From AI to SEC Rule 2A-5: How evaluated pricing is being redefined

At a recent LSEG Pricing Services forum in New York City, panelists and financial industry executives discussed how the world of evaluated pricing is evolving. Artificial intelligence (AI), the democratisation of private and loan markets, and new forms of governance engagement were key topics during the afternoon event. Whether a firm is facing volatility, regulatory change, operational transformation or other forms of disruption, it helps to work with an evaluated pricing team that is transparent and trusted.

• At the 3rd Annual LSEG Pricing Forum: Pricing landscape in today's market & regulatory environment, attendees talked about how the world of evaluated pricing is evolving
• Topics such as the use of AI, the democratisation of private and loan markets, and changes brought on by SEC Rule 2A-5 were discussed
• Amid changing operational and governance practices, volatile markets and developing technology, it is important to work with an experienced and trusted evaluated pricing provider.

Recent trends in the evaluated pricing landscape were on the agenda at the event. The growth of AI, the democratisation of the private and loan markets, and impact of altered forms of governance were discussed among the panelists and attendees.

AI has potential for providing evaluated pricing – AI could be taught to enhance existing models, to theoretically provide accurate pricing over time.

However, attendees expressed concerns about the risks associated with using AI for pricing. For example, unknown data or model flaws could lead to an inaccurate price determination. This could result in incorrect regulatory capital holdings, portfolio valuations, and risk management decisions. There were also concerns about how AI might react in periods of extreme volatility, such as the one caused by a global trade war in 2025.

Instead, some attendees said they are using AI successfully for administrative and operational functions, such as request for proposal (RFP) and due diligence questionnaires (DDQs), to generate standardised documentation for vendor responses. A few firms are also leveraging AI for some rules-based projects for operational processes and support analysis with downloaded pricing.

The democratisation of both the private and loan markets is gathering momentum. For example, the growth of exchange-traded funds (ETFs) for AAA-rated CLOs means that wealthy retail investors now have direct access to investing in the private and loan markets. There is high demand among investors for these ETF products from alpha-seeking retail investors, and this is expected to grow. 

However, accurate pricing for private market assets is a complex area. As this market grows, regulators are focusing on the impact of pricing practices on investors. For example, In March 2025 the UK Financial Conduct Authority published a review, Private Market Valuation Practices, which specifically called out issues around transparency and governance. The UK is the largest centre for private market asset management in Europe.

In another example, the global trade war created volatility in the international $1 trillion collateralised loan obligation market (CLO). In the US, CLOs own about two-thirds of the country’s riskier corporate loans. Investors worried about the impact of tariffs on the profitability of companies financed through loans contained in CLOs. Since then, the CLO market has bounced back. However, accurate loan and CLO pricing during such volatility is critical for investors.

As a result of US SEC Rule 2A-5, there is growth in the formation of non-board valuation committees at the investment advisor level. Rule 2A-5 requires the board to be ultimately responsible for the valuation process. However, the board may assign a designee – such as the investment advisor – to assess and manage the valuation process and oversee and evaluate any pricing services used, along with other obligations. These non-board valuation committees are increasingly the bodies that are meeting with evaluated pricing vendors.

Valuation committees are engaging with evaluated pricing vendors on a periodic basis. They often ask for a deep dive analysis of securities that differ from other vendors as well as securities that are only valued by one vendor.  Some firms even choose to have three or more vendors for each security to satisfy their own internal compliance requirements.  Vendors are asked to speak at valuation committee meetings especially after periods of market disruption.

Non-board valuations committees – and firms themselves – should also be looking at how well their controls held up during the recent period of market volatility around pricing. For example, firms should look at how well their pricing models held up under such stress. In addition, firms should explore how their internal audit function should evolve to handle increased volatility in both liquid and illiquid securities.

LSEG Pricing Service is working with financial firms around the globe as they evolve their engagement with evaluated pricing. Today, our clients are successfully using our evaluated pricing data in their emerging use cases.

In response to the demand for private market data, LSEG has a multi-year strategic collaboration with Dun & Bradstreet, which broadens the use of private market information in our analysis. The strategic relationship offers the ability to enhance content discoverability of data areas, including Ownership & Shareholder Information and Officers and Directors data, as well as the opportunity to further work together to develop new connected private market data sets to optimize capital market use cases. A new private market data feed is expected to be available in the near future. Read the full press release.

Additionally, LSEG is dedicated to supporting customer governance needs including SEC Rule 2A-5. Our 2A-5 quarterly packet contains pricing methodologies, frequently asked questions, and back testing results. Existing customers can access this documentation by joining the Pricing Service distribution list: pricingservice@lseg.com.