Lumesis New Issue Pricing and Scales platform aims for efficiency

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Lumesis on Tuesday introduced the DIVER New Issue Pricing and Scales service, designed to help bankers, underwriters and municipal advisors create new-issue scales and pricing analyses in a transparent platform.

Lumesis is expanding its data services in the municipal market harnessing technology with the goal of creating more efficiency with the digital platform, which also provides users the ability to refine parameters and comparable securities to reflect their own professional judgment. This is another expansion of technology-based products in the municipal space, adding to a growing list of tools.

“Pricing and Scales resulted from conversations with clients looking to find a more efficient way to address the demand for scales from bankers and to support municipal advisors as they prepare issuer clients coming to market,” said Gregg Bienstock, CEO of Lumesis.

“Market participants said any solution must deliver comprehensive data, provide complete transparency and make them more efficient while reserving the ability for market professionals to refine the results based on their expertise.”

The digital platform is “complementary” to benchmarks widely used in the municipal market and currently includes Refinitiv’s MMD AAA interpolated curve. Lumesis is also working with Bloomberg LP to incorporate its BVAL AAA and Treasury curves.

Tim Stevens, president of Lumesis, said: “We are excited to deliver to the municipal market a service that allows market professionals to easily generate custom scales derived from market trades associated with bonds that represent meaningful comparables based on key credit and structural features of the deal being priced. The service offers flexibility to meet the unique characteristics of deals in the municipal bond market and enables professionals to efficiently evaluate different structures while expressing their professional judgment throughout the scale creation process.”

Bienstock said that instead of inundating trading desks with requests for scales and trade data to create scenarios for pricing new issues, users can create their own scales and run a variety strategies months before a transaction, including differing coupons and structures, compare with other similar outstanding deals, and look at trade data in both the primary and secondary, to give clients a sense of where the market is and where it might be on the day of pricing.

The Pricing and Scales platform gets its data from Lumesis’ proprietary obligor database, secondary and primary trade data from the MSRB and new-issue data from Ipreo and other sources.

The target audience includes public finance groups, institutional capital markets groups, underwriters, municipal advisors and bankers. Bienstock also said he has heard from a handful of larger issuers with potential interest.

Currently, there are six firms with contracts for the Pricing and Scales platform and other firms with contracts in the works, Bienstock said.

“Right now we’re using it in pilot mode as they’re still making improvements and additions and taking input from our users, said Anne Noble, managing director of public finance at Stifel. "Generally speaking we think it has great potential to make us more efficient because it gives us the ability to view a wide range of comparable deals and easily vary the inputs to look at the comparisons to establish scales and determine accurate pricing levels for our clients,”

Noble said the platform allows the firm to work with a client a couple of months before pricing to give them a very realistic view of the market and it "gives us a wide range of data points in advance of investor feedback."

She said that Stifel is using the platform in combination with its "standard methodology of having the underwriting desk write scales, but it’s definitely an additional, useful set of information that we can share with clients based on actual comparable deals."

Bienstock said the idea is to reduce workflow stress and make the process more efficient to free up firms’ talent pool to focus more on the end client.

“Can we take the process of creating scales and apply technology to it in a more efficient, comprehensive and transparent fashion? The answer to that is ‘yes.’ Participants can create a structure, maturity by maturity, calculate spreads and yields and then have the ability to dive into the underlying data for each maturity and adjust it as market conditions demand,” Bienstock said.

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