Today, consensus pricing can be an opaque process, namely due to the lack of transparency around methodologies. Specifically, the challenge process is laborious, inadequate, and time-consuming, resulting in a delayed final consensus price.
While there are independent price verification (IPV) tools on the market today, most require manual analysis, calculations, and processing when it comes to the challenge process. By the time a resolution is reached, the books are often closed. Firms must use additional resources to remediate and support their work.
As a result, they may buy secondary data sources to back up and justify their positions. However, regulators rarely consider these alternate sources to be as reliable, which affects a firm’s regulatory compliance and risk.
With limited transparency and visibility across the challenge process, participants cannot effectively or accurately evaluate its success.
ClearConsensus™ is a transparent, high-fidelity consensus network that powers today’s data-driven financial firms. What makes the solution unique is how it tackles historical transparency, data quality, analytics, and challenge process difficulties through an easy-to-use platform. It also includes trusted authoritative data sources, such as Parameta’s Evidential Price (EvP), for richer price calculations to provide a robust and timely challenge process for better position justification.
The ClearConsensus challenge process is streamlined, rules-based, and verifiable, improving efficiency, accuracy, and trustworthiness.
When a price submission is determined to be an outlier through the ClearConsensus methodology, participants have the ability to offer further evidence to prove their price was valid through the submission of an associated trade or order. ClearConsensus policies ensure trade and orders are valid, verifiable, and of sufficient size to determine whether they’d be accepted or rejected. Accepted challenges automatically recalculate the accepted ranges while maintaining the price anonymity of the participants.
During a consensus run, there may be submitted data points that fall outside the acceptable range. These outliers are identified based on explicitly defined policies that incorporate deterministic statistical calculations and additional data points from authoritative data sources (such as the EvP).
After the submission window (including the ability to address data quality issues) closes, consensus calculations are completed, and the challenge window begins. The participants do not need to weigh in on one another’s challenges and can focus on their own results. The evidence is reviewed against specific policies for rapid approval or rejection within one business day. Transparency and fidelity are ensured as policies are set to accept only valid trades or orders of sufficient size.
ClearConsensus provides final consensus results to all participants within one day, incorporating redefined boundaries based on all accepted data points. Every participant can be a beneficiary of the updated ranges, regardless of their engagement in the challenge process.
After a consensus is published, all participants get full access to two separate consensus results – the pre-challenge and the post-challenge consensus reports. Based on participant and firm-specific needs, either or both of the consensus results can be incorporated into the IPV process. By reviewing pre- and post-challenge results, all firms can evaluate their own price more accurately, allowing greater resilience, control, and predictability for managing risk.
Additionally, the ClearConsensus platform provides explainability and context into why certain data points are outliers and why some were recovered through the ClearConsensus methodology (EvP, challenges, etc.). As a result, firms can better manage their pricing, submission and challenge operations, while ultimately improving strategies and decision-making.
Participants can complete the entire consensus process (submission, consensus, challenge resolution, and publication) before the close-of-books. There is clear end-to-end traceability, transparency of rules applied, and auditability at every step. This ensures market participants improve their business resilience, reduce risk, and optimize capital allocation.
For more information, please contact us, or request a demo with a member of Parameta Solutions and PeerNova today.
