The future of Euro-MTN technology platforms was a hot topic of debate at Euromoney's MTN and CP conference in London last month. It was raised in an open-discussion panel that included four heads of desk and it was allotted its own workshop - eMTNs - Who Let The Dot Out - hosted by Dresdner Kleinwort Wasserstein (Dresdner). Both panels showed that there was little agreement on a topic that could potentially change the Euro-MTN market forever. Some dealers have tried hard over the past few years to mould together the advantages of technology and the market in which they work. BNP Paribas and UBS Warburg were two of the frontrunners in setting up their own trading websites. But after a period of rapid activity towards the turn of the millennium, the development of technology platforms in the market has noticeably slowed. In a survey carried out prior to the Euromoney conference, Dresdner found that hardly anyone was actually using the platforms. But half of those questioned believed that the platforms will be beneficial and that they will use them in the future. So the debate is: if the market wants these platforms, why are they not being used? Henry Nevstad, global head of Euro-MTNs at Dresdner, was not expecting the latter result. "It surprised me how many were still optimistic about the advent and potential of these platforms," says Nevstad. "I am not sure myself. It will eventually happen, but it will take a long time." Nevstad believes that it has been a case of trying to accomplish too much too soon. He says: "People have been over-optimistic about what can be achieved. It takes time to change people's behaviour - and there is a mass of people who need persuading. Too many have been premature in talking about online execution of trades, which is very ambitious. Looking at the plain vanilla market would be the more obvious place to start, but even there it will not be an easy thing to achieve." Technology platforms have not been successful as far as private placements and structured trades are concerned. Even in the Euro-CP market, which is more standardized, there has not been a great deal of progress. The only real success so far has come in the automatic trading systems that are used for syndicated pools and book-building. These offer issuers the chance to watch their book grow. It also seems to be a technology that investors want to use. Louise Herrle is the treasurer at Freddie Mac - by far the biggest syndicated issuer in the Euro-MTN market. She has found that the book-building systems have been a real success and is impressed by the continued progress. She says: "The dealer community is now pushing towards a common protocol on these systems, rather than being secretive over their own tools." Future progress for Euro-MTN technology platforms may depend on whether dealers can show similar collaboration. A joint-venture platform for the market has been discussed but seems some way off. Competition between the different houses is fierce and many trades happen on the back of aggressive dealing. There is a reluctance to work on systems that were not created in-house - something Nevstad, at Dresdner, labels as a "not-invented-here syndrome". Using so many different sites is time consuming. For real progress to be made the market needs one aggregator. A common approach would be a major step forward as Frank Czichowski, head of capital markets at KfW, identified at the Euromoney conference. He said: "The platforms have not evolved into anything meaningful and I don't think that they will. They are a dead-end road. Bankers, issuers and investors all have to get together and work out which products work and which don't." Technology could help the Euro-MTN market if employed in the right way. It could improve efficiency, facilitate transparency and bring down costs. Much time and effort is being ploughed into the technology platforms. The challenge now is to get more people using them.
May 17, 2002
