Accredited-Benchmarks Proposed to Shed Brighter Light on Bond Market Pricing

January 8, 2015

NEW YORKJan. 8, 2015 /PRNewswire/ — DelphX LLC, an independent pricing-service for fixed income securities, yesterday recommended that the Financial Industry Regulatory Authority (FINRA) and the Municipal Securities Rulemaking Board (MSRB) establish uniform standards for measuring the accuracy of continuous forecasts of the current market price (“Market-Price”) of fixed income securities published by independent pricing-services. The proposal also recommends regulators recognize Market-Price forecasts that consistently meet the specified accuracy requirements as an “Accredited-Benchmark” pricing reference for the subject security.

Larry Fondren, President and CEO of DelphX, noted that, “There is a critical need to increase pre-trade price transparency for investors in the fixed income markets.  Regulatory recognition of Accredited-Benchmarks could provide a validated source of accurate pricing references that enable individual and institutional investors to more confidently assess the current Market-Price of securities they are considering buying or selling, and more efficiently determine the quality of their fixed income transactions.”

“By employing EMMA and TRACE post-trade pricing information to validate and demonstrate the accuracy of continuous pre-trade Market-Price forecasts, we believe Accredited-Benchmarks could dramatically increase bond market price transparency.”

To provide that increased pre-trade price transparency, DelphX recommends that FINRA and MSRB:

1)  Establish an environment in which pricing-service providers are incentivized to calculate, validate and publish in real-time continuously-updating forecasts of the Market-Price at which each of a broad universe of outstanding fixed income securities would currently trade;

2)  Prescribe a standard protocol that providers could employ to uniformly measure and report the accuracy with which their Market-Price forecast for a subject security at the time of each trade in that security predicted the actual price at which it traded – as reported to TRACE or EMMA;

3)  Specify the minimum acceptable level of historical accuracy the aggregate Market-Price forecasts published by a provider must consistently meet to qualify as an Accredited-Benchmark; and

4)  Provide guidance to regulated firms, by recognizing Accredited-Benchmarks as an acceptable reference source of the current Market-Price of a subject security for inclusion on customer confirmations and other price-related disclosures.

Shant Harootunian, President of bond market consulting firm, Stage Three Enterprises, Inc., observed that, “Implementation of a regulated protocol for measuring the accuracy of reference-prices and accrediting those benchmarks that meet the specified standards could add a level of confidence in the fixed income market that has been long overdue. This added pre-trade price transparency will potentially promote liquidity to the benefit of investors, issuers and all other market participants.”

Wyck Brown, Sr. VP- Director of Investment Strategy at ALPS Fund Services, Inc. commented that, “As bond transactions continue to move toward electronic platforms and mutual fund and ETF investors increasingly embrace fixed income investments, the need for accurate pricing, and verified valuations materially increases. Standardized accuracy requirements would greatly enhance confidence in those benchmarks that qualify and will likely improve the liquidity of fixed income securities and related assets.”

About DelphX

DelphX is a provider of validated Market-Price forecasts for fixed income securities. Throughout each trading day, it continuously forecasts and publishes in realtime the specific Market-Price at which each subject fixed income security would currently trade. The accuracy of the “MAV=n” (Market-Adjusted Value per congruent nexus) Market-Price forecasts published by DelphX for each security is also continuously tracked and reported for each security.

To enable independent validation of the current and historical accuracy of the MAV=n pricing for each security, a transparent and auditable record of all trades involving that security and its MAV=n Market-Price forecast at the time of each trade is also available.

The historical accuracy of most MAV=n pricing forecasts, including those for securities that rarely trade, consistently exceeds 99.0%.

For more information about DelphX, please visit