www.securitiesindustry.com
DECEMBER 15, 2008
NEWS DESK
Former Townsend CEO Jeffrey
Wecker is heading Lime Brokerage; TD Ameritrade offers unified
managed accounts program for
RIAs; and more. PAGE 3
PERSPECTIVES
COMMENT:
At the heart of financial institutions’ failure to measure
and control risk exposures is “the
failure to aggregate basic data
across vast enterprises,” writes Financial InterGroup’s Allan D.
Grody. PAGE 4
IPO Delayed, Liquidnet Faces Patent Issues
Initial valuation may
overlook patent risks
Liquidnet’s Rising Volumes
BYJOHNHINTZE
When Liquidnet Holdings
announced in July that it
was planning an initial public offering, expectations were high,
even in a difficult environment.
After all, the institutional brokerage had built a stellar reputation
with its buy-side-only block trading platform. But the virtually
frozen IPO market has caused at
least a temporary delay, which may
give investors time to consider impending decisions in a patent dispute that could have a major effect on Liquidnet’s business.
A Liquidnet spokesperson said
last week that the firm will continue to refresh its S-1 registration statement on a quarterly basis,
“in case we decide to pursue the
offering.” There is “no definitive
timetable” for the IPO, he added.
That statement came after CEO
90
Average daily
80 volume in millions
70
60
50
45
gy
40
30
28
20 17
10 6
5
0
81
84
73
71
SEC and Finra
Clash on Mutual
Recognition
Critics call initiative
a radical departure
64
57
58
VIEWPOINTS:
Goldman Sachs’
Hudson Street is a “conduit” for alternative research, says platform
head Tom Conigliaro, supporting
and offering access to a host of con-
tent and technology
providers. “Investors all
over the globe are all
looking for an edge,” he
says, and the platform
is responding with rapid expansion.
PAGE 8
2002 2003 2004 2005 2006 2007 2007 2007 2007 2008 2008 2008
Q1 Q1 Q1 Q1 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Source: Liquidnet
DEPARTMENTS
TRADING:
Omgeo and the Korea Securities Depository plan to provide
investment firms with automated
trade matching and processing.
PAGE 9
Seth Merrin was quoted in several news outlets saying that Liquidnet’s public listing, originally
slated for this quarter, would likely be postponed until 2010.
This summer, Liquidnet cited
$500 million as a target for the
proceeds. That amount, depending on the stake sold to the pub-
lic, could have given it a much
higher value than the $1.3 billion
market capitalization of rival Investment Technology Group
(ITG). When ownership is concentrated in a few hands, selling
stakes as small as 10 percent is not
uncommon, and a successful sale
Continued on page 18
BYCAROLE. CURTIS
Adivide has opened up between the Securities and Exchange Commission and the Financial Industry Regulatory Authority (Finra) over an initiative
that would significantly loosen restrictions on overseas exchanges
and broker-dealers that do business in the U.S.
In August, the SEC announced
an agreement with Australian regulators that extends mutual recognition to both countries’ trading
venues and financial firms. Beginning next year, select Australian institutions, under the supervision of their home regulators, will be able to sell securities
to qualified U.S. investors with-
Continued on page 19
COMPLIANCE:
Seeking to improve
European transparency, the U.K.’s
Investment Management Association
calls for a consolidated tape and new
order-routing mandates. PAGE 10
ASSET SERVICING:
The Depository
Trust Co. has received approval to
make changes to its direct registration system and compensate transfer
agents for the necessary systems modifications. PAGE 10
Trading Risk the
Focus of New
FPL Committee
Getting Risk Systems to Ask the Right Questions
Effort under way to
establish best practices
for bad trades
TECHNOLOGY:
Microsoft has developed an Excel add-in it says catches
90 percent of the problems caused by
running spreadsheets on a server grid.
PAGE 12
Asia, at a recent symposium in
Hong Kong. However, that is
apt to change as boards and regulators demand a greater, and
more clearly defined, role for
risk management—one that enables it to overcome the influence of star traders on a roll.
“We have a window of opportu-
Continued on page 15
DATA MANAGEMENT:
Start-up Aqumin introduces a visualization tool
that lets investors integrate large
streams of data into a three-dimensional environment. PAGE 14
▼
People in the News
People Index
BY TOM GROENFELDT
Contrary to what one might
expect at this point in the
global financial crisis, investment bankers are not complaining bitterly about the shortcomings of risk technology—nor
are they rushing to order more
of it.
Financial technology giant
SunGard Data Systems cites an
example that may offer some insight. The company’s Adaptiv risk
management software was recently chosen to replace a system
p19
p19
▲
On the Web
Short-sale restrictions aren’t easing
market volatility; Russell Investments publishes T Standard 2.0.
See Breaking News at:
www.securitiesindustry.com.
BYKATHERINEHEIRES
Amid dramatic volatility, FIX
Protocol Ltd. (FPL), the governing body for the buy-side-to-sell-side messaging protocol, has
formed a risk committee to address
growing concerns among market
participants and trading venues.
Problems stemming from erroneous trades and order validation
are at the top the group’s agenda as
it seeks to establish industrywide
best practices for a range of risk-related trading issues. Such difficulties came to the fore, according
to committee members, on Sept.
19, when tens of thousands of bad
trades were removed from the consolidated tape.
Continued on page 16
Mat Newman
at a financial firm with large positions in credit risk. The institution’s risk system was churning out
reports that were passed around
and occasionally commented on,
but risk management was not part
of the decisionmaking process. A
massive concentration in credit
risk was built up without it ever
being factored into the firm’s risk
management.
“There was no link to say, ‘we
have a limit on this,’ or, ‘you have
to charge more for it because it
is riskier from a systemic risk perspective,’” said Jonathan York,
VP of SunGard’s BancWare
ERisk business. “If they had
turned it off, it wouldn’t have
changed any decision.” That’s not
so unusual, said York. “Lots of
organizations have risk as an ancillary activity.”
Right now business units are
the first line of defense in risk
management, said Tim Bezencon, ANZ Banking Group’s
chief risk officer for Northeast
