Bloomberg’s launch of an electronic trading workflow for asset-backed securities, announced earlier this month, lands in an asset class that has resisted automation longer than most of fixed income. The list-based process, now being rolled out to clients across the US and EMEA, is built around the Bids Wanted in Competition and Offers Wanted in Competition – BWIC and OWIC – conventions that have long governed how ABS bonds change hands, with defined dealer response windows, deal entry, analytics and multi-dealer execution in a single environment, and straight-through processing from pricing to settlement. Bloomberg describes it as a first-of-its-kind workflow for the asset class; BWIC/OWIC list trading in ABS has not been packaged this way before, though the underlying mechanics are well established in adjacent corners of fixed income.
ABS has spent the better part of a decade watching the rest of fixed income migrate onto screens. Investment-grade credit electronified. High yield followed. Mortgage trading built out its own automated plumbing. ABS, meanwhile, has stayed where it was – on bid lists worked through email, spreadsheets, chat and voice, with the surrounding workflow largely untouched even as execution itself crept onto electronic venues.What made ABS hard
“ABS has historically been harder to automate because the market is both fragmented and structurally complex,” Derek Kleinbauer, Global Head of Fixed Income and Equity Trading at Bloomberg, tells TradingTech Insight. “Unlike more standardised products, individual ABS bonds can have very different collateral pools, cash-flow characteristics and risk profiles, which makes liquidity and price discovery more security-specific.”
Where an electronic market depends on enough fungibility for price discovery to function across a screen, ABS pulls the other way – many bonds trade infrequently, and participants lean on comparable securities, dealer expertise and investor relationships to assess value and source liquidity. Automating execution in that environment was always the easier half. Automating the workflow around it – the distribution, the quote-gathering, the reconciliation – was the part that stayed manual, because the information being moved was never standardised enough to move cleanly.
What has changed is not the market’s structure but the industry’s ability to connect the steps without disturbing it. “Improvements in data, analytics, interoperability and straight-through processing make it possible to digitise the movement of information throughout the trade lifecycle, rather than simply moving the final execution onto a screen,” he says. ABS pricing and liquidity sourcing are left as they are; what gets digitised is the connective tissue around them. Trading desks have grown leaner while bid lists have grown longer, and the email-and-spreadsheet model that held for years scales badly against that arithmetic.One slice of a larger workflow
The workflow addresses list distribution, quote collection, bid evaluation and execution – the BWIC/OWIC core. Asked how much of the full ABS trading workflow that represents and what remains manual or off-platform, Kleinbauer keeps to the territory the launch occupies, describing BWIC and OWIC as important workflows where many participants still rely on manual processes, casting the release as a step in a broader evolution. The boundary of what is now automated is clear enough; the size of what sits beyond it is left open.
The workflow also captures dealer responses electronically – winning and non-winning bids alike – producing a record of the whole process rather than just the cleared trade. That data can feed analysis of pricing competitiveness, response quality and dealer performance over time, and, as Kleinbauer puts it, “the data generated through the trading process can become an additional input into a trader’s analysis for investment decision-making.” In a market where price discovery has always been relationship-mediated and hard to observe, the workflow produces a structured record of who bid what, and how competitively.
ABS as the wedge
Kleinbauer points beyond ABS to Agency CMOs, CMBS and CLOs as sectors where the same workflow principles can be applied, framing the launch as the opening move in electronifying structured credit more broadly rather than a self-contained product.
If the workflow holds up in ABS – the awkward case, the one that defeated earlier attempts – then the path into adjacent structured-credit sectors becomes a question of sequencing rather than feasibility. The harder test is whether digitising the connective tissue, without touching how these instruments are priced or how their liquidity is sourced, delivers enough to pull a relationship-driven market onto a structured workflow at scale. ABS has held out longer than the rest of fixed income for reasons that have not gone away.
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