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IDC’s Strategic Deal with Markit Provides Cooperative Framework

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This month’s data redistribution deal between Interactive Data Corp.’s FT Interactive Data and Markit Group belies a more strategic alliance, than at first it appears. The agreement gives FT Interactive Data clients access to the models Markit uses for its bond valuations as well as use of Markit’s own credit default swap, credit index and bond pricing data within FT Interactive’s own corporate and government bond evaluation models.

The deal lends credence to
A-Team Group’s recent findings that evaluations data is finally gaining credibility within the European marketplace, having long been accepted as a way of pricing illiquid bonds in the U.S. (A-Team’s research, which was commissioned by Reuters, is available for download at www.a-teamgroup .com/fixedincome.php.)

Under its deal with Markit, FT Interactive Data will use Markit’s pricing data within the models it uses for its corporate and government bond evaluations services. The Markit data will be used in addition to the existing sources FT Interactive Data’s evaluations teams currently use. FT Interactive Data believes this will provide increased market visibility of credit markets instruments and give clients a wider view for comparative analysis between bond offerings.

FT Interactive Data is a market leader in providing independent daily market evaluations, covering around 2.5 million fixed income and international equity issues. It supplies evaluated pricing to more than 4,000 global financial institutions. Though terms of the arrangement are not public, Markit doubtless sees value in this potential audience for its pricing services.

As part of the arrangement, FT Interactive Data will make available to clients a series of Markit data services. These include Markit’s CDS and loan datasets, historical data, CDX and iTraxx families of index data, and Markit’s Reference Entity Database (RED). Meanwhile, Markit will provide its clients with access to FT Interactive Data’s fixed income evaluation services through the Markit Portal, a distribution channel for asset pricing, news and research.

For FT Interactive Data, though, the Markit deal holds the promise of offering clients the ability to conduct their own evaluations using Markit’s models. This could appeal to clients holding thinly traded, over-the-counter derivative securities for which no documentation or valuation mechanism exists. Markit’s bank and dealer contributors allow it to price such securities.
As such, the relationship with Markit is strategic for FT Interactive Data, which foresees leveraging the accord to help it develop pricing services that meet the increasingly complex requirements of holders of OTC securities, including credit default swaps. The company believes its arrangement with Markit gives it an edge over others operating in this area.

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