FITCH, the rating agency, launched ABCDS Pricing this week, which provides consensus pricing data on over 7,500 asset backed credit default swaps.
The pricing information is supplied by 14 leading market makers, according to Fitch.
"The participating banks send us their pricing data, and we clean it, normalise it and send it back to the market makers so they can see where there are exceptions, which is key for assessing credit risk and provides them with a strong benchmark for valuing their trading books" said managing director Thomas Aubrey, based in London.
This means that the subscribers to the service can check where their internal prices vary from the market consensus — a valuable tool in a period of great illiquidity and price variance in the asset backed market.
About half the prices will be based on consensus, while a benchmark service shows a derived price for the more illiquid assets, said Aubrey
The asset types include credit card, auto asset backed securities, residential mortgage backed securities and commercial mortgage backed securities. Exactly two thirds of the US ABCDS covered is RMBS, and of that around half is based on subprime mortgages.
Fitch was approached by banks keen to see a ABCDS pricing service towards the end of 2006, but the timing of the launch could not be more apposite, said Aubrey. "Though issuance volumes have obviously changed, people are still holding these assets and therefore need to value them," he said.
Fitch was solicited by the banks rather than either Moody’s or Standard & Poor’s as it already had in place its Pricing Service Consortium which furnishes data on single name credit default swaps.
The cost of the service depends on the number of assets required by a subscriber. Aubrey said the relationship Fitch has with the banks that make up the Fitch pricing services consortium is "different" from those it has with other clients, and the cost structure for them reflects this.
