Q&A: Will Easley

Fast Technolog

Drives BOX’s

Quick Growth PAGE ^y11

VOLUME 21 NUMBER 11

MAY 18, 2009

COMMENT p. 4

Hedge Fund Power Shift Could Be Good

OPERATIONS p. 9

Removing Risk From Derivatives

TECHNOLOGY p. 16
Virtualization Saves Natixis Time, Money

TRADING p. 20

What Happend At Tocom?

Direct Edge’s ELP Program Causing Market Brouhaha

By John Hintze

WITH ITS EXECU TION VOLume increasing, Direct Edge’s three-year-old program that flashes orders to a private network of broker-dealers before routing them to other quoting markets, is generating calls for regulatory review of the practice as well as the broader notion of dark liquidity.

Direct Edge filed an official application May 7 to convert its two electronic communications networks, EDGX and EDGA, to full-fledged equities exchanges. This was preceded by months of discussion with Securities and Exchange Commission staff to tailor the proposal, which includes

securitiesindustry.com a SourceMedia brand

the ECNs’ Enhanced Liquidity Provider mechanism for flashing to its broker-dealer network, to meet the stricter regulatory requirements for exchanges. Direct Edge’s filing indicates approval is likely, arousing criticism from competitors who believe the preorder routing system may violate regulations.

The ELP program, launched in spring 2006, briefly flashes orders that can’t be filled on Direct Edge’s ECNs to 25 broker-dealers, giving them the opportunity to execute the orders before they are routed to other quote-displaying markets.

Direct Edge’s rapid growth may also be fanning the flames. For April, Direct Edge announced that it handled a record 2. 13 billion shares, a 273 percent increase from a year earlier. About 162 million shares were executed in the ELP program, nearly four

CONTINUEDONPAGE20

SPECIAL REPORT

EXCHANGE OF NEW IDEAS

While exchanges are taking a cautious approach to spending, that doesn’t mean they aren’t looking to introduce new functionality and systems for trading and clearing

FULL STORY ON PAGE 10

SocGen Ups Derivative System

By Chris Kentouris

SOCIETE GENERALE SECUrities Services has added software at its Paris headquarters that will improve the monitoring and valuation of over-the-counter derivative trades for its growing outsourcing business.

The custody and securities processing arm of French investment bank Societe Generale has installed Misys plc’s Summit FT suite of front-, middle- and back-office software for OTC contracts, as well as hybrid and structured products. The software performs an array of booking, collateral management, pricing and settlement functions.

Summit FT replaces a combination of proprietary and third-party systems – and plenty of paper-based work that increased the potential for errors. Launched in 2005,

CONTINUEDONPAGE22

Northern Trust Adapts Technology to Changing Times _ON_the_WEB

securitiesindustry.com

By Chris Kentouris

THE CLIENT IS KING, SAYS Peter Magrini, technology applications and client solutions practice executive for Northern Trust in Chicago.

While such a stance has become commonplace among asset servicing providers, it is far from easy to fulfill. Like many of its peers, the

ever-expanding global marketplace is forcing Northern Trust to ensure 24-by- 7 sup-

port for its customers

Q

while their increased

&
A

diversification of trading strategies requires it to incorporate new financial instruments into its IT strategy. Market volatility has generated higher trading volumes—hence revenues

from clearance and settlement activities—but also prompted customers to seek greater transparency into their portfolios, more efficient risk management controls and timelier information.