BWIC Trading Mechanics
Definition
Bids-Wanted-In-Competition (BWIC) is the primary mechanism for selling leveraged loans and structured credit in secondary markets. Sellers circulate lists of positions to potential buyers (typically via dealer platforms), buyers submit bids, and sellers choose which bids to accept. BWICs provide price discovery but also signal selling pressure—large BWIC volumes indicate forced selling or deleveraging.
Why it matters
BWIC dynamics drive secondary market liquidity in leveraged credit. During March 2020, BWIC volumes exploded to $30B+ weekly (vs. $5-10B normal) as forced sellers dominated the market, causing bids to collapse to 70-80 cents even for performing loans. Understanding BWIC mechanics explains why illiquid markets can gap down severely—once bid-ask spreads widen beyond 5-10 points, sellers either accept massive discounts or withdraw positions, creating frozen markets.
Technical details
BWIC process mechanics
Typical BWIC workflow: (1) Seller provides list of positions to dealer desk. (2) Dealer circulates to buy-side (CLO managers, credit funds, opportunity funds). (3) Buyers have 24-48 hours to submit bids (price and size). (4) Dealer aggregates bids and presents to seller. (5) Seller chooses which bids to accept (not obligated to sell at any price). (6) Trades settle T+7 to T+14 (longer than bonds). The seller's identity is often anonymous but market participants can infer based on position size and holdings data.
BWIC volumes as market signal
Weekly BWIC volume is a critical market indicator. Normal markets: $5-10B per week, mix of portfolio rotation and opportunistic selling. Elevated markets: $15-20B per week, suggests deleveraging pressure. Crisis levels: $30B+ per week (March 2020, Q4 2008), indicates forced selling. When BWIC volumes spike, bid-ask spreads widen and bids deteriorate because buyers know sellers are under pressure. This creates negative feedback loops: forced selling → wide spreads → more selling → wider spreads. Savvy buyers wait for peak BWIC volumes to deploy capital.