Exchange operator plans
to deliver tools that mix
equities and options in
complex orders.
PAGE 6
HOW WALL STREET OPERATES
Volume 21 number 23 • December 14, 2009
UPTICK p. 4
Wall Street 2(009)
TRADING p. 8
CBOE Takes 3D View of Itself
OPERATIONS p. 20
Impossible Mission: Simple Pricing
LAST WORD p. 27
A Decade of Revolution
Measuring Operational Risk:
How the Mistakes Add Up
SPECIAL
REPORT
By Chris Kentouris
Societe Generale reports a
$4.9 billion loss from fraud perpetuated by a rogue trader; Morgan Stanley confirms that an operations executive stole money by
cooking the books; credit Suisse
takes a $2.8 billion write-down
for errors in valuations. and let’s
not forget what could be classified
as the worst financial crime—
Bernie Madoff is able to bypass
scrutiny from the Securities and
exchange commission in faking
$50 billion worth of transactions.
those are just a handful of
the instances of so-called operational risk factors that made
their way through the press. But
EXCHANGING
PLACES
new electronic
trading platforms—
like equiduct at
the Berlin Bourse
(shown here)—are
exploding across
europe.
taking the hit:
once-dominant
london Stock
exchange.
Fresh Insight
For a Fresh Week
The LSE
after four outages,
can technology
restore its
pre-eminence? 9
Not So Fast
on FAST
MONDAY MONITOR
www.securitiesindustry.com
Analysis Found Only on the
for each of those cases, there are
hundreds, if not thousands of
others which never do.
the parties involved—typi-
cally two broker dealers or
banks, or a financial firm and
its customer—”settle” any dis-
putes privately. the injured
party is always made whole
often through a handshake of
sorts over the telephone or
through an email.
rarely, if ever, do such issues
ever make their way through
the court system. and for good
reason. the motto: treat others
as you wish to be treated ap-
pears to be key. “nobody wants
to sue anybody for fear they
could easily find themselves in
the same boat in the future,”
says one recently retired for-
mer operations executive at a
major new York bank. “the
blue code of silence applies and
nobody ever crosses that line.”
among the most common
operational mistakes cited by
two dozen operations execu-
tives contacted by Securities
Industry News last week: it
glitches; failed settlement of
trades, incorrect valuations,
Small Brokers Fight Auditing Proposal
CONTINUED ON PAGE 16
Berlin Börse
Equiduct
Why citadel
investment thinks
its Berlin market
can handle all
comers. 12
securitiesindustry.com • a SourceMedia brand
By Carol E. Curtis
SMall BrokeraGe firMS
are taking their fight against
having their accountants subject to regulation by the Public
company accounting oversight Board to the Senate.
comes after a compromise in the
House of representatives last
week, first reported by
Securities Industry News, that would
give the Board the authority
to decide whether auditors of
small brokers need to register
with them, rather than leaving
the issue up to lawmakers.
like the original House
proposal, the Senate plan—
part of Banking committee
chairman christopher Dodd’s
financial regulatory package—seeks to broaden the
