Four Wall Street firms are joining together to launch a new electronic trading platform for mortgage and asset-backed securities. The joint venture partners - Bear, Stearns, Credit Suisse First Boston, Lehman Brothers, and Salomon Smith Barney - say the aim of the new company will be to provide a more efficient marketplace for investors, along with significant operating cost savings for the industry.
In a joint statement, the four firms said: "What led us to this effort was a shared belief that we need to make it easier, cheaper, and faster for our institutional customers to trade mortgage and asset-backed securities and a recognition that advances in technology and communications mean that by supporting a single new trading platform, we can achieve a level of liquidity never previously available."
In its first stage of operations, the new company will offer dealer subscribers an electronic network as an alternative to the traditional telephone-based systems through which most inter-dealer trading takes place today. The system will initially handle trades in Ginnie Mae, Fannie Mae and Freddie Mac guaranteed mortgage securities and will be open to any dealer that meets customary industry credit standards.
The network will subsequently be expanded to provide direct access for institutional investors as well as broker-dealers and will broaden its product mix to handle secondary trading in the full range of mortgage and asset-backed securities. The new company will also provide ancillary products and services, including analytic and research data used to value the securities.
The founding partners say they will consult extensively with institutional investors to assure that the new platform meets their requirements.