www.securitiesindustry.com
JANUARY 19, 2009
NEWS DESK
Millennium hires fund administrator GlobeOp; youDevise upgrades
alpha-capture system; commodities
tech vendor Brady purchases
Comsoft. PAGE 3
PERSPECTIVES
COMMENT:
Following the collapse
of the independent investment
banking sector, many have asked
whether the SEC could have done
more. Now the Federal Reserve
will see if it can improve on a flawed
regime. PAGE 4
Industry Mulls Potential of
Nasdaq Clearing Initiative
Does the NSCC utility need a competitor?
Madoff Scandal
Ensnares Finra,
Calls for Adviser
Oversight Grow
BYJOHNHINTZE
With Nasdaq OMX Group
slated to launch a clearing
service in the third quarter, exchange officials have been pressing industry players for feedback
on how best to compete against
the National Securities Clearing
Corp. (NSCC) in the continuous
net-settlement arena.
Self-clearing broker-dealers
largely view the prospect of an
NSCC rival favorably. “
Conceptually, firms would be crazy not to
be interested in creating competition and bringing innovation and
additional value to the industry,”
said Jeff Bell, EVP of clearing and
technology at Los Angeles-based
Wedbush Morgan.
But Nasdaq will face major
hurdles. In today’s bear market,
broker-dealers may prefer to devote their operational resources to
more urgent tasks than developing connectivity to a new clearing
service. And although Nasdaq
points to price as its competitive
focus, most brokerages view the
charges from NSCC—a not-for-profit Depository Trust & Clearing Corp. subsidiary that returns
excess fees to members—as reasonable, especially after a series of
cuts last year.
“Nasdaq is doing this at a really challenging time, and it’s going
to put a lot of pressure on [bro-ker-dealers] to have to change
their systems around and interface
with a second clearinghouse,” said
Bell, adding that he shared his
views with both NSCC and Nasdaq early last week.
The clearing facility appears to
be part of Nasdaq’s long-term
strategy to build market share.
Continued on page 14
BYCAROLE. CURTIS
The Securities and Exchange
Commission is not the only
regulator taking heat for Bernard
Madoff’s alleged $50 billion Ponzi
scheme. Christopher Dodd, D-Conn., last week asked Mary
Schapiro, CEO of the Financial
Industry Regulatory Authority
(Finra), why her agency failed to
detect Madoff’s conduct for almost twenty years.
Dodd’s question came at the
confirmation hearing for
Schapiro, who has been tapped by
President-elect Barack Obama to
succeed Christopher Cox as chairman of the SEC. Bernard L.
Madoff Securities, pointed out
Dodd, was a regional broker-dealer, placing it under Finra’s
purview. Although the firm was
also an investment adviser—out-
Mary Schapiro
GUEST COMMENT:
Focusing on
risk management, mergers, client
retention and cost reduction, Financial Insights analyst Sean O’Dowd offers ten predictions for the
financial services industry in 2009.
PAGE 6
VIEWPOINTS:
Far from contributing to the current financial crisis,
fair-value accounting
“provided transparency to recognize that
there was a problem,”
according to Michael
Mard, a member of the Financial
Standards Accounting Board’s valuation resource group. FAS 157,
says Mard, has been misunderstood.
PAGE 7
DEPARTMENTS
TRADING:
Chicago Board Options
Exchange aims to launch an all-elec-tronic exchange in the New York
metropolitan area by August.
PAGE 7
DATA MANAGEMENT:
Think-tank
JWG-IT plans to define how firms
should create and maintain customer
and counterparty data. PAGE 10
DMA a Priority
In Emerging
Markets Amid
Sagging Results
STANDARD & PROTOCOLS:
ISITC
is preparing to launch a message type
designed to improve trailer-fee processing for mutual funds. PAGE 10
BYCHRISKENTOURIS
Despite diminishing returns in
many of the once heralded
emerging markets, financial services
firms and network providers are
bolstering their direct-market access (DMA) tools as they prepare
for a resurgence.
“There are numerous attractive
investment opportunities in emerging markets, both in terms of absolute return and significantly
greater relative growth,” says Chris
Wolf, managing partner and co-chief investment officer of Cogo
Wolf Asset Management, a San
Francisco-based global strategy
fund of hedge funds. But he concedes that “some may be over-
Continued on page 13
side of Finra’s oversight—its advisory staff were also brokerage
employees, and the self-regulatory organization (SRO) has broad
examination authority. “Finra performed exams but never looked
at the individual investments,”
Dodd said.
Schapiro faulted the SRO’s
“stovepipe” approach to regulation. “The investment adviser activity did not run through the
books of the broker-dealer,” she
said, adding that a larger issue is
the “increasing migration of activity available for inspection and
oversight out of the more closely
overseen broker-dealer community. ... Finra was not aware of the
investment adviser fraud.”
At a Jan. 5 House Financial
Services Committee hearing on
regulatory reform, Spencer
Bachus, R-Ala., asserted that the
different treatment Finra accords
brokers and advisers is a key reason the Madoff fraud continued
for so long. Finra—and its predecessors—inspected the New
York-based broker-dealer on a
Continued on page 14
TRADING:
Instinet adds Hong Kong
equities to its Asian alternative trading platform. PAGE 11
Technology provider Marketcetera”s open--source trading platform.
▼
People in the News
Company Index
People Index
p3
p15
p15
Open-Source Technology May
Gain as Wall Street Cuts Back
▲
On the Web
Mediant cuts proxy material distribution costs; DTCC pledges
support for all CDS clearing
solutions.
www.securitiesindustry.com.
BYKATHERINEHEIRES
With staffing and resource
cuts forcing financial
firms’ IT managers to do more
with less, many industry observers
see wider adoption of open-source
technology on the horizon.
“The market for open source
among financial services firms
will increase over the next few
years,” says Larry Tabb, CEO of
New York-based Tabb Group.
“Developers that can’t get money
for licensed software will start migrating to open source, especially for products that have been
around and thoroughly vetted.”
Continued on page 12
