OliveTree Taps Markit for SecLending Data

OliveTree made the Markit data available in OTAS within the past month to mutual clients of both vendors, some of whom are already using it, while others are now trialing the data, says Charlotte Wall, head of sales and marketing at OliveTree. The data should appeal across the vendor’s client base of asset managers, who will be able to use the data to evaluate entry and exit points for holdings, as a stock screening tool, or to more easily spot potential risks, whether they are long-only, long-short or multi-strategy funds, she says.

However, the data won’t be limited to existing mutual customers, as Markit expects to win subscribers as a result of the exposure to OliveTree’s client base. “We have typically worked with big hedge funds, but we are not that well known among the traditional investor community in the long-only space… and this puts our data alongside other factors used by traditional asset managers,” says David Carruthers, managing director and co-head of securities finance at Markit. “This helps to make our data more widely known among this group of investors.”

Even long-only firms not actively involved in short selling or stock lending need to be aware of activity in the short interest market, since they are at risk of being underweight or overweight in a stock if the value of a stock rises and they need to increase its weighting in their portfolios, or if hedge funds short-sell a stock, causing a drop in its value, Carruthers says. “Very broadly, the fields include rate and volume data, which means customers can assess how much is on loan, the cost of borrowing, and how many days it would take to close out a position in the market,” he adds.

Wall says firms have found it challenging to bring together all the components that can impact an equity’s performance—from credit default swaps and options volumes to sentiment and insider dealing—in one place while ensuring the data is accurate.

“To get all that data in one place and verify it involves a tremendous amount of time and effort,” she says. “We take the data that vendors provide, and before we submit it to the OTAS platform, we perform 163,000 checks, because clients are frustrated by erroneous data that looks like a signal but is noise.”

OliveTree already carries securities lending data from SunGard, which it rolled out earlier this year (IMD, July 1). “Short interest data has been available in the platform for just over a year from different sources, but we wanted to broaden the breadth and depth, so we added SunGard and now Markit,” Wall says. “Some of our clients had existing agreements with Markit, and wanted to see that data in our platform.”