Onbrane, a fintech company that is currently operating in the Negotiable European Commercial Paper (NEUCP) market, is now offering clients access to the $1Trn Euro Commercial Paper (ECP) market. The firm’s OTC platform brings together issuers, intermediaries and investors, enabling digital comparison, negotiation and tracking of CP with increased process automation.
“The global primary debt market is predominantly inefficient, and more often than not, it is archaic,” comments Pascal Lauffer, CEO, Onbrane. “Onbrane’s raison d’être is to help fix this by providing the finance industry with the technology fabric it needs. Bringing the ECP and NEUCP ecosystems on Onbrane is a great step in the right direction.”
Lauffer told TMI that he believes the market today suffers from “serious pain-points” due to the lack of digitalisation, insufficient access to sources of liquidity, overall lack of transparency, and archaic processes – all of which have been highlighted by the COVID-19 crisis.
“Our vocation is to respond with an OTC platform which connects all the existing actors. We believe the market does not need a revolution but an improvement and a simplification of its processes by means of technology.”
The CP market has been slow to adopt digital processes in part because it was deemed to be working okay, with most market participants prioritising other investments, says Lauffer. “It has existed since the mid-19th century and modern CP markets are still subject to slow manual processes run by people that learned it the old way,” he comments.
“There is an inability for different actors to connect with one another. Getting rid of these old habits requires them to come out of the comfort zone. We are addressing all of this by offering a smooth transition from old to new, from manual to automatic, from rigid to flexible.”
The debt market today is made up of many sub-markets, including CP, which itself can be subdivided into domestic markets such as the NEUCP, EUROCP, and the USCP. A major goal of Onbrane’s one platform/one primary debt market approach is to remove the geographic barriers that it says previously held back dealers and brokers from dealing foreign CPs. Lauffer believes that this approach aids transparency, allowing asset managers to know where the opportunities are, in terms of markets, currencies, maturity and rates, for example.
“Onbrane provides a large amount of data essential for this knowledge while respecting the discretion of the market. Market unification will only be reached by respecting the existing ecosystem and its functions, instead of disrupting it by removing essential actors.”
As part of its move to progress the CP markets, Onbrane has recently developed a module for Sustainable Commercial Paper. “Our sustainable module will be live in mid-December and we expect to have our first sustainable paper transaction on the platform by Q1 2021,” Lauffer confirms.
The module is the result of requests from many CP issuers “to simplify their processes of sustainable paper issuance”. It aims to streamline communication and reporting in line with best market practices laid down by the likes of the ICMA, and the new EU taxonomy.
The module is the result of collaboration with many players involved in sustainable finance, including French and European dealers and investors, ESG rating agencies, climate consulting firms, auditors, regulators and other fintechs.
The firm has created a similar module for Asset-Backed Commercial Paper, and before the end of this year, it plans to launch one covering USCP.