Bloomberg Brings European ABS Trading Online

According to a GlobalCapital article, Bloomberg has begun to sign up several banks for its ALLQ system, which hopes to bring core, prime European ABS trading online. However, some dealers have resisted.

The article states, according to proponents of the ALLQ system, a move to electronic trading would bring the securitization market in line with other credit products and potentially broaden the base of investors in the asset class. Conversely, opponents argue the move is unnecessary given the slower pace of trading securitized products and the already liquid nature of prime, "flow" asset classes that Bloomberg wants to move to the platform.

Dealers that are opposed argue that certain unique aspects of ABS trading such as the lack of homogeneity between deals, the lower deal volume compared to other fixed income markets, and the additional time dealers take to mark ABS bonds compared to corporate credits make the ALLQ platform, "a solution to a problem that never existed." In the article, one investor took his argument a step further, stating that, "the reality is that screen prices are simply not that reflective of where you can actually trade in an over the counter market these days. Some days they are- but many days they are not."

It's also unclear whether an electronic trading system will fix what ABS investors have said is one of the fundamental problems facing the secondary market – dealers just don’t have the capital they used to, weakening their ability and willingness to make markets.

SFIG members believe that the current Basel capital rules, in their entirety, are overly punitive when applied to securitization. Please see our recent comment letters for more details.

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