The Future Of Capital Markets
It’s been a big week for Origin.
On Tuesday we emerged from our “beta” phase and officially launched at Euromoney’s Global Borrowers and Bond Investors Forum in London.
Last summer we were in a different place. We had no product. We had no customers. We were just a tiny team with a big idea.
Since then, we’ve doubled our team. We built the first version of our product, then upgraded it and refined it. We gave it to our first set of customers, and took their feedback and iterated it some more. Our engineers have updated our code base over 1,200 times in 12 months. It’s amazing what you can do in a year.
A lot has happened in the world this past year as well. Exactly 365 days ago, the UK held it’s referendum on the European Union, actually just one day after last year’s Euromoney conference. But as we all remember, the mood in the market was sanguine, and why wouldn’t it be? Betfair odds showed as high as an 86% chance of victory for Remain on the morning of the vote. Of course, once the votes were counted that evening, we all know the result was very different.
Of course, not to be outdone, four months later our friends in the US decided to lay down a Trump card of their own. And today, we find ourselves in a different world: one where politicians, governments, and citizens are questioning one of the fundamental principles of our society, which is that trade is good.
Free trade has underpinned the economic structure that we grew up with, that we studied, and that we’ve spent our careers working in. And it is what has led to the unprecedented growth in size and success of our market.
However, the scary truth is that while the political signs of this retrenchment from started showing up in 2016, cross-border financial activity was actually in decline much earlier.
A recent report by Mckinsey Global Institute shows that global capital flows actually peaked in 2007, and now, 10 years later, they are off that peak by roughly 70%.
Much of that retreat has been led by a decline in cross-border lending by banks. Anecdotally, we know this to be true. Banks have spent the last decade divesting of assets, clients, offices and employees.
With profitability down, regulation up, and interest rates low, business models had to be re-calibrated. The industry is becoming more focused, more specialised, more domestic. And probably safer.
Interestingly, one asset has seen an explosion in cross-border activity: data. In 2005, 4.7 Terabits per second of data was transmitted across continents, most of it flowing between Europe and North America. In 2014, that number grew 45x to 211 Terabits per second, with pipes opening between Africa, Asia, Europe and Latin America. What is in all of this data? Google searches, intra-company traffic, news articles, fake news articles, Youtube videos, and yes plenty of EMTN funding spreadsheets.
Taken together, we see that globalisation is not retreating, rather, it’s changing. The physical globalisation manifested in branch offices, supply chains, and roadshows, is being replaced with a more cost-efficient, scalable, digital one.
At Origin, we believe in this future.
Our mission is to foster and protect the global capital markets, by being the digital connective tissue that connects market participants from around the world.
We believe that financial markets work best when they are simple, transparent, and global. We believe in a market where any borrower can raise funding through any dealer anywhere in the world, and where dealers can originate and sell new product to investors, cheaply, efficiently and profitably.
So, how are we going to do it?
From humble beginnings 2 years ago, we launched our platform in beta in January this year. We are now excited to now announce the official launch of Origin with 9 banks and 30 borrowers as founder users.
I would like to take this opportunity to thank our clients, investors and of course our team for their support and positive energy.
This is just the beginning. We started in Europe, but our ambitions are global. We are expanding to Asia later this year, and we will eventually move to the Americas. Right now, our clients are some of the largest bond issuers in the world, but there are many smaller borrowers and dealers who need visibility. We want to be the go-to platform for debt capital markets origination, and we want you to be a part of it.