What’s the latest news with NGT?
Given the great industry adoption of our flagship trading platform NGT, we’ve shuttered most of our legacy trading systems, including Trade2O and Trade Optimisation. As of September, 93 percent of our trading flows were on NGT, and we expect to reach 100 percent shortly. AutoBorrow, our remaining legacy trading platform, will be retired in December this year. This is a very exciting time for EquiLend and for the industry.
Why the migration from AutoBorrow to NGT? As they say, if it’s not broken, why fix it?
Indeed, AutoBorrow has been our core trading platform since the inception of EquiLend in 2001. It has worked very well over the years, with upwards of 100 different financial institutions around the globe using it for securities finance trading in recent years.
However, AutoBorrow was developed for, and tailored to, a specific segment of the securities finance market—general collateral (GC) trading. As markets have become more dynamic over the years, the industry was in need of automation beyond just GC trading. Thus, we developed NGT to allow our clients to automate trading of warms and specials in addition to the traditional GC flow.
The NGT development and rollout was a significant undertaking, not just by EquiLend but by the industry as a whole. Building to NGT involved considerable infrastructure work on the part of EquiLend and our clients, but we worked together with our client base throughout the development and rollout process to ensure NGT would serve them in the best way possible.
The industry’s efforts to migrate to NGT have clearly paid off. EquiLend has seen trade executions in the non-GC space double since the introduction of NGT, with hit rates increasing 10-fold among clients adopting the Targeted Availability workflow, a brand-new functionality introduced in NGT. The majority of our clients have already migrated all their trade flow to NGT. It is clear that NGT has overtaken AutoBorrow to be our flagship trading platform.
Has streamlining your trading offering affected trade flows on your systems?
Yes it has, and we’re excited to see how it continues. Over the course of the last quarter, we have had a series of record trade count dates, most recently on 19 September, when close to 42,000 trades (counting one side of the trade only) were conducted on our platforms globally. It’s important to note that the recent record trade dates are not attributed to any specific market events, which goes to show that our clients are simply doing more of their trading on our platform.
How do you ensure that NGT meets the demands of the industry?
While designing and building NGT, we have one core mandate: to build a product that clients need, want and love. We adopted an interactive software development process, constantly seeking client feedback in all phases of the product lifecycle. This effectively shortens the feedback loop, and it gives us the intelligence we need to make sound product decisions that cater to our clients.
From a business perspective, we host global NGT industry meetings to share usage statistics, reinforce market best practices and build a network of dedicated and committed stakeholders. Similarly, we held monthly developer days, a series of sessions ‘by developers, for developers’ to help technologists understand and implement the various NGT functions.
I believe that the level of client engagement with EquiLend is unprecedented and has been a key factor in the success of NGT.
SFTR is going to have an immense impact on trading in the European securities finance market. Can NGT help with SFTR?
The Securities Financing Transactions Regulation (SFTR) regulatory mandate in the EU affects both trading and post-trade activities of the securities finance transaction. Because of this, EquiLend is incredibly well positioned to provide a front-to-back solution that is congruent with the reporting requirements. NGT is the most logical place to start, as it is the beginning of the trade lifecycle and therefore the entry point to the ecosystem of EquiLend’s SFTR solution.
A vast swathe of the industry has either built out to NGT for straight-through processing or is utilising our trading screens. The existing NGT mechanism can be leveraged not just for new loans, but for other integral requirements of SFTR reporting. As we enhance NGT for SFTR support, we are taking steps to actively reduce client build requirements with the knowledge of how invasive new technology builds can be.
In addition, by using NGT as a trading venue, firms can look to receive standardised and consistent trade data for reporting purposes, therefore reducing the risk of information mismatches.
What are some of your future plans for NGT?
Data. In this era of advanced technology, having the means to automate is only the first step. But, armed with data, firms can do so much more, as we’ve seen happen through DataLend. NGT is in a unique position in that we facilitate requests and execution, and we can help clients leverage that data for insights into their business.
With increasing trade flow, we are ramping up our data-crunching abilities to be able to provide NGT-specific trade data analytics to our clients. Internally, we are also increasing data-driven design processes in our product development by using client behavior data to ensure we build a best-in-class platform.
NGT also has opened the door for various strategic opportunities. A successful trade execution is simply the first in a series of trade-lifecycle events. Having established connectivity with our external partners—for example, central counterparties (CCPs), regulatory technology firms and other technology providers—we are constantly looking to expand the breadth and depth of our service offerings.
What did you learn from building a brand-new platform?
It has been quite a journey over the past few years. We had some lofty goals, which included building a brand new platform from the ground up, while keeping the lights on for the legacy system.
We also had to make sure that it was business-as-usual for our clients, and at the same time coordinate across very different timelines and priorities from firm to firm. There were many moving pieces, with each posing a risk if not managed well.
I am comforted by the fact that the industry’s resilience and commitment to moving toward more dynamic, automated trading is paying off. NGT is the biggest initiative that EquiLend has undertaken since its inception, and we are thrilled that our vision, shared by our clients, has come to fruition in such a positive way for the industry.
But, make no mistake, this is just the tip of the proverbial iceberg. There is so much more to be done to bring even greater efficiency to the securities finance industry, and we will be right there at the forefront.