Ablrate will give lenders much more choice when it launches its blockchain-powered secondary market. Chief executive David Bradley-Ward explains how it will work
LIQUIDITY IS ONE OF THE biggest challenges faced by any market and the peer-to-peer lending sector is no different.
But Ablrate is working on a solution. Last year, the platform began working towards the launch of an ambitious blockchain-powered secondary market which will also be made available to all P2P platforms. The aim is to make the secondary buying and selling of loans more efficient and therefore improve liquidity across the sector. “This is cooperation, not aggregation,” said David Bradley-Ward (pictured), chief executive of Ablrate.
Ablrate has partnered with blockchain provider ASMX, a company started by David Bradley-Ward, to create this marketplace, and it is due to launch in the fourth quarter of this year.
“The idea is to provide a service for platforms’ internal markets, but also to connect all platforms on the ecosystem,” explains Bradley-Ward. “To do this you have to have a ledger system that books all settlements accurately, securely and in a way that all platforms can agree is correct. The cost of doing this would traditionally render smaller trades unprofitable for all and, effectively, you would not be able to create a market. So that’s how we hit upon using blockchain technology which uses cryptography and user consensus to secure and accurately record and settle transactions.”
Three platforms are currently working towards integration with ASMX: Ablrate, Huddle Capital and The House Crowd. Discussions are also ongoing with a number of other platforms ahead of the secondary market’s launch later this year.
“With all the regulatory changes that have come in recently, we believe that the wind is moving towards liquidity,” says Bradley-Ward. “The importance of liquidity to a marketplace cannot be overstated. We’ve originated around £50m in loans and around £39m of that is traded on the secondary market. So that gives you an idea of the importance of it to our lenders, there is no reason to assume that it is not the same on every platform, and some don’t even offer a rudimentary secondary market.”
Ablrate’s own secondary market provided the inspiration for this venture. It is extremely popular with the platform’s users, and currently trades around £30,000 to £40,000 each day, although it has traded upwards of £150,000 per day in the past.
Ablrate’s secondary market is currently used by around 5,000 registered investors, and they are not shy about speaking up when they see a potential problem.
“There was some criticism of how our market operated in the old days,” says Bradley-Ward. “We received feedback that a secondary market operating on a bid and offer basis would attract people flipping loans, i.e. buying large amounts in the primary market and flipping at a premium in the secondary market.
“We’ve now added a delay on the amount of time before you can bid so other people have the opportunity to read the documents. “We’ve also got three tiers of bid limits, so for an hour there might be a £1,000 limit, for the next it might be £5,000 and so on. We don’t always deploy these limits but they are available if we need them. We are trying to create liquidity for the benefit of all lenders and not just a trading opportunity for market participants.”
Through the integration with ASMX and by paying attention to the finer points of liquidity, Bradley-Ward may be creating something truly unique.
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