TradeWeb is widely acknowledged as having revolutionized US commercial paper, and it may soon pull off the same trick in Europe. In the first quarter of 2002, TradeWeb estimates that it was handling more than 10% of the market, based on Federal Reserve data. Since then, volumes have grown steadily. In the first week of 2002 they were at around $62 billion. In the week before Euromoney went to see the platform in September for these awards, volumes were at $102 billion.
The inventory trading system enables investors to search in a variety of ways through the offerings of whichever of TradeWeb’s nine dealers they have a relationship with – and these include some of the biggest players in the market, with an average of 2,300 offerings displayed each day. The user enters the parameters of the paper they want – maturity range, minimum size, minimum yield – to produce a filter that can be saved and applied repeatedly.
This brings up a list of dealer offerings, with quantities, maturities, yield and discount levels, ratings from Moody’s and S&P, and live prices. Each of these variables can be used to sort the selection, so that, for example, investors who can only buy paper of a certain regulatory type can easily weed out what doesn’t concern them. This facility is quite powerful, and can be configured to sort by a hierarchy of priorities. For example, it can be set to show paper by rating bracket, and then, within that, to sort by yield.
Red prices on the inventory screen are indicative, and give the dealer up to five minutes to come back to confirm or reject the trade. More than 80% of firm offerings go through on the price displayed. Clicking on an issuer name brings up a complete list of all its programmes currently on the system, which can again be sorted and filtered using multiple criteria.
The trade blotter lets clients keep track of what they have done on the system, and is downloadable into Excel for back-office and mid-office scrutiny. The platform creates a full audit trail for each user, and can automatically allocate orders across accounts using pre-set rules.
The system is in the process of being extended to cover ECP. If this happens, the sector could be looking very different in a year’s time.
