www.securitiesindustry.com
JUNE 25, 2007
NEWS DESK
New SRO named; e-trading firms
ranked; Leibowitz at NYSE; and
more. PAGE 3
PERSPECTIVES
COMMENT: A recent Morgan Stanley settlement with the SEC points
up the need to address emerging risks
and compliance issues in automated
trading. Firms must screen and train
employees in the trading area “and
regularly reaffirm that [they] are in
compliance,” says PricewaterhouseCoopers’ Jack Moorman. PAGE 4
SPECIAL REPORT
Once shunned by systems managers as
an uncontrollable security nightmare,
instant messaging (IM) has gone
mainstream as an institutional trading tool and for
other critical enterprise
purposes—and functionality is continually improving. “Real
conversations, any news source, any
proprietary data” can be tagged and
delivered to one point, says Lou Eccleston of Pivot Solutions, the maker
of IMTrader. Also in this report, covering major topics from last week’s
Sifma technology conference: AOL’s
IM trading offering, derivatives and
enterprise data management, SunGard on compliance, Siemens on
open-architecture trading. PAGE 13
DEPARTMENTS
TRADING: TD Ameritrade builds
back-testing, automatic execution and
other institution-class functions into
a strategy development tool for individual investors. PAGE 6
CLEARING & SETTLEMENT:Clearstream
chief executive Jeffrey Tessler expresses
concerns about Europe’s planned Tar-
get2Securities settlement system, but says
it could be transformative if “designed
the right way.” PAGE 8
Source: Voltaire, Securities Technology Analysis Center
For High Throughput and Low Latency,
A Host of Technology Options and Tools
BY CHRIS KENTOURIS dicative of the fact that slowdowns
Facing rampant growth in trad- can occur anywhere in the trading
ing volumes, the securities in- chain, and ideally, every one of its
dustry also faces a tough set of tech- links needs to be bottleneck-free.
nology choices as it seeks ways to Market-data volume peaks have
digest and process data at the speed been recurring since the 2001 in-and level of accuracy necessary to troduction of decimal pricing of
satisfy internal, customer and regu- stocks and the resulting narrower
latory demands that themselves are quote spreads. But the best-execu-constantly growing and changing. tion and trade reporting require-
While exchanges take a variety ments of Regulation National
of quote mitigation initiatives, fund Market System in the U.S. and the
managers, banks and brokerages Markets in Financial Instruments
are looking at direct exchange Directive in Europe, along with
feeds, hardware accelerators, penny pricing of U.S. options and
streaming data and event process- the steady growth of algorithmic
ing engines and collocation—plac- and programmatic forms of trading servers in close proximity to ing, are poised to take data volumes
exchanges and other market cen- to further new heights.
ters to reduce the time it takes for That leaves financial firms to
transaction data to travel round- deal with the familiar trade-off be-trip. The range of offerings is in- Continued on page 24
DATA MANAGEMENT: Interactive Data’s
DirectPlus exchange data service is integrated with TradingScreen’s execution
management technology. PAGE 9
Taking Stock of the Latency-Performance Race
Lowering Latency With InfiniBand Benchmarking Claims Get
More Scientific; Norm Is
Down to Microseconds
BY JEFFREY KUTLER
Market conditions change
moment to moment, and
the systems running instantaneous
trade analytics and executions have
to adapt accordingly. How fast they
do that has become the central bat-
tle in the securities industry’s tech-
nological arms race, and capturing
Updates per second a snapshot of that performance can
indicate how effectively systems are
keeping pace.
Mean latency (ms)
Those measures, typically expressed in milliseconds of response or transport times, will also
be changeable according to market
conditions and other, technical
variables, but rigorous methods of
measurement are more in evidence as securities firms and their
vendors seek to define and verify
what they mean by high performance. In at least two instances
last week, reports from the Securities Technology Analysis Center
(STAC) of Chicago and New York
were trotted out to provide independent validation of recent advances in extremely low-latency
performance at extremely high
market-data rates.
For the Reuters Market Data
System (RMDS), Hewlett-Packard
Co. (HP) joined with Intel Corp.
and grid-computing backbone
company Voltaire to deliver what
Continued on page 22
SEC Approves SHO
Changes, Removes
NYSE, Nasdaq Tests
BY JOHN HINTZE
The Securities and Exchange Commission has
approved changes to the regulations governing short sales
for the last two and a half
years, including elimination of
one gaping loophole and setting the stage to tighten or
even remove another.
The SEC also chose to remove the New York Stock Exchange’s Rule 10a-1 “tick test”
and Nasdaq’s similar “bid test,”
the latter coming into effect
after it was granted exchange
status. Those rules prohibit
short selling a security on exchanges at a price below the last
price on the tape, though the
rule applies inconsistently
across the exchanges and, in the
case of the bid test, does not
apply to more volatile smaller-cap stocks. The decision, depending on when it becomes
effective, could raise significant
operational issues in light of the
quickly approaching final implementation date for Regulation National Market System.
On its Regulation SHO
pertaining to short sales, the
SEC decided to eliminate a
hotly disputed grandfather
clause that allowed broker-dealers to maintain indefinitely short positions in which
Continued on page 25
▲
On the Web
Power Costs Fuel
Efficiency Drive
In Data Centers
BY SHANE KITE
Demands for computing
power and the costs of real
p26 estate and energy are peaking at
p26 the same time, leading major Wall
Street firms to retrofit, redesign or
build new data centers that work
better with distributed, cutting-
edge, cooler-running hardware.
New York-based CS Technol-
ogy, which helps Fortune 500
companies through data center im-
Continued on page 26
DATA MANAGEMENT: Thomson Financial allies with Albridge for data consolidation in wealth management and
BT Radianz to support ultra-low-latency algorithmic trading. PAGE 11
▼
Company Index
People Index
Swift opens to regulators; ISE’s
penny pilot pricing; and more.
See Breaking News at:
www.securitiesindustry.com.
Did SOX Kill the U.S. Capital Markets?
And does technology offer any hope for a renaissance?
BY MAUREEN NEVIN DUFFY Commission’s unanimous adoption
Even before the Sarbanes-Oxley May 23 of rules aimed at easing com-Act’s (SOX) provisions went into pliance with the 2002 law’s internal
effect, critics were pre- controls requirements.
dicting dire conse- But the question
quences for U.S. markets lingers: Has SOX
and their global compet- caused the U.S. to lose
itiveness. Statistics show- its edge as a capital mar-ing that initial public of- kets leader? If so, can
ferings are down on U.S. Yankee ingenuity—and
exchanges and up in perhapsthetechnolog-London, Hong Kong William Cline ical innovation on
and elsewhere seem to vindicate those which U.S. exchanges and financial
views. The preponderance of opin- market participants pride them-ion led to the Securities and Exchange Continued on page 22
