Challenges in Securitized Products Markets

Securitized product markets are highly heterogeneous, given significant differences in the loans underlying mortgage-backed securities, asset-backed securities, collateralized loan obligations and other instruments. However, across the board, there are widely acknowledged inefficiencies associated with manual processes and limited trust in data between institutions. 

Beyond the challenges that are common across other securities markets, securitized products face a unique set of issues associated with the fact that these securities effectively bundle the cash flows and risks of a number of underlying loans.

Across the value chain, inefficiencies today include:

  • Origination and underwriting of underlying loans: long lead times; lack of data. standardization (contract terms, credit profiles, collateral); highly paper intensive; decentralized information and storage; costly to access and reconcile data.
  • Security structuring: complex, manual and costly processes to evaluate, rate and pool loans, which is often duplicated across multiple parties; slow, opaque and manual settlement processes.
  • Trading: except in certain MBS, relatively shallow over-the-counter markets, with constraints in liquidity and significant market information asymmetry.
  • Loan servicing: manual process to monitor and collect payments; limited insights offered to investors; fragmented account management.
  • Security servicing: costly due diligence and research due to absence of single source of truth; time lags leading to out-of-date or imperfect information; manual/slow reconciliation (time lags between loan payments and investor distributions).

How We Help Securitized Products Markets

XDEX can enable all relevant participants in the value chain to access the same data on underlying loans in real time, thereby reducing the need to verify and audit data throughout the security life cycle.

End-to-end origination, securitization and servicing

Eliminate the need for each party to reverify each individual loan at every step of different processes; improve transparency of underlying loans (improved risk management); reduce reconciliations and complexity in operations; potentially reduce capital required to settle trades.

XDEX is a single source of truth about the underlying assets (data, terms and cash flows) that is connected to a single source of truth about the securities, accessible by all relevant parties to improve processes associated with trading and managing the life cycle of securities.

XDEX is designed to integrate with other systems for individual processes that would not necessarily benefit from a distributed ledger or would require transforming an additional complex ecosystem (e.g. an initial loan issuance or exchange).

Major changes from current state

  • Loans are originated or loan data is brought onto XDEX immediately after origination (using a standard data model); all downstream transactions are based on this loan data and associated smart contracts
  • Securities are created as digital assets on a distributed ledger, enabling both a shared source of truth on the security (e.g. terms, ownership) and programmability of securities from issuance (replacing paper-based manual processes)


  • Eliminate the need for auditing/verifying individual loan files at every step for every party (e.g. loan warehousing/sales, credit enhancements, primary market, trading)
  • Transparency of underlying loans for all parties at all times, enabling investors to better understand risk
  • Reduce complexity in operations and/or operational burdens associated with reconciliation activity, thereby reducing transaction costs for all parties
  • Potential to reduce capital required to fund settlement
  • Streamline or automate all processes associated with coupon and principal payments, clearing and settling, and/or maintaining regulatory compliance

Tokenizing loans for servicing and data management

One approach to addressing the lack of transparency at the loan level is to create a digital representation of each loan that can then be used to facilitate loan payments and data sharing. Rather than originating loans directly on a distributed ledger – which could be challenging given the fragmentation in participants in underlying loan markets – a tokenized version of the loan is created after origination that then becomes the single source of truth for the loan.

Parties involved in a securitization, subsequent investors in the securities and loan servicers are then able to access verified data on the underlying loans without each party necessarily having to audit the full loan pool at every step.

Major changes from current state

  • Underlying loans are onboarded to XDEX after origination, which becomes the single source of truth on the underlying loans for all parties (e.g. investors, servicers, borrowers)
  • While borrowers still interact with their servicers directly, their payments are recorded by the servicers on the distributed ledger, ensuring accurate data on loan performance


  • Reduce the need for auditing/verifying individual loan files at every step for every party (e.g. loan warehousing/ sales, credit enhancements, primary market, trading)
  • Transparency of underlying loans for all parties at all times, enabling investors to better understand risk
  • Loans can be brought on or off XDEX at any point in their life, depending on the interests of the owner/servicer

Improving security servicing

The trustee of the special purpose vehicle that holds the underlying assets can use XDEX both to ensure greater transparency of performance and to automate elements of servicing.

Major changes from current state

  • XDEX becomes a platform for originators, servicers, trustees and investors with digital/smart contract representations of loan terms (e.g. origination and servicing guidelines)
  • Connect trustee and servicer for managing ongoing servicing


  • Ensure transparency and shared source of truth on loan ownership and performance in the event of defaults or other adverse events, thereby reducing the potential for disputes and/or litigation
  • Achieve better investor transparency (e.g. faster and more accurate trustee reports) without having to bring investors directly onto a shared platform