London - Markit Group Limited ("Markit"), the leading industry source for independent mark-to-market pricing and asset valuations, today announced it has added valuations for base metals derivatives traded in the London markets to its Totem Service.
The largest players in base metals derivatives have joined the service which provides risk managers and product controllers with independent verification of mark-to-market levels. The service is the latest addition to the commodities valuations business which already includes pricing on a large range of energy contracts and precious metals.
Due to recent increases in the prices of metals, many traders now find themselves with options which are deeply in or far out-of-the-money, and are consequently difficult to value. Strong client demand for an independent service for price verification of the skew in options volatility smiles led Markit to introduce this important initiative.
In addition to the options prices, the Totem Service provides pricing for forwards on aluminium, copper, nickel, zinc, lead and tin which have significantly longer-dated maturities than those listed on the London Metal Exchange and COMEX.
Markit's Totem Service is a month-end service for the sell-side which provides independent valuations on OTC derivatives spanning credit, equity, currency, interest rates, energy, power, metals and structured products. The service is regarded as the market standard in price verification.
Dmitri Musienko, Associate Director of Commodities Product Control at Barclays Capital commented: "We welcome the launch of Markit's base metals valuations service. Not only is it a very useful tool for valuing skew, but it also enables us to value maturities outside those quoted on exchange, two areas where information has not previously been available."
Tim Barker, Executive Vice President of Markit and Head of Valuations said: "We are pleased to be able to help our clients establish best practice in product control and risk management in this asset class. As regulatory and accounting burdens grow, there has certainly never been a more acute need for an independent price mark to enhance the integrity of the valuations process."
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