Mellon Financial Corporation is to provide to institutional clients through its Asset Servicing group an independent over-the-counter (OTC) derivatives valuation service covering a range of swaps and options. The move comes as regulatory and risk pressures force investors to seek independent valuations, rather than relying entirely on their investment managers or prime brokers. The new offering has been created in response to rapid growth across the spectrum of OTC derivatives – not just the most common, interest rate swaps and credit default swaps – but default basket swaps, total return swaps, currency swaps and inflation swaps, among others, and demand for independent valuations from across all trading groups including hedge funds and investment managers, according to Mellon.
Mellon will electronically share information with its data pricing vendors throughout the day, and collate a fair valuation which will then be delivered on a daily or monthly basis to clients either via the client’s normal accounting statements or via an electronic file on request.
An expansion of its existing offerings through its Asset Servicing group – which is comprised of Eagle Investment Systems, DPM Mellon, Mellon Analytical Solutions and its joint venture partnerships, ABN AMRO Mellon and CIBC Mellon –
the service is “really a natural progression, as growing demand and greater investments for trading in exotic instruments and OTC derivatives means that clients look more frequently to their service providers to provide a wider range of information and services”, according to Patrick Ludden, product manager in Mellon’s Asset Servicing group.
Ludden says Mellon will be working on several further developments to support derivatives processing during the next 18 months. “Initially we will focus on enhancing our reporting services, through transaction processing, and risk and collateral management. This is one of the first stages in development that creates a knock-on effect in constantly improving the surrounding services, which all tie in.”
Mellon’s Asset Servicing group provides solution-oriented services and tools to support the entire investment process for investment managers, public and private pension funds, endowments and foundations, mutual funds, insurance and other financial institutions. Mellon Financial Corp is currently undergoing a merger with Bank of New York, to create the world’s largest securities servicing and asset management firm.