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A pricing service for money market reform

Jayme Fagas
Jayme Fagas
Global Head, Valuations and Transparency Services, Refinitiv

Money market reform places new responsibilities on EU fund managers to ensure no repeat of problems seen in the financial crisis. Amid the need for quick and accurate net asset value calculations, how are Refinitiv pricing services helping to achieve #SmarterTrading on a variety of assets?

  1. EU Money Market Reform came into force in January, with the aim of boosting resilience against financial market difficulties and limiting cross-border contagion.
  2. Money market managers now require more frequent valuations, enhanced investor disclosure and greater transparency.
  3. Refinitiv provides a specialized pricing service, with fast, accurate and reliable pricing for public and non-public assets including corporate bonds.

In many ways, EU Money Market Reform is simply catching up with developments in the United States.

During the financial crisis, some U.S. money market funds — previously seen as bulletproof, income-generating repositories for short-term cash — did something that had never happened before: they broke the buck.

That is, investors discovered they’d lost capital and, worse still, couldn’t get their money out.

Wind forward ten years and the European Union (EU) has now implemented regulations designed to avoid any repeat. These came into force in January 2019, more than two years after U.S. money market funds were subject to new rules in October 2016.

The money market reform aims to make funds more resilient against financial market difficulties, reduce the risk of runs and limit cross-border contagion. The new rules apply to all new and existing money market funds within the EU.

Under the regulations, some money market funds will need to have a floating net asset value (NAV) rather than the previously permissible constant share price. Other funds, such as those invested purely in government debt, will retain their constant price, except under exceptional circumstances.

It also introduces enhanced investor disclosure, greater transparency and more demanding reporting obligations for fund managers.

While this sounds complex, the key to complying with many of these requirements is having access to fast, accurate and independent pricing.

How does specialized pricing help?

Put simply, pricing services help managers of funds with floating NAVs to quickly and accurately calculate them.

To help fund managers do this, Refinitiv provides a specialized pricing service for money market instruments, which is updated throughout European market hours. Evaluations are available both intraday and at standard market snapshot times.

That means fast, accurate and reliable pricing for public and non-public assets including corporate bonds, agency notes, commercial paper, certificates of deposit, sovereign debt, municipal bonds, and asset-backed securities.

Refinitiv pricing services

To further support money market fund managers, we have extended our service to provide prices on bespoke money market instruments, including repurchase agreements and bankers’ acceptances for all money market funds and/or all types of portfolio holding instruments.

Customers need only submit a small series of data points to receive price evaluations on these short-term instruments which are often unique to the individual client’s portfolio.

But we understand that it is not enough to just have pricing, you need it to be transparent and verifiable. So, all of our valuation methods offer transparency and include price recipes and other relevant data.

We are a completely independent third party pricing provider that does not originate, issue, trade, buy, sell, or position these instruments.

And we understand that accuracy is also paramount.

Our evaluations team, which employs professionals with deep fixed income experience, incorporates industry accepted pricing models, stringent quality control checks and extensive market data to support more accurate NAV computations and more reliable assessments of risk.

Accurate and accountable

Our pricing service is helping fund managers to accurately and accountably calculate NAV, satisfying investors and regulators alike.

It is also helping fund managers stay within their portfolio diversification and liquidity requirements, while also supporting their reporting obligations.

Get in touch to learn more about how our independent evaluated pricing service can help you satisfy regulators and succeed in the marketplace.

Discover why evaluated pricing is the key to staying one step ahead of the curve in a highly risky and complex regulatory world