Multi-Vendor Price Verification & Validation as a Service Price Processing Case Study

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1 Delivering: Fair Value Pricing (ASC 820, IFRS 13) Risk Data Aggregation (BCBS 239) Data Governance & Audit Compliance Business Requirement Pricing is at the heart of every financial services firm and has proven to be very challenging to automate. As a result, many Bloomberg PolarLake clients have implemented the Pricing and Risk Data Solution to put a Price Processing & Data Governance process in place. In each case, external and internal pressures resulted in the requirement for a Pricing Solution which would provide: A cross division Integrated Pricing Processing environment A controlled environment with complete data storage, archive, auditability and transparency A pricing platform for the future These requirements were driven by the need to deliver accurate pricing information across: Trading and Settlement Systems Risk Management Solutions Regulatory Reporting Processes Internal Data Governance Processes Fig. 1 Pricing Management and Visualisation The Bloomberg PolarLake Pricing Solution In order to meet the business demands of a large number of Bloomberg PolarLake Financial Services clients, a Managed Solution was implemented to deliver an industrial strength Pricing Data Management Solution which: Acquires, stores and archives data from multiple vendor and internal sources, managing multiple asset classes including Equities, Fixed Income, Derivatives, FX Spot, Forward Rate, Interest Rate and Index price data Creates stores, archives and manages related Instrument Data, Market Data & Meta Data Applies client driven business rules to create purpose built golden copy data sets Integrates business rules including Pricing Tolerance across vendors with related Vendor hierarchy Delivers a complete process and exception management workflow including User Workstation and graphic visualisation Provides an online audit trail, giving full data transparency on Price Processing Creates management reports for Operations, Finance and Risk Management Enables data quality and data lineage to be established and recorded, underpinning risk and regulatory reporting from Risk Data Aggregation (BCBS 239) to Fair Value Accounting (ASC 820 and IFRS 13)

2 Price Processing Bloomberg PolarLake implemented a solution, via its Managed Service, which delivers complete intra-day and end of day Price Mastering according to client defined price points and business specific work streams: Reporting and Insight for Data Governance Operational Intelligence, Data Lineage & Audit Reporting Data Acquisition The management and fulfilment of the acquisition, storage and archiving process from scheduling to realisation utilizing multiple internal and vendor Pricing Sources covering all asset classes Data Validation Validation of acquired data carried out through the application of business rules selected from the Bloomberg PolarLake Rules Library and Client specific rules created to maintain Client Processing DNA Price Repair/Exception Handling The manual repair of prices through the use of the Bloomberg PolarLake Workstation and workflow processes.all changes are recorded, stored and archived Business Case Golden Copy Creation Golden Copy data sets are created for use in specific business cases such as trade & settlement, risk management and regulatory reporting. The data sets which are stored and archived are produced by applying source hierarchies, waterfalls, arbitration rules, tolerance rules, exception rules and output format rules. Golden Copy Distribution Golden Copy data sets are formatted for use by consuming applications and distributed according to business timetable and technical requirements In order to track the Operational Effectiveness of the process (data throughput times, exception analysis, vendor issues etc.) the solution provides an extensive set of Operational Reports. Based upon the wide ranging archived data, the reports extend beyond aggregated Operational reports by detailing the specifics of Data Lineage, Audit History and providing the reconstruction of data elements at a particular point in time together with the business rules which were applied to the supplied data. This insight not only provides an in-depth analysis of Price Processing but delivers a platform for wider intelligent application to risk management and regulatory reporting processes. Fig. 2 Operations Reporting

3 Fair Value Accounting and Disclosure - ASC IFRS 13 Requirement The Bloomberg PolarLake Pricing Solution delivers the key element required by our clients to meet their ASC 820/IFRS 13 disclosure and reporting obligations transparency. These International Accounting Standards demand transparency in: Valuation Methodologies Stored and Archived Pricing Inputs Delineation of Market Data and unobservable inputs Breakdown of market and model based pricing Meeting the Demands Data Lineage The Bloomberg PolarLake Pricing solution records and archives all acquired data together with the relevant source details. This includes vendor data and client data sourced from partners such as brokers or calculated data derived from internal models. This enables the classification of pricing into The Fair Value Hierarchy Level 1 - quoted market prices Level 2 - inputs corroborated by the market (evaluated pricing) Level 3 - client data for example derived from calculation models Asset Classification/Additional Detail Assets are classified according to flexible business rules. This enables reports to be generated by asset class and showing applicable additional detail such as transaction size etc. Fig. 3 Data Visualisation, Analysis and Quality Dashboard Audit/Change History A complete Audit History is made available showing all changes in data and process enabling reporting for example on change of Fair Value Level and providing high quality reports for internal and external audit

4 Effective risk data aggregation and risk reporting Basel BCBS 239 Requirement Bloomberg PolarLake Pricing Solution clients demanded a practical approach to Data Governance which would support the BCBS 239 stated principles of: Data Architecture and IT Infrastructure Accurate and Reliable Risk Data Completeness Timeliness Adaptability Clarity and Frequency Review Distribution Meeting the Demands Architecture and Infrastructure The Bloomberg PolarLake Pricing and Risk Data solution delivers a complete data storage, archive and management architecture and infrastructure. Clients have accessed the solution via the Bloomberg PolarLake EDM Managed service and through on-premise installation of the platform software. Implementations and on-boarding are carried out by highly experienced teams using standard processes which have seen clients operating within a matter of weeks. Accurate and Reliable Data Clients use the Pricing and Risk Data solution to source and manage data from multiple sources including both vendor and client internal data. All asset classes are covered and data is acquired from a wide range of internal business units. As a result through the application of business rules it is possible to compare data from vendor sources with for example trade data and accounting data, checking and proving accuracy. Completeness With the ability to acquire store, archive and manage data from multiple sources and manage flexible meta-data models, Bloomberg PolarLake clients are able to access and group data by multiple categories e.g. business line, legal entity, asset type, etc. Timeliness and Adaptability Price Processing takes place on a 24x 7 basis. Through the use of business rules, the processing of individual data categories is prioritised to meet risk reporting requirements. Work streams are activated on both planned schedules and according to adhoc requests. The ability of the solution to on-board new data sources at speed through the application of a soft data store ensures that clients can react to the latest situations.

5 Effective risk data aggregation and risk reporting BCBS 239 Meeting the Demands (Contd.) Clarity Through the concept of Consumer Orders, the Bloomberg PolarLake Strategic Pricing and Risk Data Solution selects and delivers precisely the information required by a requestor. As a result, risk data can be formatted and delivered to multiple recipients in a manner which they implicitly understand and which can be integrated with relevant downstream systems. Frequency Process flows determine the frequency of the delivery of the Consumer Orders described above. In addition ad-hoc requests can be made as required. Review and Remedial Action All activities across the pricing process are recorded to provide a complete audit trail for internal and external auditors to use in creating reports for Supervisors. Should remedial action be required, the solution enables Bloomberg PolarLake clients to update data through the Bloomberg PolarLake workstation using a 4 eyes principle. All data is recorded and it is possible to create reports showing the changes, the consequences and the complete data lineage for all stages in each individual process. All such requests are recorded and monitored to ensure delivery and to provide a complete audit trail. Distribution All distribution of data is logged and stored for audit purposes. Data is distributed based upon Consumer Order requests and is delivered in the exact format and frequency requested by each individual order.

6 Client Benefits Bloomberg PolarLake Pricing and Risk Data Solution clients have benefited in multiple ways: Timely and appropriate implementation of a pricing infrastructure The solution is available today The solution can be delivered as a managed service including access to the Bloomberg PolarLake Data Operations team or as an onpremise installation Implementation time and costs minimised through Bloomberg PolarLake experience Proven Environment Installed world-wide across the financial community In-Use across a wide range of data volumes and Asset classes Both on-premise and managed service case studies available Phased Implementations Industrial Strength Price Processing From Data Acquisition, storage, archive to Distribution Complete Data Lineage Exception Management with 4-eyes principle Full Audit Trail A platform for Fair Value Accounting Transparency Data Lineage Asset Classification An independently auditable and transparent data management framework for BCBS 239 From data architecture and infrastructure through storage, archive, management and distribution to review Cost/Budget Control Tackling the priority business need For More Information BloombergPolarLake.com Dublin info@bloomberg London uk@bloomberg New York usa@bloomberg Singapore asia@bloomberg Sydney asia@bloomberg The BLOOMBERG PROFESSIONAL service and Bloomberg data products and services (the Bloomberg Services ) are owned and distributed locally by Bloomberg Finance L.P. ( BFLP ) and its subsidiaries in all jurisdictions other than Argentina, Bermuda, China, India, Japan and Korea (the BLP Countries ). BFLP is a wholly-owned subsidiary of Bloomberg L.P. ( BLP ). BLP distributes the Bloomberg Services either directly or through a non-bflp subsidiary in the BLP countries. The Bloomberg PolarLake enterprise data and management products and services (the PolarLake Services ) are owned and distributed locally by Bloomberg PolarLake Ltd. ( BPL ) and its subsidiaries. BFLP, BLP, BPL and their affiliates do not provide investment advice or guarantee the accuracy of prices or information in the Bloomberg Services or PolarLake Services. Nothing on the Bloomberg Services or PolarLake Services shall constitute an offering of financial instruments by BFLP, BLP, BPL or their affiliates. BLOOMBERG, BLOOMBERG POLARLAKE, BLOOMBERG PROFESSIONAL, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG ANYWHERE, BLOOM-BERG TRADEBOOK and BLOOMBERG.COM are trademarks and service marks of BFLP or its subsidiaries. Bloomberg Finance L.P. All rights reserved Bloomberg Finance L.P