Acknowledging its lack of reliable pricing data for illiquid securities, Bloomberg is quietly building a team of analysts in preparation for a product launch in the pricing evaluations business. The move follows the lead of long-time evaluations provider Interactive Data Corp. (FT Interactive Data) and recent moves by Reuters, Standard & Poor’s and others, and underscores the growing acceptance of evaluated pricing services as identified by A-Team’s recent survey Fixed Income Pricing: Are Evaluations Gaining Value?
Bloomberg has hired evaluations business veteran John Lynch to head the team of analysts. Lynch previously ran the EJV (Electronic Joint Venture) evaluations data provider before and during its ownership by Bridge Information Systems. EJV is now owned by Reuters – it was one of the key components it secured through the Bridge acquisition – and forms the backbone of Reuters’ recent push in the evaluations space (Reference Data Review, September 2005).
The evaluations data initiative will significantly bolster Bloomberg’s pricing data offering across the enterprise, by using analysts to hand price and validate pricing, and adjust models in real time based on changing market conditions. This will be an improvement on its current ‘blackbox’ approach to pricing illiquid securities where it uses computerised models to calculate a price based on a number of generic inputs. This approach fills holes in the range of coverage but it does not provide a high degree of accuracy or reliability to clients, which is becoming increasingly important in today’s regulatory environment, hence the growing acceptance for evaluated pricing.
It also plays to Bloomberg’s strengths as a dominant provider in fixed income data, the asset class with the highest degree of illiquid securities in need of pricing. It is not yet known whether Bloomberg will look at other areas, such as derivatives, highlighted as a segment desperately in need of independent pricing data, but the company is said to be in discussions with the likes of Numerix, a specialist provider of derivatives pricing engines, about potential partnerships.
Lynch will oversee a team of upwards of 50 people, according to sources, based primarily in Bloomberg’s data operations center in Princeton, New Jersey. It is also believed that some staff will be based in New York and London, suggesting an international flavour for the evaluations service. Lynch reports to Zackery Cohen, who is leading the product development efforts for Bloomberg.