Giving a vote of confidence to the outsourcing discussion, Bank of New York (BNY) has opted for Value-Link’s pricing validation service over sourcing data feeds directly from the information vendors, after a year-long RFP process.
BNY’s Central Pricing Unit will be sourcing a range of daily intraday and closing valuation pricing data with global coverage via ValueLink to feed into its accounting systems. The data will be used to price portfolios internally and externally on behalf of its clients for its third-party administrator services.
The service, delivered via FTP download, is being used in BNY’s London office and some European offices, including Luxembourg. ValueLink hopes the use of its services will be extended through other regions and departments in BNY.
It is not clear how this service fits with BNY’s recent purchase of a 51% stake in U.K. transaction and accounting data management company Netik (Reference Data Review, July 2004). BNY had been a client of Netik’s data management capabilities, which are now being used to underpin BNY’s own outsourcing investment management solution SmartSource.
Prior to going live with ValueLink, BNY managed the multitude of data sources internally, with an asset coverage of around 70%. According to Matthew Cox, head of pricing and data management at BNY, “ValueLink has provided the ability to increase coverage of our asset universe to over 99%. This in turn has greatly reduced manual intervention and any risk inherent with this process.”
BNY evaluated a number of data vendors through the RFP process, said to include Bloomberg, FT Interactive Data, Reuters, and Telekurs Financial for sourcing of its pricing data. ValueLink was the only data aggregator on the selection list. While the aggregation service comes at a premium to sourcing data directly, BNY is likely to have realised the cost savings and reduced administration headaches that comes with handing pricing data sourcing and data validation processes to a third party.
The deal marks a reincarnation of an earlier deal between BNY and ValueLink going back to 1992. This relationship ended in 2001, following what is understood to be a senior management level decision to save money by bringing the process in-house. The turnaround signals the realisation of cost-effectiveness that outsourcing can bring. It may also have been helped by BNY’s joint venture with Allied Irish Bank in Ireland – AIB/BNY Fund Management (Ireland) – which is an existing client of ValueLink’s and is understood to have become involved in discussions in support of the service. Both entities, however, remain separate clients.
Data that ValueLink is managing on behalf of BNY includes that from Reuters (including Telerate), Standard & Poor’s, Telekurs Financial, Thomson Financial, London Stock Exchange, ISMA, Barclays Capital, EuroMTS, and other sources.
Says Trevor Beach, operations director at ValueLink, “We source data based on specific client requirements only.” ValueLink covers equities, fixed income, commodities, derivatives, indices, interest rates and exchange rates and more.
Noticably absent from the vendor list are FT Interactive Data and Bloomberg, which BNY is still sourcing directly as these are vendors not currently available via ValueLink. According to Beach, “We find most clients already source FT Interactive Data so it is unnecessary for us to interface to them.”
Reuters, meanwhile, has for the first time in several years, made its Datascope services available via the ValueLink validation processes. The two companies have had a frosty relationship dating back to 1995, when ValueLink became an independent company. At that time, there was an existing data licensing agreement between Reuters and the former company, but there was no exchange of letters notifying Reuters of the change and updating the contract. As such, ValueLink, which continued to distribute Reuters data, was technically doing so without permission.
While that resulted in an end of the partnership, Reuters is now keen to expand its third-party software relationships, and appears to have put past differences behind it.
Stephan Choate, chief executive officer at ValueLink, says, “It adds a new dimension to our fully validated global securities data services.” Reuters Datascope, available by separate contract, will be incorporated into ValueLink’s intraday, closing price, corporate action, and dividends valuation services.
In other plans, ValueLink is currently in discussions with a handful of clients about taking an extended period of validation time – 30 minutes rather than the current 15 minutes after the 12pm pricing – which would allow them more time to add value and perform fuller validation functions. This is in the works for sometime over the next year, according to Beach.