Both Deutsche Bank and J.P. Morgan are testing new platforms that will enable collateralized debt obligation portfolio managers to execute hypothetical online trades to immediately see if their CDOs pass compliance requirements. The banks are pitching the technology as part of their trustee services to expedite compliance assessment and allow managers in any time zone to interact with the market, reducing limitations currently associated with desktop technology. Deutsche Bank will be the first bank to officially launch its product, iCDO, which is currently being tested by OppenheimerFunds. J.P. Morgan is planning to launch its Web version, internally known as CDO-hypo, by the end of the fourth quarter. Steven Park, director of CDO sales for the corporate trust group at Deutsche Bank, said the firm is working with management at OppenheimerFunds to eventually enable its portfolio managers to execute hypothetical trading online for two of the funds more recent CDOs, HarbourView II and III. "We're working on the development of the product and we're in the process of finalizing a couple of deals on their system," said Bill Jaume, portfolio manager for the HarbourView vehicles. He said other banks acting as trustees offer other systems to CDO managers, but none offer Internet-based systems. Currently, managers must use either desktop technology or contact their trustee to find out such information, which can take anywhere between a half hour and a full day, managers said. One portfolio manager said the systems should help save time. "It will be especially helpful when working on something like a swap. You won't spend a lot of time working on it to find out it won't fit in the portfolio's requirements." The manager explained that a CDO is a moving target as the collateral can be upgraded or downgraded or debt can be paid down, making an up-to-date Web-based technology useful. Andy Tuck, spokesman for J.P. Morgan, said the firm has a couple of clients also signed up for testing. Currently, the firm offers clients password-protected access to information on their deals and compliance information. But this will be the first product to allow managers to log on and hypothetically make a trade, providing information on whether or not the trade will pass compliance before placing a call to the trustee. Bank of New York, the other largest trustee player in the CDO market, is not planning on launching an Internet-based product anytime soon. Richard Constantino, senior v.p. of the structured finance group, said the bank provides its clients with CDOnet, a product provided by Wall Street Analytics, a desktop-based program that runs compliance tests but needs to be installed on a user's computer.
Trustees Unveil CDO Internet Trading Platform