Agile, which offers technology that brings mortgage lenders and broker-dealers onto a single platform, has launched limit orders, a new quote request type for the To-Be-Announced mortgage-backed securities (TBA) market.
Limit orders allow traders on Agile to request a specific price level, rather than conducting an open-ended bid process, giving them greater confidence and freeing precious time, especially during periods of market volatility.
“Limit orders help me get better execution for my clients in a choppy market,” says Drew Thornhill, senior trader at MCT, one of Agile’s hedge advisor clients, who manages coverage on over $450 million in open pipelines on behalf of mortgage lenders.
“In my experience, it’s impossible to get the same efficiency and execution over the phone that I can achieve using Agile for limit orders,” Thornhill says in a release.
TBAs are broadly used by mortgage lenders to hedge their open pipeline of locked mortgage applications against changes to interest rates during the origination process. Improvements to execution and efficiency in TBA trading can have an outsize impact on mortgage lender profitability.
Limit orders allow traders to select a desired price level and time in force, in addition to the typical TBA quote request details.
Limit order functionality is also beneficial to broker dealers, who are given extra time and dynamic communication tools to acquire the level the lender is seeking or share background toward reaching a different agreement, the firm says.
“Limit orders are very useful on the fringe coupons that are not as liquid, to build up price certainty and prepare for origination activities at the low or high end of the rate range,” adds Greg Vacura, president at Agile. “They are also useful on spec deals where lenders need to get more granular pricing on a specific tranche, loan size, or state. Developing limit orders in collaboration with our lender and dealer clients has led to a rewarding win-win.”