SecondMarket launched markets for MBS, whole loans, and CDOs yesterday.
Through the firm's platform, buyers and sellers are able to trade these assets in a robust, centralized marketplace that has transparency, price discovery as well as an extensive network of market participants.
The firm hired two former Credit Suisse directors to lead its efforts in these three asset classes.
Elton Wells, formerly a director with the bank's structured products group, will head SecondMarkets MBS and whole loans markets.
Meanwhile, Adrian Radulescu, previously a director with Credit Suisse and head of the European leveraged finance CDO structuring desk in London, will lead SecondMarkets CDO market.
Via its online trading and auction platform, proprietary matching algorithm and deep network of relationships, SecondMarket has established itself as a marketplace for different illiquid asset classes since its founding in 2004. These assets include auction-rate securities, bankruptcy claims, limited partnership interests, as well as restricted securities and blocks in small capitalization companies.
SecondMarkets trading network has 2,500 buyers and sellers, many of whom have expressed an interest in buying RMBS, CMBS, CDOs, and portfolios of various whole loans, such as residential, commercial, construction, consumer and industrial loans. Currently, more than $1 billion in illiquid assets have already been traded over SecondMarket.
Because of the opaque nature of many of these assets, pricing is extremely hard. In an effort to improve investors abilities to determine the value of these assets, SecondMarket is providing transparency by aggregating data on MBS, whole loans and CDOs for free to SecondMarket participants. SecondMarket also has a set network of third-party service providers or the SecondMarket Ecosystem, which provides valuation, research, data, analytics, legal and transaction advisory services.
Today, the multi-trillion-dollar MBS, whole loans and CDO secondary markets are nearly frozen. For the global economy to recover, it is critical to unfreeze these assets from the balance sheets of financial institutions around the world and restart the securitization markets, said SecondMarket CEO Barry Silbert. The most effective solution lies in a time-tested model an organized, independent secondary marketplace that provides transparency and price discovery.
The SecondMarket online marketplace and auction platform is expected to serve as a complementary market to assist the efforts being undertaken to address the legacy asset problem by governments in the U.S. and abroad. We applaud the federal governments initial efforts to address the legacy assets and restart the securitization markets, Silbert said, and an independent, active secondary marketplace is essential to bolster those efforts.
Over the past six months, SecondMarket has been diligently and expeditiously preparing for the launch of these markets by hiring dozens of employees, expanding our technology capabilities and developing key industry relationships, said Silbert. We are confident that our efforts will result in transparency, liquidity, a functioning secondary market for the so-called legacy assets and, consequently, the restart of the securitization market.
Bill Seidman, former chairman of the Federal Deposit Insurance Corp. and Resolution Trust Corp.(RTC) and advisor to SecondMarket, commented on the SecondMarket model. When we were working with troubled bank assets during the S&L crisis, we were forced to do a lot of work to create a market for these assets, Seidman said. Had there been a SecondMarket when I was at the RTC, I would have jumped at using their platform.
A link to a profile ASR wrote on SecondMarket is found below: