Buyside seeks independent valuations of derivatives

We've noted the many problems in the credit default swap market, which still doesn't have an automated trading venue. But as Wall Street & Technology makes clear, there are huge markets for derivatives that likewise have no automated clearing mechanism (which of course makes valuations very tricky). In the past, the buy-side relied on the sell-side market makers for prices. But increasingly, they are seeking third-party valuations. Northern Trust began offering an OTC derivatives valuation service three years ago. The bottom line is that hedge funds and others really do not trust their counterparties for valuations in this environment. This strikes me as a decent example of new markets exploding without a sound technology infrastructure in place that can link the entire market. No wonder we're seeing more start ups march into this arena.   

For more:
- here's the Wall Street & Technology article