The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

SIX Financial Partners Numerix to Add OTC Derivatives to Evaluated Pricing Service

SIX Financial Information has passed the first milestone on its roadmap for the Evaluated Pricing Service (EPS) it introduced in August 2012 by partnering Numerix to produce valuations for OTC derivatives. The outcome of the first phase of the partnership, EPS services covering interest rate swaps, credit default swaps and foreign exchange derivatives, went into production this week after beta testing since June, and additional OTC derivatives are due to be added to the service over coming months.

For SIX Financial Information this is a departure from traditional partnerships covering data distribution agreements. Instead it embeds Numerix’s cross-asset analytics for derivatives valuations into the company’s EPS infrastructure.

Ian Blance, head of evaluated pricing business development at SIX Financial Information, says that while the fixed income products within EPS use a proprietary valuation model, the company decided not to develop it own analytics and methodology for OTC derivatives and considered a number of vendor options before settling on a non-exclusive partnership with Numerix.

“We chose Numerix because our prime goal was to use a best-of-breed solution from an industry perspective. The Numerix solution has great coverage, it can scale and it is seen in the industry as a leading provider of OTC derivatives evaluated pricing. It is also flexible and offers other options so we can and will expand into other asset classes where gaps are perceived by our clients,” he says.

While the Numerix pricing engine will provide the analytics piece of the OTC derivatives valuations service, SIX Financial Information will provide the rest of the infrastructure, including data, a user interface and product and delivery elements. With phase one of the partnership complete, the roadmap continues with plans to take in asset classes including equity derivatives, commodities and inflation.

SIX Financial Information is not new to OTC derivatives evaluated pricing as it has been providing an analyst-driven service for some time, but this was constrained by personnel resources. Blance describes the Numerix-based system as systematic and scalable, and expects migration from the analyst service to be completed by the end of this year with the analysts still very much in the picture but using the new service to evaluate more asset classes and assets.

Blance explains: “By adding capability for OTC derivative valuations to our strong fixed income product we are broadening the solution we can offer and increasing our ability to assist clients in meeting their commitment to independent and objective pricing.” He sees competition in OTC derivatives valuations coming from big players such as Bloomberg and Thomson Reuters, but also from more niche providers such as Pricing Partners.

In terms of the EPS, Blance says more vendor partners will be added to further increase asset class coverage before the end of the year, but suggests they will not be as extensive as the company’s relationship with Numerix.

Reflecting on the introduction of the service, which is dedicated to defensibility, he says: “EPS is going well and we will complete the migration of clients from our old pricing products to the new service at the beginning of December. We have held a number of client events in Europe to explain the service and will hold events on a more global basis early next year. EPS has had a good reception and we are attracting new clients. Our initial intent was to concentrate on fixed income products and then on OTC instruments, and that is what we have done.”

Related content

WEBINAR

Upcoming Webinar: Managing the transaction reporting landscape post Brexit: MiFID II, SFTR, EMIR

Date: 16 March 2021 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes The transaction reporting landscape has, for many financial institutions, expanded considerably in size since the end of the UK’s Brexit transition period on 31 December 2020 and the resulting need for double reporting of some transactions to both EU...

BLOG

DSB Opens First Consultation on UPI Fee Principles

The Derivatives Service Bureau (DSB) opened a first round of industry consultation on fee principles for the Unique Product Identifier (UPI) today. The consultation ends on 5 March 2021 and is the first of two consultations before a final report is published in September 2021. The UPI will come into play in 2022 and will...

EVENT

RegTech Summit New York City

Now in its 5th year, the RegTech Summit in NYC explores how the North American financial services industry can leverage technology to drive innovation, cut costs and support regulatory change.

GUIDE

Corporate Actions 2009 Edition

Rather than detracting attention away from corporate actions automation projects, the financial crisis appears to have accentuated the importance of the vital nature of this data. Financial institutions are more aware than ever before of the impact that inaccurate corporate actions data has on their bottom lines as a result of the increased focus on...