www.securitiesindustry.com
MAY 7, 2007
NEWS DESK
Cantor’s Lutnick slings some
zingers; Eurex and ISE volumes
jump; and more. PAGE 3
U.S. Equity Options
(millions of contracts traded)
PERSPECTIVES
COMMENT: Penson Worldwide’s Andrew Koslow assesses portfolio margining—the good, the bad and the
ugly. One unresolved issue: Who will
be liable in investor suitability cases.
PAGE 4
2002 2003
2004 2005 2006
Source: ISE
ORIGINAL SOURCES: The SEC’s
Paul Atkins worries that the failure
to do a proper cost-benefit analy-
sis of regulations
may put U.S. markets at a disadvantage as a globalization wave sweeps
across the securities
industry. He blasts, as an example
of poor rulemaking, Reg NMS as
“a carte blanche for unsupervised
meddling by the SEC staff,” adding,
“the real consequence will not be
known for years.” PAGE 6
DEPARTMENTS
TECHNOLOGY: The road to globalization can get complicated, say
Sifma conference panelists.
PAGE 10
TRADING: Townsend Analytics,
which had a link to the International Securities Exchange options market, connects to the ISE Stock
Exchange. PAGE 11
TRADING: Citigroup, in a first, distributes algorithms through agency
brokerage NeoNet. PAGE 11
DATA MANAGEMENT: With a
CBOE database, Penson’s Tick
Data supports options arbitrage.
PAGE 12
Eurex-ISE: One
Partnership, Two
Trading Platforms
BY JOHN SANDMAN
The $2.8 billion acquisition
by Eurex of the International Securities Exchange (ISE)
that was announced last week will
create the largest transatlantic derivatives marketplace, with 545
exchange members and 2.1 billion contracts traded annually, few
overlaps between the businesses,
and therefore the prospect of a
seamless merger process with $50
million in annual cross-selling and
efficiency gains by 2012 already
identified.
Yet this is apparently not a
classic case of melding disparate
business units and deciding upon
one or another best-of-breed
technology. Each exchange will
maintain separate trading platforms, ISE for contracts in U.S.
dollar denominations and Eurex
in euros. As options become an
increasingly international asset
class, the linkage to the biggest
Continued on page 17
Citi a Hedge Fund Administration Leader
Big-bank buyout of
Bisys is latest in
consolidating field
BY CHRIS KENTOURIS
Citigroup’s pending takeover of
Bisys Group of Roseland, N.J.
accelerates the consolidation of the
hedge fund administration market
into a handful of megabanks as
other, more specialized players fight
to stay in the game. Source: Hedge Fund Manager HFM Week
The transaction, which involves
the sell-off of two Bisys divisions several years to strengthen their po- $11.85 a share, or $1.45 billion.
to leave Citi with sizable mutual sitions in fund services. In the bur- Another 15 cents a share will
fund and hedge fund administra- geoning hedge fund field, Citi’s come from a special dividend to
tion businesses, puts the New York Bisys acquisition will rank fifth be paid at closing, which is ex-
banking giant in the same league as among administrators after the pected before year-end, bring-
Bank of New York Co., HSBC merger of Boston’s State Street and ing the gross purchase price to
Holdings, JP Morgan Chase & Co. Investors Bank & Trust Co. is taken $1.47 billion. Private equity firm
and State Street Corp., all of which into account (see table). JC Flowers & Co. will then buy
have used acquisitions over the last Citi is paying Bisys stockholders Bisys’ retirement and insurance
services division, leaving Citi’s
For Data Management, Broadridge net cost at $800 million.
Aligns With GoldenSource and IBM Bisys’ fund services and al- ternative investment services
BY CHRIS KENTOURIS The first phase of the imple- units have mutual fund, hedge
Broadridge Financial Solutions, mentation pertains only to refer- fund and private equity fund
formerly the brokerage services ence data—descriptive information clients. The assets under man-group of Automatic Data Process- about securities—but it will subse- agement amount to $400 billion
ing, is offering an enterprisewide data quently be expanded for business in mutual funds, $231 billion in
management service through an al- entity information and other data, hedge funds and $63 billion in
liance with GoldenSource Corp. and according to Richard Stumm, the private equity.
IBM Global Business Services. Broadridge VP of business devel- Of Bisys’ 2,500 employees
GoldenSource’sdatamanagement opment in charge of the Global about 1,400 work in alternative
software is underpinning what Broad- Reference Data Solution. investments. The company ser-ridge has dubbed the Global Refer- The new managed service offers vices offshore funds from
ence Data Solution. The IBM Corp. an infrastructure to capture and col- Dublin, Bermuda, the Cayman
unit is the “preferred systems inte- late data from both internal client Islands and Hong Kong. Citi
grator” to help users distribute the sources and commercial vendors, as does not break out the number
data to their downstream applications. Continued on page 18 Continued on page 14
Hedge Fund Assets Under Administration
($ billion as of November 2006)
Single-Manager Funds of Funds Total*
$310 $105 $415
174 84 259
123 134 257
151 52 203
143 43 185
145 21 165
142 — 142
56 77 133
100 23 123
86 21 107
Citco Fund Services
HSBC Alternative Fund Services
Fortis Prime Fund Solutions
Bisys Alternative Investment Services
IFS (State Street Corp.)
Investors Bank & Trust
Goldman Sachs
UBS Fund Services
GlobeOp Financial Services
Caceis Investor Services
* Some totals are off slightly due to rounding
TRADING: Jones Trading names Citi
electronic trading veteran Will Geyer
as president and COO. PAGE 12
▼
People in the News
Company Index
People Index
▲
On the Web
ICE opening clearinghouse
in London; ITG going
self-clearing.
See Breaking News at:
www.securitiesindustry.com.
Reuters Buying Data-Search Company
ClearForest technology feeds navigation needs
B Y JEFFRE Y KU TLER pected to close within a month, will
p3 euters Group announced an make Reuters an owner of entre- p18 R agreement last week to acquire preneurially developed data and text
p18 ClearForest in a bid to searching and analytics
own and build on ad- technology, which has
vanced techniques for become a hot commod-
analyzing data in many ity throughout the busi-
forms and formats and ness world. The de-
putting it into necessary mand for bespoke, so-
context for securities re- phisticated searching in
search, trading strategies Gerry Campbell the financial industry
and other applications in the finan- was reflected in at least two other
cial industry and beyond. recent deals: Goldman Sachs &
The acquisition, which is ex- Continued on page 16
Another Platform
Bows to Buy Side
Swapstream introduces
dealer-to-client model
BY MELANIE WOLD
Recent signs of hedge fund and
other sophisticated executing
firms’ increasing control and influence over trading systems and strategies included pressure on Europe’s
MTS Group to give them direct access, and an indications-of-interest
(IOI) service from JP Morgan Chase
& Co. subsidiary Neovest that al-
Continued on page 16
