Freddie Mac enters partnership for single security-related exchange path

Freddie Mac and Tradeweb Markets have entered an arrangement under which the companies will work on a direct-to-Freddie Mac exchange path for institutional investors related to Freddie Mac’s single-security initiative.

When developed, approved institutions will be able to use the path to exchange eligible Freddie Mac Gold PC and Giant PC 45-day securities for the Freddie Mac 55-day, To-Be-Announced (TBA) uniform mortgage-backed security (UMBS) and 55-day, non-TBA mortgage-backed security (MBS) when Freddie Mac commences its proposed exchange offer, currently expected in May.

“This arrangement will allow investors to use the Tradeweb platform and pursue a familiar approach to exchange their eligible Freddie Mac mortgage-backed securities,” said Michael Hutchins, executive vice president of investments and capital markets at Freddie Mac. “This is another important step toward the implementation of the single security initiative in June 2019, paving the way for a combined Freddie Mac and Fannie Mae To-Be-Announced market of uniform mortgage-backed securities.”

The companies plan to develop a standardized transaction entry point on the Tradeweb platform. The path would enable submission of valid MBS for exchange, acceptance of float compensation, and selection of a settlement date. Additionally, investors could use their order management systems’ integration with Tradeweb to request exchanges. This could also be done directly through Tradeweb.

“We’re pleased to work with Freddie Mac on a direct exchange path for institutional investors,” Tradeweb Markets President Billy Hult said. “Tradeweb has facilitated electronic trading in mortgage products for over fifteen years. We are particularly well suited to connect leading institutions that are active in the mortgage market to Freddie Mac in order to enable efficient exchanges.”