An outsourced portfolio valuations service could save the industry significant amounts of money by eliminating duplication of effort by investment banks, custodians and trustees. So believes Jeff Gooch, recently appointed to head Markit Group’s portfolio valuations and trade processing businesses.
Gooch joins the Markit executive management team following an 11-year stint at Morgan Stanley, where he was most recently managing director, global co-head of fixed income operations and global head of OTC derivatives operations. He was formerly the European co-chair of the ISDA (International Securities and Derivatives Association) Operations Committee. He has also served as Morgan Stanley’s board director of Markit, in addition to being a member of the Markit RED (Reference Entity Database) advisory board.
After 11 years in operations at Morgan Stanley, Gooch had begun to miss the “entrepreneurial side of consulting”, he says: “Previously I had been a management consultant (in the financial services practice at Ernst & Young) and I had started at Morgan Stanley in change management. I decided I wanted to be more business driven – part of the business, as opposed to supporting the business.”
Markit appealed because he had known the company for a long time and also because it has been “very successful”, Gooch says. “The company has a number of very talented individuals – people with front office trading backgrounds who are very energetic – and this appealed to me as a working environment.” Its people are one key reason for Markit’s success, he reckons – “this is an industry where a few individuals can make a real difference” – with another being its achievement of “a very hard balance”. “They are unique in that they are majority industry owned, but still have a very entrepreneurial, commercial culture.”
Gooch brings relevant experience to his new role on both the valuations and derivatives trade processing sides. “During the last 18 months Morgan Stanley had seen the need to build an independent valuations function in the bank, and some of the people in my team created that function from scratch. I am therefore familiar with the business issues involved – and of how important independent valuations are to clients and to the banks,” he says. “Going forward I will be looking at what we currently do around valuat-ions, and ensuring that the offering is fully rounded, as well as looking at where else we can sell these services. Markit has done very well with its valuations so far, but I think we can grow the business very quickly.”
He also sees a need for portfolio valuations outsourcing services. “There is a requirement from funds for independent valuations, but there is also a requirement from service providers,” Gooch says. “Pretty much all the investment banks, custodians and trustees are essentially taking the same positions and working out what they are worth. There is a lot of duplication, there is a lot of legal risk in play if NAVs are wrong, and the activity is costing a great deal.” There is an opportunity for Markit to help the industry reduce its costs by offering an outsourced service, he reckons, “because we have unprecedented access to data and can avoid duplication of effort across the market”.
Gooch’s involvement with industry efforts to improve trade processing for OTC derivatives – by ISDA and entities such as the DTCC, with its Deriv/Serv offering – has been long-standing. In his view, there is a need for greater focus on upstream data quality. “The way the market is structured, with, for example, the DTCC warehouse coming along, is that there is a lot of strength in the downstream areas,” he says. “But at the moment the upfront workflows – the connectivity between dealers and funds for example – are relatively under-developed. The industry has focused heavily on tackling confirmation backlogs, but what is really important is to improve the quality of data upstream to reduce problems at the confirmation stage. Much more needs to be done to improve the workflows other than confirmations, and for all the more complex products, as opposed to the vanilla instruments.”
The Markit Trade Processing offering – formerly known as Communicator, and acquired by Markit last year – is well-positioned to meet this need, Gooch believes. Markit Trade Processing connects to DTCC and Swapswire et cetera, and handles the paper efficiently; it is also starting to expand into trade affirmations and non-confirmation workflows, he says. “Much work has been done with the sell side on OTC trade processing – and indeed Markit has been working actively with the sell sides. But the Markit Trade Processing product is well positioned for the buy side: Markit offers easy access for funds to technology to support their workflows.”An outsourced portfolio valuations service could save the industry significant amounts of money by eliminating duplication of effort by investment banks, custodians and trustees. So believes Jeff Gooch, recently appointed to head Markit Group’s portfolio valuations and trade processing businesses.
Gooch joins the Markit executive management team following an 11-year stint at Morgan Stanley, where he was most recently managing director, global co-head of fixed income operations and global head of OTC derivatives operations. He was formerly the European co-chair of the ISDA (International Securities and Derivatives Association) Operations Committee. He has also served as Morgan Stanley’s board director of Markit, in addition to being a member of the Markit RED (Reference Entity Database) advisory board.
Subscribe to our newsletter
