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Ecuador appears to have beaten investors into submission with its debt restructuring proposal to swap $6.65bn in defaulted Bradys bonds and Eurobonds for $3.95bn of new 12 and 30 year global bonds. After roadshows in New York and London this week, Ecuador was on track to attain the 85% investor approval it needs for the restructuring to go ahead. Ecuador's success, however, was more the result of coercion than negotiation. If 50% plus one of the current bondholders vote in favour of the exchange, then that will result in the dissolution of certain terms on the current bonds, making it a worse bet for bondholders who do not vote in favour.

Mexico ? Grupo Televisa SA

Erdoelbevorratungsverband (EBV) set out its stall in the private market last week, by issuing a euro25 million ($24.57 million) 30-year CMS-linked note. The borrower achieved a tight sub-Libor price due to its triple-A rating and status as a quasi-state entity. But with eight other German borrowers holding top ratings, competition is hotting up. EBV may have to be increasingly adventurous in its issuance to keep a foothold in private placements. EBV has been lucky in that investor appetite for its paper has been strong since it signed its euro2 billion programme on 13 September, last year. But its funding requirement off the facility in 1999 was low and it had the luxury of being able to wait five months for the right opportunity. Westdeutsche Landesbank (WestLB) was the quickest dealer off the mark with a trade for EBV. It was lead-bookrunner off its inaugural which will settle on September 29 2000. Hans Joachim Von Hanisch, head of Euro-MTNs at WestLB in London, explains why the deal was transacted so far in advance. He says: "The trade was driven by demand from pension funds in Europe which were keen to invest in the 30-year category and wanted forward purchase of bonds in September." Sanders Schier is on the board at EBV and is responsible for its financing. He says EBV will focus on the private market in 2000 since that is where he believes it will get the best levels. EBV has issued schuldschein for 21 years and intends to continue to rely on this source. As a result the funding target off its Euro-MTN shelf this year is relatively small at euro250 million, so Schier thinks a public issue would probably not suit EBV's strategy. He explains: "We have certain dates when refinancing is due but we know that it is unlikely investors will be there then. So we have a permanent buffer zone of euro100 million. If a dealer comes to us with a trade of up to euro50 million per tranche and it is an attractive offer then we will do it." EBV is responsible for importing, storing and maintaining emergency oil reserves within Germany. It was set up in 1978 by the government through its oil stockholding law because Germany is 98% dependent on imported oil. EBV doesn't need government approval for every note traded, but its link to the state does mean it is limited in what it can issue. Yet, borrower flexibility is essential as competition heightens and investors take the driving seat. Schier, at EBV, is aware that even triple-A rated issuers have to play into buyers' hands. He says: "For the time being we are limited to issuing in euros as a conservative approach. While targets can be achieved in euros we will continue to issue in the currency. But the programme allows for issuance in other currencies and I think this will be one of the next steps." Some banks are concerned that EBV is ignoring the potential for quality funding in other areas. An official at Deutsche Bank in Frankfurt, arranger off EBV's facility, says: "The tight pricing and the fact that EBV is restricted in the currencies and structures it is open to could be a problem. Japanese investors have shown interest in the name, but they can only buy in yen. EBV could play on many more possibilities but there is work to be done." EBV believes it will have no problem standing out from the crowd. Its state support makes it extremely stable since the law protects it from changes in the market price of its oil reserves and it is forbidden to ever sell at a loss or be bankrupt. Schier, at EBV, emphasises that EBV's debt is highly attractive to risk-adverse investors. Also, as a corporate, it offers diversification from the usual set of triple-A rated banks. He says: "EBV's 20% risk weighting in addition to Standard & Poor's triple-A rating, its government backing and the security of the law which does not allow EBV to go bankrupt, means it can position itself strongly in the market as a superior credit to compete with other issuers in its peer group." Triple-A rated Kreditanstalt fur Weideraufbau (KfW) issued $9.44 billion off 70 non-syndicated trades in 1999. Frank Czichowski, head of capital markets at KfW, believes that in a rapidly changing market borrowers can't afford to be rigid in their style of funding. He considers that KfW's success comes from being alert to market dynamics and being fast to react. He says: "There are more issuers coming to the market so competition is clearly growing. For triple-A borrowers providing liquidity for investors is one of the main issues. Speed and flexibility are also priorities. Often investors want to express a certain view on the market or want something specific. Issuers have to be quick in responding to these particular needs." One of EBV's aims is to increase its recognition in the market. Von Hanisch at WestLB, says: "EBV is keen to raise its profile and increase attention on its credit since it has an on-going need for private placements." But the new borrower did not use the traditional route of a public debut issue to get its name known so it has its work cut out. Yet Schier at EBV, has full confidence in his chosen panel of banks. He says: "We selected eight banks which we know have strong national and international coverage and can reach the investors we want to target. We are willing and happy to visit investors on an individual basis, but we think it is more valuable to concentrate on keeping up contact with dealers."

Eicsson's treasurer Vidar Mohammar gives his opinions on competion and online trading in the MTN market... Q. How has your borrowing strategy changed as the market has become more credit aware? A. Not really. Ericsson is pretty well known already. We are borrowing at much the same levels as we were a year ago. Q. How do you reassure investors about your credit? A. We have had the same rating for such a long time that it is not an issue. The market sees us as a pretty good credit. Q. How important is it to be a pan-European household name in selling your story? A. Being a household name absolutely makes life easier. Investors already know who you are when you go out and roadshow. Q. What percentage of your investors are non-domestic? And how does this compare to a year ago? A. The majority of our investors come from outside Sweden and this has not changed. Q. What sort of structures are investors interested in buying from you? A. They are interested in all sorts of structures but we mainly issue plain vanilla. If the pricing is right we will do equity-linked deals. Q. How do you feel about the market going online? Are you happy for your levels to be posted on a screen that everyone can access? A. We are happy to post our levels if we are issuing, but if we are not issuing it is a waste of time. Q. Do you think borrowers' relationships with their dealers will suffer as a result of online trading? A. It's just another way of issuing. It is not replacing other ways of issuing, it is complementing them. It is useful for reaching institutional investors. Q. How do you see the market developing in 2000? A. It will be more common to go online. This should push pricing down, which is good for borrowers and investors.

? Bancaja International Finance Guarantor: Caja de Ahorros de Valencia, Castellon y Alicante (Bancaja)

Eridania Beghin-Say's manager, capital markets, Paolo Falcone gives his views on online trading and competition in the MTN market... Q. How has your borrowing strategy changed as the market has become more credit aware? A. EBS' strategy has not changed a lot. We use our Euro-MTN programme opportunistically as a way of lowering our funding costs. And though in the last months of 1999 the costs of borrowing were higher, we tried to stick to our targets. Q. How do you reassure investors about your credit? A. We have explained our situation. Being in the agri-business is very cyclical. We were rated A- by Standard & Poor's and were downgraded in October 1999. But we are now a very strong triple-B+. After the downgrading we reviewed our targets. Q. How important is it to be a pan-European household name in selling your story? A. While in France and Italy EBS has very good name recognition, in some other European countries our brands are better known. For instance, our olive oil brand, Koipe, is the leading olive oil in Spain. Q. What sort of structures are investors interested in buying from you? A. Almost all our transactions are structured but we swap all our trades into floating rate. Structured notes are currently a good way of hitting our targets. If we understand the risk we will look at credit-linked, currency-linked or equity-linked. Q. How important is it for you to be a frequent borrower, able to build your own yield curve as triple-As can? A. We have not used our programme to issue public bonds. We have not issued any bonds since 1998. We have set up targets for three to 10 years for our programme and we issue frequently but in small amounts. We like to tell the market that we are here. Q. How do you feel about the market going online? Are you happy for your levels to be posted on a screen that everyone can access? A. We are thinking of posting our levels online with dealers who may be interested, including Warburg Dillon Read (WDR). But we will not do this in the short-term. We prefer only some dealers knowing our targets. When we change our targets we tell the dealers we are working with. Seeing other people's levels could be interesting and allows you to see where you are compared to the rest of the triple-B's in the market. Q. How do you see the market developing in 2000? A. The market will be more active on both sides. There will be opportunities for corporates and investors. Our Euro-MTN programme provides us with a good source of funding. It does today and it will tomorrow.

The telecom sector is in the limelight, as M&A activity persists. Added to this is the UK licences auction for next generation mobile phones, where the six remaining companies are bidding for five licences. Investors could stand to make large gains. However, the phrase event risk is on everyone's lips, usually with negative connotations. The Mannesmann deal shook investor confidence and the general consensus is that caution is needed. With more M&A activity to come, will MTN issuers be sticking to the public markets, and could investors be in for a rough ride? Despite the threat that event risk poses to investor interest, the telecom sector is growing at a phenomenal pace. Issues in 1999 amounted to $16.61 billion off 46 trades compared with $5.56 billion off 24 trades in 1998. Issuance by telecom companies in the first quarter of 2000 has already reached $9.71 billion off 23 trades and if this continues, 2000 will be twice the size of 1999 in terms of issuance. Warburg Dillon Read (WDR), one of the top dealers off telecom programmes, does not see event risk as a big problem. Gavin Eddy, executive director, head of Euro-MTNs at WDR, believes that investors want to buy telecom notes because the market is developing so quickly. He says: "There probably isn't a more exciting sector at the moment and investors want exposure to it." But Eddy admits that risk from M&A activity cannot be ignored, although he thinks that investor confidence has been restored. He says: "AOL and Time Warner type deals may become typical of the telecom sector, with more high-tech and media companies merging with telecom companies. It's a unique sector and it's consolidating very quickly. It's a sector where there is very large event risk but investors are willing to accept this." Tecnost signed a euro10 billion ($9.53 billion) Euro-MTN programme for Olivetti in July, last year, and it now has the second largest outstanding issuance in the sector at $5.68 billion. The programme was set up specifically for M&A activity. Luciano La Noce, director of corporate finance at Tecnost, says: "We set the programme up for flexibility. We have not used it much yet but our two large issues in the public market had to meet important deadlines for the Telecom Italia takeover." Only France Telecom, Europe's second biggest telephone company, has issued more. After a spate of issuance this month, the company has now raised $6.67 billion, mostly by public trades. But the threat of credit downgrading has not posed a problem for the MTN market's most active telecom issuers. La Noce says: "The Mannesmann deal last year created unrest among investors, and then there was Orange too. The market realizes there is event risk. This is reflected in pricing, but there has been no drop in credit quality. We have not felt any adverse effects of investors' fear of event risk and we have had no trouble selling our paper." Sonera signed its euro2 billion MTN shelf in May 1999 and is not concerned about the effect a ratings decrease could have. Pekka Reijonen, treasurer at Sonera, says: "Obviously event risk was a key issue for investors. But investors are aware of this and they can judge for themselves based on individual company names, ratings, strategy and history." Despite this, Sonera is not shy of being acquisitive and announced plans on April 18 to buy the Swedish software company Across Wireless. Lehman Brothers has arranged four programmes for telecom companies, including Tecnost's, the sector's biggest MTN programme. Julia Ward, director, head of MTN origination at Lehman Brothers, agrees that M&A activity in the telecom sector has had an effect on the market. She says: "Consolidation in the sector may lead to some existing programmes disappearing. However, new programmes will be set up and in many cases the issue proceeds will be used to fuel M&A activity." But signings are slowing down. Five telecom companies entered the MTN market in 1999, but in the last six months there has been only one: Cable & Wireless Optus. Issuance from telecoms has increased, although this has been mainly in the public market. In the past month there have been 14 trades from the sector and eight were issued by France Telecom. Daniel Cogoi, head of Euro-MTNs at BNP Paribas Group says: "Acquisitions have fuelled the volume of issuance in the telecom sector. The need to raise large amounts quickly leads issuers to the public syndicated markets as opposed to the often cheaper private MTN market. Despite this, the telecom sector should witness significant growth in the private MTN market as it seeks to refinance existing debt." However, issuance in the private market, according to MTNWeek league table criteria, during 1999 and 2000 amounts to only $2.26 billion off 28 trades. This accounts for only 8.53 per cent of total MTN issuance by telecoms. This is confirmed by Tecnost, who intends to use its MTN programme again in 2001 and 2002 to restructure its outstanding debt. La Noce says: "We will probably use the public market because of the size of issue required, but private trades are also a possibility." Eddy also predicts that the public trades will dominate, but for another reason. He says: "With the current auctions of the third generation mobile licences in the UK, we are likely to see heavy telecom issuance in the public markets in the coming weeks. This is already causing some weakness in the secondary spreads."

Fannie Mae set a new record in the dollar markets this week with a blow-out $11.5bn three tranche offering. The deal, led by Goldman Sachs, Merrill Lynch and Morgan Stanley Dean Witter, is the biggest non-government corporate or agency bond issue in dollars and the second largest non-government offering in any currency, behind Deutsche Telekom's $14.5bn transaction in June.

? Bayerische Landesbank Girozentrale Rating: Aaa/AAA/AAA

Leak darling Rupert Lewis of JP Morgan will pass a milestone in his life this weekend. It's his 30th birthday. And to ensure his party on Saturday goes with a swing and has all the right people, he's invited... a load of MTN traders. Apparently the email invitation began: The venue's set, the stars invited.... So Leak hopes Rupert won't be too disappointed when it's only the market's glitterati that turn up. The location is The Pen in Fulham for anyone who deleted their invite by mistake. And MTNers have been playing musical chairs in the market again. This time the French banks are having a reshuffle. Julien Lefournier, who was head of the desk at SG, has left the bank. Tarik Senhaji has taken over as Euro-MTN head and the main dealing has been transferred from Paris to London. But Julien has yet to announce his new post. And BNP Paribas has poached Sally Easton from Chase, where she spent 10 years working in capital markets fiduciary services. Sally, who is vice-president of the IPAA, will establish the French house's UK corporate trust operation.

When Liberty Lighthouse (Lighthouse) signed its $5 billion Euro-MTN programme on March 2 this year, dealers got excited. The borrower was predicted to be a top-quality special purpose finance company which would sell triple-A rated paper at Libor-plus pricing levels (see MTNWeek, issue 126). One inaugural issue later and the market has been made. The three-year euro200 million ($206.7 million) note was issued on June 2, via Merrill Lynch. The deal's price-tag was Libor plus 13 basis points. It was snapped up by Italian and German accounts as well as some in France, Switzerland, Ireland and the UK. The Lighthouse signing is part of a growing trend for structured finance companies to access funds in the Euro-MTN market. It resembles successful vehicles such as Sigma and Citibank Credit Structures' (CCS) Beta and Centauri companies. Dresdner Bank's conduit, K2, was the most recent of these to join the market with a $6 billion Euro-MTN programme signed last February (see MTNWeek, issue 116.) And rumour has it that CCS is preparing to launch yet another conduit called Echo, by this September. But the set-up of Lighthouse is different in some ways to other finance companies. Its owner, Liberty Hampshire, approves each of Lighthouse's investments and is owned by Zurich Financial Services Group, senior management and a group of wealthy individuals. Mark Walter, executive officer and one of the three founding partners of Liberty Hampshire, manages the programme with a team based in Chicago, USA, but operating on European time. He says: "The structure is based on a belt and suspenders approach which leads to more liquidity and more capital. It's a structure above reproach from the credit point of view." Lighthouse can issue $5 billion in debt for every $1 billion of capital. This compares well to other structured finance companies like Beta for example, which can have a maximum of $15 billion in debt per $1 billion of capital. Dominic Curcio, managing director, of Liberty Hampshire's London office, says: "Lighthouse offers much more capital to protect investors from portfolio losses. Its permitted leverage is five to one. That's much less than Beta or Sigma. It means investors get very safe triple-A notes." That said, notes off other programmes like Beta's with a higher leverage are still rated triple-A, just like Lighthouse's notes. Arguably, most investors would rely on this much more than a leverage ratio, which is almost like an extra safety precaution against risk. But Lighthouse's portfolio is top quality. It cannot invest in assets rated below single-A. It holds 64its portfolio in triple-A rated assets, 22n double-A assets and 13n single-A. This compares well to other similar issuers. Sigma holds 49its portfolio in triple-A assets, 23n double-A, 28n single-A and 1n triple-B assets. Although no funding targets have been set by Lighthouse for the year ahead, it has $5 billion in outstanding debt in US MTNs, US CP and Euro-MTNs and plans to be a frequent issuer. According to Curcio, at Liberty Hampshire, the aim is to shift the balance of this debt so that about one- third or one-half of it will be generated off the Euro-MTN programme. To do this, the issuer will be very active and accommodating to investors. Curcio says: "We're a dollar company but we will look at all currencies and structures. We want an all-in Libor level we're comfortable with." Rab Ker is head of short- and medium-term finance at Credit Suisse First Boston (CSFB) which arranges Lighthouse's Euro-MTN programme. He believes much of Lighthouse's success in the US can be attributed to a determined effort to cultivate investor demand beyond the more conventional one-year trade. He says: "Of their approximate $1.5 billion new issue volume in the US this year, nearly 40as been in the two- to seven-year maturities. We expect that they will be equally active in working with investors out the curve in Europe as well." Initially, heavily structured trades, like credit-linked notes, will be avoided. Walter, at Liberty Hampshire in Chicago, says the funding strategy will resemble that of the US market. He says: "It will be along the same lines to the extent that the market is interested. We like to look at places in the market others haven't looked at in order to please investors." Initially, Lighthouse is content to cater for the US investor base and investors in the Euromarket. Curcio, at Liberty Hampshire in London, says: "We've been told the Japanese are not big investors in special purpose finance companies. We have no objection to selling into Japan but that's the feedback we're getting." As more structured finance vehicles like Lighthouse tap the Euro-MTN market for funds, and more guaranteed investment contract- (GIC) backed issuers sign programmes, the competition for investor attention will be tough. The amount of funds available for top-rated, secured notes from such financial vehicles isn't limitless. Ker, at CSFB, says: "The number of new programmes in the pipeline has us all contemplating issues of supply and demand. However, issuer opportunities are clearly abounding in a market that is engaged in the euro, diversification of investment portfolios and growth."

The market turned a corner in 1999 with the launch of the first online trading system for Euro-MTNs. And by the end of this year it is expected that all major banks will have internet dealing capabilities. For traders it could be a case of sink or surf. But banks must watch out that technology doesn't become their worst enemy. If market pressure leads to one central online system dealers may end up causing their own disintermediation. Over the next few years significant changes are set to take place in the way business is done. Online systems will give investors an extra way of communicating with dealers and buying notes. Warburg Dillon Read (WDR) was first off the starting blocks into online trading for Euro-MTNs. It launched its system on October 21 1999. But other firms have been quick to follow in its footsteps, including BNP Paribas Group (BPG), which is rolling out IssueMaster to its clients, Credit Suisse First Boston with PrimeDebt, Merrill Lynch with its Ideal system, and Morgan Stanley Dean Witter (MSDW) with ClientLink. Yet problems could lie ahead. If banks show different pricing levels for the same issuers it will create confusion rather than transparency. And in the event of this the market will demand one common system. Marc Falconer, director, Euro-MTNs, at Salomon Smith Barney (SSB), believes this is a strong possibility. He says: "It would require the co-operation of several market leaders. It would be a fine show of foresight by the market." But Daniel Cogoi, global head of Euro-MTNs, at BPG, is concerned about the implications. He says: "Eventually when all banks have online trading there'll be room for less than 10 main players. But the really interesting part will be whether we move towards having one common online marketplace in the future. This could damage the dealer's own business, let's hope dealers act accordingly." At the end of February 2000, WDR claimed to have generated $1.5 billion-worth of Euro-MTN business from its internet trading system. But while revelling in its early lead, the bank is looking ahead. It knows it cannot afford to sit back and become complacent. Gavin Eddy is executive director and head of Euro-MTNs, at WDR. He left Merrill Lynch in May, last year, to launch WDR's web trading system and head up the desk. He says: "An adventurous bank might look to float their trading platform in a few years as a joint venture with other dealers. With a common platform and live pricing feeds from each of the dealers, execution would simply become a function of the best swaps and derivatives pricing. This would dramatically squeeze out marginal players. In a commoditized market like Euro-CP this could be a reality, but I think the complexity of the Euro-MTN market will make the process slower." While investors and dealers may be keen to increase the efficiency of trading through online systems, most banks admit that many issuers have concerns about the technology for various reasons. Eddy, at WDR, explains that this was worse in the early days. "Being the first bank to move in this arena, WDR had to address issuers' fears and anxieties. However, the majority of borrowers are positive. Most realize this is the way the market is developing. It caused a bit of a storm at the beginning but there aren't many who have reservations about our system now," he says. But Michael John Lytle, vice-president, Euro-MTNs, at MSDW, points out that one particular portion of borrowers will be badly hit. He says: "In general, the issuers' response has been positive. But some issuers are suspicious and nervous, especially arbitrage borrowers. They like inefficient markets because historically that is what provided them with the opportunities." Issuers voice concerns that when pricing levels are fixed up on a screen they will forfeit flexibility and control. If an investor only chooses to look online and not speak with dealers he might fail to realize that some borrowers' levels are negotiable. Falconer, at SSB, explains: "Many borrowers have a different approach to different markets, but this can't necessarily be shown on a screen. For example, if an issuer has not done a yen trade in a while, it might be prepared to be flexible on its funding level to get a deal away in Japan." However, Sean Murphy, director and head of funding, at Citibank Credit Structures (CCS), considers it is the responsibility of issuers to ensure their levels are right. CCS speaks with WDR every day to confirm its pricing levels shown on the system. "We want what's up there to be an accurate reflection of our posting levels, but we are not committed to deal at the screen rates," Murphy says. It's up to issuers to be vigilant, checking levels and keeping them realistic. If issuers take this responsibility there is no risk." Some market participants are critical of online systems for Euro-MTNs because they believe the market should be private. Some sceptics consider information about structured notes and the pricing of private transactions should be confidential. WDR's Eddy, thinks this is an unrealistic and outdated view. He says: "I don't agree that the market is private any more. With the various information systems, databases and media devoted to the market, very few trades are not seen these days. It's very difficult to keep trades a secret now." WDR is surging ahead with the next phase of its system. This includes ChatLite, an interactive page which allows dealers to chat to investors and issuers in real time on the web. This can also be used as a proxy order form for clients. The system is also being updated to include more swaps prices and mark-to-market evaluations, as well as dealers' commentary and trading analysis. Online trading is suited to homogenous, regulated securities. Systems only show levels for fixed and floating vanilla issues. As a result, many dealers consider its value will be lost in the Euro-MTN business because it cannot be used for highly-structured notes. Over three-quarters of the total $201.69 billion-worth of non-syndicated issuance, traded between March 1 1999 and March 1 2000, was plain vanilla, according to MTNWare. This is for trades of less than $250 million and with a term greater than 364 days, excluding self-led deals and issues off financial repackaged facilities. But dealers report that the structured market is growing. And this is often where the most value is found for banks. Falconer, at SSB, is sceptical that accurate pricing for such notes can be done online. He says: I'm sure many types of securities can be traded on the web, but for highly-structured MTNs I question how quickly it can happen. I believe the success of e-trading will be limited to vanilla products." Cogoi, at BPG, disagrees. He thinks structured notes are becoming more regular and could be traded on the web. He says: "Its a matter of volumes. The more you sell and volumes increase then patterns are seen and dealers recognise structures. It's very rare now that any structure is completely new and different. Ideas tend to repeat. Having said that, there are parts of the market that are highly tailor-made." And John Key, head of e-commerce in debt markets, at Merrill Lynch, is optimistic of what can be achieved. He says: "Structured transactions by their nature are tailor-made and a machine will not easily replace the work of the dealer. But that is not to say it can't be done. There are applications that allow investors to put their requirements into set parameters and the system can price the trade." Yet, for more complex trades most dealers agree that investors usually want to talk through ideas to get extra market colour. Lytle, at MSDW, says: "Short-dated vanilla MTNs are suited to this type of technology, but I don't think investors are going to be happy buying structured products on the net. For these notes, they want a dialogue and expect advice from dealers as they are usually taking a specific view on a particular market." Kreditanstalt fur Weideraufbau (KfW), issued $716.5 million-worth of structured notes in 1999, according to MTNWare. Frank Czichowski, head of capital markets, at KfW, says: "If KfW was to post general pricing levels it could be misleading. I don't think it would add transparency. For short-term vanilla trades, showing levels is advantageous and can improve transparency. But since most of KfW's MTNs are structured notes it is difficult to post realistic levels - it is a question of market conditions and risk at a particular time." But the many benefits of online trading are clear. It saves investors and traders time and banks claim it will improve market transparency and get more information to clients. Most banks' websites include a Euro-MTN page with live issuer website links, credit research and structure ideas. But WDR's system does not show secondary levels for issuers. And some sceptics argue therefore, that there is no more transparency created from such a web page than investors get from speaking to a dealer on the phone. Eventually secondary levels could be shown, as they are for vanilla Eurobond issues, but there are no plans yet to do this for Euro-MTNs. On the plus side, Cogoi at BPG, states that web systems radically make trading more efficient because they can cut out wasted time. He says: "Some issuers have commented that they don't like it, but most dealers don't have the time to discuss a difference of one or two basis points. From the bank's point of view it's very expensive to have a trader talking this over and not getting other business done." Yet many borrowers believe their needs are being overlooked as dealers concentrate on getting web systems up and running. Advocators of online trading are defensive and claim it will not replace client relationships. They argue it is a complementary method of communication, giving investors more choice. Key, at Merrill Lynch, says: "Clients want ease of access to banks. The power of the web is the power of information and the speed in which it gets it out there. In certain areas there is resistance from investors and issuers, but ultimately it's going to be part of the everyday way we do business. Within two years people will look back and wonder what all the fuss was about." Banks launching online systems must face hurdles of security and legality. Firms are dedicating a lot of time and money to ensure their systems are secure. Key, at Merrill Lynch, admits the bank sacrificed time in its log-in process to ensure tight security. And Lytle, at MSDW, agrees it is a double-edged sword. He says: "There are a variety of security issues. We have spent a lot of time making our system secure, but greater security tends to make a system more cumbersome and less user-friendly. You have to find a balance." Security concerns will be heightened further with automated trading. WDR claims click-and-trade is already possible on its Euro-CP system, although the increased complexity of MTNs renders it more difficult for this product. Yet dealers all agree that within a few years it will be a reality. And when investors are able to simply click and trade there are many more implications which will be thrown up, as Murphy, at CCS, explains. He says: "For issuers offering a wide variety of products and reliant on swaps, if an investor could simply click and trade there would be financial risk. Borrowers wouldn't know at what level they could swap the deal out. An issuer also needs to avoid the possibility of multiple execution, where he finds that his funding requirement has been filled by more than one dealer. Unless the Euromarkets become sufficiently liquid to support an allocation process, even firm Libor-based offerings will need to be executed over the phone." Market participants know that they've seen the future of the market in online trading. And whether they like it or not progress in this area is inevitable. No doubt within the year online trading will have become second nature. Although many still need reassurance that this technology is the right path for Euro-MTNs. Czichowski, at KfW, has an optimistic but cautious view. He says: "Online trading will provide access to the market for more investors, but the market is a long way off automating structured transactions. These systems are improving the amount of information, but they won't provide liquidity in themselves, you still need dealers to support the technology." Gmac was one of the most active corporate issuers in 1999. It has reservations about some aspects of the technology but sees benefit in the way it can be used to reach more investors. Cynthia Ranzilla, vice-president, at Gmac, says: "Anything that gets information to investors in a more convenient manner is a plus. The long-term value will come if dealers are able to expand their distribution network." Banks are stressing to clients that their online systems will not replace the service of dealers, but act to enhance it and make it more efficient. Eddy, at WDR, claims the technology is about giving customers greater choice. Also, he believes the bank's strategy of being more transparent and offering up extra information will make it a tough contender among the competition. He says: "Investors will be more endeared to dealers who are transparent about pricing; showing levels and giving investors the tools to price simple structures for themselves." Yet Falconer, at SSB, points out that due to the nature of the market the value of internet systems could be limited. He says: "The Euromarket is still maturing compared to the US. It needs to be more homogeneous, and levels need to be closer to those in the secondary market before online trading can really work." That said, Falconer concludes that the market has a tendency to surprise. And where technology is involved perceptions can change very rapidly. He says: "European investors' appetite for credit has grown much quicker than people expected. The market has proved itself adaptable so there is a case to be optimistic."