A consortium of top-flight financial institutions has announced plans to build a standards-based platform for securities lending.
The founding members of the Equilend consortium - Barclays Global Investors, Bear Stearns, Goldman Sachs, JPMorganChase, Lehman Brothers, Merrill Lynch, Morgan Stanley, Northern Trust, State Street, and UBS Warburg - say the automated platform will provide the securities lending industry with the technology to streamline and automate transactions between borrowing and lending institutions and will introduce a set of common protocols. EquiLend is also aiming to create a repository of data from members' transactions that can be used to produce a set of objective benchmarks for the industry.
"The experience and reputation of the founding members and their input in the development of the EquiLend platform enables it to address broad industry needs," says Ralph Vitale, executive vice president at State Street.
The founding institutions have committed equal contributions toward an aggregate capital investment of $40 million. EquiLend is working with NerveWire, a management consulting and systems integration firm focused on inter-enterprise collaboration. It is anticipated that the system will be operational sometime in 2002.
Martin Tell, managing director at Morgan Stanley, comments: "Globally, EquiLend will provide benefits to all transaction participants and offer members the flexibility to borrow and lend individual stocks as well as baskets of securities."
As securities lending transactions exist today, a borrower typically communicates demand through a variety of non-standardised communication methods to locate the security and then negotiates the terms with the lender. When the security is located and the terms are agreed, the deal is recorded in each firm's internal systems where the parties capture all the information needed for settlement and billing.
Through the EquiLend platform, a borrower or lender will have the option to initiate an order to one or many counterparties. When an offer is located and the terms are agreed, EquiLend will match the parties' settlement instructions and send a shared trade ticket to each of the participants' proprietary trading and settlement systems.
The Equilend partners say the automated platform will streamline manually intensive front and back-office activities throughout the transaction as well as reduce the number of failed trades in the settlement process.