NEW YORK--()--Real-time market pricing transparency is coming to the mortgage and asset-backed securities market. Regulators are moving forward with proposals to apply the corporate bond transparency system known as TRACE (Transaction Reporting And Compliance Engine) to the entire MBS and ABS markets. But the final timing of dissemination of the information to market participants is not clear.
“Regulators need to move forward in a reasoned and responsible way, but they must move forward.”
Joseph S. Fichera, Chief Executive Officer of Saber Partners LLC, who initiated the proposal in 2007, will speak again at the Euromoney IMN ABS East conference on October 23nd at 4:25 pm in Miami. Joining him on the panel will be Ola Persson, Director of TRACE and Fixed Income Strategy, Financial Industry Regulatory Association (FINRA) and Lou Violante, CFA, Structured Products Manager, MarketAxess. The panel will discuss the history and future of transparency in these markets.
Follow on to 2007 Conference on TRACE and MBS/ABS
In 2007, Mr. Fichera and Saber were invited to organize and lead a panel discussion at a Euromoney IMN ABS conference about applying TRACE to the MBS and ABS markets. Mr. Fichera brought together for the first time regulators, investors, academics, investors and representatives of the underwriting community to discuss the possibility of applying TRACE these markets.
To see the 2007 panel and listen to the discussion, see http://saberpartners.com/pricing_transparency_corp_mbs_abs.html
Following that discussion, FINRA began a study and initiated a rule making process for full transparency. The proposal to expand TRACE reporting and define all asset-and mortgage backed securities as TRACE eligible securities was filed with the SEC two years later in October 2009. The proposal called for collection of transaction information for regulatory purposes and to allow FINRA a chance to study the data prior to proposing dissemination policy. Proposal was approved by the SEC in March 2010.
Next Steps: To Be Determined
That process is now culminating in regulations that will provide real-time pricing transparency to market participants in this one dark market. However, when and how the information will be available to all market participants is still an open question.
“Transparency promotes more efficient markets yet whether one supports or opposes transparency efforts often depends on whether one is a buyer or a seller,” said Mr. Fichera. “Regulators need to move forward in a reasoned and responsible way, but they must move forward.”
To learn more about the conference, see http://www.imn.org/Conference/ABS-East-Conference/Home.html
Saber Partners, LLC, is a New York-based financial advisory firm. It provides independent analysis, strategic financing advice and expert witness dispute resolution services to private and public sector entities including state and federal regulators. The firm advises on tactical and often innovative financing solutions across a spectrum of financial products including corporate debt, equity, securitized debt and municipal finance. Clients have included ExxonMobil Corporation, U.S. Securities and Exchange Commission, Governor of California, Municipal Water District of Southern California, Texas Instruments, Dow Corning and Public Service Commissions of Florida, West Virginia and Wisconsin on securitization among others.