CanDeal - DNA Reference Pricing Service

CanDeal DNA provides intraday valuations for a universe of over 95,000 Canadian fixed income securities. Our unique partnership with the trading desks at leading Canadian dealers along with our proprietary quantitative techniques ensure that our Reference Prices are precise and consistent representation of the Canadian institutional fixed income market throughout the trading day.  

CanDeal DNA publishes intraday prices for each security using dealer contributed price quotations and trade reports. We deploy proprietary methodologies developed in collaboration with our dealer partners ensuring precision and consistent coverage for a broad universe of securities.

Coverage:

Rates

• Government of Canada
• Federal Agencies
• Real Return Bonds
• Related Bills & Strips 

Credit

• Provincials & Agencies
• Municipals
• Canadian Corporates
• Project Finance
• Commercial Paper
• Maples
• Related Bills & Strips

Asset Backed

• NHA Mortgage Pools
• Canada Housing Trust
• Securitizations
• Asset-Backed Commercial Paper
• Commercial MBS
• Residential MBS

Data Acquisition 

The foundation of our products is our unique ability to gather front-office trade and pricing data from Canada’s leading fixed income dealers. Using IOSCO principles, CanDeal DNA has a Data Submission Guide setting out quality standards for our contributors, and oversight and transparency requirements. Our technology platform monitors compliance with these guidelines and provides feedback to contributors on data quality and timeliness, resulting in a continuous feedback loop and input improvement process. 

Pricing Inputs

Our input data set is composed of price quotations, trade reports, and reference data:

• Price Quotations are two-sided quotes for institutional-sized transactions, sourced directly from the primary pricing engine utilized by the dealing firm’s front office traders. This provides CanDeal DNA with the same information that those traders use for instrument valuations and trade decision making.
• Trade Reports are the complete record of each contributing dealer’s transactions across all channels and with all clients, including related parties.
• Reference Data is a direct feed of prospectuses and term sheets from the dealer’s origination and syndication teams.

Data Validation, Processing and Platform

Our comprehensive rules-based data quality solution verifies that contributed data is precise, timely, and free of semantic errors such as crossed quotes, locked markets, and outliers. CanDeal DNA aggregates detailed Trade Report feeds from our contributors enabling us to validate that contributed price quotations precisely represent institutional trading in the OTC markets.

A fully automated cloud-based technology platform enables us to acquire and process hundreds of thousands of price quotations per day and highly scalable infrastructure allows us to utilize sophisticated algorithms for data validation while meeting our clients’ stringent timelines for fast delivery of high-quality data products. 

Optimized Coverage with Evaluated Pricing 

Characteristics of the Canadian fixed income market make it difficult to achieve precise prices for the full depth and breadth of the market. CanDeal DNA has defined and implemented methodologies to optimize the contributor price inputs using quantitative tools and filters to enable us to produce intraday Reference Pricing for over 95,000 securities.

Evaluated Price Methodology 

CanDeal DNA uses a proprietary evaluated pricing engine to ensure precise and timely pricing on over 95,000 Canadian fixed income securities each day. We provide coverage of Canadian rates, credit and asset-backed instruments, including NHA mortgage pools, money markets, strips, municipals, and real return bonds using models specifically designed to reflect a trader’s view of the market. Our pricing models have been designed in collaboration with Canada’s leading traders. 

To ensure both precision and coverage, our curve-based evaluated pricing model constructs a waterfall of curves by issuer/sector. Our curves are built using the highest quality composite prices available as inputs and subject to a daily stability framework that ensures the continuity of point values across time and is designed to measure and optimize the quality of fit. 

Composite Price Methodology 

Composites of dealer sourced observable quotations are the core of CanDeal DNA’s information advantage. Our proprietary Performance Filtered Composite (PFC) methodology uses cloud-based compute power to back-test each price contributor’s quotes for fidelity to the trading history of each security in our Canadian fixed income universe. We filter composite contributions by the contributor’s Tracking Error to trades to ensure that our composites are built using prices proven precise by the traded market. The Tracking Error calibrates each dealer’s contributed prices against trades to confirm quote quality and rank for inclusion in the composite price against predetermined minimum thresholds. Using our unique methodology results in composite pricing for 30,000+ securities and sector and issuer yield curves populated with best available composite prices.

The bid-offer spread for composite prices is derived from observed and valid two-sided prices to ensure a positive spread that can be traced back to individual submitted two-sided quotes. 

IOSCO Principles 

We have leveraged our unique relationship with Canada’s banks to ensure prudent governance of our valuation practice. Our Evaluated Pricing Working Group includes representatives from the finance, valuation and market risk teams at all six major Canadian banks. Our Pricing Committee provides oversight from senior capital markets executives. We have documented and made transparent our methodologies and processes for managing price challenges and other requests for information.

Trade Class – Per Instrument Liquidity Metric 

CanDeal DNA’s Trade Class is our proprietary metadata tool that documents the power of our validation process on a security-by-security basis based on liquidity and traded prices and provides unique insight to each security’s trading history. 

Suggested Use Cases

• Intraday and end of day valuations
• Risk, Market Surveillance
• Market monitoring
• Trading and pricing decisions
• Compliance & risk management
• Scenario analysis
• Quantitative modeling
• Valuations