www.securitiesindustry.com
JANUARY 14, 2008
NEWS DESK
Belgium dematerializes; Taiwan exchange plans to sell stake; consortium of banks buys into Instinet’s
Chi-X. PAGE 3
PERSPECTIVES
GUEST COMMENT: The Single Euro
Payments Area (Sepa) will go live in
two weeks, but because “regulatory
mandates were
drafted before their
impact on operational issues was
fully understood,”
observers looking at
implementation issues “could be forgiven for thinking that it is years
away,” writes Biss Research’s Gary
Wright. PAGE 4
DEPARTMENTS
DATAMANAGEMENT: The Trade Ideas
consortium’s alpha-capture system sees
increased demand from buy- and sell-side firms as competitors enter the
market. PAGE 6
Technology-Focused Citi Forges Trading Giant
Bank integrating acquired
businesses, in-house systems
BY JANICE FIORAVANTE
As a new top management deals
with massive credit-related
losses, Citigroup’s business units
have numerous question marks.
CEO Vikram Pandit has stated that
each business line will be scrutinized with an eye toward selling assets to shore up the capital base.
However, one strategic component—systematic trading—is heading in the opposite direction as Citi
fuses recent acquisitions with existing systems to form a global trading powerhouse.
Under Sanford Weill, who in
October 2003 was replaced as CEO
by Charles Prince III, the company’s technology focus was on
squeezing out cost savings, say industry observers, especially in com-
Futures Upstart
May Use Equities
Strategies to Attract
New Participants
Divesting its real estate holdings, Citigroup has sold its office complex
at 388-390 Greenwich Street in New York.
TRADING: Lime Brokerage acquires
a minority stake in the Chicago
Board Options Exchange’s CBOE
Stock Exchange. PAGE 7
mercial banking. But over the past
few years, Citigroup has invested
aggressively across asset classes, acquiring sophisticated technology
firms and harnessing their leadership—moves that suggest a continuing priority on innovation.
Continued on page 17
TRADING: NYSE gets approval
from the Securities and Exchange
Commission for its point-in-time
electronic cross; reports record
volumes. PAGE 8
TRADING: Agora-X has tapped OMX
to provide technology for its electronic communications network for OTC
commodity contracts. PAGE 8
TECHNOLOGY: Goldman Sachs’
open-architecture strategy now has a
formal structure, providing clients with
a transparent understanding of its
product offerings. PAGE 9
COMPLIANCE :Chinese regulators have
taken steps to open the country’s financial markets, allowing foreign companies to issue stocks and bonds on the
mainland and easing restrictions on joint
ventures. PAGE 12
Fair-Value Reporting
Rule Brings New
Compliance Pains
BY CHRIS KENTOURIS
Anew fair-value reporting rule
is pushing investment fund
managers, hedge fund managers
and their service providers to reevaluate their operational procedures
and the technology used to collect
and report on the data required to
price securities.
Financial Accounting Standard
(FAS) 157 will affect firms complying with U.S. Generally Accepting
Accounting Principles for reporting
periods after Nov. 15, 2007. The
Continued on page 16
Arca Options, ‘Market-Structure Leader’
NYSE’s Boyle plans to leverage momentum in 2008
Introduced in August 2006, Board Options Exchange.
NYSE Arca Options has been a “NYSE Arca was the fastest-major beneficiary of the options growing U.S. equity options ex-market’s steadily rising change in 2007, with a
volumes. Based on the 60 percent growth rate,
all-electronic equities compared to the indus-platform that NYSE try average of 30 per-Euronext acquired with cent,” notes NYSE Arca
Archipelago Holdings Options VP Edward
in March 2006, NYSE Boyle. “We have plans
Arca’s share of daily in place for 2008 to
transaction volume was Edward Boyle leverage that momen-at 16. 3 percent last month, up from tum by implementing new func-
14. 6 percent in December 2006. It tionalities, new products and order
typically ranks third in options mar- types, and continuing to attract new
ket share, behind the International participants.”
Securities Exchange and Chicago Continued on page 14
BY JOHN HINTZE
The consortium of banks
and trading firms planning to launch a fully electronic futures market this year are
seeking not only to take a portion of the existing exchanges’
profits—which they’ve helped
build—but to diversify the asset
class’ market structure, likely
borrowing strategies from the
equities and options worlds.
It’s easy to see why the financial institutions are eager to
get a seat at the table. The stock
price of the largest U.S. futures
exchange, CME Group, formed
by the Chicago Mercantile Exchange’s acquisition of the
Chicago Board of Trade
(CBOT) last year, was at $618
Friday afternoon, up more than
1,700 percent from CME’s $35
IPO price in 2002. The merged
firm’s reported cash earnings for
the first three quarters of 2007
was up 53 percent from the previous year, and operating income 60 percent.
Citigroup estimates that the
new venture’s backers—Bank of
America, Barclays Capital,
Citadel Investment Group, Citi,
Credit Suisse, Deutsche Bank,
eSpeed, Getco, JP Morgan
Chase & Co., Merrill Lynch &
Continued on page 15
▼
People in the News p3
Company Index p19
People Index p19
▲
On the Web
BATS adds two investors;
eSecLending to use EquiLend
for operational work; and more.
See Breaking News at:
www.securitiesindustry.com.
FpML Version Outburst: Controlled Migration
Credit downturn accentuates need for straight-through processing
BY JOHN SANDMAN troduced a working draft of FpML 4. 3 in February
Since its inception nearly ten years ago, the finan- and released the final, recommended version in De-cial products markup language (FpML) has gone cember. Version 4. 4 of the standard, which has been
a long way toward automating the clearance and set- in the draft stage since September, is expected to be-tlement of a wide range of derivative instruments. But come final this month. A draft of 4. 5 is anticipated in
a flurry of recent upgrades—reflecting a staggered ap- February and a recommended version in June.
proach to the introduction of new functionality—have Karel Engelen, ISDA policy director and head of
arrived amid increasing demands for straight-through FpML.org, said the goal is to add functionality over
processing in the wake of the credit crunch. multiple versions to simplify implementation. “The
FpML.org, part of the New York-based Interna- FpML standards committee decided to have shorter
tional Swaps & Derivatives Association (ISDA), in- Continued on page 19
