Paradise Island, Bahamas - The Asset Securitization 2000 conference surely presented an opportunity for technology-savvy ABS players to show their wares as the industry increasingly strives for market efficiency and transparency.
An innovative Internet platform for the collateralized debt obligations sector, called iCDO, sponsored jointly by Deutsche Bank and Lewtan Technologies, was debuted here for interested passersby, and is slated for a Dec. 31 official launch date.
Mainly marketed to collateral managers, the new tool could have a tremendous impact on the sector, giving managers access to an impressive, complete array of real-time CDO deal data, as well as allowing them to run compliance tests, stress tests and "what-if" scenarios on portfolios, right at their fingertips.
"Instead of the inefficiency associated with collateral managers all using their own replicating systems to do their analyses, we created a central system where a manager can slice and dice a portfolio," said John Wallace, vice president and product manager for ABS at Deutsche Bank. "This will be very powerful."
"The real power of using fully Web-enabled technology is that it is not dependent on phones or faxes," added Dinkar Jetley, a managing director. "This replaces the need for a desktop support system. Moreover, it puts everybody on the same platform."
Even more importantly, the technology could potentially lead to a Web site where collateral managers could actually do trades online.
"It seems a natural evolution down the road that if a collateral manager is looking at hypothetical trades, executable trading online makes sense, so it is a possibility," said Jay Lebed, the vice president of strategic planning at Lewtan. Lebed also mentioned the possibility of involving other partners in the future.
"We will have the infrastructure to allow collateral managers to decide who sees what information," Wallace said. "They will now be able to manipulate data and maintain portfolios online."
Internet-based iCDO will provide CDO issuers with real time transaction data and reporting functions, and will supply DB's Corporate Trust & Agency Services (CTAS) clients with consolidated processing and information services, encompassing full asset reconciliation. One feature will allow investment managers to enter details of a proposed trade via their Internet browser and instantly determine the effects that the trade would have on the compliance and diversity of the portfolio.
Additionally, Deutsche Bank has announced an agreement with Lewtan Technologies, a Boston-based software and Internet company specializing in the asset-backed securities market, that will lead to the introduction of Web-based solutions for the securitization industry.
DB has taken an equity stake in Lewtan, and going forward, the bank's CTAS business will work with Lewtan to develop new applications for servicing the structured finance markets globally.
The Purpose
The initial goal of the applications will address the back-office needs of the securitization market, such as corporate trust, administrative and servicing capabilities. "Lewtan is a pioneer in developing technology and Web-based applications for the structured finance market, and CTAS is a leader in providing the market with trust and administrative solutions. By working together, we will bring a new dynamic to servicing the needs of the securitization industry," Jetley said.
"This further strengthens Deutsche Bank's position as a leading corporate trust provider for complex, structured products, and demonstrates our unequivocal commitment to remaining at the forefront of the corporate trust business."
Stuart Lewtan, President and CEO of Lewtan Technologies, said the deal "will enable industry participants to conduct business more nimbly and more efficiently through Web-based solutions that are seamlessly integrated with administrative services."
Lewtan described iCDO as "a key step in our vision of creating efficiency and collaboration for the structured finance market. iCDO will give collateral managers the ability to run compliance tests and cash flows on hypothetical trades. And, it will deliver robust reporting capabilities. Beyond that, it will provide an Internet-based platform for easily sharing selected information with other parties in the transaction."
Currently, there is no centralized reporting mechanism for the collateralized debt market. One Lewtan representative estimated that the collateral analysis capabilities provided by iCDO in an instant would normally take a collateral manager "at least 10 hours" to do without the technology.
Moreover, the huge database which will be compiled as a result of the new tool will be formidable, a source noted.
Separately, a source knowledgeable about Lewtan told Asset Sales Report that the firm envisions making its asset-backed data Web site, ABSNet, the "one-stop" shop for the securitization professional.
"Ideally, we would like to provide a platform where any user, regardless of their role in the market, can perform most, if not all, of their day-to-day activities using all or some subset of ABSNet," he said.
In terms of execution capability, "there's not much I can tell you about online trading at this point... they recognize the need, but haven't entered the planning stages yet," he said. "It's definitely something they're considering, though not necessarily with Deutsche."
Additionally, Wells Fargo Corporate Trust signed an agreement with Lewtan last week to disseminate securitization data over ABSNet on deals in which Wells Fargo is a trustee.
