OTC World Adapts to High(er)-Frequency Trading

Terry Flanagan

Markit acquires equity analytics provider QSG.

As OTC markets expand to accommodate higher-frequency trading strategies, there’s been a concomitant demand for high-quality analytics for the OTC product space.

That’s the motivation for the acquisition by Markit, a provider of valuation, analytics, and post-trade processing services, of Quantitative Services Group (QSG), a provider of equity research, advanced trading analytics and investment consulting services.

“We expect the OTC markets to become more electronic, in response to Dodd-Frank and other trend, and while they will take their path and own speed, certain techniques in the equity world, like factor analysis and transaction cost analysis will make their way into the fixed income markets.  This acquisition positions us for that shift,” Armins Rusis, managing director and global head of data, indices and research at Markit, told Markets Media.

QSG will become part of Markit’s Global Data, Indices and Research business.

The acquisition expands Markit’s capabilities in equities and will enable Markit to expose its high-quality data products to QSG’s statistical processes and create new tools for investment managers and traders.

Markit intends to expand QSG’s quantitative, factor-based research and trade analytics services to the global over-the-counter markets.

“In short, our data takes their technology to new markets and their technology takes our data to new levels,” said Rusis. “Specifically, QSG expands our work in equities which today focuses on dividends data and forecasting, ETF data and equity index administration.  We expand their work into fixed income by providing market expertise and our data.”

Currently, factor analysis is a common technique in equities.  Markit will work with QSG to apply its methodologies to fixed income asset classes utilizing Markit’s datasets.

“ In terms of market analytics, we will combine QSG’s tools with Markit data to enable market analytics for fixed income asset classes (CDS, bonds, loans, etc), and enable cross-asset class analytics that apply fixed income insights to equity  markets and vice versa,” said Rusis.

The acquisition is one of several that Markit has made over the years as it has built out its core businesses.

Earlier this year, Markit acquired QuIC Financial Technologies, which provides risk analytics solutions to test market and credit risk tolerance in financial portfolios and simulate risk at the enterprise level.

Markit’s data set feeds into the QuIC Engine, the high-speed computational framework that powers QuIC’s product offerings

By combining Markit’s strengths in data and valuations with QuIC’s analytics expertise, the integrated platform will offer a comprehensive solution for risk-related services spanning independent pricing, valuations and analytics across asset classes.

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