NPL Markets (‘NPLM’) is a next-generation trading platform that is critical to the international development of illiquid credit assets and markets. NPLM’s proprietary technology serves as a crucial nexus to bring together vendors, purchasers, and servicers to efficiently price and trade illiquid credit assets.

NPLM is changing the liquidity profile of the NPL asset class in several fundamental ways. First, NPLM’s unique data-driven pricing and trading platform increases demand and liquidity by making it easier and more efficient for vendors to reach potential investor and for potential investors to formulate pricing of NPL assets. Not only does this reduce transaction costs, but also makes NPL assets available to a wider range of potential investors – including non-specialist investors. In addition, NPLM’s comprehensive trading ecosystem allows potential investors to screen more targets quickly and select those that meet investment criteria, resulting in a more focused investment portfolio.

Secondly, such increased demand and transaction efficiency allows for the growth of secondary markets for NPL assets. Not only does secondary trading create additional liquidity, but it also allows asset managers, private investors, and integrated debt collection platforms to trade efficiently out of NPL assets that do not meet investment parameters – such as secondary sales, tail, or single names. This allows investors to tailor their exposure to NPL assets to meet more narrowly defined risk profiles, recovery curves and liquidity objectives.

Finally, the increased demand and liquidity for NPL assets provided by the NPLM platform is an important tool to help banks better manage their balance sheets. It allows EU banks to become more pro-active in their management and sale of legacy NPL assets, as well as complying with more stringent classification and provisioning regulations going forward. For example, NPLM’s pricing analytics can provide vendors with important indicative pricing based on actual historical data before the transaction takes place, providing banks with more accurate guidance for provisioning. This ability for banks to actively manage their balance sheets and sell NPLs and restructured single names more efficiently has several benefits. These include an accelerated replacement of capital through the sale of assets, and rationalisation of internal work-out and recovery functions, leading to cost reductions.

It is becoming increasingly clear, therefore, that sophisticated and data-driven trading platforms such as NPLM not only provide game-changing opportunities for vendors and investors, but are fundamentally changing the profile of the NPL asset class. A necessary and timely disruption, tomorrow’s technology is beginning to redefine the development of illiquid markets, unlocking the potential of a connected, efficient and international ecosystem.