www.securitiesindustry.com
NOVEMBER 17, 2008
NEWS DESK
Bank of New York Mellon bolsters
private equity fund administration;
Tethys Technology introduces for-
eign exchange tool; BNY Con-
vergEx’s new order router. PAGE 3
PERSPECTIVES
GUEST COMMENT: “Front-office
technology and product prolifera-
tion have run far ahead of middle-
office control and back-office pro-
cessing capabilities,” says Asset Con-
trol’s Martijn Groot. PAGE 4
Credit Market Woes Spark
Interest in Securities Futures
OneChicago reports new market makers
Wolters Kluwer’s GainsKeeper calculates cost basis
DEPARTMENTS
TECHNOLOGY: Regulatory demands
and new vulnerabilities are driving con-
tinued growth in IT security spending,
even as firms face constraints. “Partic-
ularly in bad times, you want to make
sure things go well,” says Gartner’s
Ruggero Contu. PAGE6
Cost-Basis Burdens Looming
New reporting rules present operational, tech hurdles
TECHNOLOGY: BT Global Financial
Services is offering Chicago-based
firms ultra-low-latency connectivity to
market data providers and exchanges.
PAGE 6
TRADING: Dark liquidity pools, an increasingly important part of the trading landscape, depend on users’ trust
for success, which makes
transparency a vital component. For example,
Credit Suisse’s Advanced
Execution Services unit,
which runs the CrossFinder platform,
is regularly audited by PricewaterhouseCoopers. “This has been a big
selling point for us,” says AES director
Eugene Choe. PAGE 8
BYCHRISKENTOURIS
Under the recently passed economic bailout bill, brokerages, mutual fund companies, issuers and their transfer agents will
face new cost-basis reporting requirements that are likely to pose
substantial administrative and technological challenges. Software and
service providers are adapting
quickly to the mandate, accommodating firms who have until 2011
before they must begin reporting
customers’ cost basis when selling
certain products.
Depository Trust & Clearing
Corp. (DTCC) last week said it has
bolstered AccuBasis, an online cost-basis reporting service used by 35
brokers, banks, transfer agents and
issuers including Aflac, Walt Disney Co., Johnson Controls and
First American Stock Transfer. Last
month, Eagle Investment Systems,
a unit of Bank of New York Mellon Corp., announced that its investment accounting solution now
supports the new reporting requirement, while Wolters Kluwer
Continued on page 18
BYJOHNHINTZE
Neglected by most of Wall
Street’s major brokerages,
OneChicago, an exchange that since
2002 has listed single-stock and
other securities futures, may be regaining some of its luster as new
regulations and risk concerns curb
firms’ financing and securities lending businesses.
Twenty-four firms lined up to
make markets at OneChicago when
it began operations, including giants
such as Bear Stearns, Deutsche Bank
and Goldman Sachs’ Spear Leeds &
Kellogg. However, brokerages cited
a lack of demand for the products
and their activity soon lapsed. Proponents of single-stock futures
(SSFs) argue that they were never
adequately promoted by brokers,
who feared that the instruments
would eat into the revenues generated by their financing and traditional short-selling services.
Currently, Quiet Light Securi-
TECHNOLOGY: A pair of announcements from technology providers
point to increasing interest in measuring trading system latency. PAGE9
Performance Attribution
Platform Spending
TECHNOLOGY: NYSE is making
Portware’s trading systems available
on a hosted basis to firms on its Secure Financial Transaction Infrastructure network. PAGE 14
ties, Chicago Trading Co. and
Timber Hill, an affiliate of Interactive Brokers—an investor
in OneChicago since March
2006—are the only active market makers on OneChicago. The
Chicago Board Option Exchange (CBOE) and CME
Group—OneChicago’s other
stakeholders—and their members have automatic access to the
exchange through the CBOE-direct and Globex platforms.
The tide, however, appears to
be turning. According to David
Downey, CEO of OneChicago,
two market makers—Group
One Trading and Société
Générale—have taken the necessary steps to connect to the exchange and will begin trading
after testing is complete. Group
One, a Chicago-based options
firm, anticipates making markets
in SSFs by year-end, said
Downey, adding that Société
Générale recently entered the
final certification stage. The
French bank trades in markets
such as the U.K., Australia, Spain
and South Africa where SSFs and
contracts for differences—a similar product—are traded more
actively.
Goldman and Merrill Lynch
& Co. are in the process of de-
Continued on page 20
TRADING: The Dubai Mercantile Exchange’s Oman crude oil futures will
move to the Chicago Mercantile Exchange’s Globex platform next year.
PAGE 14
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On the Web
SIX Swiss Exchange shuts down
London platform; Ballista opens for
options trading. See Breaking News
at:
www.securitiesindustry.com.
p3
p22
p22
New Name and
Platform in Place,
Canadian Venue
Takes Aim at TSX
BYALEXAJAWORSKI
In an increasingly competitive
Canadian equities market,
emerging-company exchange CNQ
has undergone a reinvention, changing its name to the Canadian National Stock Exchange (CNSX), upgrading its technology and hiring
new talent.
The moves by CNSX—
operated by CNSX Markets, formerly the
Canadian Trading & Quotation
System, which also runs alternative
trading system (ATS) Pure Trading—come near the end of a year
in which Canada has seen a profusion of new platforms, backed by
both local companies and those
from its neighbor to the south. On
Nov. 7, one day after CNSX made
Continued on page 17
Performance Attribution Systems:
New Entrants, Expanding Scope
BYKATHERINEHEIRES
How is that well-known hedge
fund manager bringing in
stellar returns when many of his
2007
peers have been hit with major loss-es? Is it asset allocation, security selection, currency trading, derivatives activity, or all of the above?
And can that mutual fund that has
failed to reach expected results turn
its performance around?
In a highly volatile market, companies that provide cutting-edge
tools to help investors answer those
questions by dissecting portfolio
performance are seeing a marked $333 million
2008 $363
2009 $399
2010 $443
2011 $496
2012 $556
2013
increase in interest. “When markets
go bad, the demand for performance measurement and attribution capabilities goes up,” notes
Phillip Silitschanu, senior analyst at
Boston-based Aite Group.
Silitschanu estimates that the
market for stand-alone performance
$628
Source: Aite Group
attribution platforms will climb
from $333 million to about $500
million by 2011, despite the general market slowdown. The systems
typically cost between $250,000 and
$500,000, with a 10 percent annu-
Continued on page 20
