Special Report: Risk Management, page 9
www.securitiesindustry.com
JULY 14, 2008
NEWS DESK
OnePipe aggregation service adds
anti-gaming technology; Volante
earns SwiftReady label for messag-
ing data services; Kilk & Co. signs on
for Broadridge’s U.K. proxy service.
PAGE 3
PERSPECTIVES
COMMENT: Even as they place ever-greater demands on their software,
simplicity has emerged as a key differentiator for Wall Street firms
looking for intuitive products.
PAGE 4
SPECIAL REPORT
Financial firms are spending millions
of dollars on enterprisewide risk man-
agement systems, but
recent events have
prompted many to ask
how much progress is
actually being made.
Business lines often operate independently and access core systems to
varying degrees, which can produce
inconsistent data that hampers even
the most sophisticated tools for measuring market and credit exposure
across an enterprise. “Any system receiving data from multiple silos can
only develop a good approximation of
risk,” says Sophis’ Philippe Stephan.
Also in this report: Third-party access and mobile connectivity are top
op risk threats; Asian firms move to
bolster risk management systems; a
panel of CROs on the impact of the
credit crisis; and more. PAGE 9
DEPARTMENTS
TECHNOLOGY: Fidelity Investments
has lured away executives from Morgan Stanley and Merrill Lynch to fill
a pair of top technology positions.
PAGE 6
Liffe Plans Entrance Into Credit
Derivatives Clearing Business
BYSHANEKITE tracts will be based on Markit
NYSE Euronext subsidiary Group’s i Traxx European indexes.
Liffe plans to get a head start Regulators have been pushing
on its derivatives exchange com- the industry to reduce systemic risk
petitors by offering centralized clear- in the credit derivatives arena and
ing of European credit default swaps those calls grew louder following the
(CDS) indexes by the end of the year. last-minute rescue of Bear Stearns,
Liffe, the world’s second-largest whose credit default swaps positions
derivatives market, said last week that threatened counterparties with
its Bclear trade confirmation and pro- major losses. Many players have
cessing platform will feed the trans- seized on central counterparty clear-actions to LCH.Clearnet, which will ing mechanisms as a solution to mit-guarantee them—the same process igate risk in the $62 trillion sector.
the exchange currently uses for eq- The expansion of Bclear, which
uities derivatives. Liffe’s CDS con- was introduced in 2005, places Liffe
ahead of venues such as Deutsche
Borse’s Eurex derivatives exchange
and the Chicago Mercantile Exchange (CME), which have both
voiced their intention to offer CDS
trading and clearing but have yet
to announce specific timetables or
rollout plans. Eurex and CME already trade futures based on credit derivatives, while the Chicago
Board Options Exchange offers options on CDS.
Ade Cordell Continued on page 19
Blogging Filters
Bringing Order to
Chaotic Content
STANDARDS & PROTOCOLS:
Depository Trust & Clearing Corp. and
Swift are teaming on interopera-ble message formats for the alternative investment industry. PAGE 6
Alternative research providers
give shape to unstructured data
BYKATHERINEHEIRES
As blog postings and other content about stocks, market sectors, products and company actions
permeate the Internet, time-pressed
portfolio managers, traders and research analysts are finding it harder and harder to keep pace. But a
p3 new generation of research
p19 providers is working to change that
p19 with algorithms and pattern-match-ing technology that aggregates and
analyzes a seemingly impenetrable
body of information.
“In a market where prices are
changing all the time, the person
who has the best information about
any event that might impact a trading price has an advantage—and
that includes unstructured data that
TRADING: TheMarkets.com will
deliver research from brokers and
independent research providers directly to its clients. PAGE 7
▼
People in the News
Company Index
People Index
A module from FirstRain’s
technology blog impact report
▲
has been filtered for quality, relia-bility and relevance,” says Patricia
McGinnis, research director with
IDC affiliate Financial Insights and
co-author of a June report on the
subject.
On the Web
New bill could expand
SEC’s enforcement powers;
SEC aims to streamline SRO
rulemaking; and more.
See Breaking News at:
www.securitiesindustry.com.
Framingham, Mass.-based IDC
estimates that the market for unstructured data research, which includes blog postings, has reached
$100 million annually and by 2013
will exceed $250 million. “It’s clearly a growing universe,” says
McGinnis.
Continued on page 17
Welcome to an
Uncompressed
World: Higher
Fees Imminent
B William O’Brien
Y JOHN HINTZE
Nasdaq Stock Market’s elimi- the practice, but the commis-nation of trade compression, sion has yet to make a ruling.
effective July 11, could prompt a sud- Nasdaq decided not to wait
den spike in clearing and settlement for the SEC to take action, an-costs for broker-dealers, who will nouncing in March that it
likely have to alter their trading planned to cease compressing
strategies. And while firms can turn trades for submission to the
to other venues for compression ben- NSCC (Securities Industry News,
efits, that option may be short-lived. March 10). Nasdaq was the
Compression allows brokers to only exchange—and the largest
aggregate buy or sell orders into a venue—to permit compression,
single trade to submit to their clear- the benefits of which have been
ing firms or the National Securities a boon for high-volume trad-Clearing Corp. (NSCC), the equi- ing firms who may only be
ties clearing subsidiary of the De- making pennies on each trade.
pository Trust & Clearing Corp. Nasdaq declined to comment.
(DSCC). In April 2006, NSCC filed Direct Edge CEO William
a proposal with the Securities and O’Brien, former SVP of new
Exchange Commission to eliminate Continued on page 16
European Clearers Are Up In Arms
Over EuroCCP’s Pricing Claims
Cost-comparison study puts DTCC subsidiary on top
BYCHRISKENTOURIS cents and 55 eurocents. Euro-
Amid escalating competition CCP will clear for the conin European clearing, De- sortium-owned Turquoise
pository Trust & Clearing Corp. multilateral trading facility
(DTCC) subsidiary EuroCCP has (MTF) when it launches in
issued a report claiming that it Continued on page 18
will offer the lowest costs on the
continent.
The assertion has not gone unnoticed, as many of Europe’s clearing providers are taking issue with
the study’s methodology. For example, Heiner Seidel, spokesperson
for Eurex Clearing in Frankfurt,
said the study “is based on erroneous assumptions which make its
ultimate estimate of our average cost
too high.”
Released earlier this month,
the report says that EuroCCP will
clear trades for 2.92 eurocents a
side on average—and for no more
than 6 eurocents—while its competitors charge between 14 euro-
Nasdaq no longer permits
trade compression
