This month, I’ve been busy organising a couple of webinars on the pricing and valuations challenge in the market (one of which is at 3pm on Thursday – see more here), as well as helping our research team on our upcoming North American valuations benchmarking report (check the site in the coming months for more). Both of these tasks have involved me talking to the pricing data community out there in the market, and one message has come across loud and clear: data vendors need to do better. Whether it be improving their responsiveness to pricing queries, improving their user interfaces or providing access to underlying data inputs to evaluated prices, there is much still to be done to support pricing teams in the current market.
After all, these teams are facing a much higher degree of scrutiny from both the regulatory community and the investor community in the glare of the post-crisis data transparency spotlight. Fair value price transparency requirements and the gradual move towards a more harmonised accounting standards environment (and by gradual, I mean glacially paced) is set within the context of the whole debate about data quality across the financial services business (see more on which here). Whether it is related to risk management, pricing, trading or reporting, firms need to be able to stand behind their numbers.
Accordingly and as demonstrated recently by the number and very specific questions asked by audience members to panellists during our recent panel on acceptable price tolerances for evaluated prices, market participants are looking for a high degree of transparency from their vendors about data inputs and methodologies in the hard to value space in particular. If pricing tolerances are set, firms want to know the details around the decisions and methodologies behind setting them. Providing access to analysts, whether it is via email, telephone or face to face is also important to firms in this endeavour.
The reassurance that a vendor can react quickly to any requests for more information, queries or complaints is also vital, given that timeliness of data is an issue that is high on the agenda for investors and regulators at the other end of the data chain. And it is here that many firms feel vendors could do better. Responsiveness and overall client service is often cited as a complaint against data vendors, along with the usual grievances about too expensive and overly complex pricing structures (see the ongoing furore about end user licences, for example, more on which here). Getting back to a client within 24 hours is perceived as a ‘must have’.
Keeping a diverse client base isn’t an easy task however, given the variety of questions fired at panellists during the recent webinar and the range of complaints I’ve been hearing recently. Some pricing teams are keen for the ability to customise user interfaces as much as possible for example, whereas others are much more interested in front ends being as simple as possible. Some would like to get regular phone calls from their vendors to check in and update on their preferences regularly, while others would prefer to hear as little as possible.
But it is taking these preferences into account and tailoring the overall approach (and related service level agreements) to meet any specific requirements that will keep firms satisfied. Well, that and a serious revision of pricing structures.
I fully expect this critical review of data vendors to continue over the next few years; given the slew of regulatory requirements on their way and the pressure firms are facing to reduce operational costs. Increased scrutiny of pricing may be forcing many firms to consider dual or triple source pricing data, but it is also forcing them to review who is offering the best value. Who’s getting the best grades? You’ll have to see our benchmarking to find out…