Asset Pricing and Reference Data

The financial markets have seen an extended and unprecedented period of change and turbulence. Regulatory requirements, new clearinghouses, industry consolidation, and new instruments continue to emerge. As a result, firms have significantly examined their approach to pricing and data, both from a content and data integrity standpoint and in terms of how information flows throughout the organization.

Harnessing information and automating data so that it flows seamlessly through downstream systems has never been more vital. Now more than ever, financial firms are recognizing that data is an asset – once it comes into the organization, it needs to be tracked, integrated into the various systems, and be subject to standards in terms of format, user rules and storage.

• Data Integrity and Workflow Seamlessness -- More often than not, organizations need to take the best in class data from several sources.  They are working with many disparate types of data, including pricing, terms and conditions, symbology, corporate actions and many others. The data must populate downstream systems in such a way that maximizes workflow efficiency, and minimizes trade failure and other risks.   Because legacy applications and databases often exist to do very specific things, this creates significant mapping and normalization challenges, particularly in light of the industry consolidation that has taken place in recent years, where integration issues remain.

• Portfolio Pricing Methodology - Independence and Transparency -- As risk has increased and instrument structures have grown in complexity, investors and their boards, as well as regulators, are no longer willing to deal with a “black box” construct. Valuation services methodology must be well dcumented and transparent. Most investors require a minimum of two independent pricing sources in order to derive a Net Asset Value for their portfolio; this is increasingly true as hedge funds come under similar regulation.   ISN partners with our clients to create processes to ensure that the methodology and delivery capabilities of the provider are consistent with the objectives of the organization and meet their internal and external requirements.

• Vendor Capabilities Assessment – The industry is flush with providers who offer different “flavors” of solutions. This includes portfolio and individual instrument pricing, analytics, data storage, portfolio management and risk tools. It is important to understand precisely what the provider is offering. For example, in the case of pricing, are they offering a model, yield curves on the underlying instruments, dealer quote based pricing, or some other methodology? In the case of workflow settlements and data management, which specific workstreams are they focused on, and could this capability be maximized by coupling the solution with that of another vendor? ISN works with clients in identifying assists clients in identifying requirements of the pricing function and evaluating vendors to ensure that the right solution is in place.