www.securitiesindustry.com
JUNE 2, 2008
NEWS DESK
NSX sets up East Coast headquarters; BATS expands New York office; Credit Suisse algos on the
Reuters forex platform; and more.
PAGE 3
Returns Rise, Risk Premium Falls
bps bps
BATS Deal With Yahoo Reignites
Market Data Reform Debate
PERSPECTIVES
GUEST COMMENT: “Improved market infrastructure and increased
buy-side demand have put electronic trading at the top of the
agenda in the Asia-Pacific markets,”
says Portware’s Scott DePetris.
PAGE 4
ORIGINALSOURCES: The private sector’s desire to preempt regulation
through voluntary efforts will “ring
hollow” if it is not followed by “proactive
and tangible actions,”
says Treasury’s Anthony Ryan, who highlights four areas in which Wall Street
firms need to “share responsibility
and be actively engaged.” PAGE 6
DEPARTMENTS
COMPLIANCE: Small firms are voicing
concerns about the cost of complying
with the proposed guidelines for hedge
fund managers issued by the President’s
Working Group. PAGE 8
DATA MANAGEMENT: Wombat will
provide OneMarketData’s tick data
solution to Borse Berlin’s Equiduct
Trading platform. PAGE 9
June July Aug. Sept. Oct. Nov. Dec.
Avg. Total Return to lendable
Total Risk Premium
2007 2007
* * The revenue from securities lending and reinvestment activity,
scaled by the lendable assets, in basis points (bps)
Source: Spitalfields Advisors
Sec Lending Sees Challenges,
Opportunities in Credit Crunch
BYCHRISKENTOURIS 32 executives it surveyed at leading
Global custodian Northern global asset management firms lost
Trust Corp. in March said money in their cash collateral pools
that a $13.5 billion collective short- over the past year.
term extendable portfolio, or Step, The disclosures highlight the
cash collateral pool was hit with an potential risks confronting stock
unrealized loss of 1.35 percent for lenders in the wake of the credit
the month. Northern Trust is far crunch. The Northern Trust pool
from the only institution experi- represented 75 percent of the cash
encing such losses. collateral for the lending activities
In a report issued last month, of one of the bank’s index funds and
Boston-based research firm Vodia 5 percent of the firm’s total $267
Group says that 38 percent of the Continued on page 17
BYJOHNHINTZE
BATS Trading began providing
unlimited real-time stock quotes
to Yahoo Finance’s 19 million users
last week—a promising development
for a platform that expects to be
granted exchange status shortly, as
well as a step toward reforming the
distribution of market data.
Kansas City-based BATS is offering the data to Yahoo at no cost,
and it will be accessible to all of the
Web site’s users. Though BATS has
made its market data freely available
since the electronic communications
network (ECN) went live in January 2006, Yahoo is the first major
Web portal to build functionality to
distribute it.
Joe Ratterman, chairman, president and CEO of BATS, said he
reached out to several online distribution channels over the last year
to inform them of BATS’ offering.
However, Yahoo ultimately pursued
the agreement and its technology
department created a connection to
the ECN’s data feed.
“The more market share we
got, the more credible we looked”
to Yahoo, Ratterman explained.
“Getting through the comment
period for our exchange application was another indication that
we would be a good long-term
partner.” The window for comments on the application BATS
filed in November with the Securities and Exchange Commission ended on April 7.
BATS is providing Yahoo
with real-time best bids and offers and associated shares per
quote, which users can access
from the information pages for
individual securities. Over the
next few weeks, Yahoo anticipates introducing a BATS-pow-ered order book, portfolio and
multi-quote features.
TRADING: Flush with profits, Chinese brokerages plan to spend
money on technology and service
expansion. PAGE 10
TRADING: Canadian Trading &
Quotation System has launched an
order router with Integrated
Transaction Systems. PAGE 11
TRADING : The newly rebranded
Pink OTC Markets hopes to attract new investors to the over-the-counter equities market. PAGE 12
The partnership is a boon for
Yahoo users, who now have direct access to granular quote data
for free. And the information is
attributed to BATS on the
Yahoo site, providing the soon-to-be exchange with widespread
public recognition. In fact,
BATS is following in the footsteps of predecessor ECNs
Archipelago and Island. Agency
Continued on page 18
TECHNOLOGY: Dow Jones unveils
new charting and portfolio tools for
online financial services providers.
PAGE 13
John Akbari
▼
People in the News
Company Index
People Index
▲
Dealers Seeking
Home-Field
Advantage in
OTC Derivatives
BYSHANEKITE
Dealers are escalating their efforts to maintain control over
the development of the lucrative
over-the-counter derivatives market, say observers, as reflected by a
pair of investment bank consortiums that are planning to launch
p3 interdealer brokerages focused on
p18 credit and interest-rate derivatives.
p18 One of the initiatives, dubbed
V10, is based in London, according to Michael Gooch, CEO of interdealer broker GFI Group, who
spoke about the potential competitors on his firm’s first-quarter
earnings call. Dow Jones Financial
News reported in late April that the
V10 group—which may have
Continued on page 14
On the Web
New CEO at Townsend;
European Central Bank offers
details on pan-European
settlement platform.
See Breaking News at:
www.securitiesindustry.com.
Jitter Chatter Is Getting Louder
Consistent messaging flow a
growing Wall Street priority
BYKATHERINEHEIRES
In an industry where milliseconds
often mean the difference between success and failure, hiccups
in the flow of messaging traffic can
have a major impact.
Despite recent Wall Street cutbacks, spending on technology related to low-latency trading is expected to grow from $100 million
this year to $170 million by 2010,
according to Tabb Group. One area
of increasing focus is jitter—
variation in the delivery of information—in the high-speed, low-latency messaging systems that fuel
the securities industry.
Messaging technology vendors
have been touting expertise in jitter management as trading firms,
who have been closely monitoring
their latency levels, raise questions
about consistency in their systems.
“In the last six to 12 months we
have been hearing more about jitter in financial services, especially
from the vendors, as the granularity has increased in customers’ ability to measure latency,” said Spencer
Greene, CTO of Palo Alto, Calif.-based Tibco Software’s financial services group. He noted that jitter
represents “the level of static in system operations.”
According to Greene, the term
Continued on page 16
