BNP Paribas Securities Services has gone live with an outsourced OTC derivatives data service from ValueLink. The service became operational in December, and since then ValueLink has been working with BNP Paribas to fine-tune reporting based on the requirements of the fund administrator’s own clients, according to the vendor’s operations director Trevor Beach.
ValueLink’s outsourced service provision involves the automated collection from BNP Paribas’ counterparties of mark-to-market values, nominal positions and other trade information for instruments including interest rate swaps and credit default swaps. It also provides a suite of automated reports including unprocessed trades, nominal position and cross-currency discrepancies, missing data, stale and percentage movement mark-to-market values and the valuation of broker positions.
The new service constitutes a significant extension to a long-standing relationship between the two companies: since 1997 ValueLink has been providing intraday and closing validated pricing to BNP Paribas (originally Henderson, then Cogent, prior to becoming part of BNP Paribas). “The relationship has grown as BNP has taken on more clients and its asset range has increased,” Beach says. The OTC derivatives data service has its origins in a review meeting between BNP and ValueLink last summer, he continues. “We have been supporting OTC data for two other clients – one for just over a year and another for two years. This is a complex area, and it took a lot of work to get them operational and settled in. We decided not to go to market too early with the product, but rather to let it bed down first, to ensure it was working. When we were talking to BNP it emerged that things had changed somewhat at their end, with OTC pricing moving into a different area, with which we had a relationship. The model they wanted was different but related to the models employed with our other two OTC data clients.”
At this point ValueLink’s product development manager Nigel Winter became involved. “Late last year we went to see BNP to establish the existing process at their end,” Winter says. “Essentially, BNP was in receipt of information from all its brokers and counterparties through different channels and was manually inputting that data into a spreadsheet which operated as its audit trail and through the calculations within it was creating asset prices daily. This was clearly limiting the volumes BNP could handle.” ValueLink then assessed how much of the existing BNP process could be automated within its operation. “In fact we have automated the whole process – there is no manual entry at this end at all,” Winter says. “We replicated the same process in an automated environment, and on top of that have built a suite of reports to run on the back of the information in our database, which BNP can use at their end as soon as the valuation is complete.”
ValueLink is providing intraday and end of day snapshots. Key require-ments of BNP were accuracy and timeliness, to enable the reduction of risk, Beach says. “Another driver was scale. Fund managers are getting more and more into OTC derivatives, and BNP was finding it more and more difficult to provide validated information, which was restricting investment in these areas. BNP now has a far greater ability to provide a service around OTC derivatives.”
ValueLink is now confident its OTC data service is ready for wider roll-out – it is handling a far wider range of data for BNP Paribas than it does for its first two clients – and it will now be approaching existing and prospect clients about the possibility of them outsourcing their OTC derivatives data management. “This has always been an area in which we have been interested,” says Beach, “and we are now ready to take on significantly more business.”
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