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Equilend : EquiLend 10th Anniversary
Profile: ralPh vitale www.equilend.com 23 head-scratching following the initial presentation. You have to realise that this was unique: there was a lot of talk across financial services about these exchange-type arrangements and improving supply chains. But I have never heard of another platform that brings both sides of the industry to the table in this way. Decades: Did you ever think that the process would break down? Not more than a couple of times a day! Waiting for everyone’s money to show up was one of the first challenges. Even after the money was there and development began, there was feature creep; for every single element, we needed agreement among ten different sets of interests. But you have to be optimistic about these things and I always assumed that, unless there was some major rupture, we’d get it built and that it would work. Once everyone was committed to the project, we worked very well as a group. I thought EquiLend would be adopted more quickly by the rest of the industry after we launched. But it turned out to be a long, slow slog to bring other participants in, even though it was proven to be working well. Ten years after EquiLend started, it has 64 clients; even back in the late Nineties, we were dealing with about 150 brokers around the world – the benefits from the economies of scale to everyone were huge. I think perhaps some people didn’t trust the concept, didn’t want to spend the money or the time or suffered from inertia. Others were miffed that they had been left out of the founding group in the first place. Some would seem very interested initially, and a year later their systems had changed and joining was suddenly less appealing to them. Decades: Looking back, what did you learn from your time with EquiLend? From the EquiLend experience, I learned that, as much as people and businesses have competing or conflicting goals, there is probably some point of common interest. Finding it wasn’t easy: a lot of the players came to the table kicking and screaming. While there was definitely a fear of being left behind, a lot of people didn’t ultimately want it to happen. I think John Martinez puts it very well when he says that we all wanted to be on the boat, but no one wanted it to leave the dock. // The broker-dealers were understandably reluctant to reveal this information. Inevitably, there was some resistance from them around the platform: I believe that EquiLend was essentially a defensive play for them; some may have wished it had never happened. In the end, these objections to the exchange element meant that the main focus became increased automation. Prior to EquiLend, every lender needed a different set of connections to interface with every different broker. Eventually, the firms agreed on a single pipe through which to distribute the data to all participants. Decades: How did the member selection process work? We selected people by their size: the big players who would be able to quickly realise an economic benefit. We also wanted the number of banks and brokers to be even. I don’t know why I was elected chairman – I think it was a case of people pointing to me and saying: “Well, it was his dumb idea.” Marty Tell of Morgan Stanley was instrumental in bringing the other brokers to the table. BGI had been working on something along the same lines, which they eventually abandoned to join EquiLend. There were two other ventures in development, too: a totally independent group and a firm from Chicago that wanted to build a model that used an exchange central counterparty. I clearly remember the first EquiLend meeting in a room at Morgan Stanley. It had been hard work getting the other nine participants there – in some cases, I’d had to warn that what we were doing could take apart their business models, so they should be at the table. Some, I think, were there just to see what that would mean. When I laid out the idea, it was clear that virtually no one had considered anything like it; there was a good deal of I had well-formed concerns that our business was at risk of disintermediation by broker-dealers going directly to our clients” Curriculum Vitae (extracts) 2003 – retires 2002 – leaves equilend board to manage state street’s acquisition of deutsche bank’s Global securities services and securities lending businesses 2001 – appointed to chair equilend board 1987 – head of securities lending, state street (became separate division in 1993) Manufacturing consent Left: Ralph vitale at home in his workshop 64 The current number of EquiLend clients EL.indb 23 26/08/2011 09:56