BNY Mellon has announced its early adoption of EquiLend’s innovative 1Source platform, marking a significant milestone in the evolution of securities lending. The move highlights BNY Mellon’s commitment to advancing its securities lending operations with cutting-edge technology and improving overall efficiency.
As part of the collaboration, BNY Mellon will also acquire a minority stake in EquiLend, reinforcing the long-standing partnership between the two organizations. The 1Source platform, powered by distributed ledger technology (DLT), is designed to boost transparency, streamline processes, and improve efficiency in the securities lending market.
The 1Source platform is expected to revolutionize traditional securities lending by offering enhanced trading and management tools. By acting as a “single source of truth,” it ensures real-time, consistent data across all parties, reducing the need for complex reconciliations.
EquiLend confirmed yesterday that BNY Mellon’s minority investment follows the platform’s recent private equity buyout by Welsh, Carson, Anderson & Stowe, marking a shift away from its previous bank ownership. Alongside this investment, BNY Mellon will become one of the first users of 1Source, further cementing its longstanding relationship with EquiLend. For the past 20 years, BNY Mellon has utilized EquiLend’s solutions, which currently enable about $2.9 trillion in on-loan assets globally.
Solving Key Challenges in Securities Lending
A major benefit of 1Source is its ability to streamline contract management through DLT. While traditional securities lending systems handle initial transactions effectively, they often struggle when managing contract modifications, such as changes in rates, settlement instructions, or reallocations. These modifications can lead to discrepancies between different parties.
1Source addresses this issue by utilizing smart contracts to ensure that all parties are in agreement on any changes. This approach creates a unified data set, enabling all stakeholders to update their systems with the same, accurate information, eliminating the need for time-consuming reconciliations and reducing errors.
The platform is built on Digital Asset’s Canton blockchain and its DAML smart contract language, offering security, transparency, and interoperability. This technology enhances accuracy and efficiency in managing securities lending transactions.
Collaboration and Future Prospects
1Source was developed in close collaboration with an industry working group, and although its launch was delayed last year, the platform is now focused on delivering core functionality while avoiding unnecessary features. A significant area for future growth is collateral management, a key use case for DLT in institutional finance.
In Europe, for instance, Eurex Clearing is now authorized to use DLT-based collateral for margin purposes, while Euroclear is exploring DLT solutions for collateral management. In the United States, the Commodity Futures Trading Commission (CFTC) is planning a pilot program for tokenized collateral, based on recommendations from an industry committee.
These developments highlight the growing interest in DLT-based collateral management solutions, further expanding the potential impact of 1Source. If successful, the platform could significantly reshape the securities lending landscape, driving more widespread adoption of blockchain technology in institutional finance.
Conclusion
BNY Mellon’s adoption of EquiLend’s 1Source platform represents a transformative shift in how securities lending will be conducted. With its advanced use of distributed ledger technology and smart contracts, the platform promises to bring greater transparency, reduce operational costs, and enhance the management of complex financial assets. As BNY Mellon leads the charge in early adoption, 1Source is set to play a pivotal role in the future of securities lending.
