Asterisk Networks
Former SBL Networks CEO Tammy Phillips discusses her new P2P securities finance technology venture Asterisk Networks
Can you tell us about Asterisk Networks?
We established Asterisk Networks because we could see a growing frustration in the securities lending marketplace. It is over complicated, opaque, and has been largely unchanged for many years. The current wholesale marketplace, operating from beneficial owners through agent lenders to investment banks and borrowers, has outstanding loans in excess of $2 trillion generating more than $4 billion in fees annually. Some 90 percent of these loans are in highly liquid general collateral-type securities. The current bank dominated model has been overwhelmed by regulatory costs and reporting which in turn has impacted revenue for both the buy-side and intermediaries.
Our platform provides a solution and enables the removal of many of these impediments. Securities finance transactions can be negotiated with complete transparency, with the participants—borrowers and lenders—meeting electronically in a secure, scalable and efficient way.
What does Asterisk Networks provide to participants?
Our participants have a common theme, they want an alternative route to market that allows both beneficial owners and hedge funds direct access to each other in a bilateral relationship. However, they want to do this with the efficiencies achieved in the wholesale marketplace such as electronic execution, post trade reconciliation, documentation, secure settlement, collateral management and reporting.
Our platform delivers a standardised framework for peer-to-peer (P2P) securities lending providing electronic negotiation, market standard documentation, incorporating Euroclear’s infrastructure for settlement, triparty collateral management and reporting. In addition, the Asterisk platform enables participants to manage the full life-cycle of events associated with stock loans such as rate changes, returns, recall, corporate actions, together with access to a real-time anonymised transaction ticker providing data such as security identifier, quantity and fee on every transaction executed across the platform.
Who can join the platform?
Any eligible counterparty can participate in the platform. Participants sign documentation for platform connectivity that binds them to standardised protocols around execution, market standard documentation, and collateral management. Once a participant has onboarded with Asterisk Networks, they then approve other participants as active counterparties for bilateral transactions.
So, any counterparties operating in the current market can use the network? Not just beneficial owners and hedge funds?
That’s correct. Our marketing will focus initially on beneficial owners and asset managers such as insurance companies, pension funds, sovereign wealth funds, mutual funds, UCITs funds, along with hedge funds as you would expect in a P2P environment. This remains our primary target today. However, through working with some visionary early adopters we are developing an even broader strategy for our platform amongst banks. The banks connecting with our platform are taking the innovative approach of restructuring their service offering to better fit this current regulatory environment, adopting our vision for the efficient use of financial resources in the form of agency prime.
At its core, Asterisk simply facilitates lenders and borrowers negotiating directly for transparency and price discovery. With the future of best execution on the horizon, this is likely to be a focus for all participants in this marketplace. For both borrowers and lenders, the Asterisk Platform provides the opportunity for an alternative route to market that increases price discovery, revenue, flexibility and control. Additionally, lenders can directly influence increased utilisation, borrowers can bid for stock, and intermediaries can carve a new role in an evolving market allowing them to create more efficient returns on their financial assets under the agent prime structure.
What barriers to entry have you experienced?
We are working hard to deliver a route to market with Asterisk Networks that utilises as many standard features from the current marketplace as possible. Market standard documentation, triparty services and no massive deviations from standard processes. Once the decision to utilise Asterisk Networks has been made, documentation is swift. The next, and very important decision for participants to make, is who to add to their approved participant list.
You have had a very close association with the P2P marketplace over the past 18 months. Is Asterisk Networks linked to your former employer SBL Network?
No, there are no corporate links between Asterisk Networks and SBL Network Limited. There is certainly a shared philosophical mindset that the market place could be improved. With market circumstances being favourable towards such innovation, Asterisk is committed to delivering a service that offers benefits to lenders, borrowers and intermediaries who embrace change.
It was recently reported that SBL Network went into liquidation, can you tell us what went wrong at SBL Network and how can you avoid that again?
There was a strong primary concept at SBL Network Limited to provide a standardised framework for P2P securities lending transactions providing price discovery, transparency and efficiency in a secure environment to increase revenue for its participants. However, there was not a consensus amongst shareholders on the future business strategy. With diminishing financial resources and no ability to raise additional capital for a singular fully-supported business strategy, the board and shareholders had no option but to place the company into a creditors’ voluntary liquidation as previously reported.
Do you have the same team at Asterisk Networks?
No. While I have offered roles to both former employees and contractors that provided business services to SBL Network, there are some that will join us, some will provide advisory roles within the business and some have decided to explore opportunities in new and very different sectors of financial services.
What has reaction to Asterisk been like? Are you getting strong support?
We are at the chrysalis stage and, so far, we have had overwhelming support. This has come from likely participants, a range of stakeholders, new investors, service providers that form part of the infrastructure of the platform like Euroclear and mentors.
I would like to say thank you to everyone for their support, you know who you are.
Their understanding and counsel in recent months and during my brief interlude has been really appreciated.
You must have had a very busy month. When do you expect the Asterisk Networks butterfly to emerge?
Yes, it has been very busy and there’s still plenty to do but the team is up to the challenge. The plan is to launch in Q1 2019. I’ll keep you on top of the developments.
