BNY and the National Bank of Canada went live this week with EquiLend’s 1Source platform,
joining the blockchain-based system designed to eliminate manual trade
reconciliations in the securities finance industry.
The company
that offers stock lending said a global broker-dealer will begin trading on the
platform soon, with several other firms close to signing on. BNY and the National
Bank of Canada are now executing securities lending transactions through the
distributed ledger, which maintains a synchronized record of trades between
counterparties.
Banks Start Trading on
EquiLend’s Blockchain Platform
The
industry currently spends roughly $100 million annually on reconciliation teams
and fixing settlement breaks, according to estimates from industry
participants. EquiLend’s system is built to remove those costs by keeping both
sides of each transaction aligned from the start, rather than having firms
record details separately and fix mismatches later.
“This
milestone underscores BNY’s commitment to innovation and leveraging new
technologies to mitigate risk,” said Nehal Udeshi, Head of Securities Finance at BNY. “By using 1Source, we’re aiming to manage challenges
associated with manual reconciliation, while delivering benefits to our
clients.”
For example, EuiLend’s services have been used by eToro for the past six months, allowing UK and European users to earn additional income by lending their stocks. A similar product was launched by Robinhood in 2022 and by Interactive Brokers in 2023.
More Firms Preparing to
Join Network
Carl Attie,
Managing Director and Head of Global Securities Finance at National Bank of
Canada, said the bank joined the platform as part of its focus on technology
solutions for clients.
“This
milestone lays the foundation for broader adoption and future enhancements,
enabling us to streamline processes, increase efficiency and enhance resilience
in the securities finance marketplace,” Attie said.
EquiLend
developed the platform with Digital Asset’s Canton blockchain technology, which
allows multiple parties to share transaction data while maintaining privacy
controls. The system launched with coverage of North American equities backed
by cash collateral, though expansion to corporate bonds, non-cash collateral,
and European markets is planned.
Third-party
analysis from Vy Solutions in 2022 estimated the platform could save the
securities finance industry hundreds of millions of dollars per year through
reduced operational expenses and fewer settlement failures.
Platform Targets
Fragmented Back Office Systems
The
securities lending market has relied on fragmented back office systems where
counterparties maintain separate records of the same transactions.
Discrepancies in quantities, rates, or settlement dates often surface days
after trades are executed, creating reconciliation headaches and liquidity
risks.
EquiLend’s
system puts each transaction on a shared ledger where both parties see
identical information in real time. Lifecycle events like recalls, rate
changes, and returns are processed within the same environment, automatically
updating both sides simultaneously.
“Each
new participant strengthens the network effect of 1Source, accelerating the
industry-wide benefits of improved accuracy, transparency, and
efficiency,” said Rich Grossi, CEO of EquiLend.
The
platform currently supports loan initiation, daily mark-to-market calculations,
benchmark-based rate adjustments, recalls, and buy-ins. EquiLend plans to add
automated rerating for large loan books tied to benchmark shifts, which should
cut another source of breaks when reference rates change.
This article was written by Damian Chmiel at www.financemagnates.com.
Source link
