Tradeweb and three Wall Street firms this week launched technology designed to mitigate the risk of failed to-be-announced (TBA) MBS trades in situations where deals can be resolved by delivery through tri-party arrangements.
Problems with tri-party trades occur, for example, in situations where an asset manager buys an MBS pool from one dealer with the intention of selling it to another, but the trade does not clear because the "sold" pools cannot be delivered to the buying dealer.
Tradeweb, Goldman Sachs, BlackRock and Credit Suisse have created an electronic assignment process to address this. The process creates an electronic contract between parties, ensuring that all pools will be cleared from one party to another when the transaction is processed.
(Sometimes, clearing a deal can become particularly delicate in the current regulatory environment, market participants said.)
Separately, Credit Suisse researchers recently said that MBS market participants believe the Federal Reserve may soon impose a TBA "fails charge" with details coming later in the month.
Fails have been more frequent this year due to supply-demand imbalances between TBA deliveries and constrained origination volume that some attribute, in part, to the Fed's intervention in the market.
In TBAs, loan pools have yet to be determined, but must fall within a specific range of characteristics.
