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It is fair to say the reputation of the leveraged loan market is
not one of innovation and automation. The perception persists of an
industry characterized by old-fashioned paper trails, faxes and
emails. We hear about market participants working in silos, with
limited data and little collaboration on foundational activities.
But is this perception fair? The answer is complex but, generally
speaking, the majority of market participants enjoy advanced levels
of automation and the business benefits that this brings. In this
blog, we take a look back at some of the key milestones of the past
decade that have set the industry on the path of automation and we
look forward to some key technology developments on the
horizon.
The last decade has seen the transformation of trade settlement
through the end-to-end automation of the process, with our ClearPar
platform playing a central role in this evolution. In the last ten
years, the number of trades settled has quintupled and market
participants now number in the thousands rather than the hundreds.
This huge growth has been supported by enterprise-grade processing
power; the rise of managed services; and a drive to digitize and
automate trade documents, data, wire generation and workflows. Here
are just a few key milestones in the development of ClearPar:
ClearPar milestones, 2010-2020
What do these milestones mean in practice for our clients? Well,
hundreds of millions of API calls made via our platform mean that
our clients, large and small, consume vast amounts of highly
actionable trade data and customize their own workflows to suit
their priorities. Let's take another example - the automation of
Standard Settlement Instructions. This development puts investors
in the driver's seat for payment instructions - a key area of risk
as billions of dollars for trade proceeds, interest and principal
paydowns flow between market participants daily.
Clients that have invested in these tools and others have beaten
the market in settlement times, overhauled their operations and
markedly improved their risk management profiles. We will dive into
some of these tools and how they are used in the real world in
future pieces.
In addition to ClearPar, our managed service for client
onboarding has yielded double-digit improvements in settlement
times for large clients, while our reference data for LIBOR
replacement (LiRD)
delivers key insights into the fallback provisions for over eight
thousand facilities to leading asset managers.
The decade ahead
As we look to the next ten years, there is even better news on
the horizon. With the foundation we have established, we are now in
a strong position to increase the velocity of transformation in the
loans space.
Looking to the immediate future, our 2021 roadmap includes a
strategic project to move our data centres to the Amazon Web
Services (AWS) cloud. This is a significant effort and one that
will deliver greater resiliency and speed to the market.
Longer term, we are focused on bringing even greater scale to
our clients. What would we, in conjunction with our partners, need
to do in order to support the market if it were to double or triple
in size? Perhaps the best indication lies far away from the
high-volume, highly-traded US market, weighted as it is by
complicated, legacy market practices. Last summer, we entered into
a partnership with iLex to enable
the development of a fully automated market in the Asia-Pacific
region. This will span from syndication through to execution and
settlement, with the aim of boosting liquidity and efficiency for
the corporate loan market. You can read about it here
and watch our recent webcast
here.
Is this the future of the global loans market? It is too early
to tell, but we are committed to challenging the status quo and
collaborating with clients and partners to bring greater automation
and efficiency to the industry. Look out for our next blog, which
will dive into some of our innovations in more detail.
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
