Lessons we’ve learned whilst digitalising DCM
2023 has been a year when digitalisation became an even-more popular topic for participants in the debt capital markets and I’m pleased to say that Origin has been at the centre of that shift.
Whilst digitalisation can mean different things to different market participants (from introducing workflows through to DLT and smart contracts), even the most basic forms involve looking at legal documents and trying to simplify them as much as possible. But this process is not without its problems and pitfalls, which is hardly surprising given the complexity of the problem at hand.
This week, we published a whitepaper that summarises the lessons we’ve learned from digitalising more than 90 debt issuance programmes.
An ever expanding niche
I’m proud that Origin has been at the forefront of MTN programme digitalisation from, pretty much, the very beginning.
We launched the first digital DCM issuance platform, and were involved in the first fully digital bond issuance in 2019. Since then, we’ve launched our Documentation product and been involved in over 1,000 issuances using digitalised documents. Additionally, we’ve digitalised 85 MTN programmes and 9 CD programmes, selected from the largest, most frequent issuers.
As these numbers prove, we’re seeing more interest from issuer clients who want to automate and digitise the documentation process for their debt issuance. They see this as an exercise in:
Improving efficiency > by reducing drafting time.
Reducing operational risk > by ensuring drafting consistency.
Automating workflow > by capturing structured data at source and STP’ing that data all the way through the process.
Our Documentation tool aims to solve these problems by enabling issuers to digitalise their EMTN final terms template and have a machine produce specific final terms outputs for each of their trades. The beauty of our flexible templating technology is that we now cater to whatever specific customised template the issuer needs. As our business has evolved, so has our tech.
Making it worthwhile
And as we’ve developed and evolved, we’ve worked our way through nearly 100 EMTN programmes. On the way, we’ve noticed several patterns. Some templates are easier to digitalise than others. Others have the same sections of the EMTN final terms that keep causing friction when it came to the digitisation process. This has taught us that some tweaks can be made to those sections to ease the process. In almost all cases, the tweaks are stylistic (i.e. not involving specific legal changes to the document) and merely suggestions around drafting preferences.
The point is that, absent the digitalisation motive, the suggestions are all, essentially, “nice to haves.” These programmes are working well and, for the most part, will have been established years ago and have since been adapted to the issuer’s needs. Again, the changes are stylistic, so when a human drafts something, it doesn’t matter how it’s done and the cheapest method is to carry on with the precedent.
However, if you want to make a template machine-readable, certain choices can have a huge impact on the ease and cost of digitalisation, and ultimately whether or not an issuer gets to enjoy the benefits of the digital revolution.
Learnings as we go
Given the growing interest in digitalisation within DCM, we thought it would be interesting to dig into what we’ve learned whilst building our Documentation tool, seeking to identify the most common issues that we’ve encountered during our review of MTN issuance documentation. The list of learnings is by no means exhaustive, but it does represent some simple fixes that could easily be implemented to facilitate digitalisation for a wider group of participants.
We presented our learnings to the DCM community in a whitepaper titled, Lessons From Digitalising 90+ Issuance Programmes. It’s aimed at lawyers who specialise in DCM and EMTN programmes, including those working in private practice, or in-house at investment banks or frequent issuers. But we hope anyone involved in DCM digitalisation will find it an interesting and useful read.
So, if you’re struggling for some reading material over the next few days, if the new hardback under the tree wasn’t the one you shared a link to on the family WhatsApp, or watching another rerun of Home Alone doesn’t have the same appeal as it did when you were in a teen, give our MTN programme digitalisation whitepaper a read. We’d love to hear what you think.