Thomson Reuters rolls out pricing tool for structured notes and OTC derivatives

Thomson Reuters has launched Pricing Service Plus (TRPS Plus), a new DataScope capability for structured notes and hard-to-value over-the-counter (OTC) derivatives aimed at increasing transparency into the evaluated price, methodologies and market data associated with the pricing of products.

The service is a response to new requirements from regulators enforcing rules such as Dodd-Frank and European Market Infrastructure Regulation (Emir), which are devoting attention to illiquid and complex instruments, with a particular focus on derivatives and structured products, according to Thomson Reuters.

Financial institutions are struggling to meet valuation and risk management requirements for their exotic derivatives and complex structured products, said Jayme Fagas, global head of valuations and transparency for Thomson Reuters Pricing and Reference Services, in a statement. The service will give providers access to the price but also the traceable details of the valuation “allowing them clear line of sight into the instrument and its value,” according to Fagas.

It also provides risk analysis, such as value-at-risk (VaR), credit valuation adjustment (CVA) and greeks, which will add transparency to valuations and allow customers to get a tailor-made evaluated price with complete access to cashflow descriptions, market data inputs, numerical methods and model assumptions to help address transparency and regulatory requirements.

“Thomson Reuters has been pricing structured notes and derivatives since 2006, and TRPS Plus is aimed at providing transparency to eventually all the derivatives it prices,” said Robert Vincini, head of pricing service specialists.

“We have seen an increased demand for transparency in pricing across asset classes from our clients, especially around the more complex securities,” said Vincini. “This is a reflection of the regulatory environment. We had done a lot of work to increase the transparency of our fixed income pricing but we felt we could add more transparency to the pricing of complex derivatives and structured notes. We think structured notes clients will benefit because this pricing tool covers model assumptions, cash flow descriptions, and market data inputs which will bring added transparency to the product and its value.”

The service is accessible via Thomson Reuters DataScope Select, the company’s strategic global data delivery platform for non-streaming content, and is an addition to the existing Thomson Reuters Pricing Service, which covers over 2.5m fixed-income securities, derivatives and loans, priced daily, including: collateralised loan obligations, collateralised debt obligations, asset-backed securities, commercial mortgage-backed securities, credit default swaps, corporates, US municipals, and more.

DataScope Select now covers more than 650 structured notes and derivatives. Combined with the legacy-Pricing Partners financial library, which was acquired in by Thomson Reuters in June 2013, TRPS Plus will allow DataScope Select to deliver transparent pricing on all standard or non-standard derivatives. Valuation and risk reports will also be delivered intra-day or end-of-day according to customers’ requirements.