IHS Markit has extended the use of its OTC derivatives valuation data to financial institutions working on best execution compliance. The time-stamped valuation data can help firms monitor intraday and historic transaction costs across interest rate, equity, FX, credit, commodity and structured product OTC derivatives.
Laura Misher, managing director of derivatives data and valuation services at IHS Markit, says: “Financial institutions need to validate and contextualise the effectiveness, quality and timeliness of each transaction. In terms of compliance, OTC trades are the most difficult to manage due to their complexity and the availability of quality market data.” The IHS response, based on the company’s market data on OTC derivatives, is the provision of transparent valuations and inputs that can be used for transaction cost analysis.
Using its industry standard portfolio valuations data and methodology, IHS Markit can calculate OTC trade slippage, which is the difference between the executed and expected price of transactions. Trade slippage can be expressed in a range of price or market sensitivity terms and firms can use this information to confirm execution quality and prepare reports on trading effectiveness.