www.securitiesindustry.com
JUNE 11, 2007
NEWS DESK
Another Bisys case; Muriel Siebert’s
dividend giveback; optionsXpress’
portfolio margining; and more.
PAGE 3
PERSPECTIVES
GUEST COMMENT: “The best way to
reduce the level of risk and potential
errors” in administering and expensing stock option grants “is to let
your computer do the work,” says
Two Step Software’s Gary Levine.
PAGE 4
“Program staff reexamined many legacy data
management protocols and discovered
problems that, if not corrected, could continue
to adversely impact how certain limited
information sets are loaded into the database.”
—FinCEN statement of April 26
VIEWPOINTS: The Central Funds
Facility, Clearstream’s answer to Europe’s investment funds settlement
challenge, was supposed to be available
to Luxembourg transfer agents in the fall,
“but the very positive
results of the pilot will probably lead
us to advance the full launch,” says
Philippe Seyll. PAGE 6
the agency, Steve Hudak. But delay
is clearly the operative word.
“We need to be vigilant in monitoring for any transactional problems that may arise,” explained Ed
Dorris, FinCEN’s chief information officer. “This modernization
strategy affirms our responsibility
to make the financial sector’s contributions to law enforcement and
national security more useful,” he
said. “This temporary delay allows
Continued on page 17
ORIGINAL SOURCES: Sifma president
Marc Lackritz says the consolida-
tion of self-regulatory agencies
needs to be followed by “meaning-
ful and regular interaction with all
stakeholders throughout the rule-
making process.” PAGE 8
DEPARTMENTS
TRADING: Liquidnet sets its sights on
Japan and four other countries as it looks
to bring its buy-side block trading model
to the Asia-Pacific region. PAGE 10
(9-months ending March 31, $ millions)
2007
2006
COMPLIANCE: Hong Kong’s securities
regulator puts an official in charge of
China affairs, signaling closer policy cooperation with the mainland. PAGE 11
TRADING : The Q-Wixx platform for
credit derivative portfolio trading goes
live, with broad support voiced by buy-and sell-side participants. PAGE 12
TRADING: Investment Technology
Group agrees to acquire Chicago agency
brokerage and futures commission merchant RedSky Financial. PAGE 12
Bumps Emerge On
Road to Completion
Of SRO Merger
BY CAROL E. CURTIS
The dismissal last month of
a class-action suit seeking
to block the merger of self-regulatory organizations (SROs)
NASD and NYSE Regulation
turned out not to be the last po-impact on the way some informa- tential obstacle to the deal, as
tion is loaded into FinCEN’s data- was assumed at the time (as re-base. The IRS makes BSA data ported online by Securities In-
available to law enforcement agen- dustry News, May 7). Even as the
cies through its enterprise com- principals continue to say that
puting center (ECC) in Detroit. the merger will close this
FinCEN and the IRS have agreed month, speed bumps have
to work out the bugs in their exist- emerged that could, if not de-ing technology before introducing rail the merger, alter the way it
any new products or procedures. is executed.
That was characterized as a Richard Greenfield, the at-
“technical capacity delay on Fin- torney who represented plaintiff
CEN’s end” by a spokesperson for Continued on page 15
Bisys Alternative Investment Business Shines
Citigroup getting unit with BBiissyyss SSeeggmmeennttRReessuullttss
double-digit margins, growth
Investment Insurance
BY JANICE FIORAVANTE Services Services
While Bisys Alternative Investment Services, $474.2 $190.2
441.8 182. the fourth-largest hedge fund administra- 9
tor, was looking at ways to fend off competition from Operating earnings 2007 $53.4 $41.3
prime brokerages and others, it was considering dif- 2006 51.3 48.6
ferent “structures” for servicing that fast-growing 2007
segment of the financial industry. In that strategic 2006
evaluation process, “we were showing the company
to different firms,” said the Bisys Group unit’s president, William Neville. “When we talked to Citi, it
seemed like the right fit.”
On May 2, Citigroup announced a definitive
agreement to acquire asset management industry
outsourcer Bisys, which had been on the selling block
Delay of Revised SAR Deadline Latest IT Setback for FinCEN
System glitches also affect
Treasury AML agency’s
cooperation with IRS
BY JOHN SANDMAN
Last month the Treasury Department’s anti-money-laun-dering (AML) arm announced that
it was delaying the June 30 effective
date for banks, brokerages and most
other financial services companies
to file certain revised suspicious activity reports (SARs). The Financial Crimes Enforcement Network
(FinCEN) had set that date last December, with the goal of simplifying the reporting process through
increased automation and, ultimately, reducing the redundancies
of multiple firms citing the same
suspicious activity in their filings.
The delay does not affect the
basic SAR filing requirement,
which will continue to be mandated using paper forms. But following last year’s abandonment of BSA
Direct, the Web-based filing portal that would have made SARs
available electronically to law enforcement agencies, it is another Revenues
setback that sources say may result
in the deadline being pushed to
December.
FinCEN’s struggles to upgrade
legacy IT systems don’t stop there. Operating margin
A recently initiated plan, in cooperation with the Internal Revenue
Service and incorporating a newly
established Bank Secrecy Act (BSA)
data quality management program,
has run into problems that FinCEN said could have an adverse
11.3% 21.7%
11.6% 26.6%
Source: Company reports
for nine months, for $800 million—its net cost after
the sell-off of insurance and retirement services businesses to private equity firm JC Flowers & Co. Bisys
ran into problems with regulators over improper
kickback payments to mutual fund companies in its
Continued on page 17
TRADING: Singapore Exchange chooses GL Trade technology for the upgrade of its order management system.
PAGE 15
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People in the News
Company Index
People Index
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On the Web
Risk Benefit Seen in Netting
Service for Prime Brokers
BY CHRIS KENTOURIS
In a risk- and cost-reducing initiative, the Fixed In-
come Clearing Corp. (FICC) subsidiary of Depos-
p3 itory Trust & Clearing Corp. (DTCC) will be allowing
p18 prime brokerages to either match or net transactions
p18 in U.S. Treasuries on behalf of their hedge fund clients
through its government securities division (GSD).
DTCC said the service, in which prime brokers
will be assigned identification codes for each hedge
fund client, will be available in the fourth quarter.
The New York-based organization would not iden-
tify the eight prime brokerage customers expected to
sign up directly, but it stands to reason that the lead-
Continued on page 16
Instinet’s new executive team;
Project Boat signs customers;
ICE buys ChemConnect.
See Breaking News at:
www.securitiesindustry.com.
Choice in Managed Accounts
Pershing makes open-architecture move
BY JOHN HINTZE
With the recently launched Managed Account Network (MAN), Bank of New York Co.’s Pershing subsidiary is giving its correspondents’ advisers ready
access to five independent managed-account providers
and consolidating their customers’ financial data on the
clearer’s NetExchange Pro adviser workstation.
It is the latest, major step by Jersey City, N.J.-based
Pershing in the direction of open architecture, in which
financial advisers are given a menu of managed accounts from different providers. MAN’s options are
Lockwood Advisors, which Bank of New York has
owned since October 2002, as well as Envestnet Asset
Continued on page 16
