In a move that marks a significant leap forward in the trading landscape of off-screen securities, Agile, which brings mortgage lenders and broker-dealers onto a single electronic platform, has launched electronic bidding for the fourth month in the To-Be-Announced mortgage-backed securities (TBA) market.
The addition of electronic bidding for fourth month securities ushers in a new era of efficiency, the company says in a release. By offering the option to extend trade settlements an additional month, Agile’s electronic platform minimizes the need for frequent rolls, thereby streamlining the process of maintaining an aggregate hedge position.
“I use fourth month securities to hedge long-term builder forward contracts,” says Andrew Price, secondary marketing trader at Highlands Residential Mortgage. “Electronically trading fourth month on Agile is extremely efficient, and anytime I put fourth month in competition, my execution is better than a single-dealer bid. It’s always helpful to have that extra protection while trading an off-screen security.”
This groundbreaking development fosters a deeper understanding of trading dynamics for fourth-month securities, empowering market participants to make more informed decisions regarding their pricing compared to standard TBA security settlements. According to traders using Agile, the reduced frequency of transactions translates directly into increased efficiency and lower hedging costs, as each transaction incurs associated costs.
For builders, securing fourth-month TBAs via Agile offers a distinct competitive advantage. By aligning forward agreement rates with fourth-month security prices, Agile promotes pricing transparency from the inception of contracts, empowering builders to make more informed decisions.
“Having the ability to bid fourth month competitively has yielded better, more reliable trading levels which provides greater confidence in offering stronger extended rate lock pricing or rate specials,” says Eric Bridges, vice president of secondary marketing at M/I Financial.
Photo: Nadine Marfurt