The Value of a Homogenized and High-quality Historical Dataset of OTC Derivatives across Institutional Functions

In the dynamic landscape of financial markets, over-the-counter (OTC) derivatives are essential for various financial institutions, including banks, hedge funds, insurance companies, and asset managers. These institutions rely on accurate and comprehensive historical datasets for multiple functions such as trading decision-making, hedging, valuation, risk management, accounting, and reporting. However, there is a global shortage of high-quality historical data on OTC derivatives, particularly during stressful market periods.

OTC Derivatives Data Challenges
The lack of centralized and high-quality historical data on OTC derivatives presents significant challenges for market participants and regulators, including:

• Limited Transparency: OTC markets lack transparency compared to exchange-traded markets, making it difficult to obtain comprehensive historical data on transactions and positions.
• Complexity of Instruments: The diverse and complex nature of OTC derivatives requires detailed information for accurate data collection.
• Data Quality: Ensuring the quality and consistency of data is challenging due to limited access to information.
• Limited Historical Data: Historical data is often limited in scope and duration, especially for less liquid or bespoke instruments.

Benefits of a Homogenized and High-quality Historical Database
A precise historical dataset of OTC derivatives is vital for various business functions across institutions. Key use cases include:

• Trading and Portfolio Management: Historical data aids in identifying market trends, developing trading strategies, assessing risks, and optimizing portfolio allocation.
• Risk Management: It supports the development and backtesting of risk models, stress testing, risk metric computation, and validation of pricing models.
• Valuation Control and Independent Price Verification (IPV): Historical data helps validate pricing methodologies, reconcile valuations, and monitor trader marks.
• Accounting: It is used to calculate the fair value of derivatives and reconcile financial reporting figures across business areas.
• Audit: Historical data demonstrates compliance with regulatory requirements and adherence to risk management standards.

OTC Derivatives Historical Data
S&P Global Market Intelligence (SPGMI) offers a unique, high-quality, accurate, and transparent cross-asset historical dataset of OTC derivatives with extensive market coverage. The dataset is available from 1997 and includes daily services. It utilizes data from market makers, interdealer brokers, and exchanges, covering a wide range of products and underliers, including equity, interest rates, foreign exchange (FX), credit, commodities, repos, and XVA.