Tim Keenan and James Palmer
EquiLend
Swaptimization, the new service from EquiLend, promises to make the total return swaps market more efficient. Tim Keenan and James Palmer explain

EquiLend has launched a new matching platform for total return swaps. Why have you gone down this avenue?

Tim Keenan: From our close ties to the securities finance industry, we were encouraged to look to provide a source of automation and efficiency for the total return swaps (TRS) market in a similar way that we have and are continuing to provide to the securities lending and repo markets. When EquiLend was created by our owner market participants 15 years ago, we saw the same need for an efficient technology solution for the securities finance market as we now see for the TRS financing market. Through leveraging our expertise, existing technology and deeply embedded client relationships, our aim is to replicate the success of the EquiLend and BondLend trading platform in this expanding market.

How attractive is the synthetics business to your current stable of clients? Is it a service that will attract a new kind of customer?

James Palmer: The markets have certainly seen a shift in dynamics as the banks face the changing regulatory landscape. Synthetic financing balances have risen as an off-balance sheet alternative to access funding and cover short positions.

Where firms are focused on attaching the cost of balance sheet to each trade across financing groups, the synthetics business is treated advantageously and is therefore often a cheaper alternative.

This shift has caused ripples down the chain of the securities lending and repo market participants, with many traditional lenders looking to see how they can play a part in this new dynamic.

How does the TRS service work for counterparties, and what are the benefits?

Palmer: Swaptimization leverages our proprietary algorithm to create a centralised pool of liquidity to fund long inventory and cover synthetic shorts. Each participant is able to load a list of long inventory and/or short needs into a matching session that, taking into account credit limits, pairs the securities they have loaded with counterparties on the other side of the trade. Our new graphical user interface (GUI) then makes it easy to communicate and agree the matches with one’s counterparties before producing a comprehensive term sheet once the trade has been finalised.
Live trades are then reflected on the screens that support the full trade lifecycle, managing unwinds, substitutions, resets and expiries.

Our technological solution automates a trade that happens either bilaterally or manually via voice brokers today. By centralising market participants into a single venue, the available pool of liquidity is greater than that available in the broker market.

The GUI also makes the agreement of the TRS more efficient than existing processes—which, with additional plans to leverage existing connectivity to our client base to automate the trade booking and confirmation, adds scalability to this enhanced market access.

Is it a standalone service or added value?

Palmer: At EquiLend we view each individual service as value added. Swaptimization is tailored to the derivatives side of the trading market and as such sits as a standalone service to EquiLend’s and BondLend’s core suite of services.

What can you tell us about the service as it stands, in terms of who can use it and where? What about plans to expand?

Keenan: The Swaptimization sessions represent EquiLend’s first move to add efficiency to the TRS financing market. In doing so, our client base has highlighted a number of additional areas in the lifecycle of the trade that we will be looking to focus on and further leverage our existing suite of services. As an industry-owned entity, our direction is led by the market participants themselves. We will continue to innovate where we are needed, be that in expanding into alternative TRS trade flows, aiding the middle-office risk teams, or collaborating with existing industry solutions.

Interviews
The latest interviews from Securities Lending Times
Features
The latest features from Securities Lending Times
Experts discuss the current state of the European securities lending market
Senior business analyst Gilbert Scherff and securities finance and collateral management marketing director Martin Seagroatt break down what will be required of SFTR and explain how Broadridge Financial Solutions can help
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Getting to the final technical standards may indeed just mark the end of the beginning, but it is a significant milestone on this particular road. David Lewis of FIS Global maps out the rest of the journey to be made
SIX Securities Service—through SIX Repo—is developing a new methodology based on the seamless sourcing and pooling of collateral. Head of repo and securities finance Nerin Demir explains
Calypso Technology pits the viable options for a quick fix against implementing a strategic long-term solution for growth, and investigates the possibility of combining these options for the optimal securities finance solution
Matt Wolfe, vice president of new products and business development at OCC, explains how the central clearer is enhancing its stock loan programme to better serve the market
Rob Chiuch and John Templeton of BNY Mellon Markets discuss the potential impact of allowing equities to be used as collateral in the US
Tracey Adams of Lombard Risk examines examples of three challenges faced by market participants caught up on the first wave of SIMM
Country profiles
The latest country profiles from Securities Lending Times
Being an exciting emerging market is all well and good, but how long can that status really apply before interest wanes? India is doing its best not to find out
Hugh Leonard, director of repo sales at Australia and New Zealand Banking Group, explains how the Australian market has excelled in recent years
Asset Servicing Times

Visit our sister site
for all the latest asset servicing news and analysis

assetservicingtimes.com
Securities lending is in a strong place in Australia. Dane Fannin, head of capital markets in the Asia Pacific at Northern Trust, explains the available opportunities
Federico Ortega Gilly of Mexico’s Nacional Financiera explains why his country’s securities lending market is ripe for foreign investment
Russia’s National Settlement Depository has had a busy year making its securities finance market more robust and attractive to outside investors. The CSD’s Alina Akchurina explains the innovations being implemented
South Africa’s securities lending industry is on the verge of embracing a modern T+3 settlement cycle that could boost the country’s market
Experts on Canada’s securities lending industry discuss the market’s qualities compared to others, finding it to be a strong source of HQLAs
A difficult end to 2015 has not deterred securities borrowers and lenders in Asia, where certain markets enjoyed significant growth and offered new opportunities