Securities Industry News - December 17, 2007

www.securitiesindustry.com

DECEMBER 17, 2007
NEWS DESK
Paladyne adds Markit’s credit deriv-
atives pricing and reference data;
Townsend integrates Cheuvreux
algorithms. PAGE 3
PERSPECTIVES
COMMENT: Financial institutions
have invested in ever-more so-
phisticated tools for gauging and
controlling risk exposures—now
they have to trust the measure-
ments and improve their manage-
ment practices. PAGE 4

ORIGINAL SOURCES: The growth of sovereign business, in the form of state-owned, publicly traded companies and investment funds operated by governments that may not share the U.S. perspective on free markets, will present increasing challenges for the Securities and Exchange Commission, says chairman Christopher Cox. PAGE 6

VIEWPOINTS: For the Tel Aviv Stock Exchange (TASE), a memorandum of understanding with the Nasdaq Stock Market caps a year in which it raised its profile globally and learned that FTSE will upgrade it to developed market status next year. Exchange CEO Ester Lavanon says that as TASE tries to “match up to the best” it offers “a highly regulated market with better yields than our larger peers.” PAGE 8

DEPARTMENTS

TRADING: Seeking to recapture execution volume, NYSE Arca introduces a tiered fee structure. PAGE 10

Canada’s TMX Carbon Emissions Market

Group Will Have

Assets Covered

Toronto, Montreal exchange merger poses benefits, risks

BYJOHNHINTZE

Canada fell into line with global exchange consolidation last week as TSX Group of Toronto and the Montreal Exchange (MX) announced an agreement to merge into a multi-asset-class market op- erator, though back-office impedi- Source: Caisse des Depots, World Bank, Celent ments may stall an important ben- _efit _in _the _clearing _area._Emissions _Trading’s _Coming _Out

The new company, TMX Group, _will _combine _TSX’s _Toronto _StockThe Green Exchange latest to throw its hat in Exchange—Canada’s largest—with BYSHANEKITE offering futures, options, and swap the derivatives market in Montreal. T he unveiling of the Green Ex- contracts linked to products aimed _The _headquarters _will _be _in _{Toronto, change} _last _week—one _of _{a at} _curbing _global _warming _or _focusedand derivative operations will remain slew of recent emissions trading ini- on renewable energy. in Montreal. TSXalsoownsapublic tiatives by some of the world’s The new exchange will offer venture equity market, TSX Venture biggest exchanges and financial in- global carbon-based credits, includ-Exchange, as well as the Calgary- stitutions—is the latest sign that car- ing contracts known as European based Natural Gas Exchange (NGX) bon trading, just like the global cli- Union carbon allowances, which and interdealer broker Shorcan. mate, is heating up. carbon emitters in industries like

“The new group will redefine the Green Exchange—backed by power and cement manufacturing Canadian capital markets and Constellation Energy Group, Cred- can buy under the EU emissions strengthen [their] global positioning,” it Suisse, Evolution Markets, Icap, JP trading scheme (ETS) to stay below said TSX chief executive Richard Nes- Morgan Chase & Co., Merrill Lynch government-mandated caps. It will bitt, who anticipates $25 million in & Co., Morgan Stanley, the New be pitted against established mar-cost savings from the merger. “TMX York Mercantile Exchange (Nymex) kets such as the European Climate Group will list, trade, clear and offer and Tudor Investment Corp.—wants Exchange (ECX), the most liquid market data for both cash and deriv- to be “the world’s most comprehen- exchange under the ETS, according

Continued on page 20 sive environmental marketplace” by Continued on page 18

TECHNOLOGY: A new version of Platform Computing’s grid software eases adoption with added support for developers. PAGE 10

ICE Platform Absorbs Acquisitions Planning for Peaks, IntercontinentalExchange (ICE), WCE products, which previously NYSE Bolsters Hybrid Atlanta’s energy and soft com- used the Chicago Board of Trade’s HP supplies servers, modity market operator, in Sep- e-CBOT technology, began trad- _sees _global _wave _oftember completed its acquisition of ing on ICE’s platform last week and

Winnipeg Holdings, parent of the are cleared through its ICE Clear ^exchange ^enhancementsWinnipeg Commodity U.S.; commodity con- BYTOMGROENFELDT Exchange (WCE) and tracts on Nybot, re-

Canadian Climate Ex- cently renamed ICE T ^he ^New ^York ^Stock ^Exchangesaid it will be installing a line change, capping a busy Futures U.S., moved of Hewlett-Packard Co. (HP) equip- _p3year of alliances and ac- onto ICE within weeks ment to improve the performance p22 quisitions that has pro- of the deal’s completion. and efficiency of its online stock trad- p22 vided a testing ground In between the two ing system, NYSE Hybrid Market. for the flexibility of the agreements, ICE lost The New York exchange will use exchange’s technology. ^Edwin ^Marcialout to Chicago Mer- rack-based HP ProLiant DL585

The purchase of WCE, Cana- cantile Exchange parent CME servers, ProLiant BL685c server da’sleadingagriculturalcommodi- Holdings in its bid for CBOT blades and Integrity NonStop ty futures and options exchange, Holdings, but bolstered its physical servers to grow the platform’s busi-complemented another ICE addi- over-the-counter offerings with the ness by making sure its online trad-tion—soft commodity marketplace acquisition in July of the com- ing transactions occur quickly and New York Board of Trade moditytradingbusinessof Hous- accurately.

(Nybot)—which closed in January. Continued on page 16

DATA MANAGEMENT: S&P’s new benchmark indexes will aid Chinese institutional investors in building international portfolios. PAGE 12

Round 2 Penny Pilot Reports: Exchanges’ Interpretations Differ

BYJOHNHINTZE

Asecond round of reports by U.S. options exchanges on the pilot test of penny price increments reflects continued disagreement about the potential long-term affects of penny quoting on investors, particularly institutions looking to execute large orders.

The first set of analyses, delivered to the Securities and Exchange Commission in late spring, covered the period from the start of the pilot on Jan. 26 through April. The new reports—filed by five of the six options exchanges—analyze the subsequent five months, through Sept. 27, when 22 options classes were added to the original 13, and highlight the divide between those in favor of expanding penny quoting and those urging caution.

Unsurprisingly, the four exchanges benefiting most from the current market structure— the American Stock Exchange, Chicago Board Options Exchange, International Securities Exchange (ISE) and Philadelphia Stock Exchange—voiced more concerns and recommendations. NYSE Arca, one of two exchanges—the Boston Options Exchange (BOX) had not issued its report as of press time—that