"E-Bay for Illiquid Securities" Coming in Europe
September 8, 2010
Bank of New York Mellon Corp. says in the first quarter of 2011 it will launch the first online auction-based market in Europe to value asset-backed securities.
The platform will allow banks, asset managers, hedge funds and dealers to buy and sell asset-backed bonds anonymously through a system BNY Mellon officials are calling the “E-Bay of illiquid securities.”
The system, called Structured Credit Connect, will give buyers of residential mortgage-backed securities about 24 hours to post bids for securities BNY Mellon puts up for sale on behalf of its clients.
The bank will charge a fixed commission for trades executed, but would not disclose the rate. The platform will initially handle residential mortgage-backed securities – a market valued at $2.7 trillion in Europe.
Asset-backed securities are typically created by banks which repackage property loans, consumer debt and other borrowings into sellable financial instruments. BNY Mellon started a similar service for U.S. mortgage-backed securities in June.
The securitized credit market in the U.S., economists say, is recovering more quickly than its European counterpart because of the Federal Reserve’s Term Asset-Backed Securities Loan Facility, or TALF. That program provides low-cost financing to investors buying the bonds.
