IHS Markit has announced that its over-the-counter (OTC) derivatives valuation data is being made available to financial institutions for best
The London-based global information provider said that time-stamped valuation data can help firms monitor intraday and historic transaction costs across interest rate, equity, FX, credit, commodity and structured product OTC derivatives.
The firm also noted that evolving market practices and global regulations such as the Markets in Financial Instruments Directive (MiFID II), the Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation and RG 97 aim to gradually increase transparency on the execution quality of financial market transactions.
As best execution requirements continue to broaden, the most complex trades in OTC markets have come into scope, creating a need for standardized valuation procedures and reporting documentation.
OTC derivatives challenges
“Financial institutions need to validate and contextualise the effectiveness, quality and timeliness of each transaction. execution compliance,” said Laura Misher, managing director of derivatives data and valuation services at IHS Markit.
“In terms of compliance, OTC trades are the most difficult to manage due to their complexity and the availability of quality market data.
“As a leading source of market data on OTC derivatives with significant breadth of inputs, we are uniquely positioned to help firms address these challenges by providing transparent valuations and inputs that can be used for transaction cost analysis.”
HIS Markit’s Portfolio Valuations data and methodology can calculate OTC trade slippage, which is the difference between the executed and expected price of transactions. Trade slippage can be expressed in a range of price or market sensitivity terms and firms can use this information to confirm execution quality and prepare reports on trading effectiveness.
“As the regulatory frameworks have expanded from equities to bonds and OTC assets, the requirements for data and analytics have also become increasingly complex,” added Michael Richter, executive director of trading analytics at IHS Markit.
“With this in mind, we are committed to enabling firms to reduce the cost and burden of compliance through our comprehensive suite of best execution solutions.”