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ABS pricing: The battle for pricing transparency

Standard & Poor’s new evaluated pricing service joins an increasingly crowded field in the race to improve price transparency in European ABS.

Peter Jones, S&P “Is a trader marking the whole of his inventory every day?”
Peter Jones, S&P

Investors in European ABS and MBS have another evaluated pricing service to add to the array of new products on offer following Standard & Poor’s recent launch of its Securities Valuation Service. The new product is the result of a tie-up with ABSxchange, an ABS portal developed by ex-S&P European head Kurt Sampson and US-based software firm Imake Consulting. ABSxchange taps into the S&P European database to provide advanced analytics and modelling. S&P’s valuation service currently prices more than 2,300 deals in Europe and 1.1 million tranches in the US across the capital structure from triple-A to sub-investment grade. Evaluated pricing is also on offer for US securitized debt via FT Interactive. Time sensitive

In its Evaluated Prices Study (published in January this year) Standard & Poor’s describes the concept that valuations can been obtained for illiquid securities without “actual analysis by any party of the current circumstances pertaining to that credit” as an illusion. It points out that while the US markets overwhelmingly use evaluated prices for fixed income, European funds are valued using pricing data that might be “out of date and hence potentially giving rise to arbitrage opportunities that will act to the detriment of long-term investors”.

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