The latest in a flurry of initiatives bidding to improve the valuations process in the wake of the sub-prime crisis and the credit crunch comes from UK market data vendor Markit Group which in a now-familiar modus operandi is working with six Wall Street banks to launch a global, multi-bank, cross-asset client valuations platform. The announcement of the Markit Valuations Manager, set to be available in the second half of this year, follows news of valuations initiatives from NYSE Euronext and the CRIS consortium, and will surely tap into a rich seam of interest among the buy side community at which it is targeted, as the perils of failing to accurately value assets are starkly visible in the marketplace.
The Markit Valuations Manager platform will offer electronic delivery of dealer OTC derivative and consensus cash valuations from Citi, Credit Suisse, Goldman Sachs, JPMorgan, Merrill Lynch and UBS alongside Markit’s own independent valuations, on a single platform – bringing operational efficiency and transparency to a buy side firm’s valuation process, according to Markit.
The banks will provide Markit with end-of-day and end-of-month client valuations for OTC derivative instruments and cash securities. Markit will aggregate this information and offer clients access to a composite of dealer marks for cash securities and counterparty present values for OTC derivative positions. The platform is integrated with Markit’s Portfolio Valuations service and enables Markit’s independent valuations to be received alongside counterparty valuations – all with the same workflow tools.
The initiative is an intersection of several of Markit’s core businesses – trade processing/workflow, valuations and data – according to David Lefferts, managing director at Markit. “The initiative was born out of conversations with our dealer and buy side clients – the existing aggregation and distribution processes are cumbersome and both sides want us to help improve it,” he continues.
The new platform will also enhance the integrity of position information, counterparty marks and third-party valuations, says the vendor. The platform is expected to launch in the second half of 2008 with core coverage of bonds and derivatives. The system will then be expanded in phases to include more banks and all major cash and derivative asset classes, including structured instruments such as asset-backed and mortgage-backed securities.
“Clients will achieve operational efficiencies from not having to manually collate multi-bank valuations data and from the ability to seamlessly receive independent valuations alongside bank valuations,” says Lefferts. “Workflow tools with audit trail and history will better position firms to address concerns relating to increased regulatory and accounting scrutiny.”
Additionally, Markit says, the platform is integrated with Markit Trade Processing for affirmation/confirmations and portfolio reconciliation and enables upgrades and complete interoperability between them to provide full lifecycle support for OTC derivative transactions.
Jeff Gooch, executive vice president and head of valuations and trade processing at Markit, says: “Regulators around the world are increasingly focused on the importance of greater transparency, establishing best practice for client valuations, and a trusted, independent process is key. Markit Valuations Manager will allow financial institutions to better understand and manage their risks at this challenging time.”
Chris Ryan, head of global credit fixed income and FICC administration at UBS, adds: “UBS is pleased to join with our peers and Markit to develop a valuation service which, in this challenging market environment, will provide our clients with greater transparency and more consistency in third-party valuations while increasing the efficiencies of this service.”