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Catching Up On OTC Derivatives Reform
Nov 11, 2009 @ 10:20 AM By Ivy Schmerken,I’ve been catching up on my reading about OTC derivatives reform bills that were passed by the House Financial services and Agricultural committees last month. Though I am a little behind, I’ve concluded that not much has changed except that regulators really want to mandate clearing and trading on exchanges (or alternative swap execution facilities) to bring transparency into the market and save taxpayers a fortune from bailing out the banks again. At the same time, industry participants are worried about unintended consequences of these reforms.
Wall Street Bands Rock Out for Charity
Oct 29, 2009 @ 09:23 AM By Ivy Schmerken,Despite the tough environment for fundraising, Wall Street employees are still finding ways to give back to their communities. Tonight, mortgage traders and other fixed income professionals who play in Wall Street bands are hoping to have fun and raise a ton of money.
Continue reading ...Liquidnet In Rwanda
Oct 29, 2009 @ 09:20 AM By Ivy Schmerken,There are many other examples of charitable works driven by Wall Street employees. Check out the amazing work that global electronic marketplace Liquidnet is doing in Rwanda, where it’s the primary corporate partner developing the Agahozo-Shalom Youth Village (ASYV), an innovative concept to help traumatized orphans caught in the 1994 Rwandan genocide.
Continue reading ...Madoff Friend Jeffrey Picower Takes Secrets to His Grave
Oct 27, 2009 @ 12:03 PM By Ivy Schmerken,Bernard Madoff’s billionaire friend Jeffry Picower, who was found dead at the bottom of a pool on Sunday at his Palm Beach mansion, was the biggest beneficiary of the Madoff scam, according to this ABC News video report.
Continue reading ...Revelations from Book "Too Big To Fail"
Oct 20, 2009 @ 10:59 AM By Ivy Schmerken,New York Times Reporter Andrew Ross Sorkin discussed his new book “Too Big To Fail” with CNBC today in which he discloses some behind-the-scenes conversations that took place at Goldman Sachs and at Lehman Brothers when Wall Street was forced to work with Washington to save the banking system.
Continue reading ...Speculating on Ken Lewis's Successor
Oct 1, 2009 @ 11:16 AM By Ivy Schmerken,With all the talk about Bank of America’s controversial CEO Ken Lewis announcing that he will step down at the end of the year, media outlets are speculating on the succession race. Will BofA stick to its traditional roots by naming a banker, or will it go outside and bring in a Wall Street executive, perhaps with ties to Merrill Lynch?
Continue reading ...High Frequency Traders Provide Liquidity in Current Rally, Says Author
Sep 22, 2009 @ 11:26 AM By Ivy Schmerken,What impact is computer-driven, high frequency trading having on the current stock market rally? Yesterday, Rishi Narang, author of "Inside the Black Box," a new book on quantitative trading, told the Wall Street Journal in a video interview “Taking Stock of Quants in Rally” that computer-driven, high frequency traders are providing liquidity in the current rally and they are on the other side of transactions with the pension funds and real money asset managers.
Continue reading ...One Year Later: An Insider's View of Lehman’s Collapse
Sep 14, 2009 @ 01:07 PM By Ivy Schmerken,A former Lehman Brothers bond trader, Lawrence MacDonald, offers his take on why the firm should not have collapsed, in a story posted on Yahoo’s news site.
Continue reading ...Wedbush's Bell On Sponsored Access: Put the Risk Controls Everywhere
Sep 1, 2009 @ 10:21 AM By Ivy Schmerken,With the practice of sponsored access — and naked access — coming under scrutiny from the SEC, there are several theories emerging as to what are the best ways to manage the risk and compliance of high frequency trading firms gaining direct access to market centers.
Continue reading ...Goldman Sachs' Head Turning Quarter
Jul 14, 2009 @ 11:33 AM By Ivy Schmerken,Despite concerns over a theft of high frequency trading code last month that reportedly cost the firm millions of dollars, this had no effect on Goldman Sach's second quarter earnings. Goldman Sachs reported $13.76 billion in revenues for the second quarter of 2009, beating analysts’ expectations of $10.66 billion.
Continue reading ...Accused High Frequency Trading Programmer Is A Ballroom Dancer
Jul 9, 2009 @ 12:00 PM By Ivy Schmerken,Serge Aleynikov, who was arrested and charged with stealing Goldman Sachs’source code for high frequency trading software, was a competitive ballroom dancer.
Continue reading ...Merkin’s Art Sale: Is It Too Murky?
Jul 2, 2009 @ 01:19 PM By Ivy Schmerken,Victims of Bernard Madoff's securities fraud may see some payback from one of the feeder fund managers that helped fuel Madoff's global investment crime spree. New York money manager J. Ezra Merkin is selling his prized art collection of Mark Rothko paintings and Alberto Giametti sculptures, according to a report in the
The Wall Street Journal.
SIFMA: Cost Cutting, A Double-Edged Sword?
Jun 25, 2009 @ 12:17 PM By Ivy Schmerken,In my conversations at SIFMA I deliberately asked vendors and consultants how they were helping their clients in brokerage and asset management to cut costs and do more with less.
Continue reading ...Liquidnet's Tie-Up with NYSE Euronext
Jun 10, 2009 @ 11:27 AM By Ivy Schmerken,A new partnership between Liquidnet and NYSE Euronext announced earlier this week promises to connect corporate issuers with institutional investors and make their interactions more efficient through technology.
Continue reading ...SEC's Agenda: Sponsored Access, Dark Pools, etc.
May 28, 2009 @ 11:04 AM By Ivy Schmerken,At last week’s SIFMA’s Market Structure Conference, James Brigagliano, co-acting director, division of trading and markets at the U.S. Securities and Exchange Commission ticked off a list of concerns on his mind. In the coming months, the SEC will be examining a number of issues, including, sponsored access, dark pools and pre-trade order and quote messages.
Continue reading ...What Hedge Funds Can Expect From The New Regulations
May 19, 2009 @ 12:01 PM By Ivy Schmerken,Hedge funds are bracing for more regulation from the Obama Administration, which is seeking more dislosure on relationships with counterparties to prevent systemic risk.But rather than sit on the sidelines and wait for the new rules, one industry consultant urges alternative asset managers to prepare for more reporting requirements.
Continue reading ...Will Geithner Mandate CDS Trading on Exchanges?
May 14, 2009 @ 11:26 AM By Ivy Schmerken,Yesterday,Treasury Secretary Timothy Geithner signaled that regulators would mandate more transparency into OTC derivatives products and force trading of credit default swaps onto exchanges.
Continue reading ...Early Madoff Feeder Appears On PBS Frontline
May 12, 2009 @ 11:06 AM By Ivy Schmerken,Tonight, PBS Frontline will air “The Madoff Affair”, an investigative news piece, which promises to get behind the world’s first global Ponzi scheme. While Madoff sits in jail awaiting sentence in June, the media is still trying to figure out how the fraudster perpetuated the scheme for decades.
Continue reading ...Less Money to Pay for Independent Research?
May 7, 2009 @ 11:31 AM By Ivy Schmerken,A few years ago, experts were predicting that sell-side research was near death, while independent research was undergoing a rebirth. Fast-forward to the present time in which a number of economic forces are weighing on the institutional investors and hedge funds, making it harder for them to allocate commission dollars (or cash) to pay for independent research.
Continue reading ...Is the Buy-Side Risk Function Losing Status?
Apr 30, 2009 @ 11:25 AM By Ivy Schmerken,Are buy-side institutions paying enough attention to risk management in light of the ongoing financial crisis? A recent study of 90 investment management organizations raises some alarm bells.
Continue reading ...T3 Live.com: Prop Traders Go Virtual
Apr 28, 2009 @ 11:00 AM By Ivy Schmerken,With all the talk about social networks, it’s not surprising that traders want to interact and learn from each other. Proprietary trading firm T3 Capital launched an online trading community that reaches out to active traders and shares its positions with subscribers.
Continue reading ...Will Turquoise Survive the Heated Battle?
Apr 16, 2009 @ 11:43 AM By Ivy Schmerken,The battle for market share has been escalating in the European equity trading landscape and now there are predictions that not all the multilateral trading facilities (MTFs) will survive.
Continue reading ...Fidessa's Fragmentation Index: Worth Watching
Apr 1, 2009 @ 11:42 AM By Ivy Schmerken,Fragmentation is a hot topic in Europe these days.
Volumes have been shifting around since the Markets In Financial Instruments Directive (MiFID) went into effect in November of 2007 and there has been an explosion in the number of new trading venues called multilateral trading facilities or MTFs to compete with the traditional exchanges.
Treasury Lacks Staff and Software To Run Toxic Asset Plan
Mar 24, 2009 @ 01:46 PM By Ivy Schmerken,The U.S. Treasury’s unveiling of its toxic asset plan sent the stock market soaring yesterday as the government laid out its plan for selling off bad loans and other types of debt to unclog the credit markets.
Continue reading ...Spitzer Weighs In on A.I.G.'s Payments to Trading Counterparties
Mar 19, 2009 @ 11:54 AM By Ivy Schmerken,Along with the firestorm that has erupted over American International Group’s bonus payments to employees, former disgraced New York State Governor Eliot Spitzer spoke out against A.I.G. paying billions to its trading counterparties.
Continue reading ...Madoff's Guilty Plea: Did He Reveal Accomplices?
Mar 12, 2009 @ 11:22 AM By Ivy Schmerken,Bernard Madoff pleaded guilty to 11 criminal charges today in a Manhattan Federal Courthouse, in what is said to be the biggest Ponzi scheme is U.S. history. But will Madoff shed light on how he carried out the investment scam, who helped him and will he walk out a free man?
Continue reading ...Buzz On CCA Consortium Platforms: Announcement Imminent
Mar 5, 2009 @ 12:12 PM By Ivy Schmerken,Once again there is buzz about a consortium of bulge-bracket brokers bringing out a consolidated platform for client commission agreements (CCAs). This week Integrity Research’s blog reported that a broker consortium is only weeks away from announcing a consolidated commission platform.
Continue reading ...Did 20/20 Invade Madoff's Privacy?
Feb 25, 2009 @ 01:09 PM By Ivy Schmerken,Friday night, ABC’s 20/20 aired an investigative report on Bernard Madoff that showed the former financier under house arrest in his luxurious apartment working on his Apple Macintosh computer and drinking a beer. At one point, Madoff gets up to fluff his pillows.
Continue reading ...The Curious Case of J. Ezra Merkin
Feb 16, 2009 @ 11:12 PM By Ivy Schmerken,Court papers filed by New York University against New York money manager J. Ezra Merkin reveal that Merkin, who invested $2 billion with Bernard Madoff, was taking investment advice from a convicted felon.
Continue reading ...Deutsche Bank Reins In Top Trader After $1.8 Billion Loss
Feb 10, 2009 @ 11:27 AM By Ivy Schmerken,The definition of Master of the Universe is changing at large investment banks like Deutsche Bank where chess players were given wide latitude to take risky bets with the firm’s capital.
Continue reading ...FSA Considers Classifying Broker Dark Pools as MTFs
Feb 5, 2009 @ 12:26 PM By Ivy Schmerken,I recently heard that the UK’s Financial Services Authority has been eyeing dark liquidity pools operated by investment banks to figure out whether their internalization engines should be reauthorized or registered as MTFs — systems to buy and sell financial instruments — under the Markets in Financial Instruments Directive or MiFID.
Continue reading ...Psychoanalyzing Madoff
Jan 27, 2009 @ 11:19 AM By Ivy Schmerken,Much has been written about the two sides of Bernard Madoff — the successful Wall Street trader who had the ear of regulators vs. the man who confessed to a giant Ponzi scheme that allegedly lost $50 billion and ruined the lives of thousands of investors. Now there's a theory that Madoff has the personality characteristics of a psychopath.
Continue reading ...John Thain’s $1.22 Million Redecorating Spree
Jan 22, 2009 @ 05:47 PM By Ivy Schmerken,I was surprised by John Thain's sudden resignation from Bank of America where he was the head of global banking, securities and wealth management. Thain is leaving only a week after BofA’s acquisition of Merrill Lynch closed on Jan. 1st. This morning, we know this was not a resignation. Thain was reportedly forced out in a showdown with the bank's CEO Kenneth Lewis who was furious about the way Thain handled the surprise $15.31 billion fourth quarter loss that the Wall Street firm suddenly uncovered and heaped on its new parent.
New Era in Hedge Fund Transparency?
Jan 20, 2009 @ 11:26 AM By Ivy Schmerken,Just as President Barack Obama is expected to call for a new era of responsibility and accountability in America at his inauguration today, hedge funds and fund-of-funds are going to be asked to do the same.
Continue reading ...Judge Rules Madoff to Remain Free on Bail
Jan 12, 2009 @ 02:21 PM By Ivy Schmerken,A judge ruled today that Bernard Madoff can remain free on the $10 million bail he posted and continue to live under house arrest in his luxury apartment on the Upper East Side of Manhattan while awaiting for his trial on securities fraud charges, media outlets reported.
Continue reading ...Judge’s Decision on Madoff Bail Due Today
Jan 12, 2009 @ 10:48 AM By Ivy Schmerken,A Federal judge will decide today whether accused financier Bernard Madoff can remain in his luxurious apartment or whether to revoke the conditions of his bail and order him to spend time in jail.
A decision by a New York City Judge is expected around noon today, and could have ramifactions around the globe since thousands of investors both at home and across Europe lost assets in the alleged scam.
Alternative Research Providers Buck the Contraction Trend
Jan 6, 2009 @ 10:45 AM By Ivy Schmerken,Despite grim predictions of spending declines on investment research, some players in alternative research are seeing a reason to expand their offerings or test new models for independent research. According to Sanford (Sandy) Bragg, CEO and president of Integrity Research Associates, LLC, who posted a blog yesterday titled “Damn the Torpedoes,” there are firms whose models could do well in this recessionary environment.
Continue reading ...Congress to Examine Regulatory Gaps at Today’s Madoff Hearing
Jan 5, 2009 @ 10:27 AM By Ivy Schmerken,While there has been outrage over the Madoff scandal, so far there are questions but few answers on how the financier was able to evade detection by regulators in the face of numerous examinations and allegations. The House Financial Services Committee will hold an open hearing today to discuss Bernard Madoff’s alleged $50 billion securities fraud. The session titled, "Assessing the Madoff Ponzi (Scheme) and the Need for Regulatory Reform,” is scheduled for 2:00 pm EST.
Continue reading ...Options Trading Surfaces In Madoff Fraud
Dec 16, 2008 @ 01:52 PM By Ivy Schmerken,As new details emerge from Bernard Madoff’s alleged investment fraud, today’s Wall Street Journal reports that options trading played a central role in his strategy, and that red flags about options trades should have been raised in Madoff’s customer statements.
Continue reading ...Regulators Comb Through Madoff Records; Victims Speak Out (Video)
Dec 15, 2008 @ 11:57 AM By Ivy Schmerken,Regulators spent the weekend poring through the records of Bernard L. Madoff Investment Securities to check if any assets remain in the firm owned by Bernard Madoff who ran a $50 billion investment scam, according to today’s media reports.
Continue reading ...Madoff: Reflections and Reactions
Dec 12, 2008 @ 03:51 PM By Ivy Schmerken,News of Bernard Madoff’s arrest by federal agents on charges of securities fraud against his firm Bernard L. Madoff Investment Securities LLC are shocking and personally disturbing.
Continue reading ...FBI Taps Ex-Lehman IT Exec as CIO
Dec 11, 2008 @ 02:32 PM By Ivy Schmerken,The U.S. government is becoming one of the top employment agencies for CIOs leaving Wall Street firms. On Tuesday, the Federal Bureau of Investigation reported hiring bankrupt Lehman Brother’s former IT executive Chad Fulgham, as the Bureau’s chief information officer.
Continue reading ...Holiday Drinks for the Bailout Season
Dec 9, 2008 @ 10:27 PM By Ivy Schmerken,A PR firm Cognito that caters to journalists covering finance and technology is hosting a holiday party on Thursday evening with themed cocktails and descriptions that reflect the current news events. One that is bound to be popular is Cosmo Paulson, described as “a generous bailout of vodka, triple sec, cranberry juices and lime.”
Continue reading ...Hedge Fund Manager's Ordeal in Mumbai Terrorist Attack
Dec 4, 2008 @ 10:21 AM By Ivy Schmerken,I was surfing last night and found a harrowing but humanizing account of a New York hedge fund manager who survived the Mumbai terrorist attack last week.
Continue reading ...Wall Street Rallies on Geithner Pick and Citigroup Bailout
Nov 24, 2008 @ 03:32 PM By Ivy Schmerken,Wall Street is reacting positively to the government’s latest bailout of Citigroup and President-Elect Barack Obama’s pick of New York Fed Chief Timothy Geithner as his Treasury Secretary.
Continue reading ...Mandatory Clearing for CDS, No Surprise
Nov 24, 2008 @ 10:24 AM By Ivy Schmerken,It was reported last week that dealers are backing a mandatory central clearing counterparty or CCP model for credit derivatives to avoid an alternative plan to move trades onto an exchange.
Continue reading ...AIG's Bailout Spend: Parties and Seminars, Okay?
Nov 12, 2008 @ 12:12 PM By Ivy Schmerken,Controversy is swirling again over whether American International Group used some of the bailout money it received from Congress to entertain and conduct seminars for financial advisors that sell its insurance products.
Continue reading ...AIG's New Bailout Package: Banks Can Unload CDOs
Nov 12, 2008 @ 11:03 AM By Ivy Schmerken,Banks that bought credit default swaps from the American International Group are emerging as the winners in the Treasury Department’s revamped bailout plan for the insurance giant, reports today’s Wall Street Journal.
Continue reading ...Risk Models Missed the Human Factor
Nov 5, 2008 @ 12:50 PM By Ivy Schmerken,While many of us are marvelling this morning on the results of this historic U.S. presidential election, there’s another story that deserves your attention and one that Senator Barack Obama ought to read before he appoints his cabinet of regulatory czars to fix the financial mess.
Continue reading ...Wall Street Bonuses in a Bailout Year?
Oct 28, 2008 @ 11:23 AM By Ivy Schmerken,Wall Street firms are setting aside billions of dollars to make bonus payments to employees after receiving $1.25 billion in taxpayer money this week from the government to shore up their balance sheets.
Continue reading ...More Wall Street Job Losses: Mergers and the Redundancy Factor
Oct 28, 2008 @ 09:24 AM By Ivy Schmerken,There is some buzz that additional mergers are on the horizon. According to a CNBC news report yesterday, Goldman Sachs had a flirtation with Citigroup but Citi’s CEO Vikram Pandit turned down the overture.
Continue reading ...Catching Up With Mike Plunkett
Oct 23, 2008 @ 11:24 AM By Ivy Schmerken,When Mike Plunkett, who was president of Instinet North America, left the electronic brokerage firm two weeks ago, it came as a surprise to many of in the media that had talked to him over the years.
Continue reading ...Michael Douglas' Gekko Character is Back!
Oct 16, 2008 @ 10:36 AM By Ivy Schmerken,Hollywood wants to cash in on the global financial crisis. Actor Michael Douglas is interested in reprising his role as Gordon Gekko, in a sequel to the 1980s movie “Wall Street.”
Continue reading ...An Agency Trader Reflects on Panic Selling
Oct 10, 2008 @ 02:17 PM By Ivy Schmerken,With the stock market falling 600 points on the open this morning after yesterday’s huge loss, this is definitely taking a toll on everyone especially traders who are on the front lines. I picked up the phone and called back Joe Saluzzi, a sales trader at Themis Trading, an institutional agency-only broker in Chatham, New Jersey. I spoke with Saluzzi yesterday right after the close when the Dow had plunged 679 points or 7.3 percent to finish at 8579.19.
Continue reading ...Wells Fargo Returns to Institutional Brokerage with Wachovia Deal
Oct 6, 2008 @ 03:03 PM By Ivy Schmerken,Wachovia’s decision to jilt Citigroup at the altar and merge with Wells Fargo is turning into a high-stakes legal drama, but the outcome could have interesting implications for the institutional and retail brokerage business.
Continue reading ...The Rush to Regulate Credit Default Swaps
Sep 25, 2008 @ 11:39 AM By Ivy Schmerken,It seems like politicians, regulators and even the average Joe on the street now knows something about credit derivatives. These complex instruments are being blamed for the near meltdown in the financial system. No one outside of the credit markets paid much attention to credit default swaps or CDS until they threatened Bear Stearns and Lehman Brothers.
Continue reading ...The Real Cure for Naked Short Selling
Sep 22, 2008 @ 01:14 PM By Ivy Schmerken,One of our readers has commented on the story "SEC Bans Short Selling in Financial Stocks in Wake of Criticims," posted , Friday. Here's what the reader had to say:
Continue reading ...More on Lehman’s Bankruptcy and NYSE Specialist Operations
Sep 16, 2008 @ 11:30 AM By Ivy Schmerken,This came across my desk yesterday from NYSE Euronext, which explains how Lehman Brothers’ bankruptcy filing will impact its specialist operations on the New York Stock Exchange trading floor.
Continue reading ...A Wild Weekend Ends with Lehman’s Collapse and Merrill’s Sale
Sep 15, 2008 @ 01:04 PM By Ivy Schmerken,We all woke up this morning – or went to bed last night at midnight — to find that the Wall Street world as we know it has forever changed with Lehman Brothers filing for Chapter 11 Bankruptcy and Merrill Lynch being sold to Bank of America. Some media outlets are calling this a Wall Street meltdown of iconic brands. I’m not sure what to call it. It is an unbelievable turn of events and a sad end to the history and culture of these firms.
Continue reading ...The New Breed of Hyperactive Traders
Sep 14, 2008 @ 05:16 PM By Ivy Schmerken,Last week, I visited Lightspeed Trading, a direct access brokerage firm that caters to the hyperactive retail trader with institutional caliber technology and trading tools. On that day, many of the traders were focusing on the financials and anything to do with Lehman, Fannie Mae and Freddie Mac, and as well as the price of oil, such as transportation stocks.
Continue reading ...Trading Performance in Dark Pools Declines After 30 Minutes
Sep 4, 2008 @ 12:12 PM By Ivy Schmerken,I sat in on a media briefing that ITG conducted this morning looking at whether trading in dark pools adds value in terms of transaction costs. In a study, ITG analyzed the trading performance of one-time matching compared to continuous crossing versus liquidity aggregation.
Continue reading ...CME Seals the NYMEX Purchase, So Who’s Next?
Aug 20, 2008 @ 06:11 PM By Ivy Schmerken,With CME Group winning the lion’s share of votes from the New York Mercantile Exchange members to acquire its parent company NYMEX Holdings on Monday, the mammoth futures exchange is closing another chapter in the exchange consolidation race.
Continue reading ...Are Institutions in the Dark About Anti-Gaming?
Aug 14, 2008 @ 11:55 AM By Ivy Schmerken,Every major broker dealer says it has the best anti-gaming technology to prevent information leakage in dark pools. However, institutional traders I spoke to recently seemed skeptical of whether sell-side firms would police their dark liquidity pools,suggesting that the independent firms (ITG, Liquidnet and Pipeline) were more likely to expel participants that were sniffing out institutional orders or trying to manipulate prices.
Continue reading ...Career Opportunities Emerge Out of the Credit Crisis
Aug 5, 2008 @ 05:25 PM By Ivy Schmerken,While the credit crisis has meant bad news for traders on the job front, some capital markets firms actually see this as an opportunity to expand into new areas of equity trading and risk management. Take Pali Capital, the U.S. broker- dealer subsidiary of Pali Holdings Inc., recently lifted a portfolio trading and risk management team from CIBC World Markets to expand its offerings in equities and execution.
Continue reading ...The Buy-Side Values Short-Trade Ideas
Jul 30, 2008 @ 12:52 PM By Ivy Schmerken,When the Securities and Exchange Commission posted an order last night extending the temporary restrictions it placed on short selling in 19 financial stocks until Aug. 12, 2008, the SEC may have allayed the concerns of asset managers that rely upon short-trade ideas in their strategies.
Continue reading ...Why is the Buy-Side Silent on CCAs?
Jul 21, 2008 @ 02:53 PM By Ivy Schmerken,I wrote a story about the buy-side expanding the CCAs from U.S. equities to execute in international equities and across multiple asset classes. The story is getting some traction. Integrity Research summarized the story in its blog, “CCAs for Fixed Income.”
Continue reading ...NYSE Says Good Bye to Specialists; Hello DMMs
Jun 19, 2008 @ 12:37 PM By Ivy Schmerken,Change is brewing again at the New York Stock Exchange. Last Friday, the exchange proposed rules that would eliminate the traditional function of a specialist and replace them with designated market makers or DMMs. Is this a good move? How will it impact the Hybrid Market?
Continue reading ...CBOE and 3-D Markets Bring the GWAP to Options
Jun 2, 2008 @ 06:36 PM By Ivy Schmerken,The idea of creating a dark pool in options has not been easy because options trades are not permitted to occur off-exchange. But a recent deal between the Chicago Board Options Exchange and 3-D Markets, a block-crossing network, suggests that exchanges and liquidity pools can cooperate on crossing institutional orders based on benchmark prices.
Continue reading ...Is Open Source Threatening the Status Quo?
May 20, 2008 @ 02:01 PM By Ivy Schmerken,A new software upstart Marketcetera contends that its open source platform for building automated trading systems is an alternative to the likes of EMS providers Portware and Flextrade. Marketcetera's CEO Graham Miller (who previously worked at hedge funds where he developed automated trading systems) regards these platforms as proprietary and calls them restrictive and inflexible as well as expensive.
Continue reading ...Equity Markets Play the Rebate Game to Win Market Share
May 6, 2008 @ 02:35 PM By Ivy Schmerken,It's getting hard to keep up with the changes in fee structures emanating from U.S. stock exchanges and ECNs. Equity market players are changing their transaction prices left and right, offering higher rebates to liquidity providers or lower take-fees to those firms that remove liquidity.
Continue reading ...Time to End Wall Street IT's Boom and Bust Cycle?
Apr 14, 2008 @ 12:59 PM By Ivy Schmerken,With investment banks reporting layoffs and tightening their belts in light of the economic downturn, one of the major themes emerging in IT circles is sustainable cost reduction. “The industry does carry a lot of cost,” says Bob Gach, global managing director capital markets at Accenture in New York. “The industry hasn’t had the courage or need to attack these costs,” says Gach.
Continue reading ...Treasury's Plan for Regulatory Overhaul Annoints the Fed As Wall Street's Supercop
Apr 8, 2008 @ 01:49 PM By Ivy Schmerken,As Treasury Secretary Henry Paulson’s plan to overhaul financial market regulation makes its way through Washington, the question is how could this impact broker dealers, asset managers and hedge funds. Would there be less regulation for the sake of global competitiveness as some opponents contend? And which entity would oversee the opaque world of OTC derivatives?
Continue reading ...Are Exchanges Converging with Dark Pools?
Mar 20, 2008 @ 02:16 PM By Ivy Schmerken,The lines between exchanges and dark liquidity pools are blurring. Last week NYSE Euronext announced that clients of NYSE Arca’s electronic trading system would have access to non-displayed liquidity pools through participating broker-dealers and alternative trading systems.
Continue reading ...ATSs Favor Independent Tech Supplier
Nov 26, 2007 @ 03:00 PM By Ivy Schmerken,New alternative marketplaces that are gearing up to compete with traditional exchanges are staying clear of the exchange-aligned technology solution providers. In late October, Turquoise, the consortium led by seven investments banks to build an alternative trading system to the London Stock Exchange and other traditional European exchanges, chose Stockholm-based Cinnober Financial Technology AB to build its matching engine.
Continue reading ...Exchange Consolidation Raises Issues for Staying on Rival's Technology Platform
Nov 26, 2007 @ 11:28 AM By Ivy Schmerken,Everyone’s talking about the wave of global exchange consolidation, but what about the exchanges that end up running on a competitor’s technology platform? It’s interesting to consider whether exchanges that run on a trading platform that gets acquired will try to ditch the technology once it’s owned by another exchange competitor.
Continue reading ...SIFMA Fixed Income Conference Highlights Risk Management
Nov 19, 2007 @ 05:04 PM By Ivy Schmerken,Given the credit market turmoil causing top firms to report multi-billion dollar losses, it’s not surprising that risk management was a major theme at the SIFMA Fixed Income Technology and e-Trading Conference last Thursday in New York. “Risk is much more important and front and center in our minds,” said Dexter Senft, managing director at Lehman Brothers, in his introductory remarks to the conference.
Continue reading ...Trading Bonuses: What Can You Expect To Bring Home This Year?
Sep 26, 2007 @ 01:43 PM By Ivy Schmerken,With the credit crisis battering fixed-income desks and quantitative hedge funds, Wall Street traders are going to see their bonuses shrink in 2007 as firms recover from the turmoil in sub-prime mortgages and position their desks for 2008.
Continue reading ...Boston Equities Exchange (Bex) Shutters Operations
Sep 5, 2007 @ 02:22 PM By Ivy Schmerken,The Boston Equities Exchange, an automated trading facility is shuttering its trading operations today, according to an announcement by the Boston Stock Exchange(BSE). The news came suddenly and suggests there could be a shakeout among the e-trading ventures formed to compete under Regulation NMS.
Continue reading ...Bear CDO Series: Management Overhaul: Questions on Risk Management
Aug 8, 2007 @ 03:51 PM By Ivy Schmerken,The blame game is not over. This week, Bear Stearns ousted one of its senior executives, Warren Spector, under whose watch the firm brought out two leverage hedge funds exposed to the shady sub-prime market. To calm the jittery markets over uncertainty that other credit problems were lurking, the firm promoted Alan Schwartz, a relationship-oriented investment banker, as sole president.
Continue reading ...Bear CDO Series: A Credit Crisis and More Bloodletting Hits Hedge Funds
Aug 3, 2007 @ 05:35 PM By Ivy Schmerken,The credit crisis that has been rocking the stock market continues to ripple through the economy and spread beyond sub-prime mortgages to broader sectors of the housing market and other financial institutions and hedge funds. Whether this is overblown or not, we awoke this morning to learn about the closing of American Home Mortgage (AHM) Investment from Melville, Long Island, a lender to the sub-prime mortgage market. On Monday, we heard about Sowood Capital Management, the Boston-based hedge fund, deciding to sell its portfolio containing leveraged positions in bonds and derivatives at fire sale prices to Citadel Investment Group.
Continue reading ...BATS Reacts to Changes at Direct Edge
Jul 19, 2007 @ 11:07 AM By Ivy Schmerken,BATS Trading had a reaction to yesterday's blog that Citadel Derivatives is investing in Direct Edge ECN and that its parent Knight Capital is seeking to build a consortium of direct investors to grow the ECN's liquidity and might eventually consider exchange status. Even though Direct Edge appears to be taking a page from BATS' own strategy, here's what BATS Trading VP, Randy Williams, had to say:
Continue reading ...Knight Capital Lands Citadel Derivatives as Direct Investor in Direct Edge ECN, Seeks to Grow Consortium
Jul 18, 2007 @ 03:02 PM By Ivy Schmerken,Citadel Derivatives Group is making a minority investment in Direct Edge ECN, signaling a change in strategy for parent Knight Capital Group, which is now looking to attract a consortium of direct investors to grow the ECN's volume to the next level.
According to today's announcement, Citadel Derivatives, an affiliate of Citadel Investment Group, LLC, the alternative asset manager, which is a leading equity market maker in its own right, has agreed to purchase a minority stake in Direct Edge ECN.
Continue reading ...CME-CBOT Merger Sparks More Takeover Talk
Jul 13, 2007 @ 04:32 PM By Ivy Schmerken,Now that the $11.3 billion merger between the Chicago Mercantile Exchange (CME) and CBOT Holdings is a done deal, industry sources are speculating about the CME Group’s next acquisition. And while the Intercontinental Exchange raised its profile during the bidding battle, it missed out on the CBOT, and now it may need to merge with another exchange operator that wants to expand its derivatives business. Given the reality that consolidation of exchanges is moving like a tornado on steroids, it’s logical that the new combined company, CME Group, a CME/CBOT company, would be considering its next target. “Once they digest this merger, it would not surprise me if they go after another acquisition,” comments Michael Henry, senior executive in Accenture’s Capital Markets Practice who believes that it should be an international exchange.
Continue reading ...The Buy-Side Rates JPMorgan and Lehman as Top U.S. Fixed Income Dealers
Jul 10, 2007 @ 10:33 PM By Ivy Schmerken,JP Morgan and Lehman Brothers are the leading dealers with the highest market shares in U.S. fixed-income trading across products, according to a survey by Greenwich Associates, the financial services research and consulting firm headquartered in Greenwich, Conn. released on Monday. Both dealers also have the top rating by institutional investors for delivering the best service qualify across fixed-income sales, research and trading.
Continue reading ...Reg NMS Test Set for Saturday, June 30th
Jun 27, 2007 @ 03:30 PM By Ivy Schmerken,An industry-wide test will be conducted for Regulation NMS on Saturday, June 30. Brokers that participate can test their Reg NMS compliant trading systems with all the automated trading centers. When the Pilot Stocks Phase starts on July 9th all the broker dealers will have to be in compliance with Reg NMS for 249 stocks.
Continue reading ...Morgan Stanley Ranks First in Financial Insights Survey of Electronic Trading Services
Jun 21, 2007 @ 05:04 PM By Ivy Schmerken,Morgan Stanley won first place among a dozen bulge bracket brokers ranked for providing electronic trading services to buy-side clients, according to the Financial Insights 2007 Electronic Trading Services Ranking which was released at the SIFMA Conference today.
Brokers were evaluated in five categories: direct market access (DMA), algorithmic trading, transaction cost analysis (TCA), dark pool access and execution management system (EMS).
Continue reading ...Nasdaq Updates Strategy with Crossing Networks, Options and Other Value-Added Services
Jun 14, 2007 @ 04:54 PM By Ivy Schmerken,While continuing to increase its market share in U.S. equities, The Nasdaq Stock Market is focused on adding valued-added products to its INET matching engine, according to a press briefing held today.
After the purchasing the INET matching engine for $900 million from Instinet in December of 2005, and merging the BRUT ECN and Nasdaq’s own SuperMontage matching engine into INET, the U.S.-based electronic stock exchange is leveraging the INET technology to launch intraday and continuous block crossing networks and an options exchange.
Continue reading ...Q-WIXX Launch Caters to List Traders of Credit Default Swaps
Jun 12, 2007 @ 04:55 PM By Ivy Schmerken,With investment managers and hedge funds trading long lists of single-name credit default swaps (CDSs), last week’s launch of Q-WIXX, an electronic platform, is gaining traction among the dealers and bringing more efficiency to the auction process.
Q-WIXX is set up to help dealers, correlation desks, prop desks, hedge funds and other buy-side market participants execute transactions known as Offers Wanted in Competition (OWICs) or Bids Wanted in Competition (BWICs).
Continue reading ...ITG Hires Rodriguez to Focus on Global Algorithms
Jun 5, 2007 @ 06:49 PM By Ivy Schmerken,George Rodriguez has joined Investment Technology Group (ITG) in New York as director of global algorithmic sales. Rodriguez will be working in ITG’s algorithmic sales group with a focus on selling the firm’s suite of international algorithms to it’s U.S. customer base, according to Tony Huck, managing director of ITG.
Rodriguez left a senior position at TradeTrek Securities, an institutional agency broker specializing in algorithmic trading, two weeks ago. He previously worked for Guzman & Company and the New York Stock Exchange.
Continue reading ...Trading Private Paper: Are New Dark Pools On the Horizon?
May 29, 2007 @ 11:17 AM By Ivy Schmerken,Given the buy-side's interest in finding liquidity under the radar, here's a new twist on 'dark pools..'
On Friday the Wall Street Journal reported that Goldman Sachs is creating its own private system to trade the stocks of companies that want to avoid the glare of U.S. regulation. The new system —GS TRuE— short for Goldman Sachs Tradable Unregistered Equity, made its debut last week with the sale of a 15 percent stake in Oaktree Capital Management LLC, an alternative asset manager.
Continue reading ...New Independent Research Platform Targets Buy Side
May 23, 2007 @ 10:54 AM By Ivy Schmerken,With the buy-side increasingly looking to separate trading decisions from where it purchases research, a new platform offering independent research is marketing analysts directly to the buy-side.
New York-based StreetBrains, LLC is launching a third-party platform focusing on equity, alternative, derivatives and fixed income research analysts. “We’ve essentially cut out the middlemen,” says Lawrence Margolis, a founder and managing director at StreetBrains in New York. The public Web site went live on Tuesday afternoon.
Continue reading ...CME Raises Bid for CBOT, But will ICE Prevail Given Regulatory Concerns?
May 16, 2007 @ 03:10 PM By Ivy Schmerken,With the Chicago Mercantile Exchange (CME) raising its bid to acquire the Chicago Board of Trade (CBOT) last week to break the Intercontinental’s Exchange’s chances of winning the bidding war, there is speculation as to whether the upstart electronic energy market and soft commodity exchange will up the ante, or allow the CME to prevail.
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Last Friday, the CME raised its offer by 16 percent from $7.9 billion to $9.2 billion, which is still below the ICE deal, which is valued at $10 billion.
Rodriguez Leaves TradeTrek Securities
May 16, 2007 @ 01:28 PM By Ivy Schmerken,George Rodriguez, a managing director at TradeTrek Securities LLC responsible for sales, left his position at the institutional brokerage firm last week.
Rodriguez, who was responsible for sales to traditional investment advisers and pension sponsors, left over a disagreement on the direction of the firm, according to Fred Graboyes, president of TradeTrek who is managing partner and runs the firm based in Newark, NJ. TradeTrek is an agency-only brokerage firm that specializes in quantitative execution services for institutional investors, offering algorithmic trading, pre-and post-trade analysis.
Continue reading ...Maxim Group Steps into Algorithmic Space via Fidessa BlueBox
May 9, 2007 @ 01:44 PM By Ivy Schmerken,Moving into the algorithmic trading space while retaining control over its order flow, New York-based Maxim Group LLC, has gone live with Fidessa BlueBox, a suite of algorithmic trading strategies from Fidessa Group.
Maxim Group has been a sell-side client of Fidessa’s order management system since March of 2006 in offering OTC and listed trading to their clients, according to Martin Hakker, EVP marketing at Fidessa.
Canadian Brokers Band Together to Form Alpha ATS
May 7, 2007 @ 10:27 AM By Ivy Schmerken,With alternative trading systems (ATS) proliferating around the world, seven of Canada’s largest investment dealers are planning to establish a new ATS that will pool their internal flows and increase the country’s equity trading efficiencies, the group announced on Thursday.
“With these seven broker dealers banding together to launch a single ATS for internalization, it’s going to make broker internalization in Canada more efficient than ever,” says Jackie Chung, president, Competitive Metrics Inc., a strategic research and advisory firm focusing on the Canadian financial industry.
Continue reading ...Dark Pools Shine the Light on Record Volumes
May 2, 2007 @ 02:59 PM By Ivy Schmerken,Dark books have gained notoriety in the media for anonymously crossing stock trades in non-displayed pools of liquidity, but now they are shining some light on their results as they achieve record volumes.
Today, NYFIX Millennium LLC, said it achieved a single-day record when more than 80 million shares matched in its Millennium alternative trading system (ATS). NYFIX reported that trades were matched in over 2,000 individual symbols.
Continue reading ...Fidessa's Acquisition of Latent Zero Means Synergies for Buy and Sell Side
Apr 16, 2007 @ 08:05 PM By Ivy Schmerken,With more multi-asset trading on the horizon and buy-side firms clamoring for streamlined integration of OMSs and EMSs, London-based royalblue group, the company behind Fidessa, has agreed to acquire LatentZero, a provider of buy-side order management systems, for $125 million.
According to Fidessa CEO Mark Ames, the reason for the acquisition is that “ LatentZero offered us a unique opportunity at a tangible level. They are very focused on the buy-side as we are on the sell –side.” Citing their whole culture, technology development and philosophy, “Strategically, it had all the right signs,” he says.
Continue reading ...Interactive Brokers Reports Trading Contest Results
Apr 11, 2007 @ 02:09 PM By Ivy Schmerken,Interactive Brokers (IB) reported the results of its 2007 Collegiate Trading Olympiad with the top three winners creating automated trading programs utilizing different strategies with stocks and options and futures.
Brian Eckerly, 22, who won first place, received $100,000 in prize money. Eckerly recently graduated from Ohio State University with a degree in electrical and computer engineering. Eckerly traded a mix of stocks and options, using S&P 500 ETFs and the options on that, earning a profit of $294,190.
Continue reading ...ING Investment Management Refreshes Trading Turrets
Apr 10, 2007 @ 04:37 PM By Ivy Schmerken,ING Investment Management Americas upgraded its buy-side trading floor in New York City recently, deploying IPC’s IQ/MAX trading turret there and in Hartford, Conn. The 10-person trading floor, located at 230 Park Ave. in New York, made the move to the newest version of the turret last November. In addition, the firm installed the new turret for a single individual trader located in Hartford, Conn.
Continue reading ...Test Finds Infrastructure Eliminates Latency Spikes
Mar 28, 2007 @ 07:17 PM By Ivy Schmerken,With market data message rates skyrocketing, Wall Street firms are worried about data latency affecting the behavior of their algorithms. One cool technology that is getting some attention comes from the networking side where market data platforms have traditionally used Ethernet. On March 20, Securities Technology Analysis Center (STAC) published a report examining the performance of the latest software from Wombat Financial Software running on the Cisco SFS InfiniBand solution.
The test was conducted on servers using Linux on AMD Operteron Processors. Although the test was financed by Cisco, "Paying for a test does not equate with influencing the test and results or getting good results," says a Cisco spokesperson. "STAC ensures that the tests they do are neutral and fair in every way," adds the spokesperson.
STAC discovered that the combination of these technologies eliminated nearly two-thirds of the mean latency experienced by the Ethernet network, which is the network medium on which most clients run their market data systems.
The Buy Side Should Get Equal Access to Low-Latency Executions
Mar 21, 2007 @ 02:28 PM By Ivy Schmerken,There is so much focus on low-latency these days, but this has not been so much of a concern for the buy side. This is understandable because most buy-side firms use algorithms hosted by the sell-side, and most of the so-called low latency services coming out are targeted at broker dealers and hedge funds.
But perhaps the buy-side should pay attention to make sure there is a level playing field.
Buy-side firms that are executing trades through broker-sponsored algorithmic trading strategies should make sure they are getting equal treatment with the hedge funds customers when it comes to low-latency access to execution venues.
BNY ConvergEx Turns on Block Crossing Network
Mar 7, 2007 @ 06:59 PM By Ivy Schmerken,In a sign that dark pools of liquidity are continuing to proliferate, on Tuesday BNY ConvergEx Group LLC launched ConvergEx Cross, a new block crossing service that matches orders and is open to buy- and sell-side firms.
The proprietary crossing network combines the natural liquidity of the BNY agency brokerage business with the technology of Eze Castle, the buy-side order management system it merged with in October of 2006. It took only four months for ConvergEx to put together the crossing network, which has been registered as an alternative trading system (ATS) and went into production beta testing on Feb. 6 before going live on March 6.
Continue reading ...NYSE Asks SEC for Relief from Routing to ADF
Mar 2, 2007 @ 04:15 PM By Ivy Schmerken,The New York Stock Exchange (NYSE) asked the Securities and Exchange Commission (SEC) for relief from the trade-through rule because it cannot route orders to certain alternative trading systems and the International Stock Exchange that display their quotes on the NASD Alternative Display Facility. The NYSE is requesting relief for a 30-day period, from March 5 until April 5.
Reading between the lines, this means the NYSE is not fully compliant with Reg NMS and is asking the SEC for "a limited no-action" allowing the exchange to trade-through the protected quotes of NASD ADF participants for one month, beginning Monday, March 5th until April 5th.
Continue reading ...BATS Trading Mulls Over European Expansion
Mar 1, 2007 @ 01:47 PM By Ivy Schmerken,BATS Trading, the Kansas City-based ECN, is contemplating an expansion into the European equities market, said Dave Cummings, CEO of BATS Trading, in Monday’s e-mail to his subscribers.
After lying on a beach in Mexico last week reading “The World is Flat” by Thomas Friedman, Cummings was inspired by the book to think about globalization effects and the worldwide free flow of information via the Internet. So he decided to ask his readers – there are 1,500 people on his e-mail list – what they think about BATS expanding into Europe.
Continue reading ...UNX Provides Access to Liquidity Sweeping Tools Via Instant Messaging
Feb 16, 2007 @ 02:15 PM By Ivy Schmerken,Last week, IM TRADER, the instant messaging network for brokers and fund managers, began allowing institutions to sweep electronic pools for hidden and visible liquidity by integrating its network with UNX’s algorithmic technology.
“We’ve helped integrate their algorithmic system out over the IMTRADER network to help investment professionals have the ability to communicate orders to a sophisticated platform using an AOL Instant Messenger window,” explains Ed McDonnell, Pivot Solutions’ SVP of Sales. There’s no new technology involved and no change in current workflow for the buy-side trader.
ITG POSIT Targets MiFID and Others Follow Suit
Feb 8, 2007 @ 05:02 PM By Ivy Schmerken,Ivy Schmerken, Advanced Trading
Crossing networks are staking out their turf in trading Pan European equities as a prelude to competing with traditional exchanges under the Markets In Financial Instruments Directive or MiFID.
This week, Investment Technology Group (ITG) said it plans to launch POSIT Now, a continuous intraday crossing system for equities — into Europe. POSIT was the first regulated ATS in Europe but as of November, it will become a multilateral trading facility or MTF under MiFID.
Continue reading ...Credit Suisse AES Integrates with TradingScreen for Listed Futures
Jan 18, 2007 @ 01:24 PM By Ivy Schmerken,With buy-side firms ready to extend electronic trading in equities over to multiple asset classes, Credit Suisse AES (Advanced Execution Strategies) is expanding its algorithmic trading products into listed futures.
This week, Trading Screen, the operator of a multi-product trading platform, announced that Credit Suisse AES (Advanced Execution Strategies) for the listed futures markets have been integrated into TradingScreen’s full suite of trading products.
Continue reading ...James Leman Joins Westwater Corp.
Jan 11, 2007 @ 01:12 PM By Ivy Schmerken,James Leman, an industry veteran who brings 20-plus years of expertise in electronic trading as well as middle and back-office technology strategies, has joined Westwater Corp. as managing director and head of its Capital Markets Practice.
Continue reading ...OptionsHouse Goes Lives with Online Trading Site
Jan 10, 2007 @ 04:58 PM By Ivy Schmerken,OptionsHouse, a new discount brokerage firm launched its online Web site on Monday offering stock and options trading at a simple, flat-fee rate to retail investors and institutions.
Creditex Spins Off Q-WIXX Execution Service for Large Credit Derivatives Portfolios
Dec 20, 2006 @ 04:44 PM By Ivy Schmerken,Creditex Group is spinning off a new electronic platform, Q-WIXX Inc., for trading large credit derivatives portfolio. The automated execution service conducted its first beta trade for a portfolio valued at $1 billion (500 million euros) consisting of 131 North American and European credit derivatives names.
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