Broadridge Securities Finance and Collateral Management
Darren Crowther, general manager at Broadridge Securities Finance and Collateral Management, discusses his firm becoming an approved securities finance transaction submitter for the National Securities Clearing Corporation Equities Clearing Service
The market is aware of the new NSCC SFT Equity Clearing Service. What will be Broadridge’s role as an approved SFT submitter?
The role is to provide a technology utility which brings together, compares, and matches trades from both the lender and borrower before submitting them to NSCC on behalf of both parties. We call this a ‘Y’ shape as the service model resembles the ‘Y’ with two inflows at the top feeding into one outflow. The reverse will be when the NSCC accepts the trade event and pushes it back up the flow to the lender and borrower which will be viewed on the Broadridge user interface (UI). The process involves not just the trades, but the required trade lifecycle changes that come in from the lenders and borrowers. These are again matched and pushed down to NSCC for communication and then repeat the same life cycle.
Why did Broadridge get involved and what do you bring to the market?
Broadridge has a history of providing market utilities like this. For example, it’s part of the work we do today for the Consolidated Audit Trail for the US market. We have these matching data communication services already and we have a background in middle and back-office functions within the US market through the Impact and Brokerage Processing Services (BPS) products. These felt like a natural fit for our knowledge and services. We already have a large number of clients using a comparable service for the Fixed Income Clearing Corporation in repo and sponsored repo, and services on other cleared products where we do all the messaging protocols and data delivery.
Do you have interested participants already?
Absolutely. We are seeing a lot of demand coming from both lenders and borrowers. We have had a number of meetings and we have clients in different stages of discussion. We are ensuring we understand how it works for them, what their volumes look like, and what their connectivity activity will look like. There have been some really good discussions with clients across the lender and borrower community.
What type of organisations do you see using this utility and is there a different use-case based on size?
It’s very supply and demand-oriented, so the supply needs to be there on the asset side. The agent lender and asset managers are definitely looking at this to get their supply out.
On the demand side, you have the broker-dealers and the banks who are looking to tap into the supply and get the ultimate capital reduction benefits. The firms are keen to make sure the supply is going to be there and they can access and transact it via clearing, ensuring they utilise that reduction.
The question about the different organisations’ sizes is something we have had to think about and tailor our offering. Larger firms may look to have connectivity and messaging to transit the trade events. The small organisations who are doing a lower number of trades per day are okay with creating and moving spreadsheets directly in the UI. Our user experience and services need to cater for all.
In the end, everyone’s trades will be compared, matched and submitted to NSCC as part of our role, but how those events get to us will vary depending on the different types of business models and how the market size will grow.
We may also see organisations who are quite manual now but may move into more automation. That flexibility is part of the offering we are creating.
When can clients begin using this service?
The product is in the final approval stages with the regulator in the US. We are working with the Depository Trust and Clearing Corporation on the build and we will be starting this month with NSCC testing to make sure all the protocols are working. In April and May, we will then look to make it available to our clients at the top of the ‘Y’ service model so they can input their events either via UI or messaging.
When the full service is ready, we will offer end-to-end testing for clients.
This sounds like a great utility you will be offering, how are you feeling about it?
We are excited about this opportunity. We firmly believe we are the correct partner for firms in the marketplace for a utility of this type. We have a proven track record in delivering and running services of this type. The service will be key to our clients trading business and Broadridge’s proven solution resiliency, modern technologies and understanding of the securities finance market makes us the perfect partner.
