This year has seen the issuance of the first set of ISINs for the loans market and Mathew Keshav Lewis, vice president of the Depository Trust & Clearing Corporation’s (DTCC) LoanServ business, reckons this is a great start to introducing further data standardisation in this particularly slow moving corner of the market. Of course, there is some degree of bias to his view, given that DTCC launched the LoanServ platform, which is aimed at providing a secure and automated network for the transmission of standard loan messages between agent banks and lenders in the syndicated loan market, back in 2008.
Since its launch, DTCC has been adding to the syndicated loans market’s reference data standards with the adoption of new entity identifiers from Markit earlier this year. Markit introduced loan entity identifiers in 2008 as part of a broad identification system for the loan market. Working in collaboration with Standard & Poor’s and Cusip Global Services, Markit then issued the first validated entity identifiers in early 2009.
“It has only been in the last couple of months that ISINs have been issued for loans but it is the first step on the road to getting accurate reference data for the market,” says Lewis. “We need these standards in order to make the infrastructure work efficiently.”
There is certainly a lot less liquidity in the loans market than in another market such as bonds. As Lewis notes, there are more trades in bonds in a single day than are traded in loans over the course of a whole year. DTCC, however, is keen to bring the loans market up to speed in terms of infrastructure in order to make these instruments easier to trade and settle, with the related risk management benefits of an automated process.
Settlement times for loans average around the T+40 mark at the moment, which is reflective of the trend to hold most of these instruments to maturity. A large part of the loans market is a relationship market, where deals are private and non-regulated, and trading opportunities can be limited but the DTCC and other market players are interested in the potential it represents overall.
“I would like to see in three to four years’ time much more trading in the loans space,” says Lewis. “That is why we have embarked on this four year project to improve the infrastructure around the market.”