Independent Price Verification & PruVal

Facing the new pricing challenges

Automating the full IPV process lifecycle now forms part of platform simplification initiatives at many banks and audit firms.

Spreadsheets, manual data entry and repeated, sometimes unnecessary data calls, are still features of many IPV processes. Minimizing the number of steps IPV data has to pass through, and maximizing the percentage of IPV data that requires no amendment before being useful to the IPV process, has become essential for achieving business and client service levels while sustaining high levels of governance.

What’s needed is a fully auditable managed service in the cloud driving your business workflows and supporting the variances, tolerances, data-source-hierarchy and rules that reflect your needs and conform to the contracts you have with market data vendors.

With built-in dashboards to easily oversee your IPV service for multiple clients or business units, reports and exports (including to client spreadsheets), and a full audit trail, GoldenSource takes price verification to new levels.

Independent price verification is now firmly in the spotlight.

Independent price verification is the process of comparing internal prices and parameters used to mark positions to obtain position valuations to a corresponding set of independently verifiable external prices and parameters. It requires capital market organizations to access multiple evaluated price feeds from various external sources in order to analyze, compare and determine their own price. Price validation is also needed to ensure that any prices arriving through a data vendor, broker, or evaluated pricing supplier are reasonable and complete. IPV substantiates the valuation of trading assets and liabilities on the balance sheet.

Prudent valuation (PruVal) is the requirement to calculate additional value adjustments (AVA) for infrequently traded financial instruments valued at fair value. The Capital Requirements Regulation (CRR 2013) requires that banks reflect the impact of the prudent valuation adjustments in their common equity tier 1 capital, helping to ensure solvency. Common management of all risk and finance data that feeds IPV and prudent valuation calculations and adjustments also makes stress tests easier to manage.

External regulatory bodies and internal management are driving greater transparency in every capital market organization’s approach to valuing the assets and liabilities on its balance sheet. For example, the International Financial Reporting Standards (IFRS) for accounting have placed tougher requirements on how complex derivatives are valued while EMIR, Solvency II, and Dodd-Frank provisions are all putting transparency at the heart of the valuation process.

IPV with GoldenSource

The GoldenSource Independent Price Verification (IPV) solution offers a unique pricing preference and vendor hierarchy framework that enables capital market organizations to meet their regulatory, management, and audit requirements for independent price verification.

The solution combines the industry-leading Data Model and maintained Connections with client-configurable price validation rules, to provide a single point of control and a source of clean, validated prices for the front, middle, and back office.

With GoldenSource’s IPV solution, institutions can:

• Define pricing preferences and policy
• Automatically calculate the effects of price variances where they fall outside of user definable tolerances.
• Quickly and easily establish processes and workflows that adhere to agreed IPV controls.
• Control the quality of prices with a comprehensive set of data quality price validation rules, including: Single Vendor Tolerance, Multi-Vendor Tolerance, Calendar Check, Mid Check (verifies consistency of Bid, Mid and Ask prices), Missing, Stale etc.

Access pricing information from multiple sources

• Take advantage of GoldenSource Connections, out-of-the-box interfaces to prominent pricing and reference data sources and the industry benchmark for vendor feed management services.
• GoldenSource Connections are maintained by GoldenSource, freeing your time to focus on higher priority projects.
• Create custom connections to your in-house pricing sources using our comprehensive and intuitive toolkit.

Check price sources for data quality

• Supports intra-day processing.
• Sophisticated suspect price investigation and resolution framework.
• Validation rules and integrity checks delivered out-of-the-box.

Validate pricing, compare multiple sources, and measure “market consensus” around pricing

• Load, maintain and access all prices within a single repository.
• Cross-check against multiple vendors.
• Sophisticated vendor source hierarchy rules for golden price creation.

Ensure that preferred prices are distributed to mission critical systems across the enterprise

• Publish validated golden prices to downstream applications including compliance, risk, accounting, and front-office systems, ensuring that everyone throughout the organization is operating with the same information.
• Mitigate credit risk problems, compliance issues, and improve profitability by enabling key departments to make their decisions based on the correct valuations.