MAY 14, 2007
NEWS DESK
Barclays enhances PowerFill;
Hotspot adds Traiana’s NetLink;
Aleri allies with Sybase. PAGE 3
PERSPECTIVES
AEI’s Alex Pollock calls for a market
verdict on Sarbanes-Oxley; Eliza-
beth King of the SEC revisits penny
options. PAGE 4
ORIGINAL SOURCES: In one of a
continuing series of trading-en-forcement actions, the SEC finds
that Zurich Capital Markets “
provided financing to four market-timing hedge funds that employed various deceptive tactics to invest in
mutual funds” that prohibited market timing. Zurich agreed to a
penalty and profit disgorgement totaling $16.8 million. PAGE 6
SPECIAL REPORT
From the continent-spanning scope
of exchange mergers and alliances
down to the micro level of order-
routing and liquidity-seeking, market structures are in flux. This
week’s special report
looks at how NYSE
and Nasdaq are reacting to competition from alternative trading
venues, and how Asian market developments are paralleling those in
the West. “Everyone is searching to
understand what trading and price
discovery look like in an environment that is much more electronic,
and they’re experimenting with different models,” says UBS managing
director Larry Leibowitz. PAGE 15
DEPARTMENTS
TRADING: NYSE Euronext chief John
Thain spells out his scenario for “less
than five” global, multiproduct exchanges “and lots of smaller ones.”
PAGE 10
“Serious settlement failures
persist and companies are
still on the threshold list
for too long. ... Increased
disclosure and transparency
would be beneficial to
this situation.”
—U.S. Chamber of Commerce
comment, April 26
Business Group
Weighs In on
Reg SHO Change
BY JOHN HINTZE
The U.S. Chamber of Commerce entered the short-selling fray last month with a comment letter to the Securities and
Exchange Commission in support
of a proposed amendment to Regulation SHO that would eliminate
two regulatory loopholes permit-ting broker-dealers to maintain
so-called open fails indefinitely.
The Chamber, which represents
3 million companies, not only sided
with individual investors that believe that the Reg SHO loopholes
offer broker-dealers an unfair advantage, but also suggested additional changes.
Hardy Callcott, a partner in law
firm Bingham McCutchen’s San
Francisco office and a former SEC
counsel, said, “A well-reasoned
comment, particularly from a credible source like a bar association or
an industry trade group, may be
persuasive even if it’s in the minority of commenters.” The U.S.
Continued on page 26
Best Execution in Canada: Regulators
Look to Europe and U.S. for Guidance
BY CHRIS KENTOURIS
Canadian regulators are looking to gain from the experiences of their U.S. and European 11
counterparts as they move to require buy- and sell-side firms to
prove that they have provided best
execution to their clients. The
Canadian Securities Administrators 6
(CSA), an umbrella organization
for financial regulatory agencies
across the country, issued proposed 3
rules last month that parallel provisions in the Securities and Ex- Positive
change Commission’s Regulation
National Market System (NMS)
and Europe’s Markets in Financial
Instruments Directive (MiFID).
The measures are far from identical, but their common goal is to
assure the best deal for investors
ATS Attitudes:
Canadian Brokers’ Views
Negative Neutral
Source: Forefactor survey of 20 firms
while stimulating competition in
businesses that have been historically dominated by exchanges. Reg
NMS will be phased in on a pilot
Continued on page 28
U.K. Pensions Group Automating STP
velopment Group (IMSDG) with
administrators Capita Hartshead,
Mercer Human Resource Consulting and Watson Wyatt. Their
initiative, called ViaNova, is tout-ed as a “new way for sending trade
orders, confirmations and requests
for prices electronically.” The message types encompass subscriptions, redemptions, price reports
and corrections—which institutional fund managers, distributors
and transfer agents already use for
investment fund transactions on
the Swift messaging network.
Continued on page 29
BY CHRIS KENTOURIS
Five U.K. pension fund managers and administrators have
adopted the International Organization for Standardization’s ISO
20022 message types and Swift’s
SwiftNet network to automate an
otherwise manual process for communicating trade instructions and
confirmations.
Fund managers Barclays Global Investors (BGI) and Legal &
General Investment Management
have coalesced under the banner
of the new Investment Managers
Straight Through Processing De-
Globalization Trends
Prompting SEC Shift
On Brokerage Rules
BY CAROL E. CURTIS
Citing the realities of globalization, the director of
the Securities and Exchange
Commission’s division of market
regulation said last week that the
regulator is planning to ease restrictions on foreign broker-dealers doing business in the U.S.
Erik Sirri, who has held the senior regulatory post since September, told the Security Traders
Association’s (STA) annual
Washington, D.C. conference
that the commission may drop a
current requirement that foreign
broker-dealers operating in this
country play by the same rules
as their U.S. counterparts.
“We are changing our thinking” about trading foreign shares,
Sirri revealed. “The reality is that
institutional investors are reaching foreign markets in a fairly efficient way,” he said. “They work
around the protections. And for
retail investors, electronic brokerage platforms deliver access
[to foreign markets]. Does it
make sense to prohibit a foreign
broker-dealer from doing business in the U.S.?”
Today, a foreign brokerage
that wants to operate in the U.S.
generally has to comply with the
same obligations as a U.S. firm,
including registering as a broker-dealer with the SEC, joining self-
Continued on page 26
TRADING: Ahead of last week’s an-
nouncement that it introduced con-
vertible bond trading, its first product
class touching on equities, Thomson
Trade Web introduced specified-pool
mortgage trading. PAGE 10
▼
People in the News p3
Company Index p30
People Index p30
▲
On the Web
BNY ConvergEx’s Liquidity
Management Technologies;
Interactive Brokers’ IPO; and
more. See Breaking News at:
www.securitiesindustry.com.
Bond Traders Draft Market Guidelines
Unveiling set for June meeting with New York Fed
ments (repos) and government was in response to concerns raised
bond futures. The recommenda- last year by regulators from the
tions are aimed at all Treasury Department,
participants in the Trea- Securities and Exchange
sury securities market, Commission and Com-including institutions, modity Futures Trading
hedge funds and central Commission about al-banks in addition to leged “squeezes” in Trea-dealers, Wipf said. sury repos and futures.
TMPG released a Thomas Wipf In a squeeze, a trader
draft of the guidelines on Feb. 9, builds up a large position in a sought-when the New York Fed announced after bond to keep it from being
the group’s formation. The effort Continued on page 29
BY SHANE KITE
The securities industry’s Treasury Market Practices Group
(TMPG) plans to unveil its trading
guidelines before a June 14 conference at the Federal Reserve Bank of
New York, said the group’s chairman,
Thomas Wipf, who is also managing director and head of global financing at Morgan Stanley.
The guidelines are intended to
clamp down on abuses in trading
U.S. Treasury repurchase agree-
