SD-08.1 — Security Pricing

Business Domain: BD-08 Valuation & Pricing (Middle office) · Applies: PUB

Purpose

Sources, validates and applies a market price for every instrument that has one — whether a firm quoted price from an exchange or a contributed quote, or a vendor evaluated (matrix) price for an instrument that trades but not continuously. SD-08.1 is the capability that answers what is the market saying this is worth: it does not itself model a value — that is SD-08.2 — it selects, from the price sources the outside world supplies, the price the firm will use, and proves that price fit to use. The distinction that runs through BD-08: SD-08.1 produces a price the firm sources and validates; SD-08.2 produces a value the firm models itself. SD-08.1 is not raw market-data delivery — that is SD-13.4, which runs the vendor feeds; SD-08.1 takes that data and turns it into the firm’s chosen, validated price for a position it actually holds.

Service Operations

Source and select the price — gather candidate prices from exchanges, contributed-quote feeds and evaluated-pricing vendors, and select the price the firm will use under the pricing hierarchy — the documented order of preference among sources.
Apply evaluated and matrix pricing — for instruments that trade but not continuously, most of the fixed-income universe, take and validate vendor evaluated prices, which interpolate a price from comparable instruments and observable inputs.
Run price-tolerance and movement checks — compare each price against the prior price, against an independent source and against a tolerance band, and flag prices that move more than expected.
Detect stale and missing prices — identify instruments whose price has not moved or has not arrived, and apply the stale-price policy.
Apply fair-value adjustments for market timing — where a market closed before the valuation point — a foreign exchange closed hours earlier — apply the fair-value-adjustment factor so the price reflects the valuation moment, not the close.
Maintain the price record — record the chosen price, its source and its validation status as the validated valuation input the rest of the firm consumes.

Inputs and outputs

Inputs: exchange and contributed-quote feeds; vendor evaluated-pricing feeds; the instrument master from SD-13.3; the security-level market data SD-13.4 delivers; the pricing hierarchy and tolerance policy from SD-08.4.
Outputs: validated security prices with source and validation status — recorded as Valuation (E-07), consumed by SD-12.9 Fund Accounting & NAV, BD-07 Investment Risk, BD-09 Performance & Analytics, and SD-08.6, which independently verifies them.

Entities

Consumes: E-02 Instrument / Asset, E-08 Price & Market Data, E-03 Portfolio / Mandate; the SD-08.4 pricing hierarchy and tolerance policy; the SD-13.3 instrument master; the security-level market data SD-13.4 delivers.
Owns: the observable-price valuations within E-07 Valuation — E-07 names SD-08.1 as the owner for observable-price valuations. The raw price record itself is E-08 Price & Market Data, owned by SD-13.4; SD-08.1 is its principal validating consumer, not its owner.

Standards

IFRS 13 / ASC 820 fair-value hierarchy — a quoted price in an active market is a Level 1 input; an evaluated price built on observable inputs is Level 2.
ISO 20022 and vendor market-data conventions for price delivery.
SEC Rule 2a-5 and the AIFMD valuation regime treat the selection and validation of prices as part of a documented valuation process.

Open extensions

The Service-Operation-level input/output contracts.
The pricing-hierarchy and source-waterfall sub-model — which source is preferred for which instrument class.
The evaluated-pricing challenge interface with SD-08.6.