www.securitiesindustry.com
FEBRUARY 2, 2009
NEWS DESK
Standard Chartered taps Progress
Apama technology for foreign exchange; EuroCCP will clear Spanish equities; Swift signs MOU with
Vietnamese depository. PAGE 3
PERSPECTIVES
COMMENT:
The Financial Industry Regulatory Authority is in reaction mode as Congress pushes to
find out what went wrong in the
Madoff situation. PAGE 4
SPECIAL REPORT
Before the financial crisis, buy-side
firms largely linked risk management to regulatory requirements,
but the function has
taken on new urgency
apart from pressure
from the regulators.
“No hedge fund is
going to get money from an investor
unless they have an effective risk
management system in place,” says
Blaise Labriola, managing director
of technology provider Altaira. As
funds take a renewed interest in
counterparty and operational risk,
they will invest considerable money
in risk systems in order to raise capital, he says. “Beefing up risk management is a selling point for them
now.” Also in this report: Current
market conditions have given a boost
to BidRoute; Europe’s Markets in
Financial Instruments Directive may
not guarantee best execution; and
more. PAGE 7
Funds, Investors
Assess Operations
In Madoff Wake
Eyeing Options, Listings,
BATS Looks To Expand
BYCHRISKENTOURIS
Tuckerbrook Alternative Investments said last week that
it will provide investors with the
daily market values of their hedge
fund accounts from administrator
Citigroup. In December, Union
Bancaire Privée, a Geneva-based
fund of hedge funds, threatened to
pull out of any fund that does not
have independent administrators.
Following the discovery of
Bernard Madoff’s alleged $50 billion global investment scam, such
announcements offer evidence that
investors are demanding greater
transparency from their fund managers. While the term has often
been used to describe heightened
disclosure by a hedge fund of its
trading activities, transparency is
quickly expanding to include third-party analysis. Investors are unlikely to continue taking the word
of a fund manager at face value—
and they don’t want to wait for
regulators to solve the problem.
“Ninety percent or more of all
Continued on page 14
Exchange status opens
doors, says CEO Ratterman
BYALEXAJAWORSKI
Since transitioning from an
electronic communications
network in November amid
record volatility, BATS Exchange
has set its sights on increasing its
market share and expanding its
global presence, as well as some of
the opportunities opened up by its
new status.
Known for fast and efficient
technology, BATS launched in
2006, quickly growing into the
third-largest U.S. equities platform. In October, the company
opened a venue in Europe that utilizes that same technology. Now
the upstart exchange is looking
into adding an asset class and entering the listings business.
“Today we offer U.S.-listed
cash securities, along with our
BATS Europe multilateral trading
facility, but we are giving serious
consideration to equity options
and have put some initial thought
into what a listings offering might
Options Industry
Presses for Time
As Deadline for
New Symbology
Draws Closer
New nomenclature
not a priority, say
financial institutions
Joe Ratterman
need,” says Joe Ratterman, chairman, president and CEO of
Kansas City-based BATS.
Another possibility, says BATS
spokesperson Randy Williams, is
the introduction of a “second
quote,” though he stresses that
those discussions are in very early
stages. Nasdaq OMX Group
rolled out a second platform last
month, giving users a choice of fee
and execution structures, and the
New York Stock Exchange and
Direct Edge also offer multiple
models.
In response to surging market
Continued on page 15
DEPARTMENTS
TRADING:
Front- and back-office
systems providers look to capitalize on Canada’s same-day matching mandate. PAGE 6
COMPLIANCE: The Financial
Crimes Enforcement Network and
Commodity Futures Trading Commission will share information on
AML efforts. PAGE 6
Stock-Loan Platforms Race To Offer CCPs
Counterparty risk a focus
on both sides of Atlantic
Securities Lending Returns of U.S. Public Pension Plans
(basis points)
150 ■ Lowest ■ Average ■ Highest
BYJOHNHINTZE
Although the securities lending market is one of the
world’s largest, transactions have
long been conducted over the
counter and bilaterally between
beneficial owners, agent banks and
self-clearing broker-dealers. The
collapse of players such as Lehman
Brothers and Bear Stearns, however, has emphasized the need for
counterparty guarantees.
On Jan. 23, Options Clearing
Corp. (OCC) filed a proposal
with the Securities and Exchange
Commission to act as a central
counterparty for Quadriserv’s
forthcoming AQS stock-loan platform. Meanwhile, competitor
BYCHRISKENTOURIS
In the face of mounting pressure
from Wall Street, the Options
Clearing Corp. (OCC) is holding
to its February 2010 deadline for
implementation of a new nomenclature for listed options.
In separate letters sent in December to Michael Cahill, president and COO of the U.S. options clearinghouse, TD Ameritrade, Charles Schwab Corp.,
JP Morgan Chase & Co. and
UBS Financial Services all said
that while they approve of the
move to a new 21-character
symbology key, they are concerned about the timetable.
OCC has spearheaded the
switch—known as the Options
Symbology Initiative (OSI)—
since 2005 through a committee
of industry representatives.
Meeting the target date
“would place significant demands
on our technical and operations
resources which we don’t believe
is in the best interest of our shareholders in the challenging mar-
Continued on page 13
100
DATA MANAGEMENT: Using
Volante software, the London Stock
Exchange will integrate Swift mes-
saging into its matching and rec-
onciliation service. PAGE 12
▼
People in the News p3
Company Index p15
People Index p15
50
0
-50
-100
▲
-150
2006
On the Web
NSCC plans real-time trade
guarantee; NYSE-Bids joint
venture launches; and more.
See Breaking News at
www.securitiesindustry.com.
LendEX, which already has a centralized clearing solution in place,
has begun discussions with the
National Securities Clearing
Corp. (NSCC).
The drive to introduce centralized clearing has emerged in
2007 2008
Source: Finadium
Europe as well. The clearing arm
of derivatives exchange Eurex,
which plans to act as a CCP for
Clearstream Banking Luxembourg’s ASLplus securities lending program, said last week that it
Continued on page 12
