Big time Wall Street investment firms BlackRock (BLK), Credit Suisse (CS) and Goldman Sachs (GS) teamed up with Tradeweb, the online portal for fixed income and derivatives market trading, to launch a tool that’s expected to reduce the number of failed mortgage pool trades in the to-be-announced market. The TBA market is considered vital to maintaining liquidity in the mortgage finance space. However, this summer, the market was plagued with delivery problems associated with the underlying mortgages, leading to failed trades. “Failed trades are a systemic issue that impacts all market participants,” said Colm Murtagh, head of rates trading at BlackRock. “Not only do they reduce the efficiency of the TBA market, but they introduce an additional layer of risk. We are delighted to be part of the solution to this growing challenge.” The TBA market facilitates the forward trading of mortgage-backed securities issued by the Fannie Mae, Freddie Mac and Ginnie Mae. Mortgage pools are created for trading, within preset parameters, but not immediately revealed or “to be announced.” The new technology enables institutional clients to pair-off TBA mortgage pool transactions with dealers, reducing the amount of pools that need to be cleared and enabling more efficient resolution of round-robin fails between dealers, according to Tradeweb. Market participants fail to deliver when they failed to receive expected pools. A chain of matched fails frequently becomes a closed loop, known as a “round-robin.” TBA round robins are a key driver of systemic MBS fails. Currently reaching a resolution to these fails is a manual and time-consuming process. “Innovation is the lifeblood of Tradeweb. Since the earliest days of the company, we have single mindedly focused on delivering technologies that improve markets,” said Billy Hult, president of Tradeweb. “This can be best achieved by working closely with market participants to deliver relevant solutions to significant industry challenges.” Tradeweb is the industry’s largest execution venue for TBA mortgage trading. Since its creation, the online marketplace handled more than $110 trillion in transactions executed by asset managers and other institutional clients. In the third quarter, average daily trading volume topped $100 billion. Write to Jacob Gaffney. The author holds no relevant investments.

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