www.securitiesindustry.com
OCTOBER 20, 2008
NEWS DESK
Merlin Securities automates short-sale reporting; IM vendor Pivot
teams with DMA provider Marco
Polo Network; DTCC joins XBRL
US; and more. PAGE 3
PERSPECTIVES
GUEST COMMENT: As more and
more financial services executives
rely on handhelds to access critical
data, central device management
has become a priority, says Enterprise Mobile’s Mort Rosenthal.
PAGE 4
Market Ready to
Embrace Futures
Competitor, Says
ELX’s New CEO
Amex veteran Wolkoff on
upstart exchange’s future
BYALEXAJAWORSKI
As ELX Electronic Liquidity
Exchange prepares to go up
against futures giant CME Group, it
has enlisted Neal Wolkoff, former
American Stock Exchange chairman
and CEO, to lead the effort.
Initially announced by its consortium of backers late last year,
ELX had been relatively quiet since
March, when it revealed its moniker
and some details of its plans. But its
new CEO says the company has
Continued on page 20
Shares Borrowed in U.S. Financial Stocks
Sept. 19—Start of
Short Selling Ban
Oct. 8—Ban Ends
Aug. 1
Sept. 1
Oct. 1
Source: SunGard Astec Analytics
VIEWPOINTS: Newly launched multilateral trading facility (MTF) Nasdaq OMX Europe is competing
against a rapidly growing number of
pan-European venues.
President Charlotte
Crosswell says that “after
one to two years we will
probably see consolidation among some of the new players
and in the long run we expect to see
four to five MTFs surviving.”
PAGE 8
DEPARTMENTS
CLEARING & SETTLEMENT: As nu-
merous initiatives emerge to offer
clearing for credit default swaps, In-
tercontinentalExchange joins with
consortium-owned Clearing Corp.
to establish a global central counter-
party for credit derivatives. PAGE 6
CLEARING & SETTLEMENT: NYSE
Euronext’s new multilateral trading facility has tapped EuroCCP to
provide clearing services but plans
to open up the platform to other
clearinghouses next year. PAGE 6
Neal Wolkoff
Turbulence and Fear Shift
Stock Lending Fundamentals
BYJOHNHINTZE and lenders. So far, there’s been lit-
The collapse of financial giants’ tle indication that any institutions
share prices and U.S. regula- in the U.S. have found themselves
tors’ recent ban on short selling adversely exposed to the firm—a
have taken their toll on the securi- testament, perhaps, to current col-ties lending market by dramatical- lateral requirement conventions.
ly reducing borrowed shares, lift- In London, however, hundreds
ing collateral requirements in Eu- of millions of dollars in cash and
rope and raising the prospect of an securities belonging to Lehman’s
increase in the U.S. hedge fund clients have been frozen
Lehman Brothers’ Sept. 15 in their prime brokerage accounts.
bankruptcy filing marked the start Numerous European banks have
of massive volatility in an already also floundered in the credit mael-unstable equity market. Less well strom, prompting their respective
publicized is the fact that the bulge- governments to inject equity capi-bracket firm had a large stock-lend- tal. The combination of events has
ing desk that had engaged in trans- sent stock markets reeling and
actions with most major borrowers Continued on page 16
ASSET SERVICING: Amid falling returns, hedge funds are spending a
large chunk of their revenues on
operations, according to a study
from KPMG. PAGE 10
TRADING: While some observers
thought Asian firms might escape
the credit crisis relatively unscathed,
recent problems have demonstrated
that no region’s financial institutions
are immune. PAGE 12
Company Index
People Index
p22
p22
On the Web
Deloitte suggests fundamental
rebuilding of risk function; NYSE
introduces market intelligence
service. See Breaking News at:
www.securitiesindustry.com.
As Hedge Funds Go, So Goes GlobeOp?
Riding booming OTC derivatives business,
administrator says it will continue to grow
BYKATHERINEHEIRES GlobeOp, which competes with the
The financial crisis has hit the administration arms of giants such
hedge fund industry hard, as Citigroup, Goldman Sachs and
and even as it faces contraction, in- State Street Corp., as well as inde-creased oversight may be on the pendent operators including Citco
horizon. However, GlobeOp Fi- Fund Services and as many as 90
nancial Services, an administrator small and midsize firms.
with over 150 hedge fund clients in Hufschmid describes GlobeOp
the U.S. and Europe, says that the as a business that allows hedge Hans Hufschmid
dire situation actually plays to its funds to outsource “everything
advantage. after the trade occurs.” That in- ministrators do not, such as pro-
“What is happening in the mar- cludes portfolio accounting, net cessing and clearing over-the-kets right now—a total collapse— asset value calculations, clearance counter derivatives, an area that
is something that will be very good and settlement, collateral manage- has seen explosive growth over the
for our business going forward,” as- ment, risk reporting and compli- past two years—and come under
serted Hans Hufschmid, founder ance. But the firm also offers more heavy scrutiny.
and CEO of eight-year-old cutting-edge services that many ad- Continued on page 21
Guidance Arrives
For Fair-Value
Methodology,
But Some Call
For Suspension
BYCHRISKENTOURIS
Two years since the Financial Accounting Standards
Board (FASB) issued its guidelines on fair-value accounting,
the non-profit organization and
the Securities and Exchange
Commission are still addressing
industry concerns about its application in the valuation of
hard-to-price securities.
Under the newly passed
Emergency Economic Stabilization Act, the SEC has until
Jan. 2 to study the effects of the
fair-value approach. The legislation gives the regulator the
authority to eliminate the use
of the methodology for certain
financial instruments—namely,
mortgage-backed securities.
Regulators and other proponents of fair-value accounting assert that it helps investors
better understand what a firm
and its holdings are worth. But
financial institutions, which
have had to take multimillion-dollar write-downs, say that Financial Accounting Standard
(FAS) 157, effective for firms
with fiscal periods beginning
November 2007, forces them to
come up with valuations that,
