Partnership Spotlight: Bringing Immutability, Transparency and Validation to Fixed Income Asset Management and Optimization Strategies

Creating a strong form efficient fixed income market is key to fostering a higher level of investor participation necessary to realize the full potential of the asset class. The primary challenge is data complexity. In addition to different data sets for different types of loans — conventional residential mortgages, HECMs, EBOs, Non-QM, NPLs just to name a few — every loan file typically contains hundreds of data points and a myriad of disparate documents. As a result, fixed-income asset data is truly the Gordian Knot of the mortgage world.

Asset data and the asset are one and the same. 

Meaning, data is the only tangible for identifying and qualifying a mortgage loan. Property title, transaction history, borrower information, and every other digital detail in essence creates the asset itself. The challenge is that data associated with even the most straightforward loan is not only highly complicated, but it can also be flawed. The risks associated with these flaws (think clouded title, borrower repayment issues, property-related misinformation) are what ultimately determine the quality and value of the asset. If this sounds upside down, it’s because it is. Instead of assets being valued on what’s right about them, they’re valued based on what’s wrong, or rather what could be wrong, with them.

Historically, humans — even vast processing armies of them — simply don’t have the error-free computational power necessary to bring order to this level of data chaos. But the latest technology solutions — blockchain and generative AI – are more than up to the task.

This is why Rocktop, in its quest to create a strong form efficient fixed income market — recently signed a partnership agreement with LiquidFi, a blockchain provider that uses digital tokenization to bring immutability, transparency and validation to fixed income assets.

Liquidfi creates a unique digital asset (or token) for every loan within a portfolio. 

An exact replica of the original loan, the token becomes a living history of the asset. Every time there is a payment, a transaction, a legal action or any other type of action associated with the loan, it is recorded and added to the token.  The data and documents available to all (permissioned access, of course), transparent and immutable. Instead of being cloaked in uncertainty and risk, with expensive tolls to achieve clarity, the asset becomes a known quantity to anyone who wants to see it.

Asset tokenization also significantly improves and speeds up tradability by creating a guarantee that these assets meet rigorous trading criteria and addressing factors such as marketable title, collateral/document presence and potential legal challenges. The asset can be priced and traded based on its real, intrinsic value. And the actual transactions and asset transfers happen within a fraction of the time while minimizing arduous and costly post-close processes such as tracking down trailing documentation.

A key component of Rocktop’s success is what the company is not.  

Rocktop is not an outsource partner looking to displace processing labor. To the contrary, Rocktop’s data scientists, fixed-income strategists and analysts work side-by-side with client teams as an in-source partner to design and deploy solutions for managing highly complex data, deploy asset management strategies to generate operational efficiencies, trading efficiency and best execution outcomes. By incorporating LiquidFi’s asset tokenization into its solutions, Rocktop enables clients to participate in an increasingly blockchain-enabled marketplace as it develops. This is a particularly valuable component of service in an industry that eagerly embraces the idea of a strong form efficient fixed income market but struggles to adopt the technologies to get there.