Special Report: Hedge Fund Technology, page 9
www.securitiesindustry.com
APRIL 21, 2008
NEWS DESK
An open-source version of Vhayu
Velocity for quantitative research;
Jones Trading applies block trading
model to distressed debt. PAGE 3
PERSPECTIVES
GUEST COMMENT: Regulators have
been promoting competition in
the world’s equities markets, says
Liquidnet’s Howard Meyerson,
but there are still rules in place that
impede efficient trading. PAGE 4
SPECIAL REPORT
Though prime brokerages have
been bolstering their risk management services, hedge funds, increasingly concerned about their
exposures, have been turning to
sophisticated risk tools from third
parties that allow them to gauge
the effects on their entire portfolio when unexpected market events
occur. Also in this report: Growing demand from hedge funds for
independent valuations; CEO
Richard Jones on Fidessa LatentZero’s expansion into the fund
business; and two technology vendors’ differing approaches to high-speed trading platforms. PAGE 9
DEPARTMENTS
COMPLIANCE: European regulators
have thus far taken an even-handed ap-
proach to the current
market turmoil, says the
European Commission’s
David Wright. Now,
“the firms that created
this mess have to step up to the plate.”
PAGE 6
Bear Clearing Execs Stay On
BYJOHNHINTZE
Providing cause for confidence
among its customers, and perhaps reason for disappointment for
its competitors, the top executives
at Bear Stearns Broker-Dealer & Investment Advisor Services (BDIAS)
have agreed to continue with the
firm in their current positions.
In fact, the BDIAS unit is slated
A Panopticon Barseries visualization shows returns for eight hedge funds to be lifted essentially intact from Joe Triarsi
the global equity business of Bear
Visualization Tools Opening Eyes Stearns and placed in the equivalent
division of its new owner, JP Mor-
gan Chase & Co., according to
Firms look to tame unruly data with graphic presentations sources close to the situation.
BYKATHERINEHEIRES lio managers must review and On March 16, JP Morgan,
Wall Street is swimming in process on a daily basis. Thanks in which so far has weathered the
data—good news for part to the proliferation of visual- credit storm better than most, an-
providers of data visualization soft- ly sophisticated consumer Web nounced that it planned, with the
ware who are seeking to help firms sites—You Tube is often cited— backing of the Federal Reserve, to
better and more quickly understand technology providers are seeing in- acquire Bear Stearns. Two days ear-
a sea of information that is only get- creased interest in graphically rich lier, Bear’s stock had plunged by 50
ting deeper. business intelligence tools. percent, to $30 a share, and the
Vendors that specialize in the Among the sought-after systems firm appeared to be in danger of
area, along with giants like Google are state-of-the-art, interactive vi- collapsing.
and Microsoft Corp., who are rel- sualization products that let users— The deal bolstered the confi-
atively new on the scene, are capi- often without assistance from IT dence of Bear Stearns clients, in-
talizing on the vast quantity of real- staff—view data in colorful, easy- cluding its clearing arm’s hedge
time data that traders and portfo- Continued on page 18 fund, brokers-dealer and registered
investment adviser customers.
But concerns persisted because
JP Morgan’s low acquisition
price of $2 a share had Bear
executives, who own approximately 40 percent of the stock,
up in arms. The price was subsequently raised to $10 per
share.
Bear customers told
Securities Industry News that their conversations with the firm’s management had indicated that
BDIAS’s top executives will retain their positions and continue to steer the division. “The
Bear people are going to be
running it and calling the
shots,” one source said.
Portfolio Margining
Captures Billions,
But May Increase
Systemic Risk
BYJOHNHINTZE
Gross debits in portfolio margin accounts have grown to
more than 40 percent of overall
margin debt in the 11 months since
they became available, bringing assets back onshore and adding another concern for credit analysts.
According to the Financial In-
p3 dustry Regulatory Authority (Finra),
p19 a survey of the 12 broker-dealers ap-
p19 proved to offer the accounts shows
that as of Feb. 29 they were responsible for $144.2 billion of the
$334.9 billion in total U.S. margin
debt, a 25 percent increase from the
end of January. Though the debits
stood at $58 billion in July, they
dipped to $45 billion in August, a
volatile month that prompted in-
Continued on page 16
ASSETSERVICING: Citigroup is using
Globe Tax Services’ tax reclamation offering for its direct custody
and clearing business. PAGE 6
TECHNOLOGY: Soft ware outsourcing provider Epam Systems has extended its financial services offerings with the purchase of FIX vendor B2Bits. PAGE 15
STANDARDS & PROTOCOLS: FIX
Protocol Ltd. has released a service pack for FIX 5.0. PAGE 15
▼
People in the News
Company Index
People Index
▲
On the Web
ISDA says credit derivatives
volumes still soaring; Knight
offers SMA services; and more.
See Breaking News at:
www.securitiesindustry.com.
In Down Economy, Vendors Preach
Diversification and Differentiation
BYALEXAJAWORSKI Adam Honoré, analyst at
The ongoing credit crisis and Boston-based Aite and author of
the recent collapse of Bear the report, says that “2007 was a
Stearns have many securities tech- good year to be a vendor, especial-nology vendors on edge—fearing, ly if you offered anything that deor already experiencing, declining creased latency, aggregated cus-sales figures. However, most in- tomer information, or used the
dustry observers and providers word‘derivatives.’”
agree that although spending may What about 2008? “It depends
be down this year, it is unlikely that on what kind of vendor you are,”
the sector will see a drop-off rem- says Honoré. “There are some
iniscent of the dot-com bust. things people are not going to be
Information technology budgets easing up their spending on. Elec-are expected to continue to grow tronic trading, for instance, is sort
in 2008, but at a much slower pace of dependent on leading-edge tech-than last year, according to a Feb- nology. As soon as someone gets
ruary report from research firm faster than you, they have the com-Aite Group. The study—“2008 petitive edge.” Firms want to see re-Capital Markets IT Spending: turn on investment in less than 12
Sanding the Edges in a Rough Risk months, he adds, “so if you’re a ven-Environment”—predicts that the dor with an 18-month ROI and
average capital markets firm’s IT can’t make an immediate impact,
budget will grow by about 10 per- you’re going to be hurt.”
cent this year. Continued on page 19
Joe Triarsi and John Tyers
will remain co-heads of BDIAS,
according to sources. Also staying on are their lieutenants:
Richard Cancro, head of product development; Rich Gentile,
head of client services; Robert
Mumby, head of sales for the
broker-dealer services business;
Continued on page 16
