Tradeweb, a provider of fixed-income and derivatives markets, has launched an electronic solution that the company says will help reduce the number of failed to-be-announced (TBA) mortgage pool trades. The technology was created by Tradeweb in collaboration with BlackRock, Credit Suisse and Goldman Sachs.
According to Tradeweb, failed trades reached a peak this summer, as the supply of deliverable mortgages became constrained.
The company's new technology enables institutional clients to pair-off TBA mortgage pool transactions with dealers, reducing the number of pools that need to be cleared and enabling more efficient resolution of round-robin fails between dealers, Tradeweb explains. In the TBA residential mortgage market, the specific pools of loans that are deliverable against the TBA contract have yet to be determined, but will always fall within a very specific range of characteristics known to participants, Tradeweb says.
‘Electronic assignments will be an important industry solution for reducing fails in the mortgage market, because they provide a cost- and time-efficient method of unraveling TBA round robins, which are a key driver of systemic MBS fails,’ says Rob Huntington, co-head of global structured products at Credit Suisse.