Markit Launches Special iNAV Service For ETPs

June 03, 2014

Markit has launched an intraday net asset value (iNAV) service for exchange traded products (ETPs) globally, which is intended to help issuers provide greater pricing transparency. It follows six months after Markit launched its ETP platform.

The enhanced iNAV service offered by Markit draws on securities pricing data from global exchanges and is a fair value calculation that can be applied to over 5,100 global ETPs tracked by Markit. It is produced every 15 seconds and published to the major stock exchanges and market data platforms.

The iNAV is a figure used to give a real-time valuation of the ETF, which then allows investors to compare the tradable price of the ETF against the evaluated fair value. It is measured by taking the value of the assets in the ETF less its liabilities. It is different to the NAV, which is calculated at the end of the trading day. The iNAV can be taken throughout the day.

The system has been developed with a handful of issuers and Markit also has agreements in place with main market data providers and exchanges to display the iNAVs.

Exchanges use iNAVs to ensure ETPs trade in line with the fair value of their underlying constituents. As the ETP market becomes increasingly sophisticated with products often featuring constituents that do not trade during market hours, iNAVs help bring transparency to ETP pricing.

Mark Schaedel, managing director and head of data services at Markit, said: “Issuers are welcoming this service for the reason that it will more accurately reflect the fair value of the ETP.

“This should therefore help address the challenges with current iNAV calculations that cause large differences that can be seen between the quoted price on screen and the iNaV. We believe our new service will be more appropriate for harder to value illiquid instruments or markets which are closed,” he said.

The system is not fed directly to investors because of Markit’s work with both buyside and sellside, meaning that while it has been taken up by several issuers, it may also be of interest to online brokers. This will allow investors to see the bid/ask offered by their broker and to then reference this against an independent fair value.

Markit’s fair value pricing data is a fully outsourced service that calculates the fair value of an ETF outside active trading hours using the correlation between 40,000 global equities, 80,000 global bond prices and over 30 market factors.

The company’s fixed income evaluated pricing services are created using dealer contributions which provide independent pricing, transparency and liquidity data for over 2.3 million instruments. These include almost 90,000 corporate and sovereign bonds, 1.1 million municipal bonds as well as over 9,000 European and 1.2 million U.S. securitised products.


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