Yesterday Equilend confirmed that BNY has made a minority investment in the securities lending platform, following last year’s private equity buyout by Welsh, Carson, Anderson & Stowe. Before that Equilend was entirely bank owned. It also confirmed that BNY will be amongst initial users of 1Source, the DLT based securities lending solution.
BNY has been using Equilend’s solutions for twenty years. The securities lending platform enables around $2.9 trillion in on-loan assets.
Meanwhile, 1Source is designed to improve efficiencies. With DLT providing a so-called single source of truth for data, it should remove the need for reconciliations. Existing securities lending solutions handle the initial transactions just fine.
The challenge is subsequent contract changes, which are often manual, meaning each party sometimes has slightly different information. That could be the result of changes in rates, settlement instructions or reallocations.
By using smart contracts to ensure agreement on all changes, it means every party can use the common data to update their systems. Equilend is using Digital Asset’s Canton blockchain and DAML smart contract platform.
1Source has been developed in collaboration with an industry working group, and has delayed the planned launch from late last year.
While 1Source has defined its initial core functionality with the aim of avoiding feature creep, the broader area of collateral management is one of the killer use cases for institutional DLT.
For example in Europe, Eurex Clearing is now allowed to use DLT based collateral for margin purposes. Euroclear is exploring the potential for collateral management with Digital Asset. And stateside, the CFTC will run a tokenized collateral pilot following recommendations from an industry committee.
