Monis is one of the world's largest independent suppliers of analytical systems, data and services for the derivatives market, with a particular focus on convertibles. The UK-based company has recently added a new service providing clients with terms and conditions for equity-linked deals ahead of formal pricing. Here co-chairman and joint CEO, Emmanuel Mond, and convertibles product head, Mark Wightman, discuss the launch of the new system and the expansion of the Asian convertibles market.
FinanceAsia: Can you tell us about the new convertibles service?
Mond: We take all available information especially from the grey market and provide clients with all the terms and conditions of new deals, enabling them to price and value convertibles ahead of actual pricing. All the information is pre-formatted for immediate use within our analytical systems and is delivered in email format. When we first set the service up, we had 500 plus enquiries about access. It's a market niche that needed filling. Our only real competitor is probably Bloomberg. Some of the big investment banks such as Deutsche Bank and UBS Warburg have also set up convertible data services, but none have the valuation and modeling capabilities of Monis.
Is this what really sets you apart?
Yes. Being able to price up a deal is where the value lies. In the past, investors often didn't know how to value their portfolios correctly, particularly the credit portion. Now, for example, they can model what would happen if the stock price of X company fell and its bond floor collapsed.
Don't a lot of banks already have the kind of information you're now providing at their fingertips?
Firstly there's an element that a lot of banks feel swamped by information, but still manage to miss some new transactions. More and more, a lot also want to outsource data. We fill that gap. We provide a frame of reference for the convertibles market by supplying timely and independent data. Clients tell us it's extremely helpful to have verification and modelling from an independent and trusted source.
How does the service fit in with other products you offer?
Monis has always been a very traditional analytics house with a focus on the convertibles market, although we also have products covering most other derivative products such as equity and fixed income options for example. We supply integrated systems for the front and middle office and across all asset classes. These cover spreadsheet-based portfolio systems for trading, position keeping, pricing, data management etc.
Wightman: We began as an offshoot of the London Business School back in 1979 providing high-end mathematical applications for portfolio modeling. In 1994 there was a management buy-out and in 1998 we got some VC funding and moved more into the pricing and trading side. We now have a team of about 50 and client base of over 2000, with financial institutions accounting for about 400 or so. These include some of world's largest banks. The new issue service is a natural extension of our wider offering which encompasses analytics as well as industrial strength systems for convertibles markets.
How have you fared in Asia?
Wightman: Before the financial crisis, we were only selling to a limited number of tier 1 Western banks. Now we find a lot of interest from regional banks such as DBS in Singapore. A few hedge funds and institutions are also starting to use the product, but admittedly the biggest investor base for Asian deals is still back in Europe.
However since the Taiwanese government started handing out asset swap licenses, there's been an explosion of activity from the country. Citibank has always obviously been a player, but now there are probably 20 to 25 local players all getting into the business as well. It is a big growth area for us and we also provide a lot of training for the market. We're holding another seminar in June for instance.
How much does the system cost?
Wightman: For data alone, it would be about $15,000 per annum. However, most clients would also want the analytics and this starts at $30,000 upwards to a six figure sum.
What new areas are you moving into?
Mond: One thing we are looking at providing is a historical database of past convertible deals. We are also releasing a new version of our Convertible Analyser next week. This system allows clients to model trades, book trades and allocate them across different books. It's an all-in-one system. The new version includes a more comprehensive treatment of asset swaps.
The system has five different definitions of asset swaps taking into account all the various structural tweaks such as different exercise periods. We've found that knowledge of asset swaps can sometimes be quite shallow across the market.