Director, Investor Relations
Fortifying Customer Relationships Worldwide
Around the world, financial institutions continue to turn to Interactive Data to help them address time-sensitive, mission-critical challenges across their enterprises. As a result, Interactive Data moves forward as a trusted, tier-one industry leader that is well positioned to help its customers respond to key trends influencing both their day-to-day operations and overall long-term success. These trends include heightened scrutiny around the valuation of securities; increased regulation and its cascading impact on risk management and compliance; the proliferation of automated trading made possible by low latency data; and the need by financial institutions to differentiate wealth management platforms in order to attract and retain clients. Even during what may be a protracted period of significant stress across many of the world’s major economies and financial markets, these are trends that we believe our customers cannot afford to ignore.
Volatility in the equity, credit and alternative investment markets during 2008 created significant challenges for financial institutions as they strived to determine the value of their holdings across a broad range of asset classes. During this tumultuous period, Interactive Data’s Pricing and Reference Data business distinguished itself as a trusted, independent source of pricing information and evaluations for more than 2.8 million fixed income and equity securities.
As part of our ongoing strategy to address our customers evolving needs, we brought new valuation services to the marketplace while continuing to expand the global content that we collect, process, derive and deliver. In August 2008, we broadened the scope of our interest rate swap valuation service — increasing our coverage of this asset class to approximately 95% of the total notional amount of interest rate swaps outstanding. We also added 3:00 pm valuations of this information, complementing our traditional 4:00 pm valuation service. In September 2008, we began working exclusively with Prism Valuation to provide customers with Prism’s valuation services for complex OTC derivatives and structured products. During the year, we also significantly enhanced our innovative Basket Calculation ServiceSM, a web-based offering that calculates intra-day indicative valuations for equity and fixed income exchange traded funds (ETF), by delivering indicative intra-day valuations for exchange traded notes (ETNs) and values for market indices. As we move forward, we plan to continue expanding our overall securities coverage based on customer demand.
As volatility increased and valuations across certain asset classes fluctuated notably, we continued to respond to the needs of our evaluations customers for greater transparency into how our evaluations are derived. In early 2009, we launched a broad set of information resources to help customers better understand our evaluations, particularly with respect to the potential impact of daily market conditions. We also expanded the information available to help clients prepare for their obligations under Financial Accounting Standards Board’s Statement of Financial Accounting Standards No.157 (“FAS 157”). Going forward, we plan to further expand the scope of our information resources through additional online services that provide greater levels of transparency into our evaluations, including a broader set of content to help customers with their FAS 157 requirements.
“Our customers have additional time to build and maintain more precise security master files while facilitating the flow of data through the back, middle and front offices.”
Reference data — the descriptive information about a security that helps facilitate the timely processing of transactions, support risk management systems and address regulatory and reporting requirements — is taking on an even more strategic role within the workflow of major financial institutions. As new regulatory mandates are implemented and the drive to improve overall efficiency through automation continues, Interactive Data’s reference data content, domain expertise and reliable service delivery are enabling customers to streamline workflows across their enterprises, advance their compliance initiatives, and support their risk management activities.
During 2008, Interactive Data took important steps to broaden its vast reservoir of reference data services. In August, Interactive Data acquired Kler’s Financial Information Service S.r.l., a leading provider of domestic reference data to the Italian financial industry. The content from Kler’s includes corporate actions and taxation information, on Italian and international securities, with coverage spanning equities, listed and unlisted Italian bonds, funds, simple derivatives and warrants. The addition of Italian reference data from Kler’s complements the reference data that we already collect, process and deliver to thousands of financial institutions and redistribution partners around the world. In December, we acquired a majority stake in NTT DATA Financial Corporation, which had served as our redistribution partner in Japan for securities pricing and reference data. Now operating this business as Interactive Data Japan, we plan to market an even broader range of services to our Japanese customers to help them drive efficiencies across their front, middle and back offices while also helping them comply with evolving regulations.
We also took steps to provide our institutional customers with a greater range of delivery options for our reference data. In addition to offering intra-day services, we accelerated delivery of our start-of-day reference data service for North American equities by seven hours to 1:00 am ET, which is prior to the start of trading in Europe. As a result of providing our reference data earlier in the day, our customers have additional time to build and maintain more precise security master files while facilitating the flow of data through the back, middle and front offices. As we move forward, we see further opportunities to harmonize reference data content used across our organization, such as corporate actions, which will enable us to accelerate service delivery. We also plan to continue efforts to bring new services to market, including our new Business Entity Service that allows customers to support their risk management objectives by analyzing their global exposure to various entities, industries and regions.
As risk management becomes an ever more critical function within major banks, brokerages, pension funds, and insurance companies, Interactive Data’s BondEdge® represents a powerful front-office tool to manage risks and measure the performance of their diversified portfolios. During the year, we made significant progress advancing our next-generation version of BondEdge. In addition to improved functionality and a more intuitive user interface, Interactive Data is adding a broader range of deployment options, including the introduction of new tools designed to make it easier for a broader range of users to benefit from its robust capabilities, and facilitate tighter integration with complementary asset-liability and risk management solutions.