Interactive Data, a provider of pricing solutions to financial institutions and corporations, on Tuesday announced the launch of its Liquidity Indicators Service.
The innovative service, as its name suggests, offers a set of security- and portfolio-level Liquidity Indicators.
The launch happens as regulators are revising rules for liquidity risk management. Recently, the U.S. Security and Exchange Commission (SEC) has outlined rules for liquidity risk management programs for mutual funds, which would require fund companies to enhance or modify their risk management operations.
The Liquidity Indicators aim to support firms’ liquidity risk management needs during all economic cycles, even in stressed markets. They can be used to analyze a security’s liquidity compared to other securities in various groupings including issuer, sector, asset class, or against bonds with similar risk characteristics such as yield or duration. The Indicators include estimates of the Projected Trade Volume Capacity of a fixed income security, which can be used in a combination with firms’ actual position sizes to estimate the potential number of days to liquidate a position under various stressed assumptions.
“Understanding liquidity risk is a top priority for many global financial institutions. This was confirmed in the feedback we received during our recent pilot program, particularly with mutual fund companies, given applicable regulatory guidelines and responsibilities to service shareholder redemptions on a daily basis,” said Andrew Hausman, President, Interactive Data Pricing and Reference Data.
“Our clients need to have confidence in their risk assessments, including analysis of their ability to exit a position at a particular price and the overall liquidity profile of their portfolio relative to the market. These tools can help them do that,” he added.
To view the official announcement from Interactive Data, click here.