Special Report: Sibos Preview, page 9
www.securitiesindustry.com
SEPTEMBER 8, 2008
NEWS DESK
Chicago Mercantile Exchange and
Osaka exchange sign cooperation
agreement; NYSE Arca offers real-time last-sale data; TradingScreen
opens in Singapore. PAGE 3
PERSPECTIVES
GUEST COMMENT: Despite the cost
and complexity, buy-side managers
“would be wise” to continue their
support of complicated instruments,
says Citisoft’s Ben Keeler. But meeting demand from investors “will require a significant shift in approach
to technology adoption and trade
processing.” PAGE 4
SPECIAL REPORT
Encouraged by the Markets in Financial Instruments Directive, Europe has seen an explosion of trad-
ing venues. By 2009,
the continent will have
four times the number
of platforms for all financial instruments as
the U.S. and Asia combined, according to a JWG-IT report. Hand
in hand with that proliferation, a
flood of post-trade data is threatening to drown financial firms—
volumes could rise 1,600 percent in
2009. Vendors typically provide
pieces of a potential solution, but in-house technology executives are
being asked to figure out the overall
requirements and design a program
to meet them. “If you look at doing
more of the same, your infrastructure will grind to a halt and your
cost-income ratio will spike,” says
JWG-IT’s P.J. Di Giammarino.
PAGE 9
Convergence of Trading Strategies
Is Breaking Down Service Barriers
BYCHRISKENTOURIS return. And with wider acceptance
As hedge funds and traditional of their investment strategies, some
long-only asset managers bor- hedge funds are blossoming into
row strategies from one another, larger institutions and, in some
the lines of demarcation between cases, adopting long-only tech-the prime brokerage and custodi- niques to complement their more
an bank communities are blurring, innovative activities.
which is spurring both cooperation “Long-only managers are in-and competition. creasingly looking to leverage their
Many long-only managers are scale into higher-margin products
expanding their reach into over- in alignment with shifting investor
the-counter derivatives, while oth- demands for alternative funds,” says
ers are adopting hedge fund-like Andrew Wilson, managing direc-long-short strategies such as so- tor of global market financing ser-called short-extensionand absolute vices for Merrill Lynch & Co.
“Hedge funds, in turn, have been
successful in delivering alternative
strategies and are now looking to
broaden their product base, diversify their investors and increase assets further. In effect, we are seeing the convergence of asset management beginning to occur.”
One of the key factors driving
the phenomenon is the third version of the European Union’s Undertakings for Collective Invest-
Andrew Wilson Continued on page 22
A Hedge Fund
Hiring Feast
Funds benefitting from
Wall Street reductions
BYKATHERINEHEIRES
Hedge funds with the means
to hire experienced talent are
taking advantage of budget cutbacks at investment banks. Larger
funds are scooping up trading and
middle-office personnel at compensation rates far less substantial
than a year ago, according to recruiters.
While traders with proven track
p3 records continue to command top
p23 salaries, recruiters report that the
p23 days of guaranteed compensation
packages may be over. And new
hires in the middle office are getting, on average, no more than a 10
percent boost in earnings or are
being brought on at the same level
as their previous position.
The hiring activity is also highly targeted, with funds zeroing in
eFinancialCareers Job Postings
Q2 2008 v. Q2 2007
+38%
+32%
DEPARTMENTS
DATA MANAGEMENT: Mandatory
adoption of standardized fair-value
accounting is just around the cor-
ner in the U.S. But some firms are
arguing that Financial Accounting
Standard 157 doesn’t reflect the re-
ality of their business in today’s eco-
nomic environment. PAGE 6
+8%
COMPLIANCE: As the securities indus-
try adapts to more stringent mandates
for electronic communications archiv-
ing, StoredIQ aims to prepare clients
before lawsuits arise. PAGE 18
▼
Commodities
Derivatives
Equities
Hedge Funds
-30%
People Index
Company Index
People Index
▲
On the Web
Study calls for UMA standardization; Microsoft hires global
financial services head; and
more. See Breaking News at:
www.securitiesindustry.com.
on traders, portfolio managers, analysts and researchers with expertise in specialized areas such as distressed investing, oil- and gas-re-lated strategies, infrastructure-focused investments and asset-backed lending.
“There is a lot of hiring going
on in the hedge fund space at this
time—far more than usual,” ob-
Continued on page 21
Institutions and
Sell Side Alike
Grapple With
Impact of IOIs
Concerns grow over
information leakage in
dark liquidity pools
C. Thomas Richardson
BYJOHNHINTZE trades, raising questions about
The dozens of dark pools that information leakage.
have emerged in recent years Those indications of inter-have each sought to offer unique est (IOIs), which take different
features to draw order flow and in- shapes, are useful because they
crease fill rates. But some of the potentially broaden a venue’s
platforms’ “special sauce” may make available liquidity. However,
them less than fully dark, which has IOI-aided dark books may be
prompted concern from both insti- more appropriate for certain
tutional investors and sell-side com- types of orders, such as those
petitors. requiring rapid execution, than
Hidden liquidity destinations— others.
alternative trading systems (ATSs) “At the end of the day, it’s
that do not display quotes, reducing incumbent on buy-side in-the market impact of large orders— vestors to kno w who they’re
understandably want to emphasize trading with,” said Ray Tier-their darkness. However, some have ney, global head of trading at
adopted functionality that alerts Morgan Stanley Investment
market participants to potential Continued on page 20
EC Asks Securities Regulators
For Help on Code of Conduct
CESR asked to identify interoperability holdups
BYCHRISKENTOURIS “The EC is trying to deter-
The European Commission, mine whether there are any reg-seeking to expedite its volun- ulatory or other constraints which
tary code of conduct for market in- prohibit a clearinghouse or de-frastructures, has asked the Com- Continued on page 19
mittee of European Securities Regulators (CESR) to figure out why
clearinghouses haven’t been able to
follow through on dozens of requests for interoperability.
In an Aug. 22 statement, CESR
said the EC has asked that it “map out
member states’ regulatory and supervisory arrangements (set at national, regional and/or local level) relating to the setting up of links between post-trading infrastructures and
advise the commission ... on how best
to address any potential differences”
that the exercise reveals. CESR has
until January to provide the EC with
its answers and has given market participants until Sept. 19 to comment.
