| Laurent Paulhac | ||||||
Prescient Markets is a pioneer of direct debt issuance over the internet through cpmarket.com, which specializes in offerings of new commercial paper by large, regular issuers. The company launched in February 1999 after CEO Laurent Paulhac put together a business plan focused on the short-term debt markets. The initial reaction to the concept of internet distribution from potential backers was moderately encouraging. “I met with a handful of people in November and December ’98 and the view was that it was an interesting idea,” says Paulhac. “At the time many didn’t think that the internet would be that great for this kind of business, but they felt that we had a good vision.”
A group of companies under the auspices of the Direct Issuers Working Group (DIWG) liked the idea but felt that other potential providers should be allowed to pitch for the business. A request for proposals was put out to Prescient and 12 other companies. After a lengthy selection process, the eventual decision was in favour of the Prescient Markets model.
Paulhac feels this was only right. “We felt this made sense as it was our vision that led to this,” he says.
Prescient intends to expand into other products in the coming months, with the next target being certificates of deposits in the US. “We have had plans to expand into Europe but, for now, the focus will remain on the US,” says Paulhac. “We have had some contact with the major banks in Europe but we couldn’t quite get a consensus on what would be the right model for them to support. For now, we feel that it would take too long to get the industry to move forward in a meaningful way.
Also, the margins in Europe are very different. At the moment it’s unclear as to how best to develop a business model to cope with this. Add to this the fact that that we would have to raise more capital in what is now a very tight market and we decided not to pursue this at this time.”
Although the DIWG played a prominent part in the establishment of cpmarket.com, Paulhac stresses that the company remains independent. “The platform is market neutral.
The 19 members of the DIWG have all used our platform but we have also signed with organisations like São Paolo Bank, ABN Amro and Deutsche Bank.” Most business is still done with the DIWG, although Prescient expects to continue adding more new issuers.
The system is entirely web-based. New users are able to download the necessary software directly from the net, in either Java or HTML forms, and no special installation is required. While the Java system is quicker in operation, it may require some adjustments depending on the user’s in-house firewalls and security systems. Typically though, a client can be up and running within half an hour.
Because everything needed to get started is on the internet, there are no restrictions on where the site can be used. Clients are able to use the platform from any PC onto which they have downloaded it – at the office, at home or on a laptop. The first trade done by cpmarket.com, in June 2000, involved the buyer executing his end of the trade from home as he could not be in the office at the time. Such flexibility enables west-coast traders in the US to deal as soon as the markets open in the east, without having to be in the office at 4am. The straight-through processing model that Prescient has developed, with links to Deutsche Bank’s issuing and paying agent service, enhances efficiency.
Paulhac regularly contacts clients to check that they are happy and also to pick up on any suggestions users may have to improve the system. “Client satisfaction is very strong and I am very pleased,” says Paulhac. “The system is so far very reliable. We had a small problem in August, due to the high volume of business on the system, but we soon fixed it and since then there have been no problems.”
Paulhac says that the immediate future for Prescient Markets looks good. “We are adding more issuers on a regular basis, we’re adding more investors and the number of trades is increasing monthly at a very good rate. And we are constantly strengthening the platform.”
This is the beauty of a web-based platform run by a single company dedicated to technology and with management that has a technological background, rather than a consortium of members with different agendas. “We can listen to customers’ requirements and, because we have full control over the technology, we can bring those improvements directly to the technology team who make the adjustments very quickly.”
For a platform that outsources its technology, this process is much more difficult. “We feel that technology is our core business,” says Paulhac. “Companies that don’t have this move slower as they have to take all the information to their technology provider who then has to make the adjustments. This invariably creates a time lag and it’s therefore much harder to satisfy the customer.”
