A Prime Source for valuing illiquid securities; plus, exploring XBRL
I′m just back from an extended holiday weekend and wanted to share a couple of timely items from the last couple of days:
First item: NYSE Euronext enters valuation race (FT.com) Excerpt:
NYSE Euronext, the world’s largest stock exchange group, has entered the race to establish the industry standard platform for evaluating complex structured products and illiquid securities.
The launch yesterday of the exchange’s new Prime Source valuation service is designed specifically to meet the needs of large buy-side market participants′ to value large, global portfolios of such securities.
Regulators and market participants are grappling with the best way to value a range of complex fixed income instruments such as credit default swaps and mortgage-backed securities, which have wreaked havoc in the markets since the middle of last year. Problems with controlling and determining the extent of exposure to such instruments have contributed to huge writedowns at investment banks and have led to several hedge fund blowups and volatility in capital markets.
The launch of the platform comes just weeks after Duncan Niederauer, chief executive of NYSE Euronext, told the FT that the exchange had been approached by US regulators about how its systems might be used to boost transparency in fixed-income markets. …
Roland Bellegarde, head of European cash markets at NYSE Euronext, said: “The hub provides a combination of valuation services that gives users the possibility to find in one independent, neutral place all the information they need to facilitate their valuation process.” …
Appears to me that we’re again diversifying within our space, and just as important, it looks like we’re doing so in a timely fashion, given this from today’s Wall Street Journal:
Gauging the Worth of ‘Market Value’ (WSJ.com) Excerpt:
… Credit Suisse Group yesterday said it expects to take a $2.85 billion write-down of financial instruments affected by the credit crunch, which will result in a $1 billion drop in quarterly profit, just a week after telling investors it had largely escaped the worst of the financial crisis. American International Group Inc. was forced a week ago to increase by about $3.6 billion estimates of potential losses it had made to investors in late 2007.
The quick about-faces highlight the problem that companies, even those that are supposed to be financial experts, are having with a seemingly straightforward question: How much is something worth?
The difficulty lies in part in the increasing use of so-called market values to determine prices for items that companies aren’t necessarily selling. This has become especially tough since the debt crisis has caused large parts of markets to seize up, meaning there often aren’t any prices to use as reference points.
Second item: After my rant last week about XBRL, here’s a good item to follow up: SEC Makes Analyzing Corporate Performance Easier for Investors A Whole New Way to Look at Financial Data (SEC.gov) Excerpt:
Securities and Exchange Commission Chairman Christopher Cox today announced the launch of the “Financial Explorer” on the SEC Web site to help investors quickly and easily analyze the financial results of public companies. Financial Explorer paints the picture of corporate financial performance with diagrams and charts, using financial information provided to the SEC as “interactive data” in eXtensible Business Reporting Language (XBRL).
At the click of a mouse, Financial Explorer lets investors automatically generate financial ratios, graphs, and charts depicting important information from financial statements. Information including earnings, expenses, cash flows, assets, and liabilities can be analyzed and compared across competing public companies.
The software takes the work out of manipulating the data by entirely eliminating tasks such as copying and pasting rows of revenues and expenses into a spreadsheet. That frees investors to focus on their investments’ financial results through visual representations that make the numbers easier to understand. Investors can use Financial Explorer by visiting www.sec.gov/xbrl.
Hat tip to the folks at ShopYield, where I spotted this news.
A bit of trivia for your wonderful Wednesday, folks (and speaking of timely, given the news from Havana):
Today in NYSE History
20 Feb. 1961 — The securities of five Cuban railroad and sugar companies were delisted after the Fidel Castro’s communist government expropriated their assets.
Original post by admin