Fair Value Pricing

Fair Value Pricing

By Paul Cammisa

July 2019

Where clients obtain fair value pricing

When the price of a security isn’t readily available, fund managers are able to estimate the value of a security within a fund. This process is called fair value pricing or fair valuation.

Fair valuation can be applied by some firms on a daily basis. This occurs commonly to adjust the closing price of foreign securities trading in markets that have normal closing times prior to the fund’s valuation time - for example, Canadian securities linked to instruments on the London Stock Exchange.

Fair value pricing is also applicable when an extraordinary market event occurs. For instance, this can take place when a market or price becomes unexpectedly unavailable or is unavailable for an extended period. A recent example of an unanticipated market event is when Japan declared a 10-day national holiday to celebrate the succession of Japan’s new Emperor. This led to the Japanese markets being closed for an extended period of time.

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This article is provided for general information purposes only and CIBC Mellon and its affiliates make no representations or warranties as to its accuracy or completeness, nor do any of them take any responsibility for third parties to which reference may be made. This article should not be regarded as legal, accounting, investment, financial or other professional advice nor is it intended for such use.

About CIBC Mellon

CIBC Mellon is a Canadian company exclusively focused on the investment servicing needs of Canadian institutional investors and international institutional investors into Canada. Founded in 1996, CIBC Mellon is 50-50 jointly owned by The Bank of New York Mellon (BNY) and Canadian Imperial Bank of Commerce (CIBC). CIBC Mellon's investment servicing solutions for institutions and corporations are provided in close collaboration with our parent companies, and include custody, multicurrency accounting, fund administration, recordkeeping, pension services, exchange-traded fund services, securities lending services, foreign exchange processing and settlement, and treasury services.

As at June 30, 2024, CIBC Mellon had more than C$2.8 trillion of assets under administration on behalf of banks, pension funds, investment funds, corporations, governments, insurance companies, foreign insurance trusts, foundations and global financial institutions whose clients invest in Canada. CIBC Mellon is part of the BNY network, which as at June 30, 2024 had US$49.5 trillion in assets under custody and/or administration. CIBC Mellon is a licensed user of the CIBC trade-mark and certain BNY trade-marks, is the corporate brand of CIBC Mellon Global Securities Services Company and CIBC Mellon Trust Company, and may be used as a generic term to refer to either or both companies.

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