Assigning Instruments to the Fair Value Hierarchy

To satisfy fair value disclosure requirements prescribed within IFRS 13, FASB ASC 820, GASB 72, UK FRS 102, and other accounting guidance, entities are required to categorize fair value measurements (i.e. Level 1, Level 2, Level 3) based on the inputs used to measure fair value. Newly proposed disclosure requirements and amendments to the accounting guidance are prompting entities to review their fair value methodologies and processes. For example, there is an exposure draft amendment to ASC Topic 820 and an SEC proposal that would, if adopted as proposed, require registered investment companies to make monthly instrument-level hierarchy disclosures. With this backdrop, it is clear there is heightened attention being given to how entities assign instruments to the fair value hierarchy.

Our broad range of market data and our Fair Value Hierarchy level service (FVL) can help firms address their data and reporting needs under the existing and evolving accounting standards and regulatory requirements.

OBSERVABLE MARKET DATA

ICE Data Services has access to the robust and deep set of observable pricing inputs and other inputs used to support the evaluated pricing offered by Interactive Data Pricing and Reference Data LLC for certain fixed income securities. These 10+MM daily inputs are categorized, archived and can be made available to clients within the FVL service to support clients’ fair value hierarchy determination workflow.

DERIVED CONTENT

The FVL service also leverages a wealth of derived content. For example, our Liquidity Indicators service provides, among other information, a projection of the potential future trading volume capacity of a covered security and a liquidity score that represents an independent, near-term view of relative liquidity, defined as “the ability to exit a position at or near the current value”. The liquidity scores and projected trading volume capacity are two examples of derived content that can be made available for use by clients in the client defined FVL rules engine. Clients also can elect to incorporate our extensive database of comparable bonds and inter-bond relationships as a part of their approach.

CLIENT-CUSTOMIZED RULES ENGINE

ICE Data Services offers an overlay to this robust dataset in the form of a client-configured rules engine. This engine allows for an automated workflow that is consistent, repeatable and auditable - returning information on the level based on the client’s rules for determining level applied to ICE’s market and derived data.

INDUSTRY ADOPTION

In May 2016, Northern Trust announced that it was collaborating with ICE Data Services to enhance its support for fair value leveling determination for fixed income securities through the use of our VantageSM service to deliver improved transparency into evaluated pricing for most fixed income assets.

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