Bloomberg’s award-winning solution for Liquidity Assessment (LQA) leverages Bloomberg’s robust financial data sets to provide data-driven quantitative evaluation of market liquidity across multiple asset classes. LQA facilitates regulatory compliance and enhances risk management and investment processes allowing clients to:
- Estimate liquidation cost and horizon at a position level under current market conditions, and stress scenarios (consistent with the ESMA Liquidity Stress Testing guidelines)
- Assess daily changes in liquidity based on changing market conditions
- Compare liquidity analytics across asset classes and global coverage using consistent output
- Customize model parameters to create firm-specific views, scenario analysis, and stress tests
Global coverage
Bloomberg’s liquidity analytics cover more than 4.2 million securities globally including government bonds, corporate bonds, municipal bonds, secondary market loans, equities, ETFs, securitized products (ABS/MBS), TBAs, and listed derivatives.
Regulatory and investment reporting
• Regulatory compliance
• Internal governance
• Investor relations (retail, fund of fund, institutional)
• PRIIPs & MiFID II support
Portfolio risk and analytics
• Establishing risk limits
• Early warning indicators
• Liquidity adjusted VaR
Trading support
• Ex-ante analysis
• Collateral management
• Benchmarking
• Profiling
• Transfer pricing
• Look through transparency
Investment research
Liquidity metrics trend analysis:
• Decreasing market depth
• Increasing costs
Investment models
• Relative Liquidity Comparison using absolute measures
• Average cost of funding (collateral repos)
• Establishing trading mandates
Portfolio construction & optimization
• Optimizing basket selection
• Minimizing alpha loss due to trading costs
• Pre-positioning ahead of asset rotation
• Minimizing redemption cost
Download our product guides to learn more
Market liquidity is high on the regulatory agenda, increasing the focus on whether investment funds can meet client redemption requirements. Globally, supervisory authorities are turning best practice guidelines into regulation. Bloomberg’s LQA delivers the foundation for a comprehensive Liquidity Risk Management Framework, helping firms meet these challenges in a seamless manner.
Guidelines
Bloomberg’s fully customizable LQA enables firms to address and effectively manage all global market liquidity guidelines or mandates.
- Europe
AIFMD and UCITS Management Companies, along with Money Market Funds, have to implement ESMA’s Liquidity Stress Testing (LST) guidelines which came into effect in September 2020. The guidelines enhance existing standards (ex: AIFMD and Directive on UCITS), promote consistency and increase frequency of current LST practices. - U.S.
The Securities and Exchange Commission (SEC) rule 22e-4 requires mutual funds and ETFs to implement a liquidity risk management program (LRM) and discuss the operation and effectiveness of the program in the fund’s report to shareholders. In December 2020, all ETFs will need to comply with SEC rule 6c11, which requires ETF issuers to publish daily bid-ask spread metrics on their websites. - Asia
The Japanese FSA alongside the Japanese Investment Trust Association has released guidelines requiring in-scope firms to have a liquidity risk management programme in place by January 2022. This move follows other regulators in the region: The Securities and Futures Commission of Hong Kong (SFC), Monetary Authority of Singapore (MAS) and Australian Securities and Investments Commission (ASIC) all mandate either an effective Liquidity Risk Management program to be in place, or reporting of funds’ liquidity profiles. - Global
In 2017, the Financial Stability Board (FSB) recommended that the International Organization of Securities Commissions (IOSCO) consider structural vulnerabilities from Asset Management activities. In February 2018, IOSCO issued guidelines around best practices for building and utilizing a Liquidity Risk Management (LRM) framework, including governance around this process.
