As indicated by Lou Eccleston, executive managing director of S&P’s Fixed Income Risk Management Services (FIRMS) business, last month, the vendor has extended its transparency initiative by launching a new web-based portal to access its end of day pricing data and terms and conditions data. The launch comes from FIRMS’ new Valuation & Risk Strategies group and means that as well as the option to receive this fixed income pricing data via a traditional data feed, customers will also be able to access it via an analytics platform on the web.
Frank Ciccotto, senior vice president of S&P’s Valuation & Risk Strategies, explains that this launch is aimed at enabling customers to have better access to the underlying data used to calculate pricing. “By publishing the assumptions that are used in our independent pricing process alongside our pricing data, and making this information available through a web-based analytics platform, we are able to give investors the ability to engage in a much deeper level of analysis. This move toward providing a greater level of transparency is a major initiative that we will be expanding throughout the year,” he elaborates.
The web-based Global Credit Portal now allows access to: FIRMS’ asset class advanced pricing search function; terms and conditions data on around 1.9 million US municipal, US government and US and non-US corporate securities; a built-in price challenge tool; and market-based assumption factors used in price creation.
It follows the announcement at the start of this month by the group that it is now offering the assumptions data underlying its pricing and valuations via the FIRMS Global Data Solutions platform and the FIRMS Global Credit Portal. “One of the most critical issues confronting fixed income investors in the current market is price defensibility; any evaluation of an asset’s price must be able to stand up to rigorous analysis by risk managers, compliance officers and boards of directors,” explains Ciccotto.
To this end, in January, the Valuation & Risk Strategies group also undertook a quarterly Valuation Consensus Survey, which is aimed at providing greater transparency on the key input assumptions market participants use to value structured finance assets. FIRMS’ quarterly survey, which it began providing last year, invites institutions from both the buy side and sell side to provide details of their valuation methodologies and to give their expectations for four key valuation inputs: constant default rates, loss severity, prepayment rates and recovery lag.
Peter Jones, senior director of Valuations & Risk Strategies, summarises the main findings: “The figures from the latest survey show that there remain concerns for the performance of some classes of mortgage collateral, particularly in the US, and, further, that there remain some disparities between the valuation approaches of different sides of the market. Over the past 18 months it has proved difficult to deliver truly comprehensive methods for security and portfolio valuation. But, encouragingly, the results from our latest survey also imply signs of converging valuation methodologies within the structured finance market.”
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