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Chasen Purchase Bolsters Markit’s Pricing Models

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Aiming to reinforce its structured finance services, Markit Group, provider of pricing, reference data and portfolio valuations, has acquired Peekskill NY-based Chasen Enterprises. Chasen provides modelling of structured securities, notably agency and non-agency collateralized mortgage obligations (CMOs) and asset-backed securities (ABSs). The company, founded in 1989, has modelled more than 18,000 CMO and ABS structures to date.

As highlighted in A-Team’s fixed income evaluations survey (available free at www.a-teamgroup.com), the area of structured finance is growing rapidly but is seriously lacking avail-able data. For Markit, the acquisition will enable it to capitalise on Chasen’s capabilities to improve its ability to value synthetic ABSs. Markit will also leverage Chasen’s expertise to further develop its Reference Cashflow Database (RCD), due to launch later this year as the central monitoring and settlement platform for the CDS (credit default swap) of ABS market.

According to Markit, it launched the first independent ABS pricing service in November 2005. Earlier this year, it worked with dealer consortium CDS IndexCo to launch ABX and CMBX, the synthetic ABS and CMBS indices. The functionality of Markit’s ABX calculator, used for settlement of ABX index trades and free to market participants – and already backed by Chasen analytics – will also be improved and extended following this acquisition, Markit says.

Chasen is just one of several companies active in the structured securities modelling space – among the biggest is Needham, MA based Intex Solutions – but it represents a good fit for Markit’s requirements, says Kevin Gould, head of data products and analytics at Markit. “Chasen has all the skill sets – people with experience of modelling deals, and a library of deals, which is very appealing.”
Chasen’s background in collecting structured product deal data makes Markit’s “life easier” when it comes to the provision of RCD, Gould says. RCD is a centralised mechanism for the calculation of cashflows associated with synthetic ABSs. “The market quickly worked out that there needs to be one central database and everyone would share it and make calculations around it. Participants also agreed we would do the calculations for them,” he says. “RCD acts as a centralised dispute resolution mechanism and defines and calculates for every participant what the cashflows should be.” The database is in beta with four institutions prior to go live, and has the involvement of “pretty much all the major sell side institutions”.

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