LIQUIDITY ASSESSMENT & Bloomberg Data

LIQUIDITY ASSESSMENT & Bloomberg Data

LIQUIDITY KEY REGULATORY FOCUS AFTER 2008 FINANCIAL CRISIS 2 Prudent Valuation MiFID II SEC 22.e.4 RRP LQA LIQUIDITY METRICS AIFMD LQA delivers economic view on liquidity and offers key regulatory liquidity metrics to solve for needs across Sell and Buy-Side ILAAP EMIR Basel 3 Liquidity Coverage Ratio SA CCR Margin Period of Risk FRTB (aka Basel 4)

LQA LIQUIDITY MODEL OVERVIEW 3 LQA is market Impact model 1. Estimates price shift from fair value (equilibrium) given a specific volume of selling 2. Extensive use of transaction market data to determine market impact curve 3. If limited data available: clustering securities based on machine learning and big data techniques to find comparable instruments as proxy to fit market impact curve 2 1 3

LQA ENABLING ECONOMIC VIEW ON LIQUIDITY 4 LQA provides the probability of liquidating a given volume of an asset at a fair value price or better given a time frame and the market condition.

LQA<GO> The Liquidity Score section displays the proprietary Bloomberggenerated liquidity score for the security under analysis. The score is calculated as the integral of the market impact and the market impact uncertainty across some representative volumes. It is measured on a scale of 1 to 100, where 100 is most liquid. The Liquidity Analysis section provides transparency into the LQA liquidity model. It allows you to gauge the liquidity profile of the target security given 10 different volumes by providing market impact values and probability of selling at a specific exit price. The Time to Liquidation section allows you to compare the liquidation horizons (in number of days) for 10 liquidation volumes, given the market impact level you select from the Liquidity Analysis table. The output can be calibrated to an exit price that does not differ materially from the current fair value price (Materiality Standard). 5

MIFID II TRANSPARENCY AND REPORTING REQUIREMENTS 6 Market Transparency Pre-trade and post trade transparency Transparency requirements aim to ensure that investors have reliable and timely information about the level of trading interest in financial instruments. Pre trade and post trade transparency beyond equities Transaction reporting Transaction reporting by investment firms to authorities will be used for market abuse surveillance and for monitoring market integrity. Increased reporting requirements to regulators Reference data Reference data is essential information that enables authorities to fulfil their supervisory duties. Reference data is also essential to validate the data received in transaction reports.

MIFID II TRADE TRANSPARENCY: LIQUIDITY WAIVERS 7 MIFIR enables competent authorities to authorise deferred publication or waivers from the transparency requirements based on the liquidity of the security: Instruments are subjected to differing transparency regimes depending upon their assessment of liquidity The less liquid the instrument is deemed to be, the less transparency it is subjected to (delayed publication of transparency fields via APA) Illiquid bonds are not subject to pre-trade reporting and all post-trade reporting is deferred Liquidity assessments for bonds and derivatives are performed using different taxonomies

MIFID II TRADE TRANSPARENCY: LIQUIDITY THRESHOLDS FIXED INCOME 8 A bond is considered to be illiquid at issuance subject to the following issuance size COFIA Thereafter bonds are assessed quarterly by ESMA and re-categorised as liquid if they meet all of the following criteria IBIA

MIFID II TRADE TRANSPARENCY: SIZE WAIVERS FOR LIQUID INSTRUMENTS For bonds deemed to be liquid, pre-trade transparency requirements (i.e., the publication of bids and offers) apply to trading on an organised venue. There are waivers from these requirements for: Orders that are large in scale (LIS) compared with normal market size Orders held in an order management facility Actionable indications of interest (IOIs) in request for quote (RFQ) and voice trading systems that are above a size specific to the instrument (SSTI) 9

LQA LIQUIDITY AND MIFID II LIQUIDITY: DIFFERENT VIEWS 10 MiFID II Liquidity LQA Liquidity Definition Liquidity based on size of issuance and number of trades Liquidity is the ability to sell an instrument close to its fair value ask price with no cost Trade volume Fixed income instruments below trade frequency thresholds will be deemed illiquid: no transparency trade obligation Instruments that have even limited trade history in last 6 months can be economically liquid based on transaction data from clustered securities Issuance size Fixed income instruments at issuance (primary market) below certain size deemed illiquid: no transparency trade obligation LQA does not include securities below USD15mio in analysis. No size limit regarding issue size. Instruments with small issue size can still be economically liquid

LQA LIQUIDITY SCORE EXPLAINED 11 LQA liquidity score: instruments with on average lowest market impact and variation of the market impact in a 6 month time period receive the highest score The black lines represent the score boundaries defined according to percentiles (0-10, 11-20 etc.)

LQA DATA DELIVERY VIA BLOOMBERG DATA LICENSE INFRASTRUCTURE 12 Pricing Source BVAL Reporting Date 08.04.2016 AIFMD Scenario #1 Pruval Scenario #1 ISIN Description Amount Outstanding Security Data Currency Liquidity Score Market Impact (price) LQA OUTPUT Probability of Execution @ Bid Time To Liquidation Accepted Market Impact Volume Multiplie r Bid-Ask Spread Multiplier Accepted Market Impact 0,50 1,00 1,00 1,00 Market Concentrated AIFMD Price Position AVA Uncertai XS1299724911 KUNTA 4 1/2 12/29/49 350.000.000 EUR 32 1,862 1,053 0,087 2-7 Days 1,907 0,000 1,329 XS0858366684 STATK 2 1/2 11/28/22 700.000.000 EUR 72 0,592 45,187 2,818 8-30 Days 0,331 0,000 0,102 XS1137512668 MOLNLY 1 1/2 02/28/22 500.000.000 EUR 68 0,793 7,819 13,832 31-90 Days 0,571 0,000 0,270 XS0751937185 SECUSS 2 3/4 02/28/17 350.000.000 EUR 50 0,123 28,753 7,162 8-30 Days 0,067 0,000 0,000 XS0593960304 TDCDC 4 3/8 02/23/18 800.000.000 EUR 71 0,192 38,516 14,548 31-90 Days 0,143 0,000 0,029 XS0996455399 SECUSS 2 5/8 02/22/21 350.000.000 EUR 75 0,458 26,436 7,927 8-30 Days 0,222 0,000 0,031 FI4000153937 KRAVFH 2 1/4 05/13/22 150.000.000 EUR 39 0,387 87,336 0,762 2-7 Days 0,021 0,000 0,000 XS1324446092 MAERSK 1 1/2 11/24/22 600.000.000 EUR 76 0,493 17,035 3,848 8-30 Days 0,334 0,000 0,139 XS0740810881 TVOYFH 4 5/8 02/04/19 500.000.000 EUR 49 0,323 79,720 1,926 8-30 Days 0,076 0,000 0,000 XS1145526825 ISSDC 2 1/8 12/02/24 500.000.000 EUR 71 0,941 5,479 13,857 31-90 Days 0,840 0,078 0,511 XS0973806861 ELIAV 2 3/4 01/22/21 300.000.000 EUR 70 0,281 80,118 0,944 2-7 Days 0,244 0,000 0,069 FI4000033220 ITELOY 4 5/8 12/08/17 100.000.000 EUR 34 0,314 38,985 2,930 8-30 Days 0,052 0,000 0,000 XS0862010625 GFSLN 2 5/8 12/06/18 500.000.000 EUR 69 0,273 27,447 15,240 31-90 Days 0,203 0,000 0,067 XS0858089740 VLVY 2 3/8 11/26/19 600.000.000 EUR 79 0,216 57,005 2,805 8-30 Days 0,045 0,000 0,000 FI4000064167 TIEVFH 2 7/8 05/23/19 100.000.000 EUR 43 0,574 26,362 4,481 8-30 Days 0,355 0,000 0,130 XS0466670345 INVSA 4 7/8 11/18/21 600.000.000 EUR 73 0,617 29,637 5,721 8-30 Days 0,273 0,000 0,027 XS1227607402 DONGAS 3 11/06/15 600.000.000 EUR 76 1,281 4,284 13,424 8-30 Days 1,011 0,000 0,519 XS0986610425 SKFBSS 2 3/8 10/29/20 750.000.000 EUR 71 0,418 28,875 6,694 8-30 Days 0,202 0,000 0,024 Closeout Cost AVA

LQA NEXT STEPS 13 Coverage: TODAY: 130,000+ Bonds Equities (Q2/16) Loans/ABS US Munis FX, Listed derivatives LQA is being developed into a Cross Asset Liquidity Assessment Solution Functionality: Portfolio functionality (Q4/16) Stress testing (Version 1.0 available today)

RAAP <GO> REGULATORY PRODUCTS 14

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