Creditex
33 West 17th Street, 9th Floor New York, NY 10011-5511
Contact: Kevin Kane
Phone: 212-633-7277
Fax: 212-633-7316
E-mail: Kevin@creditex.com
Web Site: www.creditex.com

Creditex is a transaction and information platform with 700 registered institutional users. The instruments available for trading live on the Internet-accessible system include single-name credit default swaps and portfolio trades.

Creditex is a fully automated trading system, but with human facilitators behind the scenes.

Principal equity investors in the company include J.P. Morgan Chase, Deutsche Bank, Canadian Imperial Bank of Commerce and Morgan Stanley Dean Witter.

Additional investors include ACE Ltd., Bank of America, Bank of Montreal, Dresdner Bank, Financial Security Assurance, Pacific Life Insurance Co., UBS and West LB. The New York City Investment Fund is also a financial investor. (See review)

CreditTrade
155 Bishops Gate London EC2N 3DA, United Kingdom
Contact: Paul Mullin, global head of sales
Phone: 44-20-7302-5270
E-mail: paul.mullin@credittrade.com
Web Site: www.creditTrade.com

CreditTrade offers trading using a hybrid Internet voice-broker approach. Offers are posted on the system and the deal is finalized over the telephone with support from CreditTrade's offices in Singapore, London and New York.

Approximately 400 accounts have been opened in 15 countries. Major stakeholders of CreditTrade include Chase Manhattan Bank, Internet Capital Group, Prebon Yamane and Sculley Brothers. (See review)

EPrimus
9 West 57th Street, Suite 1670 New York, NY 10019
Contact: Joseph Bauman
Phone: 212-688-1975
E-mail: jbauman@primusguaranty.com
Web Site: www.eprimus.com

EPrimus is expected to launch sometime this year. Unlike its many credit derivative competitors, it won't serve as a broker or intermediary. Instead, it intends to act as a creator and investor, selling credit protection in the form of default swaps on the universe of more than 1,500 investment-grade names through a unique structure. The company has convinced several ratings agencies to rate its products, and has secured a triple-A rating itself.

Unlike dealers, the firm is not dependent on the ever-narrowing bid-asked spread. "As the end investor in these instruments,” says Joseph Bauman, ePrimus' CEO, "we're not looking to make money off the spread. We view ourselves as employing proper diligence in modeling and judging risk to earn money over time. We're in the business to capture a fair return on the credit risk we're assuming through the sale of credit swaps.”

Pricing will be delivered on-line through its web site, www.eprimus .com, as well as via Bloomberg and Reuters. Trades will be executed on-line, and will be fully linked to the relevant ISDA-type standardized documentation. Later, ePrimus plans to expand its product offerings into the credit insurance and letters-of-credit markets.

Creditex Deep in the Garment District

Tucked away in a vintage garment-district building in a fourth-floor room hot enough to recall the sweatshops of yesteryear, 20 computer programmers from Creditex, the credit derivatives trading web site, are toiling in an ever-continuing effort to make its product the niftiest in its class. Five floors above, in similar conditions, another 20 Creditex customer relations managers help clients learn how to avail themselves of the system effectively. The digs may not be great, but the programming is. In an age when many others are still showing off mock-up prototypes, Creditex chief technology officer Jim Miller has put together a live system with a wonderful look and feel. Creditex volumes still may not rise much above a handful of deals a day, but if an electronic platform can succeed in the complicated credit derivatives market, Creditex will likely be it. The firm has found primary funding from a group of banks within the industry, including J.P. Morgan Chase, Deutsche Bank, Morgan Stanley, UBS, Bank of America, and Credit Suisse First Boston. Credit derivatives are among the most complicated products out there. Restructuring terms can vary widely along with a whole host of other default verbiage. But Creditex handles all the different versions of documentation admirably, via a number of special columns that quickly let the trader know whether restructuring is included as a credit event or not. A user can also create any number of core documentation templates and then perform an electronic comparison to the terms of a potential counterpart. At the first level of detail, there is a checkbox exception report highlighting any differences between the terms. A user can drill down deeper to view a counterpart's summary term sheet or, if a dealer desires, a full term sheet. Creditex volumes still may not rise much above a handful of deals a day, but if an electronic platform can succeed in the complicated credit derivatives market, Creditex will likely be it. Trading takes place on one central screen that can be sorted by the best bids and offers per credit, or in a more detailed manner to show all activity and market depth. As with its competitor, CreditTrade, Creditex allows users to search for specific credits any number of ways—by geographical location, by trade date, by rating or by market sector—and the system offers a detailed trading history extending back 25 days in its Trade-Tracker module. A host of specialty icons also highlight whether a deal is under negotiation, or has special terms attached to it. Recently, the firm added a "fast mover” designation in the form of a small runner that can appear next to a bid or offer for traders who want to post a price that is dealable for a short period of time, but that then becomes a strong indication of interest rather than a hard commitment to trade. This is a nice "check-back” facility (also present in other sophisticated derivatives systems such as ICor Brokerage and Blackbird) suggested to Creditex by a few of its bank users. Compared with CreditTrade, there is no clunky reliance on the exchange of e-mails for this system to work. E-mails are still sent when someone counters a bid or offer a dealer has shown, but they are only used as a back-up facility to the live screen and personal Inbox posted in a panel directly next to the trading screen. It is within this Inbox that dealers can negotiate and chat back and forth between themselves, and where any action on a dealer's price is likely to first draw attention. The platform is open to both bank and non-bank clients, and trading is enhanced by trade facilitators located in New York, London and Sydney. Perhaps the only design fault is that the primary trade-entry screen is separate from the trade-monitoring screen, with no Inbox appearing on this second page. This means that a dealer entering prices might accidentally miss something trading in the market. The slower pulse of credit derivatives trading may not make this a big issue most of the time, but it would be better if Creditex could move this trade entry to the bottom skirt of the main dealing window, as well as allow dealers to enter new proposed trades on the fly by clicking on the actual dealing screen. The company says both of these improvements are under design. Like traditional voice credit derivatives brokers and CreditTrade, Creditex charges a standard brokerage fee on completed deals that averages one basis point per annum, but varies on a sliding scale depending on the level of the credit default swap traded. A credit default swap trading at 25 basis points per annum costs less to trade than a credit default swap that is 400 basis points bid. Although Creditex is already growing nicely, one wonders if the firm might attract even more bids and offers to the site by moving to a pricing model like Blackbird's, where only aggressor-interests pay. Dealers may still be searching primarily for simple liquidity in credit derivatives, but this would help to further differentiate Creditex's attractive platform. — B.L.

CreditTrade Credit Default Swaps Trading Via Voice-Assisted E-Mails

Born of a vision by a former Barclays Bank derivatives trader, Paul Ellis, and merged just over a year ago into a standalone entity with Prebon's former credit derivatives department, CreditTrade is a hybrid voice-assisted electronic interbank credit derivatives dealing platform. Credit market participants post bids and offers on a bulletin-board-like screen, and exchange e-mail messages with each other to propose potential deals. The company claims to have between 30 and 40 percent global market share of the credit derivatives market, with a particular strength in Asia. Among its flexible features, the system has a button to list special terms such as "with restructuring” or "without restructuring.” It also has neat capabilities to search the database of bid-offered prices in numerous ways. These include by industry sector, by rating, by company name, by trade date, by geographic location and by the rating of the bank showing a price. Bid-offered histories can be examined for a given credit going back three months. CreditTrade also has plans for some nifty new capabilities in an upcoming system update. Click on a company name, for example, and you'll be able to drill down to all news related to that company. They also hope to graphically present the bid-offered trading history of credit default swaps already being stored. Want to see how the credit default market for Dell Computer has traded in the last few months vs. that of Gateway? This should be doable in a few months. The large majority of bids and offers are still relayed verbally to CreditTrade brokers, and are then posted on the system by brokers—not by the actual bank with the interest. Unfortunately, the voice part of this operation is still clearly more central to CreditTrade's market share than pure electronic trading. The large majority of bids and offers are still relayed verbally to CreditTrade brokers, and are then posted on the system by the brokers—not by the actual bank with the interest. When another bank then wants to hit or lift a price, this results in an e-mail envelope or phone call that usually comes back to the broker. CreditTrade's screens have certainly helped improve market transparency and liquidity, and they undoubtedly have helped banks to more properly mark their credit derivatives portfolios to market. The company is also working to set better standards of dealing protocol in the credit derivatives space. But with e-mail as its central dealing tool, and straight-through processing still a pipe dream nowhere near being addressed, how nifty is this system really? CreditTrade is being used more as a tool—an information source—than as a true trading platform. Maybe that's fine for now in this still-nascent derivatives market, but will it last? — B.L.