Special Report: Global Market Structure, page 9
www.securitiesindustry.com
NOVEMBER 3, 2008
NEWS DESK
JSE makes offer for Bond Exchange
of South Africa; JP Morgan Chase
and Trading Technologies strike licensing and distribution deal.
PAGE 3
MiFID Enters Year Two
On its one-year anniversary,
EU directive a work in progress
PERSPECTIVES
COMMENT: With the U.S. government putting together a new regulatory scheme, it is critical that the
system that emerges protects not
only U.S. investors, but also the capital-raising process itself from a self-destructive loss of focus. PAGE 4
SPECIAL REPORT
As the Middle East—and the United Arab Emirates in particular—
makes a strong bid to
become an international powerhouse,
Nasdaq OMX Group
and NYSE Euronext
have entered the fray. However, the
current environment presents the
region with obstacles, according to
Brad Setser of the Council on Foreign Relations. “With the price of
oil fallen, the region clearly is going
to accumulate foreign assets at a
much slower pace going forward,”
says Setser. Dubai has been building with borrowed money and it remains to be seen whether its carbon-rich cousin, Abu Dhabi, will
provide funding to get through the
crisis. Also in this report: NYSE
Euronext’s Anthony Attia talks
about the Universal Trading Platform and how consolidating trading systems will alter the landscape.
PAGE 9
BY DAWN KISSI
One year since the European
Union’s Markets in Financial
Instruments Directive (MiFID) became effective, many market participants are still looking for clarity, even as regulatory bodies may
be shifting their attention toward
the global financial turmoil.
MiFID’s elimination of concentration rules, which in some countries required that trades be executed on national exchanges, has
driven the proliferation of multilateral trading facilities (MTFs)
such as Turquoise, Nasdaq OMX
Europe and BATS Europe. But
“despite the launch of new trading
venues offering better visible prices
and the chance of dark liquidity,
many brokers are still only trading
on the primary exchanges,” according to Richard Balarkas, CEO
of Instinet Europe in London. Chi-
Richard Balarkas
X Europe, an Instinet-backed platform, rolled out in March 2007, in
anticipation of the EU directive.
“The leading sell-side and buy-side firms have very high self-im-posed standards for execution,
which MiFID was never going to
supersede,” said Balarkas. And
“there are still many buy-side firms
whose desire to pay their research
providers fundamentally blocks any
move to improve the quality of execution services they receive.”
Continued on page 16
Spending on Direct Data Feeds for Options
62.9
North America
$US millions
Sell Side Hedge Funds Traditional Exchanges/
Asset Managers Depositories
Source: TabbGroup
Managing Data in Tumultuous Times
Technology options have been capitalizing on the in-
abound for firms coping dustry’s needs. On Oct. 27, Thom- son Reuters unveiled a hosted, low-
with surging volumes latency solution for the U.S. Op-
BYCHRISKENTOURIS tions Reporting Authority (Opra)
p3 C onfronted with the credit data feed, while Eagle Investment p22 crunch and fragmenting liq- Systems, a subsidiary of Bank of
p22 uidity, data management personnel New York Mellon Corp., said the
are struggling with capacity con- market turmoil has sparked in-
straints, latency and quality issues. creased interest in its centralized
And while financial firms are tap- data warehouse.
ping a variety of tools to handle the Two weeks earlier, complex
increased demands, their goal is the event processing (CEP) technolo-
same: calculating risk exposures and gy provider Stream Base Systems
making decisions in record time. said its platform had been installed
Software and service providers Continued on page 19
38.3
DEPARTMENTS
TRADING: As financial market volatil-
ity reaches record-breaking levels,
traders, exchange executives, regula-
tors and others discuss how the in-
dustry is coping with a difficult en-
vironment. PAGE6
2008
2011
13.0
7. 3
2. 2 4.0
7. 3
4. 8
TRADING: NYSE Arca Options has
begun listing foreign exchange options products from the International Securities Exchange under a
new licensing deal. “It’s been our belief that exchanges shouldn’t design
products in a black box anymore,”
says ISE’s Kris Monaco. PAGE 6
▼
People in the News
Company Index
People Index
▲
On the Web
BATS Europe opens; ICE
plans to buy Clearing Corp.;
OptionsMonster launches brokerage. See Breaking News at:
www.securitiesindustry.com.
F Ten Trading
Tech Draws
Bulge-Bracket
Investments
BYJOHNHINTZE
Capital may be tight on Wall Ted Myerson
Street, but four bulge-bracket firms have found the funds to matching engines.
back FTen, a technology vendor “Collocation is a very im-that provides risk and trading prod- portant factor,” said Dmitri
ucts designed for high-frequency, Galinov, head of liquidity strat-low-latency strategies. egy at Credit Suisse’s Advanced
On Oct. 30, FTen said that Execution Services(AES). “It
Credit Suisse, Goldman Sachs, JP increases speed and can en-Morgan Chase & Co. and Merrill hance performance for high-Lynch & Co. have all made invest- frequency trading models.”
ments of undisclosed size in the FTen currently has five col-New York-based company. The new location facilities in U.S. trad-capital will be used primarily to ex- ing centers including New York
pand FTen’s overseas infrastructure, and Chicago, allowing firms that
including collocation facilities that employ strategies such as statis-enable clients to shave critical mil- tical arbitration to execute trades
liseconds off execution times by more quickly. It has also set up
placing their trading systems in facilities in Frankfurt to facili-close proximity to market centers’ Continued on page 22
Storm Arrives for Syndicated Loans
BYSHANEKITE ket, which has continued to ex-
Agroup of banks are teaming on perience settlement backlogs,
a platform designed to en- needs a one-stop electronic so-courage straight-through process- lution for post-trade processing in the largely manual syndicat- ing. Currently, he said, coun-ed loan sector. But its future com- terparties use several vendors
petitors say they already offer much that specialize in different as-of the functionality that Storm Loan pects of loan settlement, book-
Marketplace will bring to the table. running and documentation.
Co-owned by Bank of America Continued on page 20
Corp., Credit Suisse, Morgan Stanley and the newly created Storm
Networks, the online system for par
and distressed loans will offer buy-and sell-side firms integrated trade
matching, primary and secondary
trade settlement, inventory, position
reconciliation and credit documentation. The platform is slated to
launch during the first half of 2009,
according to Jay Katz, managing director of Storm Networks, which
was formed to serve as loan processing development hub. The company plans to introduce additional
products in the future.
According to Katz, the banks believe that the syndicated loan mar-
