Seeking A Third Way On Pricing
![michael-shashoua-waters michael-shashoua-waters](/sites/default/files/styles/landscape_750_463/public/import/IMG/317/167317/michael-shashoua-waters.JPG.webp?h=acfe3244&itok=ceJMABf4)
In our recently published special report on Pricing & Valuations, end-users of pricing services at firms such as Wells Fargo, Northern Trust and BNY Mellon all pointed to issues with transparency and credibility of pricing. Some end-users may want a concise and to-the-point documentation of pricing and valuation methods to feel they can trust a provider.
Others, however, take the approach of using secondary and even tertiary sources, and look at their own practices and techniques. This is the method advocated by Kerry White, global director of product strategy at BNY Mellon, both in the special report and additional conversations this past week.
White could be speaking to the providers when she says, "The best way to close the trust gap is by optimizing valuation practices and price modeling techniques." White relates that BNY Mellon is asked by its clients to provide those multiple valuations from different sources.
While the Dodd-Frank Act and the Governmental Accounting Standards Board (GASB) in the US, along with European Market Infrastructure Regulation (EMIR), are increasing scrutiny of pricing and valuation, market volatility is also beginning to play a part, as White sees it, particularly for counterparty exposure and credit ratings data.
Regulations put firms and their providers "in the same boat," where prices have to be corrected immediately if necessary, she says. Everyone has to be prepared to deal with challenges to prices. Providers know that a lack of transparency can damage their relationship with firms that consume their pricing data, according to White.
Fair value requirements from GASB and the Dodd-Frank Act, still pending, could complicate the use of multiple valuation sources. "The regulations are about getting under the covers of how assets are behaving, and whether they are priced appropriately," says White.
Getting a succinct summary of pricing and valuation techniques may be a desirable goal, but that will be much more difficult to produce if multiple, more complex valuation methods become necessary. This may be the next great challenge in pricing and valuations. Reconciling competing impulses to be brief and comprehensive seems necessary to establish the trust and credibility sought after for pricing.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Regulation
Finra clears hurdle with CAT launch, but several others remain
Two major components of the consolidated audit trail are now in place. But wrangling over the CAT’s future continues.
Bloomberg, industry bodies push back on Cboe’s proposed OEMS rule change
Some industry bodies disagree with the options exchange’s proposal to carve its Silexx OEMS out of the SEC’s definition of an exchange facility and place it into a separate business line.
GenAI: US Fed reveals its five use cases
Internal sandbox used to assess viability and risks; coding and content generation on the agenda.
Zeros and ones: Industry contemplates T+0 as the next step
With the North American transition to T+1 settlement complete, same-day settlement could be the next goalpost set, though skeptics are many.
The IMD Wrap: Déjà vu as exchange data industry weighs its options
Max highlights some of WatersTechnology’s recent reporting on data costs and capacity issues facing the options industry, and asks, haven’t we seen this before somewhere?
FRTB data quality issues persist amid shifting implementation dates
Banks are finding market and reference data challenges posed by the FRTB’s standardized model tricky, compounded by uncertainty over when the regulation will take effect.
Cboe pushes rule change to make way for proprietary Opra alternatives
As US options data has grown in volume and cost, Cboe says changing the public feed's governing document would make way for more competition from private alternatives, including its Cboe One Options Feed, launched in 2023.
Regulators urged to promote cyber security investment
Public interest in stopping cyber attacks that could trigger bank runs, says Bundesbank researcher