Thomson Financial is set to add Standard & Poor’s European bond valuations data to the intraday pricing feed it launched late last year. The move – which is to be announced as early as the first week in July – adds yet another player to the bond valuations marketplace, currently dominated by Interactive Data Corp., but recently the target of both Reuters and Bloomberg, as well as Standard & Poor’s itself.
Thomson appears to be targeting the institutional investment community with the new valuations data and other recent additions to its offerings. The company has targeted versions of its Thomson ONE data service at this segment and through the Intraday Snapshot is moving toward meeting buy-side institutions’ back-office requirements.
The valuations move also marks a major foray into the reference data marketplace by Thomson, which has many data assets to draw upon in developing a credible offering in the space.
Adding Standard & Poor’s European bond and structured finance valuations to its pricing offering allows it to compete with IDC’s FT Interactive Data, which dominates the market. Reuters recently entered the valuations business, adding teams in several market centres to hand-price illiquid securities. Bloomberg is quietly developing similar plans, as exclusively revealed by Reference Data Review in April.
For Standard & Poor’s, the deal represents a significant channel to market for its bond valuations data. The company has been active in recent months, adding to its bond evaluations capabilities, with extended coverage into structured finance and derivatives (Reference Data Review, March 2006). Standard & Poor’s markets its data direct, but is also establishing redistribution arrangements. It currently offers its data via Telekurs Financial – and now Thomson – with more suppliers believed to be in discussions.
Neither Standard & Poor’s nor Thomson Financial would comment on the plans by press time. Nevertheless, Reference Data Review understands that Standard & Poor’s bond valuations data will be bundled into the Thomson Intraday Snapshot Service, which was released last December. The data will be branded as Standard & Poor’s. Commercials involve a straight pass-through of revenues to Standard & Poor’s, with Thomson handling all sales and distribution.
The addition of the Standard & Poor’s valuations data fills a gap in Thomson Financial’s intraday service as it seeks to gain traction in the marketplace. The service effectively offers a snapshot of the entire Thomson database of real-time, historic and descriptive data, with simultaneous updates for client-selected subsets of data. The service is targeted at portfolio managers, fund administrators and risk managers, who need valuations of their holdings more frequently than the traditional end-of-day process.
The Intraday Snapshot service’s updates occur within three minutes of a stipulated request; many existing services may offer updates only after 30 minutes. All data is updated simultaneously. The service is offered to clients for collection via file server, with downloaded data delivered directly into client applications, eliminating the need for local data-handling infrastructure.
Until now, the service provided snapshots primarily of exchange and other liquid securities. By adding Standard & Poor’s snapshots – which were recently sped up to five times a day (Reference Data Review, May 2006) – Thomson is able to offer a more consistent view across a broader selection of assets.
It is understood that discussion are ongoing about extending the deal to other Thomson Financial services, including possibly its front-office offerings. The deal so far includes only Standard & Poor’s European and structured finance data; data from its recent deal with Complex Security Valuations Inc. (CSV) of New York Reference Data Review, April 2006) aren’t included.
Standard & Poor’s focus in Europe is on its content rather than delivery options. While it may compete in some areas with Thomson Financial – and other big data vendors – it also views them as distribution channels for its content services. As such, the arrangement with Thomson is a good fit as it seeks to expand its valuations business within Europe.
Standard & Poor’s moved aggress-ively to fill a gap in the European structured finance marketplace this past spring, launching an evaluations service aimed at fixing the lack of transparency particularly for illiquid asset- and mortgage-backed securities.
Standard & Poor’s reckons its new Evaluated Pricing Service is the first of its kind to use cash-flow analysis and modeling to evaluate prices for European asset-backed and mortgage-backed securities. As such, the service bases its pricing on the analysis of these securities’ underlying collateral and cash flows, as well as on current market data.
This approach marks a departure from the traditional valuations method among portfolio managers of calling traders, brokers and originating banks for pricing. This can cause problems, resulting in stale prices and patchy coverage for illiquid securities.