Special Report: High-Performance Computing, page 9
www.securitiesindustry.com
JULY 28, 2008
NEWS DESK
Charles River Development and
Tradeweb team for post-trade processing of OTC derivatives; portfo-lio-margining pioneer Douglas Engmann leaves Newedge; and more.
PAGE 3
SEC Considering
Fee Cap for
Options Markets
BYJOHNHINTZE
Top regulatory officials have
asked members of the Securities Industry & Financial Markets
Association’s (Sifma) options steering committee to weigh in on a petition to cap fees at U.S. options
exchanges.
Erik Sirri, head of the Securities
and Exchange Commission’s division
of trading and markets, and Elizabeth King, associate director of the
unit, made the request July 17 at one
of the agency’s regularly held meetings with the committee. Other market participants have also been invited to comment on Chicago-based
Citadel Investment Group’s proposal, submitted July 15, to set a $0.2
per-contract limit on what exchanges
can charge to access liquidity.
“Customers are predominantly
liquidity takers [and thus charged a
fee], so from that standpoint I ap-
Continued on page 18
DTCC and Markit Pool OTC Resources
PERSPECTIVES
GUESTCOMMENT: “Derivatives are
here to stay,” writes GoldenSource’s
Neil Edelstein, and their complexity “is making the need for a comprehensive enterprise data strategy
more evident at even the most senior levels” of financial institutions.
PAGE 4
SPECIAL REPORT
As high-performance computing
becomes more cost-efficient, it has
become a fixture at firms who need
to handle massive
amounts of market
data and increasingly
complex instruments.
Almost two-thirds of
servers in the financial services industry are being used for HPC, according to TowerGroup estimates,
and its widespread adoption has
placed the emphasis on getting applications up and running quickly,
and producing rapid results. On
Wall Street, “the quicker you get an
answer the quicker you make a trade
and make money,” says IBM’s Kevin
Pleiter. “The time to calculation is
the big differentiator.” Also in this
report: Firms are learning to write
for multicore processors; and cloud
computing’s security risks. PAGE 9
DEPARTMENTS
CLEARING & SETTLEMENT: Despite
some lingering concerns from securities depositories, the European
Central Bank is moving forward
with the Target2-Securities settlement platform. PAGE 6
New joint venture will
offer integrated system
for derivatives processing
BYCHRISKENTOURIS
The Depository Trust & Clearing Corp. (DTCC) and
Markit Group have formed a joint
venture that will provide a front-to-back-office processing platform
for an over-the-counter derivatives
market that has found itself under
a regulatory microscope.
The new London-based company, announced July 21, will offer
more than 1,100 global buy- and
sell-side firms a unified system for
OTC derivative confirmations, affirmations, allocations and novations. The venture, which has not
yet been named, is also likely to accelerate the adoption of automation across the $454 trillion sector,
where many transactions are still
confirmed via phone or fax.
“Our goal is to reduce the
amount of manual processing by
offering a single portal for pro-
Jeff Gooch
cessing all types of OTC derivatives, which will also ultimately cut
down on operational costs and
risks,” said Markit EVP Jeff Gooch,
who will be chief executive of the
new company.
Gooch, who led London- and
New York-based Markit’s portfolio
valuations and trade processing
businesses, will be joined by
Michael Bodson, executive managing director of DTCC’s business
management and strategy, who will
serve as chairman. The company,
owned equally by DTCC and
Markit, will be governed by an
11-member board—two seats
held by each partner and seven
by banks. While some buy-side
firms may view that organizational structure with suspicion,
Gooch emphasized that the new
entity will actively seek their
input in management decisions.
Colombia Stock Exchange Wants
To Be a Latin American Alternative
CEO Cordoba discusses
efforts to bring ‘new energy’
to country’s capital markets
Delayed Deal
For PHLX Done,
Nasdaq Will
Begin Integration
“This important new strategic partnership with Markit reflects our ongoing strategy of
aligning with other key service
providers as a way to help the
industry meet its goals and to
better serve our customers,”
said Bodson in a prepared statement. He could not be reached
for further comment.
BY DAWN KISSI
The Colombia Stock Exchange
(BVC), the country’s sole
marketplace for equities and fixed
income, in September will ramp up
its derivatives offerings with a new
trading platform from Nasdaq
OMX Group.
The move is part of the exchange’s efforts to become an alternative to the recently formed
BM&F Bovespa and the Mexican
p19 Stock Exchange—Latin America’s
p19
largest market centers—for international investors. “We are building
momentum now,” says Juan Pablo
Cordoba, chief executive of BVC,
which was created through a 2001
merger of the Bogota, Cali and
Medellin exchanges. “We are developing our business to meet in-
BYJOHNHINTZE
Several months later than expected, Nasdaq OMX Group
has completed its acquisition of the
Philadelphia Stock Exchange
(PHLX), which it plans to integrate
into its increasingly global and multi-asset-class trading platform while
maintaining the exchange’s strengths.
PHLX’s most important asset is
its options exchange, which will be
operated alongside the Nasdaq Options Market (NOM)—a homegrown venue launched in March.
Adam Nunes will oversee all of Nasdaq’s U.S. options trading and report to Chris Concannon, EVP of
transaction services. Meyer “Sandy”
Frucher, former chairman and chief
executive of PHLX—now Nasdaq
OMX PHLX—will be vice chair-
Continued on page 19
Despite moves by the world’s
largest dealers to reduce confirmation backlogs, recent
events have spurred regulators
to urge the industry to improve
the processing of credit and equity derivatives. The Federal
Reserve Bank of New York in
COMPLIANCE: Industry players are
pointing to flawed reasoning in the
Securities and Exchange Commission’s proposed order that would
allow NYSE Arca to charge for its
market data. PAGE 6
Continued on page 17
Juan Pablo Cordoba
TRADING: Future growth in the order
management systems business will
come from the emerging markets,
says a TowerGroup study. PAGE 14
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Company Index
People Index
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On the Web
Another trading halt in Tokyo;
Eurex will offer central clearing for OTC derivatives; and
more. See Breaking News at:
www.securitiesindustry.com.
ternational standards and to be
more competitive.”
The Colombia exchange is “
investing substantial amounts of
money in consolidating our technology” across asset classes, explains
Cordoba, adding that in 2005 it replaced its fixed-income trading platform with technology from Argentina’s Mercado Abierto Elec-tronico. Once Nasdaq OMX’s X-stream system is in place for deriv-
Continued on page 16
