www.securitiesindustry.com
MAY 12, 2008
NEWS DESK
BATS enters order routing business;
Taiwan exchange signs MOUs; Op-
tions Clearing Corp. revamps por-
tal; and more. PAGE 3
PERSPECTIVES
GUEST COMMENT: The SEC’s sum-
mary-prospectus proposal “offers
a significant opportunity to reduce
costs and investor confusion with
a better, simpler model of investor
disclosure,” writes NewRiver’s
Len Driscoll PAGE 4
Derivatives Processing Push Continues Apace
GlobeOp Links to Dealers Prop Up CCorp to Keep
DTCC as Buy Side Credit Swaps Over the Counter
Focuses on OTC STP Group, Icap, Creditex Group and
BYCHRISKENTOURIS Markit Group on Dec. 20 an-
As buy-side firms and their ser- nounced they had invested in
vice providers focus increas- Chicago-based CCorp and planned
ing attention on post-trade pro- to extend its services to include cen-cessing of over-the-counter deriv- tralized clearing of OTC deriva-atives, GlobeOp Financial Services tives. In recent weeks, members of
has linked to Depository Trust & the group have said they expect to
Clearing Corp.’s payment reconcil- launch the platform in the third
iation service for credit default quarter, beginning with major CDS
swaps (CDS). indexes before adding single-name
GlobeOp, a London- and New CDS.
York-based hedge fund administra- In the wake of the credit crunch,
tor, on April 30 announced that regulators have called upon the in-clients can use its GoPayments ser- dustry to improve processing and
Continued on page 14 introduce transparency to the mar-
ket. CME Group and NYSE Euronext have taken the opportunity
to promote their data-tracking capabilities and clearing infrastructure in an effort to draw volume
from the OTC space.
DTCC’s Deriv-Serv already offers matching and confirmation of
CDS and its Trade Information
Warehouse maintains the CDS
data and automates payment calculations, settlement, notional ad-
Vernon Barback Continued on page 16
BYSHANEKITE
Rather than use an existing Depository Trust & Clearing
Corp. (DTCC) service, a group of
Wall Street’s biggest firms is tapping Clearing Corp. (CCorp) to
operate a centralized clearinghouse
for over-the-counter derivatives.
The idea, say sources close to the
situation, is to assuage regulatory
concerns, limit risk and ensure continued dealer leverage over pricing
in the booming sector.
While DTCC’s Deriv-Serv has
the necessary processing mechanisms and data, the dealers, according to sources, decided they
could both satisfy regulators and
protect their bid-offer spreads and
share of the $62 trillion credit default swaps (CDS) market by tightly controlling the development of
clearing services.
Bank of America, Bear Stearns,
Citigroup, Credit Suisse, Deutsche
Bank, Goldman Sachs, JP Morgan
Chase & Co., Lehman Brothers,
Merrill Lynch & Co., MF Global,
Morgan Stanley, UBS, Eurex, GFI
Robert Greifeld
VIEWPOINTS: As the equities landscape in Europe undergoes major
alterations, “there’s no
doubt that the role of
exchanges is going to
change fundamentally
and irreversibly,” says
SWX Europe’s Lee Hodgkinson.
In the face of market fragmentation, he says the former virt-x is revitalizing its trading offerings.
PAGE 6
Nasdaq OMX
Is Expanding,
Everywhere
DEPARTMENTS
TECHNOLOGY: BNP Paribas has
implemented an enterprisewide e-
mail encryption product from PGP
Corp. PAGE 8
COMPLIANCE: The Financial Crimes
Enforcement Network moves to
streamline the process for depository institutions exempting customers from filing currency transaction reports. PAGE 9
TRADING: Liquidnet Europe shifts
its trade reporting business from
the London Stock Exchange to the
Markit Boat platform. PAGE 10
DATAMANAGEMENT: National numbering agencies are standardizing
the way they describe instruments
issued in their home markets.
PAGE 12
TRADING: Townsend Analytics adds
access to Nyfix Euro Millennium
and upgrades its Real Tick execution management system.
PAGE 12
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Company Index
People Index
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On the Web
NYSE levies fines for not providing order data; Senate wants
stronger supervision of investment banks. See Breaking News
at: www.securitiesindustry.com.
In a Segmenting Clearing Industry,
Brokers Left With Dwindling Options
BYJOHNHINTZE of acquisitions have created a hand-
As the bigger clearing firms ful of super-clearers.
continue to differentiate their In a study issued last month,
services from their smaller com- Boston-based Aite Group exam-petitors’, introducing broker-deal- ined the strengths of some of the
ers with clearly defined business largest clearers: Bear Stearns, Fi-strategies have been left with fewer delity Investments’ National Fi-clearers to choose from. nancial, Pershing and Ridge Clear-
Ten years ago, when clearing ing & Outsourcing Solutions, a
fees were considerably higher, there subsidiary of Broadridge Financial
were about 70 firms vying for in- Solutions. Aite analyst Adam Hon-troducing broker clients. That oré, who authored the report, said
number is now closer to 25, and the that his firm sought responses
barbell-shaped clearing industry— from ten firms, but only heard
with large and small firms on op- back from four.
posite ends—has grown more ex- Nevertheless, said Honoré, the
treme. Bank of New York Mellon participating firms provide prime
Corp.’s Pershing unit still services examples of the choices available
the most correspondents, with to introducing brokers. For the
more than 1,100 customers, com- clearers, “it’s about how you dif-pared to 650 in 2000, but a barrage ferentiate yourself—the distinct
Comparing Clearers
Functionality
e
h
n
o
o
g
T
c
y
l
v
c
e
S
e
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i
BYJOHNHINTZE
Though Robert Greifeld,
Nasdaq OMX Group’s
president and CEO, emphasized non-U.S. hopes and hurdles in an earnings call last
week, the newly merged company’s U.S. initiatives are likely
to provide a more immediate
impact on its bottom line.
Nasdaq is expanding its revenue sources in many new directions, ranging from asset classes
to geographic markets to business lines. In the U.S., that expansion is already well under way
on the options front, following
the March 31 launch of Nasdaq
Options Market (NOM).
While Greifeld jokingly reported first-quarter revenue for
that initiative—after a single
day of operation—at $900, the
Continued on page 17
Usability
Source: Aite Group
value you bring to the market,” he
added.
The study describes the clearing platforms’ core functionality,
services, ability to integrate with
third-party technology providers
and relative usability. Their size is
rivaled only by a few firms, such as
Goldman Sachs Execution &
Continued on page 18
