The critical risk factor and one that should permanently end investor interest is why will anyone other than the ECB pay for the data?
As was definitively shown using a clear plastic bag and a brown paper bag, investors need to be able to access data that allows them to see what is currently happening with the collateral backing a structured finance security if they are going to be able to independently value the security.
The ECB's ABS Data Warehouse is intended to collect the collateral performance data and disclose it on a once per month basis to market participants.
Everyone knows that once per month disclosure is the exact same frequency of disclosure that opaque, toxic subprime mortgage backed securities use. These securities are called opaque because the disclosure frequency means investors do not know what is currently happening with the collateral. As a result, investors have as much ability to value these securities as they do the unseen contents of a brown paper bag.
Under the European Capital Requirements Directive Article 122a, the institutional buyers of structured finance securities are required to know what you own. It is hard to imagine how these buyers would explain they know what they own while using the ABS Data Warehouse since the data in the data warehouse provides them with as much ability to value structured finance securities as does the unseen contents of a brown paper bag.
The European DataWarehouse, a European Central Bank-endorsed project to collect information on asset-backed securities, is seeking as much as 20 million euros ($26 million) from a share sale.
ED will offer stock to ABS market participants in January, said Paul Burdell, the London-based chief executive officer of Link Financial Ltd., the project’s adviser. The cash will get ED started and cover about three years of running costs.
The ECB in Frankfurt intends to make loan-level data part of the requirement for accepting asset-backed securities as collateral for financing. Sapient Global Markets was mandated in November to build ED’s system, and Perella Weinberg Partners will manage the share sale.