Rumored to have been in the works for nearly a year, the Bond Market Association announced it was indeed publishing outstanding CDO deal documentation via its new CDO Transaction Library. The confirmation arrived on the heels of the BMA's first annual CDO conference this week.
Comprised of information once impossible to come by for those not associated with a particular CDO transaction, the searchable database provides transaction swap agreements, offering memoranda, indenture documents and monthly trustee reports, as well as updated amendments. While the majority of investment banks have made CDO deal data more public over the last two years, there was room for improvement, explained Eric Bothwell, vice president at Goldman Sachs, and a member of the BMA's CDO committee.
"While many dealers chose to make arrangements for information to be available, there wasn't a common platform for that information across the entire Street," Bothwell said. A dealer such as Goldman might post information on Intex, a third-party analytics provider, but another dealer might post on Wall Street Analytics instead.
CDO committee members began to craft the project late last year, believing that a neutral platform would not only increase transparency, but would aid all parties involved in CDO trading and education efforts. Dealers are routinely asked by investors to bid on a variety of CDO transactions, some of which are not posted on the analytic platform the institution subscribes to.
"The information is not impossible to get, but if I'm asked to bid on a transaction [not on the institution's platform], it makes it harder than it needs to be," said Bothwell.
Whereas years ago such information was treated in a secretive manner, the CDO market has changed dramatically, and available data on all deals is the key to driving growth both in the primary and secondary markets.
"The library is an extremely important step in making the CDO market more transparent, which is critical to making the market more liquid and active," said Nadine Cancell, vice president and assistant general counsel at the BMA.
In short, the more information dealers have access to on their competitors' transactions, the better their own participation in the market. If all parties involved attained equal access to CDO information, the better the trading decisions made across the board, and the better the marketplace.
The CDO Library, however, is not a free-for-all situation for anyone with Internet access.
Users of the online portal will be treated at three different levels of access: subscribers, posting dealers and non-posting dealers. All participants will be required to sign a legal agreement outlining rules governing the CDO Transaction Library, and participation on the part of dealers is voluntary. Only qualified institutional investors, recommended by a dealer, will be accepted as subscribers, Cancell explained.
Furthermore, the library will not contain information on single tranche or customized CDO transactions.
"The concerns that drove the creation of this library are not present in that market," said Bothwell. "Single tranche-type trades are more unique in nature and more confidential." The CDO Library targets concerns raised over funded, traditional deals that are asset manager-driven, he said.
The opportunities created by submitting information to the site outweigh the task of sending information.
"[The CDO Committee] thinks it's something that isn't hard to make arrangements," said Bothwell.