Originally appeared in MiFID Monitor
Following the passing of the Federal Reserve and US Treasury’s troubled asset relief programme (Tarp) last week, data providers including Thomson Reuters and Bloomberg have indicated that they wish to play a part in the programme. The vendors are keen to get involved in the area of pricing and risk management in particular, with a view to increasing transparency.
As part of the scheme, US Treasury officials have stated that over the next four weeks it will be setting up asset buying mechanisms. To handle these purchases, the Treasury plans to hire two groups of financial services firms to act as its financial agents.
The selection process will include several rounds of discussions and it is currently soliciting financial agents to provide three services to help implement the Tarp programme: custodian, accounting, auction management and infrastructure services; securities asset management services; and whole loan asset management services.
Tarp, which also gives the Fed the power to pay interest on reserves at a rate close to the Fed funds rate, has been criticised for potential conflicts of interest within the financial institutions that are chosen to administer the scheme. Accordingly, data providers feel they can add much needed transparency to the valuation of the illiquid securities that may be traded by Tarp. Thus far, both Bloomberg and Thomson Reuters have publicly stated their intention to get involved in the scheme.
According to the US Treasury, Goldman Sachs Group veteran Neel Kashkari has been chosen to head the office that will run Tarp.