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Capital Markets

Secondary trading: Markit adds ABS data to its portfolio

Greater transparency is essential for ABS to be used as repo collateral

Poor liquidity and minimal transparency has stymied the progress of the European ABS secondary market. So it was welcome news when the European Securitization Forum announced the creation of a working group for the purpose of boosting efficiency in the asset and mortgage-backed securities secondary sector. The working group is co-headed by two stalwarts of securitization trading – Rob Ford and Ron Miao – heads of European ABS trading at Barclays Capital and Citigroup respectively.

"It has been recognized for some time by the trading and investor community that there's a need for greater pricing transparency," says Ford. However, the working group's task will be made much easier this October when Markit starts disseminating secondary prices for RMBS, ABS and CDOs, including both senior and subordinated tranches.

Benchmark provider

Markit was just one of a number of data vendors that has considered the possibility of providing data in this rapidly growing sector. But Markit, which is owned by 13 investment banks, was in a good position as it is already the benchmark provider of credit default swaps levels, a leading supplier of loan pricing that also has a capable cash bond franchise.

Although the overall mission of the working group is to address all relevant issues relating to trading of ABS and MBS, the backdrop is a wish to trigger the development of a repo market using ABS/RMBS as collateral – for which reliable pricing is essential.

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