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 conversations.
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 Investor/ISF.
“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 2015.
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 EquiLend.
“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 Clearing Services.
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.