It has been a busy few months for Telekurs, following its rebrand under the Swiss Financial Market Services group as SIX Telekurs and the establishment of a partnership with Frankfurt-based valuations provider ValuePrice. The partners have also announced their first client for their pricing services offering: German asset manager Metzler Investment.
The rebrand is part of the group’s strategy, announced earlier this year, to introduce “substantial fee reductions” and benefit from synergies across the group. Rather confusingly, it has dubbed itself ‘SIX’ not because there are six companies comprising the group (there are three) but as a reflection of the underlying business that they are involved in – Swiss Infrastructure and Exchange, which lends itself to the acronym ‘SIX’.
CEO of SIX Telekurs, Marc Carletti, explains: “Our joint branding reflects the joint focus on enhancing the efficiency of our clients in the financial industry.” He claims that the rebrand will mean the vendor is “stronger, financially sound and independent”.
The partnership with ValuePrice is also representative of SIX Telekurs’ ambitions to better meet its customers’ needs, says Carletti. He explains that the vendor made the decision based on the fact its valuation pricing service was due for enhancement, “in order to meet the growing demands within risk management, especially regarding illiquid products”. The decision earlier this year to partner with Bondweb Malaysia, the Asian country’s only current bond pricing agency, to integrate Bondweb’s fair value prices into Telekurs’ Valordata Feed (VDF) and Intraday Pricing Service (IPS) is also part of this initiative.
Telekurs has previously been involved in the valuations space, for example its venture with Standard & Poor’s in Europe, but has not to date illustrated full commitment to the business. However, this recent partnership indicates valuations has been an area of major investment this year for the vendor and this is likely to continue.
“The need for transparent valuations of illiquid products has risen drastically in the last two years. In response to this trend, SIX Telekurs launched its Fair Value Pricing Service, which prices over 90,000 bonds in 11 different currencies,” explains Carletti. “In addition to this, we have joined forces with Bondweb Malaysia, in order to improve our coverage of the Asian markets. Our cooperation with ValuePrice is another step to achieving our strategy. Our next step will be to expand our offering for floating rate notes.”
The vendor’s first and foremost priority is to offer truly transparent valuations, which are not purely reliant on the insights and opinions of individual brokers, he adds. “Instead, we rely on a logical and fully transparent valuation method, which allows our clients to understand the reasoning behind the valuations.”
Carletti explains the reason behind why SIX Telekurs selected ValuePrice in particular as a partner: “ValuePrice is a very flexible partner, one who is able to offer our clients a transparent and logical value pricing model. ValuePrice is a specialist in structured products, and so complements the SIX Telekurs offerings very well. Moreover, the fact that ValuePrice is based so close to our German subsidiary means that we have excellent communication pathways, and can make mutual decisions quickly.”
He continues: “We sought an independent partner who would complete the SIX Telekurs offering by valuing these complex instruments. Up until now, it was necessary to approach a broker who was trading or had traded the instrument in question, to get the information for the valuation. However, this meant that the valuation was not entirely unbiased. Recently, we have seen a complete turnaround – more and more clients tend to prefer highly transparent and independent valuation methods. Regulation also follows this tendency, and in most important financial centres this is a prerequisite.”
Discussions between the two vendors were relatively fast and it took around six months from preliminary discussions to come to an agreement, according to Carletti. He puts the speed of this timeframe down to the fact that both sides were “confident that this would be a good deal”.
The partnership represents benefits for the clients of both parties, says Carletti: “The know-how of both companies in this segment of the market will be broadened. SIX Telekurs will further secure its position in the market as an international and reliable provider of financial information. This deal will mean that SIX Telekurs clients can enjoy an even better service and a larger data offering than before.”
According to Carletti the solution allows SIX Telekurs to offer its clients a transparent and consistent valuation process. “Therefore our clients benefit from our technical as well as industry expertise, and are also able to avoid long, drawn-out projects.”
The first joint client of the partnership is Metzler Investment, for whom the service is managed via an individual process and covers all asset classes in the portfolio. “Metzler has radically changed the approach to pricing instruments by explicitly avoiding prices provided by parties which could be biased, such as brokers. Metzler has implemented a set of preferences for which sources to use for fixed income instrument pricing. If there is no price available for a particular instrument in any of the sources selected, then the instrument is passed on to ValuePrice to calculate the instrument. This way, only actual trade prices or transparently evaluated prices are used,” he explains.
The entire workflow can also be monitored and controlled via a number of different reports and a proprietary terminal is used for controlling and management purposes. ValuePrice handles the daily delivery of valuations on special illiquid and/or structured instruments and, at the request of the client, the vendor can also offer access to the underlying reference data in addition to valuing the instruments.
Andreas Schmidt, the manager responsible for the whole project at Metzler Investment, comments: “By using this fully automated solution from a single source we achieve fairer and more transparent prices in line with IFRS and MiFID. In addition to substantially improving our coverage, we have been able to greatly reduce the amount of manual work involved as well as the number of interfaces needed.”
According to Carletti, the project took around seven months to complete and Metzler was satisfied with the implementation process from very early on. The feedback so far has been very positive from both sides, he adds.
“The infrastructure for the data delivery and processes can be in part specified by the customers themselves. Alternatively, as in the case of Metzler Investment, delivery can be offered as a coordinated solution. The client is able to specify the particular data and provider he wants. The client is also able to specify in which order of preference he wants the data to be delivered. For example, if there is no current price, the client can refer to a synthetic pricing source of his choice,” Carletti continues.
Despite Carletti’s optimism, getting taken seriously in the valuations business will be no mean feat. SIX Telekurs is going head-to-head with vendors such as Interactive Data, who has long dominated the evaluations business, and both Standard & Poor’s and Thomson Reuters, who have aggressively developed and marketed their valuations businesses over the past couple of years.
However, the ambitions of the newly rebranded vendor do not stop at valuations and Carletti hints at future projects in the pipeline. “Regarding our international outlook, we continue to be a reliable partner with close ties in the local markets, and look to strengthen our position even further. Regarding valuations, SIX Telekurs will continue to pursue its strategy of providing timely, transparent pricing for international securities and enhancing the data coverage. Looking forward, we have a number of exciting projects planned with the other division within the SIX Group. It is still too early to go into detail about these, though.”
The business of valuations is certainly achieving greater attention, given the intensified regulatory environment, and is the subject of a new major research report from A-Team Group, OTC Valuations: Pricing Assets in the Post Credit Crunch World (for more information, visit www.otc-valuations.com)
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