Securities Industry News

www.securitiesindustry.com

JUNE 30, 2008

NEWS DESK

Former Nasdaq executive will head Dubai exchange; Hong Kong Mercantile Exchange has launch date and service providers. PAGE 3

PERSPECTIVES

GUEST COMMENT: Though the future of hardware technology is based on multicore architectures, write Intel’s Rick Jacobsen and Rogue Wave Software’s Patrick Leonard, “financial services firms cannot simply migrate to multicore the way they have with other technology.” To implement concurrent computing for business applications, IT departments will need to adopt new approaches. PAGE 4

DEPARTMENTS

TRADING : Trading platform operators Napa Group and Restricted Stock Partners are finding opportunities in the collapsed auction rate securities market. “Our focus is to integrate all the broker-dealers that have information they need to share,” says Napa CEO Peter Chatzky. “We are trying to move the entire market as a whole, not trade by trade.” PAGE 6

Philip Norton

Post-Merger BGC Plots Hybrid Course Across Asset Classes

BYSHANEKITE

BGC Partners is demonstrating its post-merger strategy with a series of initiatives as it works to integrate the offerings of predecessors BGC, a primarily voice-based interdealer broker, and electronic-focused eSpeed.

The ultimate goal, said Philip Norton, executive managing director of e-commerce at New York-based BGC Partners, is to provide state-of-the-art hybrid voice and electronic trading across products

Continued on page 12

Latency Focus Missing the Forest?

J. Barry Thompson

DATA MANAGEMENT: Seeking to bolster transparency, RiskMetrics Group is providing hedge fund managers with a free service that lets them issue monthly reports to investors. PAGE 6

TRADING: Nasdaq OMX will help improve Ukraine’s trading environment and post-trade services with new technology platforms.

PAGE 8

BY TOM GROENFELDT

Latency in order routing and market data distribution is under siege. Hardware and software vendors are joining forces with labs and performance gurus on both sides of the Atlantic to analyze performance in exacting detail and eliminate microseconds of delay wherever possible.

That isn’t necessarily a good thing, says Vivake Gupta, London-based managing director of technology consultancy Lab49. Firms are focusing on the movement of market data to the trader, Gupta says, and overlooking other parts of the trade flow.

“Soon a bottleneck arises someplace different,” he says. “People haven’t been looking at the trades comprehensively.” Firms that are spending large sums of money to get their internal latency down to microseconds may “forget about three seconds of latency from the market.”

Stuart Breslow, CEO and chief information officer of execution management systems provider Townsend Analytics, agrees. One problem with discussing latency, he notes, is that the term means dif-

ferent things to different people. To address the issues effectively requires getting into the nuts and bolts of a firm’s operations and understanding its interface to the markets—viewing latency from 20,000 feet down to the micron level.

Providing links to geographically dispersed markets, Townsend, a Chicago-based Lehman Brothers subsidiary, faces inherent latency problems, but it uses data centers in New York, Chicago and other points of presence in Europe to reduce connectivity time. “We don’t spend time worrying about microseconds, because the latency be-

Continued on page 13

COMPLIANCE: Chinese regulators have ended their moratorium on foreign brokerage investment.

PAGE 8

COMPLIANCE: With beneficial owners often several layers removed from customers, some firms have adopted transaction monitoring as the ultimate defense against financial crime. PAGE 10

Harmonizing Accounting Standards No Easy Task

Uniformity could promote cross-border investment, but when?

BYCHRISKENTOURIS from the SEC, FASB and the ac- While U.S. regulators and counting community. their foreign counterparts SEC chief accountant Conrad have long cited the need for glob- Hewitt said only that the agency al accounting standards, it has would rule on IFRS later this sum-been harder to find agreement on mer, though he agreed that the who would enforce them and how U.S. should not be left behind the soon they could be implemented international community in adopt-in the U.S. ing the standards. About 100 coun-Attendees at a June 16 forum tries are either using the interna-told Securities Industry News that tional standards or altering theirs _Conrad _Hewittthey were not able to prompt Se- to meet IFRS policies established curities and Exchange Commission in 2005. The European Commis- and provide for “organized inter-officials to set a date for the move sion requires all public companies action between national authorities from U.S. generally accepted ac- incorporated in the European responsible for the adoption or counting principles (GAAP) to In- Union to use IFRS. recognition of accounting standards ternational Financial Reporting On June 18, the SEC issued a for listed companies and the Standards (IFRS). The meeting, statement noting the widespread IASCF.” The foundation is the par-held at Baruch College in New global support for the creation of ent of Europe’s International Ac-York and sponsored by the U.S. Fi- a monitoring group to oversee the counting Standards Board (IASB), nancial Accounting Standards International Accounting Standards the standard-setter for IFRS. Board (FASB), drew participants Committee Foundation (IASCF) Continued on page 14

NYSE Considers Fee Overhaul; Maker-Taker

Is On the Table

Big Board wants to attract electronic flow while maintaining differences

BYJOHNHINTZE

After proposing major changes to its market structure earlier this month, the New York Stock Exchange is looking at liquidity-drawing incentives that could bring it more in line with competitors’ maker-taker pricing models.

NYSE has long charged $0.0008 per share for market orders, the lowest fee among U.S. exchanges and smaller than that of most alternative trading systems. Nonetheless, its share of overall volume has dropped markedly, hovering around 25 percent today compared to more than 80 percent a few years ago.

Unlike its rivals, NYSE has never offered a general rebate to broker-dealers posting liquidity in the form of limit orders. In recent weeks, however, exchange executives have sought input from market participants about introducing a maker-taker model—one potential schedule would charge market-order providers $0.0015 per share and rebate $0.001 to