Standard & Poor’s structured finance platform, ABSXchange, has gained a number of new clients over the last month or so, including the UK Financial Services Authority. The ABSXchange platform, which is part of the vendor’s Fixed Income Risk Management Services (FIRMS) division, enables users to retrieve performance data from across the universe of publicly rated, securitised credits, explains David Pagliaro, ABSXchange’s commercial director for EMEA.
The division’s client base has seen strong growth over the last month, Pagliaro claims. “The take up is very strong at the moment primarily due to the general increase in demand for fixed income risk management solutions that enable users to conduct robust analysis of their portfolios,” he elaborates. “ABSXchange is also one of the most effective supports for investors to meet the new regulatory accounting requirements, and to show transparent operational and risk management processes as delineated by IFRS7, the Bank for International Settlements and the FSA.”
As proof positive of this fact, this month the FSA itself has adopted the solution, along with Prudential M&G, Credit Foncier and Barclays Capital European ABS Research. According to Pagliaro, the solution has the largest library of RMBS, ABS and CDO transactions in Europe.
“It brings together three core services – data retrieval, cash flow analysis and portfolio monitoring. Users can access timely information on the entire universe of RMBS, CMBS, ABS and CDO transactions, interrogate these deals using powerful analytical tools, and stress test and monitor existing deals within a portfolio. The service eliminates the need for users to independently collect and verify transaction data and to create complex cash flow models,” he claims.
Currently, users have unrestricted access to data and analytical tools for more than 2,500 European structured finance deals. “This number continues to grow as we add more deals in Europe and extend the reach of the service to Asia, Australia and the US. We have ongoing performance data for most of the European universe, including over 80% of European RMBS transactions modelled on the platform. Indeed, our coverage increases every day as our modelling team continues to build out our library,” continues Pagliaro.
As the solution is web-based, there is no implementation process required, he says, thus the client onboarding process is fairly rapid. The ABSXchange business unit, which was acquired by S&P in 2007, has high hopes for the future. “We hope to double our client base in the next six to 12 months,” says Pagliaro.
When it comes to trading illiquid securities, buyers and sellers will typically source different models and data, including proprietary, internal sources as well as third party suppliers such as ABSXchange, he explains. “At present, most European sell side organisations use ABSXchange in their trading operations, so our biggest driver is now coming from the buy side.”
Pagliaro reckons the current financial climate will boost investment in the solution rather than hamper it: “Investors holding opaque structured finance assets on their books are understandably becoming increasingly enthusiastic about a tool that allows them to analyse robust cash flow models that calculate returns given particular anticipated scenarios. Likewise, funds looking to buy up distressed debt and illiquid assets are using the platform to help inform their trading activity.”
Given the tough climate for vendor solutions out there, these wins are a significant achievement for S&P, which has had a troubled start to the year as a result of the European Commission’s investigations into its ISIN pricing practices. However, the FIRMS division, which is headed by ex-Thomson Financial and Bloomberg heavyweight Lou Ecclestone, seems to have performed well overall this quarter, with a number of big launches on the RatingsDirect and valuations front, as well as the ABSXchange wins. Ecclestone’s revamp of the S&P offering seems to be paying dividends thus far, one can only assume the vendor is happy with his appointment.
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