Market Structure & Dynamics

Regularly reviewing our market structure, processes and dynamics is a key component to achieving SFA’s mission of promoting a robust, liquid and healthy structured finance market as it grows and adapts to the consumers and businesses it supports.

It may surprise policymakers and regulators, as well as even some market participants, to know that it is currently very difficult – and sometimes impossible – for bondholders to communicate with the companies that issued the securities they own or for bondholders who own the same security to communicate with one another.

The current system is so unreliable that when evaluating potential solutions for the transition away from LIBOR, one of our financial markets’ most serious risk today, market participants view the option of soliciting bondholder consent for an amendment as largely unfeasible.

Publications

November 21, 2017

SFIG files Amicus brief in NCSLT case

February 18, 2020

SFA released an overview of FIMSAC’s Credit Ratings Subcommittee discussion on credit rating agency compensation models and perceived conflict of interest.

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“Market participants are keenly focused on and have rightfully questioned how – well into the digital age – the significant limitations of the current communication system remain.” – Kristi Leo, SFA, President

Market participants have rightfully questioned how – well into the digital age and long since record keeping transitioned from physical certificates to an electronic platform – the significant limitations of the current communication system remain. While there is certainly a complex chain of intermediaries that often separates the record-owner from the beneficial owner with only the final custodian retaining the record of the actual investor’s identity, today’s technology – including blockchain – provides viable solutions.

SFA is leading an effort within the structured finance market to identify the requirements for a robust and effective bondholder communication framework that could apply to all new bond issuance, if fully adopted.

Our Bondholder Communication Task Force has commenced a review of the current bondholder communication frameworks to identify operational, legal, economic and regulatory issues pertaining to those frameworks and drafted a specification document for an improved bondholder communication platform to address those issues. This project specification document will serve as the backbone for potential industry service providers to evaluate their ability to develop a platform meeting the industry’s needs at a cost point acceptable to the industry.

The Credit Ratings Subcommittee of the Fixed Income Market Structure Advisory Committee (FIMSAC), an advisory group to the SEC, is considering the role of NRSRO credit ratings in various financial markets, including the exploration of potential conflicts of interest in industry payment models. After soliciting feedback from industry participants on this topic, the FIMSAC subcommittee set forth recommendations aimed at improving both transparency and potential outcomes for investors.

 

SFA’s Credit Ratings Process Task Force submitted feedback to the FIMSAC regarding the oversight and regulation of NRSROs. To join our task force, please contact [email protected].

“Strong governance is a key pillar of a sustainable securitization market, but we can’t fully have strong governance without a mechanism for transaction parties to communicate with each other in a timely fashion when the circumstances so require. I’m very optimistic that with the Structured Finance Association’s leadership and the commitment of industry participants we will finally be able to overcome what has been a persistent obstacle to better governance in our industry for many years.”

- Francisco Paez, MetLife Investments

News

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Industry News

March 30, 2021

Recent data from S&P CoreLogic Case-Shiller Home Price Indices and the Federal Housing Finance Agency's (FHFA) House Price Index (HPI) show that U.S home prices soared in January.

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Industry News

March 22, 2021

The credit card issuer space has been heavily impacted by the pandemic with customer attrition rates falling to record lows. The American Banker writes that across the industry, outstanding balances fell to $820 billion in the fourth quarter of 2020, down from $930 billion a year earlier, as more consumers have paid down their debts and card issuers have become more selective about approving new customers.

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Industry News

March 22, 2021

The cessation of LIBOR continues within the private-label residential mortgage-backed securities market (RMBS) with the issuance of two new floating rate transactions tethered to the Secured Overnight Financing Rate (SOFR) this month. Rating agency sources say they are the first HELOC and MLI deals to opt for SOFR-benchmarked bonds in the private MBS space.

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