Simplifying bond pricing

Verdipapirfondenes forening and Norsk Tillitsmann ASA have joined forces to establish a new entity to simplify pricing of bonds.

Verdipapirfondenes forening (VFF) and Norsk Tillitsmann ASA (NTM) establish the company Nordic Bond Pricing AS in order to provide independent pricing of bonds.

Today, market actors in need of pricing of bonds, e.g. asset managers and pension funds, individually price bonds that are not traded on a daily basis. This is a complicated and expensive process.

 - Norsk Tillitsmann ASA has twenty years of experience in the Norwegian fixed income market, and we are certain that the establishment of an independent bond pricing entity represents an important step forward in order to make this market even more efficient and professional, says CEO Ragnar Sjoner. He adds that this type of service already exists in other countries. The Norwegian bond market has expanded rapidly over the past years, and more specifically, the Norwegian corporate bond market is without doubt the most advanced in the Nordic countries. Further growth is expected, as tougher capital requirements are imposed on banks, which in turn will lead capital seeking companies toward the bond market as an alternative source of funding.

 - The establishment of Nordic Bond Pricing will simplify the everyday business for our members. The new entity will also represent a reliable source of information for investors in the fixed income market, says CEO Lasse Ruud in VFF.

Folketrygdfondet and other major pension funds have become associated members of VFF in order to support the establishment of Nordic Bond Pricing. Ruud adds that other investors not being members of VFF will enjoy the services provided by Nordic Bond Pricing.

Today, VFF publishes bond prices on a weekly basis based on input from investment banks. This has become a market standard, which is to be further developed by Nordic Bond Pricing.

Based on information provided by actors in the market, coupled with advanced financial modeling, Nordic Bond Pricing will publish prices for all bonds in the portfolio. Firstly, this will be carried out on a weekly basis, aiming at providing prices on a daily basis at a later stage. The company will publish prices at end-of-business, the company will not enable any trading of bonds nor offer price quotations during the day. The company has an ambition to develop bond indices based on the pricing of bonds.

Nordic Bond Pricing AS has been formally established, and is owned 50/50 by NTM and VFF. The company structure will ensure full independence from the shareholders in the pricing of bonds. A managing director will be recruited, as well as two analysts. Chairman of the board, Jan Pollestad, has more than 25 years of experience in the Norwegian fixed income market.  

For further information, please contact:

    Lasse Ruud, CEO (VFF),        m: +47 908 99 316 [Call: +47 908 99 316]
    Ragnar Sjoner, CEO (NT),      m: +47 928 21 998 [Call: +47 928 21 998]
    Jan Pollestad, chairman,         m: +47 917 13 823

Background

How will the pricing of bonds be carried out?
Nordic Bond Pricing will continue the dialogue with the brokerage houses in order to obtain information as input for calculating bond prices. The information will be processed through financial models to create proxy bond prices using extrapolation techniques. There will be full disclosure concerning the financial models being used.

Improving efficiency
The company will deliver a commercial service to its customers. Today, the company’s clients use substantial resources to carry out calculations on an independent basis. Nordic Bond Pricing will represent significant efficiency gains in this respect. Moreover, this service will support the further development of the Norwegian bond market in general, as well as, on a long term perspective, the main activities of owners.

Independence
The company’s statutory documents will ensure that the pricing of bonds will be carried out independently of its owners. An independent auditor will approve all processes and financial models being used. In addition, there will be appointed a committee represented by key market players which will function as an advisory board to the company.

Distribution
The services provided by Nordic Bond Pricing will be distributed through Norsk Tillitsmann ASA’s web portal Stamdata.

About Norsk Tillitsmann ASA
Norsk Tillitsmann ASA is an independent trustee for investors in the fixed income market. The use of a trustee protects the interests of the bondholders, whilst being a useful point of contact for issuers as the trustee represents investors on a collective basis. In 2013, Norsk Tillitsmann ASA look back on 20 years of activity in the Norwegian fixed income market. The group of companies headed by Norsk Tillitsmann ASA represents the leading provider of trustee services in the Nordic countries, with local presence in Sweden, Finland and Denmark. Norsk Tillitsmann ASA is mainly owned by Norwegian and other Nordic banks, life assurance companies as well as  investment firms.

About The Norwegian Fund and Asset Management Association
The Norwegian Fund and Asset Management Association provides services for companies that are licensed to operate as fund managers and/or as discretionary investment managers on behalf of large individual customers. The association currently has 22 ordinary members and 14 associated members. The services provided by the association is inter alia professional and administrative support to its members, development of industry standards, promote knowledge and interest for investment companies as well as preparation of market statistics.