GLMX recently announced key milestones across securities finance electronic trading. Where do you believe the market is along the electronic trading curve?
Olivia Russell: When I joined GLMX, the firm was in the early stages of its journey, but the potential was evident. Over the years, we have seen substantial growth, especially within our repo offering. We have worked to enhance our platform's capabilities and user experience and it is gratifying to see that effort reflected in the industry’s adoption of electronic trading.
Based on the growth GLMX has experienced over the past several years, it is clear that a number of participants in the industry appreciate the ease of access to liquidity and the operational efficiency that electronic trading provides. GLMX currently has more than 115 individual firms on the platform, a pipeline of institutions currently in the on-boarding process, and recently achieved a single day high trading balance of US$1.7 trillion.
Joseph Russo: The acceleration of client adoption, and the growth in balances, is driven by a combination of the need for digitalisation and the availability of a comprehensive technology solution that supports all of their trading requirements. Manual workflows have persisted for far too long, causing inefficiencies and limiting the potential for innovation.
GLMX is transforming how financial transactions are conducted across the money market ecosystem, making them more efficient and accessible. Although GLMX continues to build aggressively in the repo space, the firm’s focus has expanded into the securities lending market as agent lenders, beneficial owners, brokers, as well as banks, need the efficiency that only technology can provide.
GLMX is rooted in building technology for the repo market, but it is now involving itself within securities lending. How is this progressing and what value can GLMX provide to that market?
Russell: GLMX has played a significant role in defining the dealer-to-client electronic negotiation sector, as well as the execution of securities finance transactions. GLMX’s strengths lie in its network of borrowers and lenders — which consist of more than 45 repo desks and prime broker relationships, and 10 agent lenders who currently use the platform, or are in the process of on-boarding. The platform’s strengths also lie within its technology — which generates large daily trade volumes of general collateral (GC), special and hard-to-borrow government and corporate bonds — and in its ability to customise technology to client workflows.
There is a large crossover between repo and securities lending when it comes to price discovery, trade structures and participants. Given this foundation, supporting securities lending activity on the platform has been fairly seamless.
Russo: At GLMX, the team listens to their clients and builds great technology accordingly. Seeing the process up close is impressive, and the amount of client-driven functionality to support securities lending trading that has been produced over the past 18 months is an example of this powerful process. The request-for-quote (RFQ) protocol, combined with many other platform tools, is effective for both lenders and borrowers to engage in price discovery and source liquidity for GC and hard-to-borrows from a much larger liquidity pool than can be achieved through emails and chats. This functionality provides the securities lending community with comprehensive solutions for real workflow issues that add immediate and sustained value.
Why do you feel that the securities lending market is ripe for the type of automation that GLMX provides, and how does GLMX propose to help market participants?
Russell: The securities lending market is massive, with US$35 trillion of lendable inventory and roughly US$2.5 trillion worth of securities on loan. However, less than 10 per cent of the on-loan transactions are executed electronically. As we have seen in the repo market, manual negotiation, execution and processing of this activity is highly inefficient.
GLMX technology is fit for purpose for this market as our technology is a mechanism to maximise access to liquidity pools, increase revenue opportunities, and to minimise operational risk. Tools to quickly match lenders’ availability and borrowers’ needs across fixed income and equity securities, in cash or non-cash transactions, with a range of communication and negotiation protocols, provide enhanced price discovery and facilitate best execution. Pre- and post-trade APIs with comprehensive support for real-time trade lifecycle management — including reprice, rerate, return and recall, and substitution — minimise operational risk.
Russo: Investing in the right technology is the only way to successfully achieve targeted returns and meet the growing demands of compliance. Several lenders and borrowers have done an internal review of the implications of the new regulations and have developed strategies to optimise trading across collateral and counterparties.
In all cases, having many options available to express financing strategies, whether that be across more counterparties or trade types, is the best way to achieve optimal returns. However, this analysis falls short if the only way to act on these options is by using the existing languid and error-prone market process for price discovery, negotiation, execution and trade processing.
How will GLMX aid securities lending market participants in terms of the new regulatory regime?
Russell: Regulation typically has mixed impacts on the marketplace — certain positive outcomes, such as enhanced settlement or transparency, versus additional costs. This is true of the proposed regulation that is overhanging the securities lending market. The industry is under intense regulatory pressure which may bring needed transparency, but it also creates additional capital and reporting costs. Borrowers and lenders are constantly reevaluating existing trading workflows to produce the best returns for clients. T+1 settlement, the SEC’s 10c-1 regulation in North America, and the Basel III Endgame in Europe will make the cost of capital for some trades prohibitive and require additional resources to meet reporting requirements.
Lenders and borrowers can use GLMX as a hub to effectively deploy capital-efficient and revenue-maximising trading strategies with the benefit of operationally expedient and risk-reducing post trade connectivity, and real-time trade lifecycle management. Also, executing on GLMX provides near-real time automated communication of trade information for new and existing transactions — for example, returns and recalls — which speeds up the confirmation and settlement process. This is extremely helpful when complying with the Central Securities Depositories Regulation (CSDR) and T+1.
Finally, the information communicated on the platform is captured digitally so trade data can be enhanced with a time stamp, UTI, LEI and other data, and can be quickly reported as needed. GLMX is experienced in reporting on behalf of clients for the Securities Financing Transactions Regulation (SFTR). GLMX provides solutions for deploying diverse trading strategies, improving the settlement process, and is essential for data reporting requirements.
What are the other benefits of utilising GLMX's securities lending services?
Russo: GLMX technology provides lenders and borrowers with access to the tools and solutions needed to thrive in today's dynamic financial landscape. This applies not only to the ease of price discovery, negotiation and execution across a number of counterparties and with multiple trade structures — such as cash collateral, non-cash collateral, callable, extendables and evergreens — but the technology also allows lenders to reinvest the cash collateral they receive from securities lending transactions on the same platform, in multiple products. Its relevance lies in the fact that the global short-term rate environment is creating a wealth of cash investment opportunities.
These same benefits for collateral movement also apply to cash investment; access to a large pool of liquidity, familiar RFQ trading protocol, block level negotiation and fund and portfolio allocation process, interactive trade blotter for trade lifecycle maintenance, and post-trade straight-through processing (STP). With support for triparty, GC baskets and cleared transactions, GLMX is supporting lenders’ reinvestment and money market fund activity on the platform. In addition to traditional repo reinvestment, GLMX offers other short-term investment options including active pilots for time deposits and certificates of deposits. This is only the beginning however, as we are building towards offering a complete suite of money market products to meet the diverse needs of our clients.
What's on the horizon for GLMX? Can you share GLMX's latest initiatives and the importance of offering clients a full suite of financial products?
Russo: GLMX is committed to continuous innovation and expanding its offerings. Our vision extends beyond repo and securities lending, encompassing a complete ecosystem of money market products. We want to be at the forefront of modernising financial workflows, and we believe our clients and the broader marketplace will reap the rewards.
Beyond growing repo and securities lending activity on the platform, our latest initiatives revolve around expanding our suite of money market products, including time deposits, CDs, money market funds, and eventually commercial paper and other short-term products. The importance of offering a full suite of products lies in providing our clients with a one-stop solution for all of their financial needs.
Traditional workflows in the money market have been sluggish, but in today's world efficiency is key. Equity market trades occur and are reported in milliseconds. There is no reason the money market cannot operate with similar speed and efficiency. A healthy and accessible money market marketplace is the key to liquidity, and technology is the bridge that will make it happen. We are also looking to expand our client base, offering solutions that resonate with corporate, state and municipal treasurers, addressing their workflow pain points, and transforming a marketplace that has long been overdue for a technological revolution. As GLMX continues to navigate the financial industry's currents, our commitment to innovation, security and client-centricity remains unwavering.
With our expansion into securities lending and the imminent introduction of a full suite of money market products, we are not just opening doors but unlocking new horizons for our clients. This dedication reaffirms GLMX's position as a pioneering force, helping to reshape the world of financial services. Expect to see even more developments from us in the near future, as we remain steadfast in our mission to digitise and transform the marketplace for the better.
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