About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Resilient Pricing Benchmarks are Needed for Europe, Agree Thomson Reuters Panellists

Subscribe to our newsletter

In light of the current high market volatility, Europe is in need of resilient pricing benchmarks in order to more accurately model instrument pricing, especially for those at the complex end of the spectrum, agreed panellists at Thomson Reuters’ Global Pricing Forum in London last week. The push towards providing greater transparency around prices from regulators and clients means that these benchmarks need to stand up to a high level of scrutiny.

Matthias Leclerc, executive director of consultancy firm Value & Risk, elaborated on the challenge of valuing complex and illiquid instruments in the current markets where a lot of attention is being directed at the underlying benchmarks and discount curves for accounting purposes. “Firms need to use reliable benchmarks in order to make the basis of their valuations models transparent to their customers,” he said.

The German short selling ban is just one instance of a market move that has challenged firms’ valuations functions, agreed panellists. The high levels of liquidity risk in certain markets and intangibles such as political risk have made this process more challenging.

Attendees to the event supported this conclusion via their responses to an interactive poll. When asked if their benchmarks in Europe were proving problematic: 29% said they were extremely problematic; 51% said somewhat problematic; 18% said they could live with the current benchmarks; and only 2% indicated their benchmarks were not at all problematic.

A broad brush approach to these benchmarks is also not appropriate, added Malcolm Oldham, head of evaluated pricing for EMEA and Asia at Thomson Reuters. The more exotic instrument classes need significantly different benchmarks and regulators must be mindful of this, agreed panellists.

The majority of attendees indicated in another poll that they were in favour of a new framework for benchmarks to be introduced in Europe. An eager 24% indicated such benchmarks were imperative, while 56% said they were important but not a priority. The remaining 20% indicated they thought such benchmarks were either a waste of time or not of interest.

Panellists and attendees alike also agreed that Europe was not likely to learn much from the US in terms of how to structure these benchmarks. Only 3% of attendees thought Europe could learn from the US in this regard, whereas 58% said there was no relevance and 39% warned that such an endeavour should be mindful of the differences between the markets. After all, Europe is made up of many different political states and the US has one currency and one government.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Navigating a Complex World: Best Data Practices in Sanctions Screening

As rising geopolitical uncertainty prompts an intensification in the complexity and volume of global economic and financial sanctions, banks and financial institutions are faced with a daunting set of new compliance challenges. The risk of inadvertently engaging with sanctioned securities has never been higher and the penalties for doing so are harsh. Traditional sanctions screening...

BLOG

Most City Mega Mergers Test Tech More Than Balance Sheets

By Gus Sekhon, head of product, FINBOURNE Technology. The City loves nothing more than a takeover tale as old as time. A US$2.5tn US asset management behemoth snapping up one of London’s most historic investment houses for £10bn sounds like a story of global ambition and deep pockets. The Schroders brand stays, the headquarters remains...

EVENT

Data Management Summit London

Now in its 16th year, the Data Management Summit (DMS) in London brings together the European capital markets enterprise data management community, to explore how data strategy is evolving to drive business outcomes and speed to market in changing times.

GUIDE

Corporate Actions USA 2010

The US corporate actions market has long been characterised as paper-based and manually intensive, but it seems that much progress is being made of late to tackle the lack of automation due to the introduction of four little letters: XBRL. According to a survey by the American Institute of Certified Public Accountants (AICPA) and standards...