Origin’s next step
Today marks the biggest step in Origin’s journey since we launched our platform to the market nearly 2.5 years ago.
As we announced this morning, we have successfully issued the first fully digital bond on the Origin platform – an AUD 30mm Green Bond issued by Vasakronan with Citi as dealer.
The transaction caps Origin’s evolution from a pre-trade, “origination” tool, into a full front-to-back issuance platform for the debt capital markets. It feels good and we’re proud of how far we’ve come. But we know this is only the beginning.
The first fully digital bond
So what exactly happened with this trade? In some respects, little changed.
Vasakronan, the leading property company in Sweden, issued the 15y bond off of their existing EMTN program. Citi’s MTN desk acted as dealer and found the investor, and Citi’s Issuer Services division acted as issuing and paying agent on the transaction. The trade was settled via Euroclear/Clearstream.
However, in other aspects, everything was different.
No one used Microsoft Word, a printer, or a pen. Citi was able to draft all documentation automatically on Origin, including the indicative and final termsheets, as well as the legal final terms that legally define the transaction. Because our termsheet generator is linked to our final terms tool, 90% of the final terms were already populated by the time a lawyer got involved. The final documentation was ready in minutes. Vasakronan were able to digitally sign the final terms directly on our platform.
Of course, that saved legal time. But the real beauty was in the connectivity. We had a digital representation of all the transaction details – the “golden source of truth.” We built an integration with Citi’s Issuer Services allowing them to consume those trade details electronically. Once the final terms were digitally signed, Citi could immediately read those transaction details from our integration. We eliminated the normally tangled web of emails and pdfs that typically fly around between back offices. In the future, we will be extending that connectivity to listing exchanges, clearing systems, and other downstream entities.
Our customers built this product
We are very proud that this evolution was borne out of the continuous feedback and input from our customers, who are central to everything that we do. Since our initial launch in January 2017, Origin has seen tremendous growth, and now serves 20 dealers and 80 borrowers from over 50 cities worldwide. Those customers all had a hand to play – this product wasn’t built in isolation in a sandbox or incubator. Rather, it was forged in the real world, and was refined and polished by over 1.5 years of regular usage and feedback from our customers. Every aspect of the design, build, and workflow was repeatedly stress-tested by our customers, giving us tremendous confidence in its quality and resilience.
This is the power of the community of dealers and issuers we’ve built.
An accessible solution at scale
The most exciting aspect of this product is it’s scalability. Increasing speed, reducing costs, and eliminating the errors in post-trade workflow have been goals for market participants for some time now. However, many of the other pilots that have been attempted in recent times have required the borrower to adopt a completely new legal framework, or require all participants to sign up to a standalone distributed ledger. But after extensive consultation with our many customers, we found that 1) people are happy with the current legal framework for debt issuance, and 2) their trust in the CSDs (such as Euroclear or Clearstream) is not a problem.
Ours is the first solution that achieves the goals of reducing time, cost, and error, but works within the current market structure. Borrowers don’t need to change anything about their EMTN (or other shelf debt issuance) programs. And nobody needs to sign up to a separate ledger for recording transactions or managing payments. The existing relationships with paying agents, exchanges, and clearing systems can be maintained. But all of those entities can access that “golden source” transaction data via straight-through-processing, saving a considerable amount of time and cost in processing a transaction.
Because it works within the system, it can immediately scale.
Distribution is built
We are already working with other borrowers and dealers to use this tool. The solution is applicable across markets, including MTNs and CDs, which are high volume, low margin and weighed down by documentation and administration. But the problems faced here are also similar in other parts of the debt capital markets, including for larger, syndicated transactions. Recent travels have shown us that the demand for our product is high.
The next step is to do more transactions with more issuers and dealers, and build integrations into other paying agents and exchanges. Importantly, we will be deploying this new solution within the Origin network that already has 100+ institutions on board, so we have a clear path to market-wide adoption. This week’s AUD 30mm note by Vasakronan and Citi was the first step.
What made this possible
At Origin, we work methodically. We build, test, and iterate. We do “client services” by jumping on (the back of) a plane and showing up to shake hands with our customers. We obsess over their client experience. We don’t get distracted by vanity metrics, and we are efficient in how we deploy limited resources. In a world of unicorns and moonshots, we can sometimes feel a little old fashioned. But this approach means that any success we have won’t be down to hype or luck. It will be because of planning, hard work and teamwork.
With that in mind, I can’t stress enough that none of this would have been possible without the tireless work of the Origin team, who have been designing, building, testing, travelling and pitching for years to get to where we are today. In the world of capital markets technology businesses, we are a very small team, but we punch way above our weight, and our achievements speak for themselves. That success is based firmly upon the talent and integrity of our small, hard working team.
And, of course, we couldn’t have done it without the support of our customers, some of whom (courageously) joined us way back in the early days, and have continued to support us ever since. To them, we are forever grateful and we could not be more excited about what lies ahead for us, for them, and for the future of the capital markets.