Specified Pools are a large part of the Agency wrapped bond market. Because of the size of the asset class, monitoring BWICs and Inventories is a tedious but critical part of the day. As we are seeing historically high volumes, cutting through the noise is a challenging task. This is an opportunity for Structured Products desks to refine their processes. Across Buy-side and Sell-side shops, efficiency and visibility gains are being made. Successful firms we have been speaking with are focused on a few simple tactics.
1. Consolidate open BWICs and daily Inventories:
Leading firms are creating an aggregated view of the market. This ensures visibility into securities they can capitalize on. Dealers, in particular, need to know what is out for bid throughout the day so they can accurately position their book, service their clients and structure their own CMO’s. Aggregating all their data points saves valuable time.
2. Filter the market to fill axes:
These desks are leveraging real time grids providing aggregate views of inventories. They can quickly filter out relevant Spec Pools that meet their interest, drilling down by specific maturities, coupons, etc. These filtering options can be applied to BWIC monitors as well by selecting specific WAC or WALA ranges, originators, or any other bond reference field of interest.
3. Analyze historical data:
Given current pricing volatility, market participants are seeking market level price transparency to improve their positioning strategies. They are developing detailed datasets of daily market information that can be shared firmwide. With historical pricing data, they are analyzing market trends and becoming empowered to make more informed decisions.
Firms that are implementing these tactics are seeing key benefits.
• Structured daily approach: Every morning the firm has a comprehensive view into bids, offers and market activity on one screen. Teams trading agency pass-throughs can now go through their day in a more fluid fashion.
• 30-50% of your time saved on the desk: Buy-Side and Sell-Side shops spend critical trading time on administrative tasks. When BWICs and Inventories are aggregated in real time, you save time. Additional time can then be spent on job empowerment and enrichment initiatives that drive broader productivity.
• Optimized pricing and value: With razor thin margins and a surge in BWIC volume there is constant focus on capturing every basis point of value when transacting. Accurately pricing each bond with live and historical data points ensures you choose wisely.
If you would like further insight into Cutting Through the Noise, check out our Spec Pool One Pager.