Following the acquisition of Pricing Partners in 2013, Thomson Reuters has increased its profile in the pricing and valuation segment of the structured products market. SRP spoke to Jayme Fagas (pictured), global head of valuations and transparency, about the increased involvement of the firm in the structured products market, its view of the market and its future plans.

Has regulation played into the hands of those providing tools and services to increase transparency in the structured products market?
As a valuation and pricing provider we are always looking to understand our clients’ existing and new requirements. We have a team specialised in serving our clients -- not reactively but, in a proactive way – interfacing with our customer base to design solutions that are closely aligned with their needs. In addition, we keep a close dialogue with regulators and auditors worldwide to make sure that we are on top of any regulatory developments to ensure that our services meet general compliance requirements.

Do you think transparency was an issue around structured products?
Many instruments like structured products can be hard to evaluate and price. We believe that anything that adds transparency to a process is always going to benefit the client. Evaluated pricing that is derived from a ‘black box’ approach is no longer acceptable and doesn’t cut it anymore with regulators. Pricing providers are now required to provide transparency around evaluations and offer greater insight into all components of an evaluated price. Pricing providers are further required to provide corresponding market data to defend their evaluation and pricing process. It’s no longer just about providing a price on a particular instrument and access to a pricing recipe. Pricing providers must supply methodologies, formulas and market data to offer more insight which ultimately allows investors to fully understand the instrument – be it complex or vanilla in nature.

Thomson Reuters has become more involved in the structured products market. What are the reasons for this push?
Structured products are a growing asset type and Thomson Reuters Pricing Service (TRPS) has increased our capabilities and coverage. However, we also have added tools and solutions that offer transparency into how structured product prices are derived. This type of transparency and insight is no longer a request, but a requirement. The acquisition of Pricing Partners in 2013 is at the core of our increased focus on structured products. We have recently launched TRPS Plus for structured notes and hard-to-value over-the-counter (OTC) derivatives. This new capability is aimed at increasing transparency into the evaluated price, methodologies and market data associated with the pricing of these hard-to-value instruments. TRPS offers customers access to not only the price but also to the traceable details of the valuation, which allows clear insight into the instrument and its value. TRPS Plus is scalable as are our other tools which deliver transparent pricing. Hard-to-value instruments like structured products are established investment types and we are scaling to be in line with the development and growth of these markets.

What else did the acquisition of Pricing Partners add to Thomson Partners?
The Pricing Partners acquisition allowed us to increase our presence in the European pricing and valuation segment especially in the structured notes and complex derivatives markets, and we now have one of the largest structured note pricing teams out there. Thomson Reuters also benefitted from this acquisition in the Asia Pacific region as Pricing Partners was already established there. The acquisition of Pricing Partners not only brought in talented staff and an increase in pricing capabilities, but also acquired a comprehensive financial library that supports pricing and valuation of structured notes and other complex derivatives instruments. We are now working to make the library available on our Eikon platform. Having data visualisations which help users to pinpoint value in currency markets across multiple value metrics and multiple currency pairs in real time is just one example of added capability. Issuers of structured notes will clearly benefit from access to this kind of market data.

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