COEXISTING WITH SWIFT

Traffic down, the global communications outfit soft-pedals a changeover in messaging.

PAGE 14

HOW WALL STREET OPERATES

Volume 21 Number 22 • October 19, 2009

UPTICK p. 4

Making Securities Secure

NEWS DESK p. 6
A “Phishing” Expedition Finds FINRA

TECHNOLOGY p. 18

Taking Delays Out of the Cloud

DATA SWEEP p. 22 Giving Swaps Credit

Morgan Stanley Tracking Delays Throughout the “Trading Loop”

SPECIAL REPORT

Bullish: BofA Integrates Merrill Lynch’s Herd

By Alexa Jaworski

MORGAN STANLEY IS NO longer satisfied with tracking the milliseconds it takes for market data to come into its trading plants in New York and London and emerge as buy or sell orders.

Now, the securities trading and investment management firm is going to watch the travel time in the entire “trading loop” between its trading infrastructure in the United States and Europe and electronic venues such as the New York Stock Exchange, Euronext, Direct Edge, BATS or Chi-X Europe.

To monitor those milliseconds at every server, hop and connection along the way, Morgan said it will begin to implement a latency management system from Corvil, a Dublin firm that supplies latency management software to exchanges, alternative trading venues, investment banks and market makers.

By John Hintze

INSTITUTIONAL INVESTORS’ ability to execute trades of large blocks of stock electronically has dropped notably over the last year and a half—as small trades under 400 shares have increased— with even top block-trading

The Block Trade is Dying. Long Live Blocks

CONTINUED ON PAGE 10

BREAKING THE ICE

Inter-dealer brokers want to block IntercontinentalExchange (ICE) from telling them where to execute trades.

FULL STORY ON PAGE 16

John Hintze

BANK OF A MERICA SNAPPED up Merrill Lynch for $50 billion, as the subprime mortage mess battered its bottom line and wrecked the Bull’s stock price.

The merger was made over one weekend in September, and there was scarcely time to examine

the brokerage’s books much less hammer out an integration strategy.

Merrill’s derivative exposures gave the firm considerable financial indigestion. But integrating the brokerage’s “thundering herd” of brokers may enable the nation’s largest bank to realize the thus-far elusive goal of providing retail customers a single place to stop for banking and brokerage services.

CONTINUED ON PAGE 20

CASE STUDY

securitiesindustry.com • A SourceMedia brand

venues seeing a reversal as unlikely.

The reasons? Algorithms slicing big trades up into lots of small ones executed in rapid-fire fashion keep improving, and fears of big swings in stock prices linger.

“I don’t see trade size ever coming back, especially with high-frequency trading making up 60% of the market. It’s a traders market right now,” says Alfred Eskandar, head of U.S. equities and a founding employee of Liquidnet Holdings.

Liquidnet is one the top block-trading venues designed to match large orders

without displaying quotes—a so-called dark pool. Its average trade this year through August fell to 50,790 shares, from 54,920 during the same period in 2008.

Eskandar says the average trade size for September fell 9% compared to a year earlier, although it remained above 50,000.

The firm’s average daily trading volume also is down. In August, Liquidnet handled 55.3 million shares a day compared to 63.9 million shares in the same period last year, a 14% drop. For the first eight months all told, the average