- Is the firm engaged in a related business that could gain a competitive advantage from its role? Examples of such related businesses include data distribution, pricing services, trustee services, monitoring, analytic solutions, loan servicing, collection services, consulting, ratings services, investment as a principal or agent or portfolio manager, and underwriting.
- Does the firm have investments that could benefit from its role, such as long or short positions in ABS transactions?
If the ABS Data Warehouse is to be valuable in restoring trust in the structured finance market, the data must be trusted. Unfortunately, there are many ways that conflicts of interest might raise doubts about the trustworthiness of the data.
Recently, the European Commission announced an investigation of Markit which shows how conflicts of interest jeopardize the trustworthiness of the information and can lead to potential problems.
Markit is the leading vendor of information on credit default swaps. It also happens to have a majority of its shares owned by 16 major dealers of credit default swaps. Because of their ownership interest, these dealers have an incentive to only supply Markit with information. In addition, since they control Markit, they are in a position to control what data is disclosed and when it is disclosed. Taken together, all of the conflicts of interest that exist within Markit have drawn the European Commission's attention and call into question the trustworthiness of the data Markit provides.