Markit has integrated its fixed income evaluated pricing and fair value data services with exchange traded fund data to deliver an enhanced intraday net asset value (iNAV) service for exchange traded products (ETPs). The service is available immediately and is designed to improve transparency around ETP pricing.
The company has offered an iNAV service for ETPs for towards a year – this will not be withdrawn – but as ETPs have become more prolific and sophisticated, it decided to take a step up and provide an enhanced iNAV service providing improved transparency around the fair value of complex, multi asset class, globally exposed ETPs.
The enhanced service draws on not only securities pricing data from global exchanges, but also data from the company’s fixed income evaluated pricing services, which are created using dealer contributions that provide independent pricing, transparency and liquidity data for over 2.3 million instruments, and its fair value pricing data, which calculates the fair value of an exchange traded fund outside trading hours using the correlation between 40,000 global equities, 80,000 global bond prices and over 30 market factors.
The iNAV service came to market this week and can be applied to over 5,100 ETPs that are tracked by Markit. It is produced every 15 seconds and is published to major stock exchanges and market data platforms.
Mark Schaedel, managing director and head of data services at Markit, explains: “The new iNAV service helps issuers provide greater pricing transparency amid increased regulatory scrutiny of ETPs. The integration of our evaluated pricing and fair value services provides the fuel necessary to enable continuous iNAV updates, even when underlying securities are illiquid or not trading.”
Responding to criticism in the market that iNAVs for ETPs are no longer fit for purpose beyond vanilla products, Marc Knowles, director of ETP at Markit, adds: “Before we introduced the new service, iNAV providers were generally pricing underlying illiquid instruments or instruments on markets that were closed using the last price available to them. In some cases, they were using a proxy such as a future. Markit was doing this too and using futures as a proxy where possible. The new service is, I think, the first to use our fixed income evaluated pricing and fair value datasets to take the iNAV to a new level of sophistication and meet calls for more transparency around fair value pricing of ETPs.”
Knowles says Markit is talking to prospective users of the enhanced iNAV service and expects to attract both existing and new clients as the service will support a broader set of clients tackling the challenges of more complex ETPs.