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February 21, 2008
Markit, Six Investment Banks To Launch Derivatives Pricing Platform
In the wake of the subprime mortgage crisis and subsequent plummeting in value of mortgage-related derivatives such as CDOs, which in turn has generated a crop of unhappy investors, lawsuits and regulatory concern around improperly sold and priced derivatives, it's no wonder that companies that offer help in determining the value of derivatives contracts are coming out with new products. While many (Numerix, Maplesoft, Quantify) offer pre-built mathematical models for calculating the theoretical value of a derivative now and in the future, Markit, a provider of several derivatives indices, strives to provide actual prices at which certain types of derivatives are currently trading. (Reuters and NYSE Euronext also offer such derivatives valuations.)
Today, Markit announced it is working with six investment banks to develop a new platform that will aggregates the banks' and Markit's derivative pricing data to help institutional investors and fund managers value OTC derivatives and thus more accurately determine portfolio performance. The six banks -- Citi, Credit Suisse, Goldman Sachs, JPMorgan, Merrill Lynch and UBS -- will provide Markit with end-of-day and end-of-month client valuations for OTC derivatives and cash securities. Markit will aggregate this information and offer clients access to a composite of dealer marks for cash securities and counterparty present values for OTC derivative positions, alongside Markit's own independent valuations, developed using industry-standard models.
Markit aims to launch the platform, Markit Valuations Manager, in the second half of 2008 with coverage of bonds and derivatives. The firm says the platform will later be expanded in phases to include more banks and all major cash and derivative asset classes, including structured instruments such as asset-backed and mortgage-backed securities.
Posted by Penny Crosman at 10:30 AM
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