Seeking to expand the market for its municipal book-running system, Dalcomp Inc. is broadening the availability of the system's electronic order-entry feature, allowing non-Dalcomp subscribers to use it.
First launched last July, the feature allows members of a negotiated underwriting syndicate to tap into the senior manager's database and directly submit orders for individual portions of a bond deal, instead of faxing or phoning in each individual order. The system had been available only to Dalcomp users, which executives say prevented it from working to its full potential.
But by next week, members of the syndicate who want to make use of the feature but do not use Dalcomp will be able to submit their orders through Thomson Municipal Market Monitor, or TM3, an Internet-based news and data service covering the municipal marketplace. Both Dalcomp and TM3 are owned by the Thomson Corp., which also owns The Bond Buyer.
"The immediate benefit is that there are more people who can enter orders electronically, and it saves the senior managers time and allows the issuers to know what's happening with their deal," said Cheryl Horowitz, Dalcomp's director of marketing.
Firms that don't subscribe to TM3 will be allowed to evaluate the service free for three months. Currently, senior managers who use the electronic order-entry feature are charged $500 per transaction, prorated for the number of syndicate members who can use it.
This means that if there are 10 members of the syndicate, and only five can use the electronic order-entry system, they are charged $250. After the evaluation period, Dalcomp is expected to retool its pricing mechanism.
While Dalcomp's book-running system has become somewhat of an industry standard, the electronic order-entry feature, because of its limited availability, has not yet gained that status, according to Horowitz. However, the expansion is expected to change that, she added.
Tom Greco, a vice president in the municipal department at Lehman Brothers, has been using the system for the past year. For the most part, he said he likes the speed and efficiency it allows.
One improvement Greco says he'd like to see is the ability to submit orders on multiple maturities, as opposed to the current one-at-a-time entry format, which - when coupled with a sluggish connection - can defeat the value of the Internet. Sometimes it's just easier to pick up the telephone.
"If guys have several orders and the Internet is slow, it would be quicker, more efficient for them just to call us and say 'here's our order, 50 bonds in '02, 50 in '03, 125 in '05,' rather than sitting (at the computer) and saying '50 submit...,' " Greco said. "I've been on the Internet when you've just wanted to pick your terminal up and throw it out the window."
Members of the underwriting syndicate who aren't connected to Dalcomp's book-running system have been relying upon the telephone to place orders, Greco said. Using the telephone instead of receiving a direct order can be labor- and time-consuming, while also increasing the potential for human error, he added.
The electronic order-entry system's initial launch was tainted by a series of minor errors - such as incomplete text fields - and actually had to be shut down for 10 to 15 minutes to correct a problem, Dalcomp's Charlotte Penrod said at a presentation last week. The errors were handled immediately and the system has been running "error-free" for the past five months, she added.
During the system's early days, Dalcomp went through extensive "hand- holding" and double-checking of transactions to help boost the users' comfort level, Penrod said. She added that they're always open to feedback and are continually looking to find new improvements.
"We want you to like this. We want you to use it," Penrod told potential clients. "Whatever we can do to accommodate the users, we will."
And at least one underwriter with a major Wall Street firm, who asked not to be identified, likes that philosophy and believes the product has the potential to evolve into a valuable tool for municipal professionals.
"I think they're on the right track, offering the service to the non- book-running customers," the underwriter said.
During a retail order period, where a deadline for faxed or phone orders is established, the bulk of the orders tend to come in around the same time: the end of the day.
"You could literally be stuck for hours after that deadline, entering hundreds of orders for individual firms," he said. "This way, the workload is spread out a little and people are more likely to put their orders in during the day as they're getting them. It gives you a better read on the status of the transaction."
When the electronic order-entry feature was first introduced, senior managers were concerned about maintaining the personal interaction with syndicate members, and about possibly not getting a good read on who was putting in "priority" orders, he said. In response, he turned to the telephone for such orders.
"If I'm going to use EOE, I want to use it to its full capabilities," the underwriter said. "I turned to Dalcomp and said, 'Give me a report that during the course of an order period I can go in and print out, all the priority orders ... so I can have that information at my fingertips.' That's what they're working on now."
While a lot of syndicate members weren't entering their orders through the system early on, some of the lead managers used peer pressure to reduce manual order entry, he added.
