NEWS DESK

China plans to launch OTC market; Turquoise taps NeoNet for market data; consulting veteran William Cline opens new firm.

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PERSPECTIVES

GUEST COMMENT: Though financial firms have struggled to obtain the accurate reference data needed to market mutual funds, NewRiver’s Jeff Levering writes that “avoiding the risks and costs of unreliable data is not as difficult as it seems.”

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SPECIAL REPORT

As Wall Street proves increasingly willing to entrust customer data to software-as-a-service providers, fi- nancial services firms are working to safeguard client access to on-demand applications, running security audits of the providers and educating users about how to interact with them. “Even with service-level agreements in place, at the end of the day that’s not going to save you if everything is lost or stolen,” says Wellington West Capital’s David Boissonneault. Also in this report: Financial institutions shift their focus from external security threats to internal controls; and server virtualization poses security risks and challenges. PAGE 9

DEPARTMENTS

TECHNOLOGY: A Platform Computing solution for IBM’s Cell technology will help banks increase computational speeds while reducing power consumption and space requirements in the data center. PAGE 6

Bear’s Clearing Strengths Attract JP Morgan

BYJOHNHINTZE JP Morgan Chase & Co., in a deal backed by the Federal Reserve, agreed last week to purchase faltering Bear Stearns at a discount price. Bear Stearns’ correspondent clearing unit, long second fiddle to the firm’s high-profile prime brokerage and trading businesses, could prove to be a significant acquisition for JP Morgan. “We think Bear will be better for ^Photo: ^{Gettyimages.com}this situation, we’ll be better for it, er brokerage correspondents. advisers and broker-dealers achieve and we have confidence [in Bear] Bear is seeking to foster more their strategic goals,” said Joe Triar-going forward,” said Howard Abner, than confidence. “We and our new si, senior managing director and cochairman of Jersey City, N.J.-based parent company are as committed to head of broker-dealer investment ad-Abner Herman & Brock, which this business as ever, and we will con- visory services at Bear Stearns, in a manages $800 million in unleveraged tinue to offer sophisticated and in- statement to Securities Industry News. assets and is one of Bear Stearns’ larg- novative solutions to help investment Continued on page 17

CLEARING & SETTLEMENT: International depository Clearstream has migrated from continuous batch to real-time settlement. PAGE6

BNP Paribas’ Big
Plans for Dark Pools

Platforms planned in North America, Europe, Hong Kong

BYKATHERINEHEIRES

BNP Paribas, well known for its global reach and offices in 88 countries, is seeking to add dark liquidity expertise to that reputation— by the end of the year, the French bank aims to have four non-displayed trading platforms in operation across the globe.

The global execution services (GES) group in the firm’s corporate and investment banking division says it plans to launch an internal crossing network in the U.S.

Continued on page 18

New Sec-Lending Platform Aims to Give
Beneficial Owners Bigger Piece of the Pie

LendEx prepares to launch, lines up central counterparty

companies and a self-clearing hedge fund. It anticipates becoming operational in May.

The goal of the new platform, according to Tabacco, is to promote greater transparency and dynamic price discovery in a historically opaque market and to enable beneficial owners to claim a bigger share of the fees paid by end users. LendEx is jointly owned by Kalorama Partners, the Washington, D.C.-based consultancy founded and headed by Pitt, and LocateStock.com, created

Continued on page 16

BYCHRISKENTOURIS Apair of industry heavyweights—former Securities and Exchange Commission chairman Harvey Pitt and LocateStock.com founder and CEO John Tabacco—are backing a new electronic securities lending platform. The system, LendEx, will cater to beneficial owners and is the first to offer what it calls central counterparty (CCP) services.

Jersey City, N.J.-based LendEx is set to be pilot-tested on April 2 with two broker-dealers, two trust

Regulatory Cooperation Prelude to a Merger Proposal?

Treasury’s new model could include combining the SEC and CFTC

BYCAROLE. CURTIS mestic finance, on Feb. 7 told the

Though the recent cooperation New York Society of Security An-agreement signed by the Se- alysts that the agency will propose curities and Exchange Commission a “newly designed model” for the and Commodity Futures Trading financial services industry, incor- p3 Commission will help build a “clos- porating “wholesale changes.” p19 er working relationship,” according Treasury’s Web site says the plan ^p19to the regulators, some are calling will seek to “improve efficiency, re-it a first step. A merger proposal duce overlap, strengthen consumer from the Treasury Department and investor protection and ensure ^Robert ^Steelcould be imminent. that financial institutions have the front” of the issue with advance

Treasury is expected to soon re- ability to keep pace with evolving moves increasing ties between the lease a blueprint for bringing the markets.” Comments were solicit- two regulators, said a source who securities industry’s regulatory ed in an October notice in the Fed- declined to be named. He added structure up to date. Robert Steel, eral Register. that the SEC-CFTC agreement Treasury undersecretary for do- “Politicians want to get out in Continued on page 19

OTC Automation Efforts Pick Up as Regulators Call for Better Processing

BYSHANEKITE Seeking to curtail the credit crunch and prevent such events in the future, the President’s Working Group on Financial Markets (PWG) has recommended improving the processing of over-the-counter derivatives. In response, trade groups and infrastructures are ramping up efforts to advance automation.

The Securities Industry & Financial Markets Association (Sifma) is working with its dealer and buy-side members to make electronic novations occur in real time and to further automate collateral management. The Depository Trust & Clearing Corp. (DTCC) plans to funnel more types of OTC derivatives into its DerivServ processing platform. And the International Swaps & Derivatives Association (ISDA) is considering fully standardizing documentation and protocols for its cash-settlement auction process used for payouts on credit default swaps (CDS) triggered by credit events.

These ongoing initiatives took on new urgency after U.S. Treasury Secretary Henry Paul-son on March 13 called upon

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TRADING: Credit Suisse’s prime services unit will offer Trading Technologies’ X-Trader order-entry software to its commodity hedge fund customers and internal trading desks. PAGE 18