July 23, 2020 - On July 21st, in the last webinar of our Ops Series, Ellen Hefferan moderated an enthusiastic panel of technology professionals including Bhavik Katira (Ten Delta), Chris Papathanassi (Finastra) and Paul Zappier (Hashlynx) who, employing the LSTA Mission Statement, recommended that we i) take the tech out of the equation and, ii) with a fresh perspective, determine what an orderly, efficient market would actually look like. How to start? First, step back and define an optimal practice/process flow for the loan life cycle (from origination, syndication, servicing, trading to settlement). And then decide the most appropriate technologies to enable this target end state.
Taking a holistic approach, areas cannot be evaluated in isolation. Many loan systems, which are heavily dependent upon one another, are not interoperable. Through the use of open architecture with both entrance and exit, APIs (Application Processing Interfaces) can be utilized to disseminate data from system to system and therefore from originator to syndicator to agent to lender to custodian. Standardized data will enable systems to “speak the same language”.
Our panelists suggested that the ideal solution would be a Utility model that would represent an end-to-end simplified approach indicating the “single source of truth” for the loan market. This Utility would utilize cloud technology and digitized real-time data. Loan market participants would have a view into their data at any point in time and their systems could both push and pull information to and from the Utility, avoiding, in many cases, the manual re-keying process as well as the need for messaging and reconciliations.
They also recognized that as an optimal flow is created, a phased-in approach to transformation could be implemented in order of priority. Artificial intelligence, machine learning and robotics are all proving to be part of the next wave of technology improvements within our loan market. Solutions ranging from “standardized” KYC documentation collection to a loan asset data master to a collateral management tool could be developed as market-wide lightweight utilities. The recently developed SOFR/SONIA calculator is a further example. Eventually the goal would be to connect these types of services to the market supported Utility. Utilitopia, anyone?
One final time, we would like to thank our sponsors: AFS, Alter Domus, CUSIP Global Services, Covenant Review, Fitch Ratings, Refinitiv, S&P Global Market Intelligence, SRS Acquiom, Virtus/FIS, Clear Structure, Finastra, IHSMarkit and Wilmington Trust. And while the Series comes to an end, new ideas bring forth a new beginning in the operations and technology world of the loan market. Stay tuned!
