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Fixed income: Quality reference data a key differentiator

Russell Ironside
Russell Ironside
PRS Propositions Manager

A new Refinitiv Expert Talk looks at the importance of quality data for financial institutions (FIs) navigating complex industry-wide challenges. When considering the vast fixed income universe, reliable access to trusted reference data – especially for hard to value instruments, such as convertible bonds – can be a key differentiator for firms.

  1. Complex, industry-wide challenges facing the financial services industry include an increase regulatory obligations, such as those introduced by MiFID II and the LIBOR transition.
  2. When considering the vast fixed income universe, reliable access to trusted reference data – especially for hard-to-value instruments, such as convertible bonds – can be a key differentiator for firms.
  3. For FIs, choosing the right reference data partner has become a key consideration.

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The financial services industry continues to face a range of complex, industry-wide challenges, including:

  • Growing regulatory obligations, including the evolving transparency and reporting requirements introduced by MiFID II, and
  • The LIBOR transition. LIBOR (the London Interbank Offered Rate) is expected to be phased out by the end of 2021, and will be replaced with alternative risk-free rates (RFRs). FIs will need to transition to these new rates, and must develop a structured response to the transition.

Reference data: Flexible and broad reference data you need

Why do we need quality reference data?

These and other changes have created a core need within the industry for complete, accurate and reliable data.

As the data revolution continues, access to quality data is fast becoming a non-negotiable requirement, because such data supports optimal decision-making and is essential for regulatory compliance.

This fundamental need for quality data naturally extends to reference data, both the static and dynamic data used to help classify and describe the individual characteristics of specific financial instruments.

Under this broad umbrella of reference data, fixed income reference data in particular can present specific challenges: fixed income is a vast and complex asset class, comprising myriad categories and sub-categories. Accessing sufficient reference data can quickly become a significant headache for many FIs.

Advanced quality and coverage

Refinitiv has responded to this challenge by developing a global reference data offering with coverage across more than 130 markets. We actively monitor data quality and leverage our extensive in-house regulatory expertise to deliver valuable insights.

We are also continually expanding our scope of coverage, and are ideally positioned to cater to any new reference data requirements created by evolving regulations.

Our data is collated from a wide range of trusted sources, and is extensively checked and maintained by global teams of data analysts, many of whom speak local languages and are closely connected to their local markets.

Our unsurpassed depth and breadth of data covers a wide range of asset classes. Within the fixed income class, our range of coverage extends to government and corporate bonds; MBS and securitised products; U.S. municipal bonds; bank loans; structured notes; and convertible bonds.

Convertible bonds

Convertible bonds can be particularly hard to value, and access to reliable convertible bonds information and coverage presents a substantial hurdle for many FIs.

Refinitiv’s convertible bond coverage is unsurpassed, with our convertible indices among the industry’s most widely used and accepted convertible bond benchmarks, which adhere to the European Benchmark Regulation and follow IOSCO principles.

With global data spanning more than 20 years, we are able to offer comprehensive coverage broken down into multiple sub-indices and carve-outs to suit any portfolio or investment mandate.

The complexity of the terms of these instruments is fully quantified and represented, which in turn allows users to power sophisticated valuation tools.

We also fully appreciate that the terms of the convertible asset class are uniquely dynamic. Approximately 3 percent of the global universe changes on a daily basis and our specialist convertible and advisory team therefore rigorously maintains all conversion ratios and volumes outstanding.

2020 was a bumper year for convertibles with the largest issuance since the financial crisis in 2008. To make the most of the market opportunity, Refinitiv offers clients the leading convertible bond index series, as well as access to best-in-class pricing and reference data.

Bar chart showing global convertible issuance (BN USD). Fixed income: quality reference data a key differentiator

Partnering for success

The fundamental importance of reference data cannot be overemphasized, and in a data-powered world, it is critical that institutions partner with global data providers able to ensure:

  • Sufficient breadth and depth of coverage
  • Accuracy and completeness
  • Timely delivery
  • Advanced functionality
  • The expertise to meet both existing and evolving data needs

Quality reference data has become a key ingredient for success in a highly competitive and fast paced environment, and consequently choosing the right reference data partner has become a core consideration for FIs navigating change in a dynamic market.

Read the full Expert Talk – Fixed income reference data: the need for quality data and comprehensive coverage

Reference data: Get the flexible and broad reference data you need