuations service for the buy side.”
—Kevin Borrett, managing director of portfolio valuations, Markit

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