www.securitiesindustry.com
APRIL 30, 2007
NEWS DESK
SEC sits on trade-compression proposal; a new trading course for Jefferies; and more. PAGE 3
PERSPECTIVES
COMMENT: Concerns about the
global competitiveness of U.S. financial markets are reminiscent of
those that surfaced about the economy as a whole in the 1970s.
PAGE 4
Securities Lending Market
US$Bns
3,500
2,500
1,500
U.S.
Europe
500
2003 2004 2005 2006 2007 2008 2009
Source: Celent
GUEST COMMENT: As a window on
how global markets regulation
could evolve as globalization pro-gresses, the SEC’s Roel Campos as-sesses the progress on international accounting standards. PAGE 6
SPECIAL REPORT
Market participants understand more
than ever that as they “invest in the revenue-generating side of the business,
there’s a need to mirror
that in post-trade processing,” says Omgeo’s
Marianne Brown. Yet as
this week’s special report
makes clear, back-office glitches, particularly in the booming derivatives
market, continue to drain IT resources.
Also, post-trade systems in Europe are
being primed for a new regulatory
regime, and fixed-income platforms
provide a range of post-trade options.
PAGE 15
DEPARTMENTS
TRADING: Proliferating liquidity
pools and order types have only increased the complexity that traders
have to deal with. PAGE 8
COMPLIANCE: Former SEC chair Harvey Pitt and Liquidnet founder Seth
Merrin ponder the effects of consolidation and regulation on market structure; and international regulators remain concerned about the lack of transparency in derivatives trading. PAGE 8
Icap Introduces E-securities Lending
Interdealer giant’s Broker Tec serves as tech platform
B Y CHRIS KENTOURIS electronic trading of numerous asset
Interdealer brokerage Icap’s re- classes, expects to build on preex-cent entry into securities lend- isting relationships and operational
ing through an electronic trading links with many of the leading play-platform adds a new competitive ers in the industry. Initially, only
wrinkle to this growing and in- U.K., French, German, Italian,
creasingly automated, multitrillion- Spanish and Japanese equities will
dollar marketplace. be included.
Once an arcane back-office ac- Roy Zimmerhansl, head of elec-tivity, securities lending tronic securities lending
has attracted substantial for London-based Icap,
interest in recent years says the concept for i-from, among others, Sec, as the platform is
prime brokerages and called, reflects in large
their hedge fund clients part the compression of
that use borrowed se- spreads. “There are
curities in arbitrage Roy Zimmerhansl more hedge funds com-strategies, which yield hefty fees to peting based on the same strategies,
lenders that are typically large insti- putting increased pressure on prime
tutional clients. brokers, who in turn put pressure
Icap, the biggest interdealer bro- on agent lenders,” he says.
kerage in the world and a company Zimmerhansl believes that i-Sec
that has become a major force in Continued on page 29
TECHNOLOGY: Reuters extends its
instant messaging capability to Yahoo’s
network. PAGE 11
Mutual Fund Governance Effort
Turns Into a Regulatory Marathon
B Y CAROL E. CUR TIS commission that remains divid-
Just when many observers of the ed on the proposed reforms, in
securities regulation scene were addition to another possible
assuming that the Securities and court challenge from the U.S.
Exchange Commission Chamber of Com-would allow controversial merce, which has
mutual fund governance twice succeeded in
rules to die a quiet death, bringing legal actions
commission chairman aimed at defeating
Christopher Cox has stat- the changes.
ed his intention to repro- Cox dropped his
pose and finalize them, Paul Atkins intention to repro-possibly by the end of the year. pose the reforms in an April 13
But complications are already speech to the Mutual Fund Di-emerging, not least the fact that the rectors Forum in Washington,
SEC chief will have to confront a Continued on page 32
Options Expensing Spurs Technology Demand
BY CAROL E. CURTIS as an expense.
If there is a silver lining to the Further, under new Securities
still-simmering options backdat- and Exchange Commission ex-ing scandal, it may be for the soft- ecutive compensation disclosure
ware companies encountering brisk rules, public companies must ad-demand for solutions to speed com- just their internal compliance
pliance with complicated new ac- controls to track options grants
counting requirements. by executive compensation com-
For public companies’ financial mittees. They must report op-
statements, 2006 is the first full year tions data in easy-to-understand
in which Financial Accounting tabularpresentations, including
Standard (FAS) 123R has been ef- the grant-date fair value, the
fective. One of a series of measures closing market price on the grant
aimed at ending abusive options date if it is greater than the ex-
practices, FAS 123R requires that ercise price of the options, and
the fair value of all stock options the date the compensation com-
granted to employees be recorded mittee or board took action to
grant the option, if that date is
different than the grant date.
Such “prophylactic rules” are
aimed at “eliminating the op-
Continued on page 32
TRADING: Trading Technologies opens
a regional headquarters and technology hub in Singapore. PAGE 11
▼
People in the News
Company Index
People Index
▲
On the Web
Clarification and Conflict in AML Regulations
FinCEN-CFTC Joint Policy Where Data Demands Meet Privacy Safeguards,
Addresses Futures Give-ups Financial Institutions Get Caught in the Middle
B YJOHNSANDMAN B YJOHNSANDMAN The European Union, for example,
Rules proposed in 2003 for cus-
tomer identification in give- B anks and broker-dealers are has a unified approach that would
caught in the middle of dueling appear to solve the problem—unless
up derivatives transactions have be- regulatory mandates when it comes an issue arises first in countries outcome final with the publication of to customer data: the demand for in- side the EU, or even those inside
joint guidance from the Commod- creasing amounts of that data to that have variations on that regime.
p3 ity Futures Trading Commission comply with anti-money-launder- “Data protection requirements
p34 (CFTC) and the Financial Crimes ing (AML) requirements, and pri- have been in place since 1995,”
p34 Enforcement Network (FinCEN). vacy concerns that would restrict Karen Briggs, London-based part-
The guidance, issued April 20, was that access. Firms might risk legal ner at consulting firm KPMG and
the result of ongoing attempts by action by customers while also facing former head of investigations at the
the Futures Industry Association sanctions for falling short of regula- U.K. Financial Services Authority’s
(FIA) to resolve the issue. tory demands. (FSA) enforcement division, said at
The CFTC, which regulates fu- Those demands often come in the recent Alert Global Media con-tures markets, and Fin CEN, the the form of a patchwork of conflict- ference in Hollywood, Fla. “
Euro-Treasury Department’s anti- ing standards that are not consistent pean Union minimum standards set
money-laundering (AML) arm, said across national jurisdictions, further out clear guidelines. Problems
SunGard buys Finetix; ICE
moves its IT to Chicago;
Instinet broadens commission
sharing. See Breaking News at:
www.securitiesindustry.com.
