FINRA issues research on securitized-asset liquidity

The number and volume of new issues of securitized assets have yet to return to pre-recession levels, according to the Financial Industry Regulatory Authority.

On Thursday (June 8), the Financial Industry Regulatory Authority, which regulates U.S. brokerage firms, released a research note on liquidity in structured products.

The research focuses on real estate securities, including mortgage-backed securities in residential housing and commercial buildings and collateralized mortgage products and to-be-announced forward mortgages. The research also looks at asset-backed securities in credit cards, automobiles and student loans.

The number and volume of new issues of securitized assets declined after the financial crisis, and trading volumes have fallen for most but not all securitized assets, according to FINRA. However, bid-ask spreads have decreased in most categories of the assets.

The research shows little correlation in liquidity between securitized assets and corporate bonds, except for collateralized mortgage obligations.

“Together with our earlier work on corporate bonds, this analysis deepens and broadens our collective understanding of these important markets, and contributes to informed decision making among securities firms, investors, issuers and regulators,” said Jonathan Sokobin, chief economist for FINRA.