Thomson Reuters is launching a video channel on its Reuters Insider TV service that will explain the methodologies it uses to underpin its Thomson Reuters Pricing Service for OTC valuations. The channel – the Evaluated Pricing Market Update – seeks to address market calls for greater transparency in evaluated pricing of hard-to-price or illiquid securities.
With increased regulatory scrutiny – and heightened client awareness of the liability of getting pricing wrong – securities administrators are paying rapt attention to how a particular valuation was arrived at. Practitioners report high levels of client challenges of the valuations they provide to their buy-side customers. Indeed, at a recent briefing on valuations transparency moderated by A-Team’s Angela Wilbraham, practitioner panellists reported that their pricing teams routinely faced due diligence of their methodologies from clients as well as from regulators.
According to Jayme Fagas, who heads evaluated pricing for Thomson Reuters, the Evaluated Pricing Market Update aims to offer the company’s pricing service client base insight into its pricing team’s approach. The weekly update will feature two- to three-minute video segments led by Thomson Reuters lead asset class evaluators, who will explain how particular valuations were handled, or how particular market events might affect valuations.
Fagas says the idea is “to share what we’re learning, from clients and from the markets, and give us the opportunity to be proactive with respect to any given market event. By offering more transparency into the process, we aim to raise client comfort levels, build confidence and ultimately generate liquidity.”
Fagas says Thomson Reuters takes different approaches across the various asset classes it covers, including 2.5 million structured products and other OTC instruments. The video coverage will be coordinated with daily market commentary, which along with the base Thomson Reuters Pricing Service is delivered via the DataScope distribution system.
The new video service will start with coverage of US markets, expanding into other regions in coming months. Fagas says Thomson Reuters has had particular success with a number of structured products, including collateralised loan obligations (CLOs). Among other securities it prices are mortgage- and asset-backed securities, and agency securities.
Thomson Reuters maintains a team of more than 100 evaluators globally, providing pricing up to nine times per day for some securities. The company has recruited pricing specialists from a range of buy- and sell-side financial institutions, trading firms, market research firms and vendor organisations, Fagas says. The result is a truly independent pricing team, she says, that credibly has “no skin in the game.”