One of the earliest electronic trading platforms to grace
the $2trn securities lending business has reached the end of
its shelf life.
AutoBorrow, part of New York-based EquiLend, will be phased
out this year, leaving its younger and more technically
advanced sibling NGT to take its place.
First launched in 2001, AutoBorrow was a novel piece of
technology for its time.
It brought automation to what was largely a manual business
where stock loan trades were based around emails and phone
Borrowers of securities (prime brokers) could electronically
match up with lenders by using AutoBorrow.
A system of 'schedules’ was implemented early
on to speed up the trading process by offering customizable,
reusable sets of rules for counterparties.
"AutoBorrow and its creators deserve credit for driving a
major shift in the securities finance industry," Dow
Veeranarong, head of product at EquiLend, told Global
"The platform has added volume and efficiency and provided
scalability to market participants globally."
Over time EquiLend’s growth, both in client
numbers and trade volumes, meant thousands of unique schedules
were running through the system.
The rapid rise of schedules, essentially pre-defined trade
terms, caused headaches for users and resulted in clients
calling for a more flexible system.
"We’ve been a victim of our own success,"
EquiLend’s chief executive Brian Lamb said back in
NGT, which launched that year, was the answer.
The platform migrated away from traditional AutoBorrow
schedules and now manages the complex securities finance
business more efficiently, from pre-trade negotiations through
to trade execution.
"Initially the schedules method used with AutoBorrow was
very useful," Veeranarong explained. "However it became
cumbersome due to trade terms changing more frequently. We
needed to adapt."
EquiLend began purging unused AutoBorrow schedules two years
ago around the time of NGT’s launch.
Another key factor behind the change was NGT’s
ability to automate higher-touch warm and hard-to-borrow trades
far more efficiently than AutoBorrow, which was used to dealing
with general collateral flow.
Over the past two years EquiLend - whose owners include
Goldman Sachs, BlackRock and JP Morgan - has seen
NGT’s user numbers rise.
A year ago there were about thirty clients using the system
every day. Now there are 82 clients on NGT, according to
"Over 80% of EquiLend’s overall flows now take
place on NGT," Veeranarong added.
"Going forward, we’re focused on enhancing user
experience and will continue to monitor new technologies
appearing in the marketplace."
Meanwhile, NGT is strategically aligned with EquiLend
The clearing division was recently formed after
EquiLend’s acquisition of AQS last year, a
platform which facilitates clearing and settlement via
Chicago-based OCC which also runs a stock loan CCP service.