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Capital Markets

Origin Markets: An Hour With Raja Palaniappan

A fortnight ago, I had the pleasure of speaking to Raja Palaniappan, CEO of Origin Markets. Origin Markets is one of the hottest fintech start-ups operating out of London, the fintech capital of the world. The hour spent with Raja provided a unique insight as to his inspiration behind the start-up, the challenges and growth the company has experienced, the firm’s plans for the immediate future, and the opportunities that Origin provides for new recruits. With a product offering with the capacity to change the way that bond issuers and investors interact, Origin Markets is a company that aims to transform the bond issuance process for good.

Purpose of Origin Markets

The aim of Origin Markets is to be a fully digital automated platform for the issuance of new fixed income securities. With a global bond market worth approximately $128.3tn, the importance of bonds in the modern economy cannot be refuted — they are the lifeblood of the financial markets. Proceeds from bond issuance are a critical enabler for many companies’ operations and for governments to finance their spending. This has been particularly important during the coronavirus pandemic, with historic fiscal stimulus plans across the globe funded by government bond issuance. However, Origin Markets has identified a missed opportunity to digitize the bond issuance process. The current process of bond issuance is incredibly manual and inefficient, when it does not need to be. Despite the standardization of the bond issuance process, this recurrent transfer of information from bond origination to settlement is yet to be digitized. Origin Markets believe that by building a fully automated digital issuance portal for fixed income securities, it will save time and maximise efficiency for all agents involved in the process — from intermediaries and professionals working on behalf of investors, to borrowers wanting to issue bonds.

Origins of Origin

Raja and his fellow co-founder Rob Taylor (CTO) met on the trading floor at Nomura in 2012, both trading flow credit derivatives and corporate bonds. The initial inspiration which prompted Raja and Rob to innovate the DCM space can be traced back to this period on the trading floor. Being immersed within the secondary trading side of the investment bank, both were exposed to the pricing and allocation of such bonds. Thus, if a bond was mispriced, they were first to see this error. Constantly seeing bonds come to market inefficiently and at the wrong price, Origin’s co-founders decided there was an opportunity to make things more efficient on the primary issuance side. Further reinforcement was the macroscopic observation that technology was transforming the secondary trading desk but there were no parallel technological improvements in the primary issuance of bonds. These initial conversations developed into a sporadic side project between 2012 and 2014, before launch of the business in 2015.

Growth since 2015

Raja spoke in glowing terms of the Barclays Accelerator program, powered by American firm Techstars, and the impact this had on the initial start-up phase of Origin. Neither co-founder had experience of starting a company before and the program provided a concentrated boot camp into how to build a fintech company from the bottom-up. Once the structure of the program was removed, the next challenge was to raise funding through roadshows and pitching to investors. The first two years of Origin’s existence revolved around trying to find a business model and customer base that fit, proving that the business could repeat the success of gaining one client and upscaling this to the next 10 customers. Having initially formed Origin with the goal of capitalising on a small opening in the bond issuance process, a slightly bigger opportunity in the workflow was identified. The next challenge for the fintech start-up is to scale up its customer base and build upon its new suite of products that have become the foundation for the company.

Origin Products

Marketplace

Origin’s original staple product is its marketplace. Described as a “LinkedIn for the bond market” by Raja, the purpose of the marketplace is to provide a centralised system for sharing information about funding requirements. In the current system, investment banks cover clients bilaterally within its own database and would call up — or meet, in pre-covid times — these clients to discuss their funding needs. Each dealer then inputs this information into a home-built spreadsheet. On the other side of the transaction, the issuer may be covered by a multitude of different investment banks and is thus having the exact same conversation with each individual investment bank. As the information that is disseminated from the borrower is standardised, the centralised Origin Marketplace can facilitate this sharing of data and vastly improve the efficiency of the ecosystem at large. Borrowers can actively post funding requirements to the market and investment banks can tailor and customise its search to the wishes of its investors.

Documentation

When a dealer finds a borrower that matches its requirements through the Origin Marketplace, then it is likely that a transaction should be executed. Origin Markets has built a product that automates the production of the documentation required to execute the trade and create the new bond. At present, this documentation is fairly standardised but is all done manually, with bankers or lawyers typing out roughly the same information in a word document. Origin has digitised this process to improve the efficiency for investment banks and is intent on upscaling this product to more customers.

Post-trade

In Q4 2020, Origin Markets announced a $7m Series A investment by Luxembourg Stock Exchange and Clearstream. This strategic investment and partnership aims to automate the bond issuance process from origination right through to settlement, further integrating Origin’s products into the existing capital markets ecosystem. The post-trade process that Origin has been developing takes all the data contained within the automated documentation and captures this in a structured format. This information is then disseminated to all of the market infrastructure entities that are necessary for settling the bond. Through partnership with the Luxembourg Stock Exchange, one of the biggest venues in Europe for the listing of fixed income, the Origin platform provides an integrated digital listing service for all newly issued fixed income securities. Origin is also aiming to settle bonds in a much quicker turnaround time, through further integration with Clearstream. The ultimate aim of the post-trade hub is to have direct integration from Origin’s bond origination systems into the stock exchange and clearing systems.

Culture and opportunities at Origin

Culture

Origin’s culture is formed around both humility and ambition, with the two traits not viewed as mutually exclusive. By remaining humble, Origin is not afraid to receive critical feedback and react to the market, iterating its products and processes to improve its way to a perfect solution. The company values radical transparency and the pursuit of truth such that there are no egos or internal politics — the company is on a relentless path to discover solutions first and foremost. Being able to take customer feedback into account is a crucial element of the design process at Origin Markets and bringing in young, talented individuals with the hunger to learn and to push themselves out of their comfort zone is an integral part of Origin’s culture and growth trajectory.

Opportunities

Origin Markets is a fast-growing, evolving organisation such that anyone who joins is subject to “two axes of growth”. This illustrates the idea that both the company and the individual is growing simultaneously, accelerating the pace of growth for any new recruit. Conversely, other, more traditional graduate roles may limit the extent of growth for new recruits by offering only one axis of individual growth. Origin provides the opportunities and responsibilities necessary for personal growth within the organisation, but this is even further magnified by the evolutionary mindset of the company. Raja reiterated that the Origin Markets of today is vastly different to the Origin Markets of yesteryear, and likewise, the company will be unrecognisable in the next year as it continues to grow and learn from the lessons of the market.

Review of 2020 and an outlook for 2021

2020 was a positive inflection point for Origin Markets, despite everything happening in the world. It was a year that saw the important securing of new investment from Clearstream and the Luxembourg Stock Exchange, as well as headcount nearly doubling by the end of the calendar year. The major documentation product, which has been in development for a while, was tested and soft launched in 2020, with the objective of scaling this up in 2021. The company has just signed a new lease on a bigger office space to be moved into at the start of this year and is hoping to achieve significant growth in the next 12 months, on the back of cementing its foundations and achieving product-market fit in 2020. Two parallel work streams are set for 2021, with a clear focus on client adoption of the documentation product as well as the integration with Clearstream’s systems. By analysing Clearstream’s workflow, Origin is aiming to identify any areas of validation checks which can be automated and upstreamed into Origin’s systems. The immediate objective is to reduce the time it takes to settle a bond from T+5 days to T+2 days by the end of the year, through automation of documentation. Further integration with Clearstream’s systems provides the potential of cutting this down to T+1 or even T+0 days. 

Origin Markets has put in solid foundations since its birth in 2015, with the next 5 years projected to be one of growth and scale in an attempt to revolutionise the bond issuance process.

For more information on Origin, see
https://www.originmarkets.com/

You can also check out their opportunities at
https://www.originmarkets.com/careers

If you would like to read the full interview transcript, you can access it here:
https://docs.google.com/document/d/1oG5eng1Y21NL2JOtQWCAe71L5PgrwwZYXLZPadmHlaA/edit?usp=sharing

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