Ablrate is the latest up and coming UK P2P platform to unfurl an online secondary market.
Ablrate emerged in the peer-to-peer space in August 2014, offering asset-backed leasing deals to investors – mostly secured against aircraft. The platform is unique in its capacity to offer lenders exposure to such transactions. Ablrate secured some early momentum in the form of a $20m investment from Synthesis-P2P. Now the platform is rolling out a carefully engineered secondary market in order to allow its lenders to sell out of contracts ahead of schedule.
Ablrate views the new exchange as a unique offering. The platform identified a few issues with the typical P2P secondary market, and set about devising solutions. The key problem with existing variants is that interest repayments are often suspended whenever a loan is listed on an exchange. In other words, it’s advantage buyer, who inherits a backlog of interest. The seller, conversely, typically loses out on earnings.
Ablrate has circumvented the problem through the use of technology. The technology in question fully calculates the amount of interest due to sellers and ensures that their accounts are suitably credited when a loan part is sold. We asked CEO David Bradley-Ward about fees. For now, no fees will be charged on secondary market transactions, but the platform has the technological capacity to levy charges in the future. In time, fees may well be introduced, capped at a maximum of 0.25%, charged to the seller on the value of the transaction. For now, however, the primary goal is to create liquidity in the newly launched service, and so trading will take place free of charge.
Another interesting twist: Ablrate is also launching an “Auto Invest” tool, which engages with both the platform's primary and secondary markets. Investors pre-set purchase criteria, and Ablrate’s algorithms are able to pursue suitable loans within both halves of the platform.
Bradley-Ward shed further light on the new secondary market, which has already seen a fair bit of action:
"The new Secondary Market is a culmination of feedback from investors and our experience trading in other markets, such as commodities and bonds, where a two-way market is essential. Any market can only be successful if there is liquidity, and that is never guaranteed, but we feel that the way we have structured the secondary market and the accuracy of the calculations, will make it an attractive addition to the Ablrate platform. In the short time the system has been live we have seen over 500 trades."
Ablrate has been lingering on the cusp of entry into the Liberum AltFi Volume Index for a while, having matched a little over £2m to date. The platform is supposedly waiting on a further £2m in loans to close, with a pipeline of somewhere between £50m and £100m in deal flow. Such grand statements of intent ought always to be consumed with a pinch (or two) of salt, but we may well see the platform’s growth rate spiral upwards in the coming months.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.