Exchange Data International (EDI) has forged an agreement with Derivative Partners to offer an independent valuation service for structured products and complex derivatives. The service was introduced this week in response to increasing client demand for independent portfolio valuations designed to meet regulatory requirements for transparency.
Zurich-based Derivative Partners provides daily valuations, calculating over 200,000 instruments using an independent database and proprietary valuation models. The service covers result sets combining various asset classes, including equity, indices, foreign exchange and commodities, and has the flexibility to integrate new payoffs and pricing models. The company currently covers European structured products, but it has the staff and models to expand both product and jurisdiction coverage depending on market demand.
Andreas Kropf, managing director of Derivative Partners Research, says: “We have been continuously developing and enhancing our coverage of complex derivative instruments. The partnership with EDI allows us to bring our valuation capabilities to a larger audience.”
Jonathan Bloch, CEO at EDI, describes the arrangement with Derivative Partners as a new initiative for the company. “Interest in independent valuations is growing as more derivatives move from OTC to on exchange status,” he says. “We have spoken to other potential providers of independent valuations for structured products and complex derivatives in the past, but Derivative Partners has the coverage people are interested in. It is not itself a provider of structured products and has great credibility.”
One of Derivative Partners’ latest link-ups was a deal made in February with SIX Financial Information under which SIX has added Derivative Partners Research structured products and complex derivative valuations to its pricing service.
Bloch continues: “We provide valuations of listed securities, but people have more products in their portfolios and we can help them. For structured products and complex derivatives valuations we needed specialist knowledge, which Derivative Partners provides.”
With reference data and corporate actions as its core business – the company will soon extend its reference data to cover mortgage-backed securities – EDI prefers to partner in other areas. Says Bloch: “We don’t cover derivatives, but we will start to look at them as swaps move onto exchanges. Then we will look at adding reference data and partners who can provide independent valuations.”