“Storm will create a clear path towards meeting the Loan Syndications and Trading Association’s goal of settling loan trades within three days,” says Ian Sandler, executive director of North American Credit at Morgan Stanley and vice-chairman of the LSTA. “In addition to T+3, Storm will help drive the continued advancement of LCDS and LCDX by removing the uncertainty involved in handling the underlying instrument.”

Storm Loan Marketplace will provide buy-side and sell-side participants in syndication and secondary loan markets with document management, workflow tools and real-time data for integrated trade matching, primary and secondary trade settlement, inventory, position reconciliation and credit documentation. The platform will use real-time agent bank data across a dedicated network to handle the processes, procedures and functions relating to new issue and secondary settlement in the par and distressed markets. This independent hub is scheduled to go live in the first half of 2009.

“The challenge in the loan market is that over the last 10-15 years, various pockets of technology solutions have been developed that work fine on their own,” says Jay Katz, managing director of Storm Networks, for example, document warehouse sites, electronic closing platforms and banks’ internal accounting systems. “None of these products speak to one another very well,” Katz says. “That creates inefficiencies, but more importantly it creates inaccuracies, and that in turn delays the process of closing and creates the need for manual reconciliations to occur.”

The platform is owned by Storm Networks and the three financial institutions (Bank of America, Credit Suisse and Morgan Stanley). Software provider Quartet Financial Systems created the software platform. Xand, an infrastructure provider, will host it.

The solution will include a document warehouse, direct integration with internal bank software and workflow for handling the closing process. “We’ll no longer need to guess what the outstanding balance is on a loan and when a bank has to move ownership from one entity to another, it won’t need to type up a paper document, we’ll send them an electronic message that lets them directly update their system,” Katz says. The platform will include user authentication and entitlements, so that each user will only be able to see those documents he has a legitimate right to see.

“What we’ve done that I think is unique is we’ve brought agency data to the front of the process -- the minute we know there’s a trade between two entities, we immediately look at the information the agent provides around that trade in terms of credit information, how much inventory the seller has, the transfer rules on that credit,” Katz says. “Then we quickly can map out the optimal path to closing that trade.”

Morgan Stanley, Credit Suisse and Bank of America are currently testing the platform by sharing information among their agency and trade systems. Eventually, Katz hopes that all the major dealer banks will connect to the real-time messaging platform (which requires dedicated T1 lines). Buy side firms will be able to access the marketplace through a simple web interface or the same type of direct messaging the dealers use. “The more you can use direct messaging, the more reliable and timely the solution is,” Katz notes.