[ R O U N D T A B L E | S E C U R I T I E S F I N A N C E ] into the trade with the understanding that it will not fail because the data and terms of the trade are in-sync , and everything that ' s about to happen post trade is predefined .”
Examples of innovation Back in June 2021 Broadridge went live with a new trading platform based on distributed ledger technology . The new distributed ledger repo ( DLR ) platform built on the success of multiple pilots with sell- and buy-side firms , including Natixis and Societe Generale , and enables firms to agree , execute and settle repo transactions on a decentralised platform . The move has the potential to transform the repo market , where firms have historically swapped highquality collateral for cash on a bilateral basis , as it will utilise smart contracts to transfer ownership of underlying securities without the need to physically exchange . The DLR platform executed $ 31 billion in average daily volume in the first week of its launch and less than two years later had hit $ 1 trillion dollars a month . “ Initially , we were looking at how you deploy this technology in a way that makes the most sense upfront . Where is it interoperable with the existing environment and within the existing regulatory regimes ?” said Chiappetta . “ We started with very basic efficiency plays around intercompany repo starting in the US , and that ' s provided our clients with a huge amount of benefit , allowing them to get comfortable with this technology . It opens the door to conversations about more sophisticated use cases , which is where we are today . A lot of those firms are global , so now we ' re expanding with similar use cases in other regions . “ Now we ' re starting to look at intraday repo that provides balance sheet relief and reduction in intraday liquidity usage . This has had a huge effect , specifically in the US .
“ We ' ll continue to expand as we develop with our clients into other use cases that make sense and as the market deepens and the network grows – it opens the door to different types of bilateral repo .” Just one year later we saw another prime example of innovative thinking through EquiLend , which used the same technology in a bid to create a single source of truth for securities finance lifecycle events and a universal source of reference data for the industry . Named 1Source , the project has been designed to resolve the industry ’ s central pain points and risks and develop state-ofthe-art technological solutions .
“ In the current workflow within securities lending there are a lot of manual components and if those have reconciliation breaks then it leads to more manual processes . So that part of the business is just screaming for tech efficiency and it ' s something that we believe that DLT can help usher in .”
GARY KLAHR , DIRECTOR , STRATEGIC INITIATIVES , EQUILEND
“ It was born out of the Digital Transformation Working Group , a group of nine firms that had asked EquiLend for its digital roadmap ,” explained Klahr . “ We all agreed that while there are numerous opportunities for industry improvement , reconciliation elimination is clearly the one that provides the most value . “ The goal is to really avoid reconciliation completely by fixing it and making it more efficient upstream .” The solution reengineers existing workflows and ensures that all lifecycle events and changes are pre-agreed with consensus , maintains the closed loop ecosystem to prevent off-chain updates to contract states , and avoids mismatches and errors while maintaining strict transaction privacy . It does so through the use of smart contracts , minimising delays in transaction settlement . “ It also facilitates interoperability and assists with upcoming T1 recall notifications and updates to securities settlement instructions ,” Klahr added . “ The goals really are increased productivity , eliminating the root causes of breaks which trading desks and operations team spend an enormous amount of time trying to fix . “ It improves settlement rates by eliminating fails as you always have the proper instructions . It ' s a reduction of your internal technology spend , quite frankly , and your third-party comparison fee spend because your data is always accurate .”
The Digital Asset effect Earlier this year , EquiLend announced that it had selected Digital Asset to provide the technology underpinning 1Source . Utilising Digital Asset ’ s Daml smart contract language and its Canton ledger , the 1Source initiative ensures trade details stay in sync throughout the entire lifecycle for both parties , eliminating the need for costly and inefficient reconciliation processes down the line .
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