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S&P, SuperDerivatives Combine Valuation Services
June 18, 2008
SuperDerivatives and Standard & Poor’s have forged a sales and marketing alliance, tying together their valuation offerings for fixed-income securities and over-the-counter and exchange-traded derivatives.
Standard & Poor’s Securities Evaluations provides valuations for about 3 million fixed-income instruments and distributes pricing data and equities valuations from vendors such as SuperDerivatives. Widely viewed as the leading provider of options pricing and benchmarking, SuperDerivatives also offers risk management systems and an online trading platform for OTC derivatives that will not be part of the deal.
The combined product, announced Tuesday, will encompass both companies’ models and pricing services and covers government, municipal and corporate bonds, syndicated loans, asset- and mortgage-backed securities, money-market instruments and vanilla and exotic OTC derivatives, as well as exchange-listed commodity, credit, energy, equities, foreign currency and interest rate derivatives. The companies say the broad coverage and geographic reach will help clients manage their investment and operational risk, in addition to their compliance responsibilities.
The total number of employees dedicated to the joint offering--and who will oversee them--has not yet been decided. S&P has tapped Damian Burleigh, managing director of global sales, as its point person for the initiative, while SuperDerivatives named its global head of sales and support, Russell Levi.
“This commercial venture between SuperDerivatives and Standard & Poor’s Securities Evaluations is aimed at enabling our customers from developed and emerging markets to effectively value the widest range of products in a single offering,” said David Gershon, CEO of London- and New York-based SuperDerivatives. “Buy- and sell-side customers will benefit from a one-stop-shop experience with the objective of delivering the most accurate and reliable valuation service with significant economies of scale.”
Lou Eccleston, executive managing director of S&P, said the partnership would create the “most comprehensive and robust global coverage possible from a single offering” and “the largest independent revaluation service in the combined cash and derivative marketplace.” Although S&P has previously augmented its evaluation services with data from other pricing providers--it signed a deal with Complex Security Valuations in April 2006 and interdealer broker Icap in April 2007--those agreements do not involve joint marketing, said Eccleston. For SuperDerivatives, the partnership is its first with another pricing vendor.
Five large asset managers have already signed up for the new service, according to Eccleston. Neither S&P nor SuperDerivatives would disclose their total number of customers, but SuperDerivatives counts Bank of America, Barclays Capital, Citigroup, Credit Suisse, Deutsche Bank, Northern Trust Corp., Royal Bank of Scotland and UBS among its clients.
“We aim to become the Microsoft of the valuations industry, with S&P bringing name recognition and global reach in the fixed-income and structured finance arena and SuperDerivatives specializing in the derivatives space,” Gershon told Securities Industry News. “It would not have been possible for us to achieve this separately.”
The deal comes as buy- and sell-side firms are increasingly pursuing third-party services for hard-to-price products. The limitations of dealer pricing has received much attention since the credit downturn, and valuation errors can lead to compliance problems and operational and reputational risk.
In April, SuperDerivatives announced that it had added exit, or liquidation, pricing to its Portfolio Revaluation service to help firms comply with Financial Accounting Standard 157. That rule requires that firms determine a “fair value” for securities they hold, defined as the “price that would be received to sell an asset or paid to transfer a liability.”
