BNY Mellon Asset Servicing, a provider of securities servicing, has introduced fair value pricing, an automated system for valuing non-US equities after the European and Asian markets c
BNY Mellon Asset Servicing, a provider of securities servicing, has introduced fair value pricing, an automated system for valuing non-US equities after the European and Asian markets close.
The system, which recently was launched with a major mutual fund complex, provides the updated valuations up until the closing of the New York Stock Exchange.
"Fair value pricing is an important tool for institutions such as mutual funds because it enables them to determine the value of the securities in their portfolios if a significant event occurs after the close of the markets that trade those securities," says Steve Berggren, global accounting product manager for BNY Mellon Asset Servicing. "This enables us to calculate a more accurate net asset value or unitized value. It also provides our clients with a standard method for a fund close price where securities are traded in multiple markets, providing more accuracy in price for participants entering or exiting a fund or plan."
The automated system gathers data from multiple vendors as well as a factoring agency. The factor determines a daily multiplier that is used to alter the closing prices of these securities in their native markets. Using the multiplier brings the prices of the securities to a fair value that reflects events that impact stock prices between the closing of the native markets and the closing of the New York Stock Exchange. Clients have the option of determining the fair value of their securities through either the data vendors or the factor.
"We believe our process is the first in the industry to be automated from start to finish, including the generation of reports that institutional investors can use for control and audit purposes both for determination of fair value use and next-day regression testing against market open prices," says Berggren. "These reports enable investors to see how a fair value update changes the values of the securities they hold."
