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Equilend : EquiLend 10th Anniversary
equilend – 10 yeaRS of innovaTion 06 with clients like Goldman Sachs and J.P. Morgan developing the electronic exchanges of the time, which were further advanced and much bigger. When I started at EquiLend there were eight or nine people in the office; only Dirk and I had a financial background. Decades: can you describe the process by which participants agreed on the detail of how EquiLend would work? Brian: There was a 40-day lock-down in Newton, MA, where the five representatives of each of the ten firms, along with about 20 people from the NerveWire team, hammered out how the platform would operate and look. As I recall, about a third were European, which combats the perception back then – that still endures – that this is principally a US endeavour. It was an intense period during which we formulated the precise specifications of the platform. This was a part of the market that lacked any standardisation: trading, contract comparison, market-to-market, billing – every element was conducted entirely over the counter. We had to go through it all at a detailed level, field by field, getting agreement. Decades: What was the atmosphere like in Newton? Brian: There were a lot of Type A personalities up there who felt strongly about a range of issues. These included ten of the brightest lawyers along with a platinum-priced outside council; ten of the brightest technology guys from the world’s biggest banks; ten of the most experienced project managers and ten very ‘humble’ trading and operations experts. Ben: You also had Goldman Sachs sitting next to Morgan Stanley as each described how they ran their business. People were being expected to share highly sensitive information and that was tough for them. Brian: Remember this was a very adversarial industry: previously we had all been encouraged to regard competitor firms with suspicion; now we were having to rely on these same firms. Decades: How have developments in securities lending shaped the evolution of EquiLend since its formaton? Ben: Actually, it’s more accurate to ask how EquiLend has shaped changes in the industry. Because there have been a couple of watershed events in securities finance that we’ve been heavily involved in. In 2003, the industry introduced the automated recall management system to help participants towards the proposed T+1 settlement cycle. The problem of recalls was identified as the stumbling block, since agent lenders, broker-dealers and the DTCC still communicated with faxes, emails and via phone. We became a central partner in this initiative because of the automation that we had already achieved. Brian: Then, in 2006, the SEC introduced Agency Lending Disclosure requirements (ALD) to clarify broker-dealers’ exposure to the underlying beneficial owners in agency lending transactions; it was adopted subsequently in Europe under the Basel II accord and by the UK FSA from the beginning of 2010. The regulators came to us and SunGard since we were recognised as the key players to help shape this. A third example was when SWIFT was looking at building a messaging standard for securities lending; we agreed to design the template. In the end it wasn’t adopted but, if it had been, EquiLend would have been the enabler. 40 days The duration for which 70 people from the ten founding firms were ‘locked down’ in Newton in early 2001 to thrash out the detailed specifications of the platform – the global standards There have been a couple of watershed events in securities finance that EquiLend has been heavily involved in” Ben Glicher The EquiLend culture extends beyond our employees to our clients and even the Boards of Directors” Paul Nigrelli >> $35m The value of the contract awarded to NerveWire to build EquiLend EL.indb 6 26/08/2011 09:53