Specified Pool Trading System for Asset-Backed Securities
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Solution Overview
Problem
Current systems for trading specified pools of asset-backed securities, particularly mortgage-backed securities, lack liquidity and efficiency, making it difficult for buyers to customize their investments and for sellers to offer and execute trades effectively, leading to increased transaction costs and inefficiencies.
Innovation Solution
A computer-implemented method and system that allows buyers to create and customize specified pools of asset-backed securities, communicate pricing, and execute trades by selecting specific assets, generating aggregate data, and submitting criteria for new pool creation, enabling direct communication between buyers and sellers and facilitating straight-through-processing.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Quantity of substance
If TBA trading is used, then liquidity is improved, but customization capability deteriorates
Solution Approach 1:
The system segments the asset-backed securities market into two distinct trading modes: TBA trading for high-liquidity generic transactions and specified pool trading for customized investments. This segmentation allows each mode to serve its specific purpose optimally without compromising the other.
Solution Approach 2:
The system introduces an intermediary platform that connects buyers and sellers in specified pool trading, facilitating efficient matching and execution. This intermediary infrastructure enables customized trading to achieve liquidity levels comparable to TBA trading by providing a dedicated electronic marketplace.
2Adaptability or versatility
If specified pool trading is used, then customization capability is improved, but transaction cost deteriorates
Solution Approach 1:
The system enables self-service functionality where buyers can independently specify their desired pool characteristics and submit criteria for new pool creation. This automation reduces reliance on manual dealer services, thereby lowering transaction costs while maintaining full customization capability.
Solution Approach 2:
The system allows dynamic adjustment of trading parameters including pool characteristics, selection criteria, and pricing terms. This flexibility enables the market to efficiently allocate resources and reduce transaction costs by matching buyers and sellers based on optimized parameters rather than fixed structures.
3Adaptability or versatility
If manual trading processes are used, then flexibility is improved, but efficiency deteriorates
Solution Approach 1:
The system replaces manual mechanical trading processes with an electronic automated platform. Buyers can specify criteria, sellers can respond with pricing, and executions can be performed automatically through the system, maintaining the flexibility of customized negotiations while dramatically improving execution efficiency and reducing operational complexity.
4Productivity
If specified pool trading platform is implemented, then market efficiency is improved, but system complexity deteriorates
Solution Approach 1:
The system is designed as a universal platform that handles multiple functions including pool specification, seller response management, trade execution, and straight-through-processing within a single integrated infrastructure. This multi-functionality improves market efficiency across different trading scenarios while avoiding the complexity of multiple separate systems.
Data Source
AI summary
A computer system and related methods configured to store and deliver, upon request, information related to asset-backed security pools, and execute transactions between one or more parties relating to the same. The system generally comprises a computer and a network interface that includes a data storage system in communication with the computer, the data storage system storing information relating to the securities, and account information related to at least one or more parties. The computer operative to provide information related to security pools to at least one of the parties, enable the at least one party to select one or more security pools for inclusion in a specified pool, provide aggregate pool data and information related to the selected specified pool to at least one other party, receive pricing information from at least one other party, and execute a trade for the asset-backed security pools in the specified pool.