Credit Investment News  October 27,2008

Trading, Settlement Application To Be Launched Next Year

STORM Networks will be launching the STORM Loan Marketplace, a new online application service that uses real-time agent bank data aimed at improving settlement efficiency and times, in the first half of2009. It is developed for use in the U.S., London and other global markets and was built in association with Bank of America, Credit Suisse and Morgan Stanley, which are all partial owners of the platform.

   Jay Katz, managing director at STORM Networks, explained that the program has direct messaging capabilities and real-time information. When an investor wants to do a trade with a bank, each party fills out a ticket that represents their understanding of the trade, and then the system uses real time matching to generate an online confirm. The two parties read the confirm online and sign off. The program is using the FpML program the Loan Syndication and Trading Association has been working on. Katz said the Storm platform has the capability to settle trades the same day; however, it can be programmed for a time frame the two counterparties want. STORM will recommend a two-day funding period; however if one party wants two days and another wants five, the program will use the larger time.
   For distressed trades, the program will perform similarly to the par process. The assignment is identical, but there will have to be human interaction for the purchase and sale agreement. "We work to automate wherever possible, minus the PSA," said Katz.
   Katz described the system as using a "pessimistic model," so no one can have access to areas unless specifically granted. The program will be programmed to understand when a lender is public on a given credit and only give that individual access to public information. It also recognizes who a lender of record is. Investors can see how much they hold of a loan and once they do a trade, the change is depicted in the program. "Once you sell off your final position, it removes you automatically," Katz said.
   Currently the company has talked to various banks about the program, but has not yet reached out to the buyside. "It's an ongoing conversation," Katz said. One portfolio manager, who had not heard about the program, thought it sounded interesting.