HedgeServ Uses SuperDerivatives for Market Data
July 13, 2010
HedgeServ has tapped SuperDerivatives to provide data for valuing complex over-the-counter derivatives during the trading day.
HedgeServ will use market data from SuperDerivatives as its benchmark data for providing values of complex or illiquid derivative securities.
This will enhance “our ability to provide on-demand valuation directly to clients’ desktops,” said Jim Kelly, chairman of HedgeServ, a hedge fund administrator with offices in New York, Dublin and Grand Cayman.
HedgeServ’s own software evaluates risks, establishes values of securities and handles intraday processing of trades.
The values of options and other derivatives are often determined by three-dimensional plots of their swings in prices over given periods of time in various markets. These plots are referred to as “volatility surfaces.”
According to Kelly, HedgeServ’s analysis showed that SuperDerivatives’ market data, when used to create volatility surfaces, is representative of tradable market conditions. That means that using SD’s data would result in more accurate prices for the complex OTC derivatives than was previously the case.
In addition, the data on volatility surfaces is being obtained far more quickly every day and from a single source instead of the next day from multiple vendors. Kelly declined to provide the names or number of the previous vendors but insists that the switch to SuperDerivatives was not motivated by cost reductions. “We wanted to give clients better quality and more timely market values,” he says.
The fund administrator services $50 billion in assets from U.S. and offshore hedge funds, funds of hedge funds, managed accounts, private equity funds and endowment investment platforms.
“Due to the current market conditions and investment climate, we see a high demand for our data within the hedge fund community,” says Chris Zingo, senior vice president of the Americas at SuperDerivatives, a New York firm specializing in data and valuation services.
Fund administrators – typically either divisions of large banks or non-bank owned firms such as HedgeServ – are being pressured by their institutional investors to ensure solid operational practices. Those include better valuation policies and that often means relying on third-party data providers such as SuperDerivatives.
