BRIDGING THE GAPS
Overcoming communica-
tions hurdles in analyzing
transaction costs.
MONDAY MONITOR
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HOW WALL STREET OPERATES
volume 22 number 5 • march 8, 2010
NEWS DESK p. 4
Days Grow Short for Indian Exchanges
TRADING p. 6
Market Data Infrastructure Tops Priorities
MARKETS p. 10
Squaring Off on Distressed Loans
OPERATIONS p. 14
Creating a Collateral Advantage
Y2K Plus 10? Cost-Basis Rules
Producing Technical Jitters
By John Hintze
A modern version of
the Y2K problem that brought
fear to computer users large
and small at the turn of the
millennium is putting Wall
street on edge.
The potential crisis: How
to deal with a proposed tax
rule requiring brokers and
dealers to provide accurate
information on the original
cost-basis of securities owned
by their customers. And how
especially to handle data-in-
tensive wash sales as high-
frequency trading churns out
You Store More
and More Data.
Can You Find It?
Barometer of Wall Street’s Health
Fin5oindex
1012.98
; 18.58
;;;T 18.6%
TECHNOLOGYWATCH
thousands of orders a second
and millions every day, from a
single firm.
if the systems are not set
up right, broker-dealers face
the threat of fines from the in-
ternal revenue service.
And, like with the Y2K bug
which threatened to shut down
operations whose computer
systems could not handle four-
digit years, a firm deadline for
compliance fast approaches at
the turn of the year.
By January 1, 2011, self-
clearing and correspondent
clearing broker-dealers which
custody assets will have to de-
cide whether to replace all or
parts of their cost-basis sys-
tems. Those systems, typically
tied into a firm’s core books
and records, primarily process
corporate actions and wash
sales.
Another similarity to the
turn of the millennium is
that broker-dealers and other
custodians affected by the pro-
posal are likely to find their
internal i T teams and potential
vendors increasingly strained
to comply in time.
By John Hintze
AfTer operATing for
nearly a year, the pdQ alterna-
tive trading system is betting it
can attract more li-
quidity from high-
frequency trading
firms by requiring
those frenetic market partici-
pants to pause.
pause?
That’s right: pause execu-
tions for up to 20 milliseconds
so liquidity-providing algo-
High-Frequency Pause: PDQ Changes Paradigm
Continued on pAge 18
CASE
STuDY
TIPPING
POINT
the SeC is betting that
a $12 million investment
in a tips database will enable
it to catch the next Madoff.
Calling for Real-Time Regulation page 3
Analyzing the SEC Tech Budget page 16
The Way and Will to Surveill page 23
By Alexa Jaworski
s Toring dATA is no THing
new for securities firms. in
many operations, every action
of every executive and staffer,
from business transactions to
phone calls to emails, is re-
corded and stored electroni-
cally. in the digital era, it’s be-
come common practice, a sign
of good business management.
But, with the onslaught of
high-profile media cases and
new regulations handed down
from the securities and ex-
change Commission and other
government agencies, the is-
sue is not keeping that data
“somewhere.”
The real issue is retrieving
the data, when needed. from
the cloud. from servers. from
cassettes. even from cabinets.
Quickly.
Continued on pAge 8
March 4 to 18, 2010
See Page 22
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