BNY and the National Bank of Canada went live with EquiLend’s 1Source platform this week, joining the blockchain-based system designed to eliminate manual trade reconciliations in the securities finance industry.
The stock lending company said a global broker-dealer will soon start trading on the platform, while several other companies are close to signing up. BNY and the National Bank of Canada now conduct securities lending transactions through the distributed ledger, which maintains a synchronized record of transactions between counterparties.
According to estimates from industry participants, the industry currently spends roughly $100 million annually on reconciliation teams and repairing settlement breaches. EquiLend’s system is built to eliminate these costs by keeping both sides of every transaction aligned from the start, rather than companies recording the details separately and resolving mismatches later.
Nehal Udeshi, Head of Securities Finance at BNY
“This milestone underlines BNY’s commitment to innovation and leveraging new technologies to mitigate risk,” said Nehal Udeshi, Head of Securities Finance at BNY. “By using 1Source, we want to overcome the challenges associated with manual reconciliation, while delivering benefits to our customers.”
For example, EuiLend’s services have been used by eToro over the past six months, allowing UK and European users to earn additional income by lending out their shares. A similar product was launched by Robinhood in 2022 and by Interactive Brokers in 2023.
More companies are preparing to join the network
Carl Attie, Managing Director and Head of Global Securities Finance at National Bank of Canada, says the bank joined the platform as part of its focus on technology solutions for customers.
“This milestone lays the foundation for broader adoption and future improvements, allowing us to streamline processes, increase efficiencies and increase resilience in the securities finance market,” said Attie.
EquiLend developed the platform using Digital Asset’s Canton blockchain technology, which allows multiple parties to share transaction data while maintaining privacy controls. The system launched with coverage for North American equities backed by cash collateral, although expansion to corporate bonds, non-cash collateral and European markets is planned.
Third-party analysis from Vy Solutions from 2022 estimated that the platform could save the securities finance industry hundreds of millions of dollars per year through lower operating costs and fewer settlement failures.
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Platform focuses on fragmented back office systems
The securities lending market has relied on fragmented back-office systems in which counterparties maintain separate records of the same transactions. Discrepancies in quantities, prices or settlement dates often only surface days after the transaction has been executed, causing coordination problems and liquidity risks.
Rich Grossi, CEO of EquiLend
EquiLend’s system places every transaction in a shared ledger where both parties see identical information in real time. Lifecycle events such as recalls, rate changes, and returns are processed within the same environment, with both sides automatically updating at the same time.
“Each new entrant strengthens 1Source’s network effect, accelerating the industry-wide benefits of improved accuracy, transparency and efficiency,” said Rich Grossi, CEO of EquiLend.
The platform currently supports loan originations, daily mark-to-market calculations, benchmark-based rate adjustments, recalls and buy-ins. EquiLend plans to add automated revaluation for large loan portfolios associated with benchmark shifts, which should eliminate another source of breakage when the benchmark rate changes.