www.securitiesindustry.com
NOVEMBER 5, 2007
NEWS DESK
India moves to facilitate foreign investor participation; Fidessa introduces smart-order routing in Canada; Charles River adds Swaps Wire
for interest-rate swaps confirmations.
PAGE 3
PERSPECTIVES
GUEST COMMENT: After a decade-long recession, Japan has bounced
back, says Aite Group’s Sang Lee, and
despite some technical issues, its securities market is “highly liquid and ripe
for continued expansion.” PAGE 4
SPECIAL REPORT
Hedge funds have given a warm
welcome to the portfolio margin accounts being offered by 12 brokerages. Adding complex instruments
to the higher-leverage accounts,
however, will mean that
regulators must approve
new models for managing risk and determining capital requirements, which
could “raise questions about what
kind of models are going to be approved, whose models will be approved, and who will do the” approving, says Fimat’s Douglas Engmann. Also in this report: prime
brokers’ liability concerns, OTC
derivatives technology vendors and
Interactive Brokers. PAGE 11
DEPARTMENTS
CLEARING&SETTLEMENT: A progress
report on the European Central Bank’s
Target2 centralized settlement engine
reveals compromises with central securities depositories, and governance
issues that have yet to be resolved.
PAGE 6
Duncan Niederauer Timothy Mahoney
NYSE Pursues Former Glory in
Joint Venture With Bids Trading
Block-trading venue seeks to reaggregate liquidity
BY DAWN KISSI ing together dark liquidity and the
NYSE Euronext and the Bids displayed-quote liquidity available
alternative trading system on the New York Stock Exchange.
(ATS) are joining forces to create Bids, which is owned by 12 major
an independent trade-execution Wall Street Brokerages, will be-destination that will seek to repli- come a NYSE member in the
cate electronically the block-trad- deal.
ing strengths of the New York According to Bids CEO Timo-Stock Exchange before the advent thy Mahoney, his ATS will contin-of market fragmentation. ue to serve as a liquidity source for
Block Interest Discovery Ser- block traders, providing features
vice parent Bids Holdings and such as trade negotiation, auto-ex-NYSE Euronext will have equal ecution, and the ability to select the
stakes in a joint venture that is ex- minimum trade sizes with which
pected to go live in mid-2008 and to interact.
will execute large orders by bring- Continued on page 26
Dark-Pool Aggregator
Aims to Ratchet Up
Matching Rates
Platform boasts simultaneous
access, increased transparency
BY KATHERINE HEIRES
Frustrated by the inefficiencies,
high costs and low matching
rates of dark pools and alternative
trading systems, agency brokerage
Weeden & Co. and its technology
partner, Pragma Financial Services,
decided to take matters into their
own hands and build a solution.
p3 The resulting platform, OnePipe,
p26 can simultaneously connect to, and
p26 assess liquidity in, 25 dark pools and
alternative trading systems. Green-
wich, Conn.-based Weeden plans to
add seven more by the scheduled
launch in January.
OnePipe utilizes proprietary algorithmic and order-routing technology that assists in the liquidity
aggregation process and, accord-
TRADING: The Tokyo Stock Exchange
and London Stock Exchange are partnering on a Japanese exchange for start-ups that will mirror the Alternative Investment Market’s principles-based regulatory model. PAGE 6
Pandemic Study Says Telecommuters
Could Strain Network Infrastructure
BY JOHN SANDMAN tandem with the Homeland Se-
Financial services firms’ contin- curity Council’s pandemic cogency plans for a pandemic of ordinating committee and in-avian flu rely heavily on the ability teragency working groups.
of staff to work off-site, but a study “We expect high absentee
by the U.S. Department of Home- rates of up to 40 percent or
land Security (DHS) suggests that more, between people taking
telecommuting could have a nega- care of sick kids and keeping
tive impact on the industry’s net- their distance from the pan-work infrastructure. demic,” which the study antici-
“If everybody telecommutes to pated would last from six to eight
the extent that they weeks, said Amato.
can, then we have con- Congestion could
cerns over whether the occur at network
communications in- backbones, he ex-
frastructure can han- plained. “We’re not
dle that,” said Gary talking about the
Amato, director of the first or last mile” he
technology and pro- said, referring to
grams division of the Gary Amato the link between
DHS’s national communications connectivity providers and their
system, at the Securities Industry & users, but the points where bulk
Financial Markets Association’s data is moved so that enterpris-
(Sifma) business continuity planning es can access it.
conference in New York last week. “The chokepoints will be the
The DHS Pandemic Communi- residential areas and the enter-
cation study, which took a year to prises that might not be able to
complete and includes data from 12 handle the changes they’d expe-
financial firms, was conducted in rience,” continued Amato. “Get-
ting to the network is where
most of the congestion will be,
when the load will be bigger
than usual on a daily basis.”
The DHS study concluded
that a typical firm may be able
to handle up to 80 percent of
its workforce telecommuting at
a given time. Amato said, “On
the enterprise side, ask yourself
Continued on page 23
TRADING: An agreement between
CME Group and the Korea Exchange
will see Kospi 200 index futures contracts offered on the Globex electronic trading platform. PAGE 6
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People in the News
Company Index
People Index
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On the Web
Truviso’s SQL-based algo
platform; Tullett’s new e-broking division; and more.
See Breaking News at:
www.securitiesindustry.com.
SuperDerivatives Answers Call for
Credit Derivatives Transparency
CEO says platform addresses subprime-crisis issues
SuperDerivatives seven years ago over credit derivatives.
introduced currency options “In recent months we’ve seen the
pricing; it has since expanded to failure of at least three areas of risk”—
handle an array of product classes. market, operational and model risk—
Last month, the London- and New says CEO David Gershon, who in
York-based provider of derivatives 2000 left Barclays Capital, where he
management tools was global head of for-rolled out a major up- eign exchange exotic
grade to SD-CD, its option trading, to
online credit deriva- found SuperDerivatives platform. tives. “A major example
The enhanced SD- was BNP Paribas and
CD, which the com- insurer AXA, which
pany says has substan- had to temporarily sus-tially increased func- David Gershon pend redemptions on
tionality and price transparency, some of their funds because they
features a dynamic pricing model claimed they were unable to value
for bespoke synthetic tranches, themaccurately.”
which facilitates efficient hedging “In general, management didn’t
and risk management of collateral- have the proper tools to adequate-ized debt obligations (CDOs). It ar- ly monitor or interpret these risks,”
rives as investors and regulators asserts Gershon. Banks typically ar-alike are calling for better control Continued on page 23
