The era of good feelings definitely is over for the over-the-counter (OTC) derivatives market judging by the tone of the conversations at yesterday’s SEFCON V.

“It’s to be expected,” said  a beaming Chris Ferreri, chairman of the Wholesale Brokers’ Association Americas (WBAA) and who hosted the event. “Last year, we all were trying to accomplish the same thing. But with ‘made available to trade’ in place, we are all competitors now. Isn’t great?”

The zingers flew wild and free during the conference’s first panel on what the industry has learned over the first year of swap execution facility (SEF) trading.

Representatives from Bloomberg, Credit Suisse, the DTCC’s Data Repository, Thomson Reuters,  tpSEF and UBS shared some rather candid thoughts and information during the verbal free for all.

Although the UBS offers a SEF aggregation service, it currently does not connect to Bloomberg SEF or tpSEF.

And when it comes to differentiating the SEFs that have sizable liquidity, it is all about the bells and whistles that they offer, according to Bloomberg’s Nathan Jenner and Thomson Reuters’ Jodi Burns.

However, the SEF operators might want to cool their technology pitch to swap dealers and institutional investors, suggested PIMCO’s Ric Okun, who spoke on a later SEF-technology panel.

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This might be heresy for a financial technology blog, but is technology driving business growth in the capital markets?

I ask this because I had an organizational call for a panel discussion I’m moderating during Linedata Exchange New York on October 7 this morning.

The panel,  entitled “Truth or Myth? What Drivers Really Play a Role in Growing the Business Today?”, promises to be an interesting conversation with Jeff Scannell, vice president of trading technology at State Street Global Markets; Ryan Bateman, director of technology at Sands Capital Management; Jonathan Wang, head of business development at TPG-Axon Capital;  and Dushyant Shahrawat, research director at CEB TowerGroup.

It was relatively easy to cover the capital markets from a technological perspective before the 2008 financial crisis. Reporters only had to ask technologists how the specific investment would generate more money for the firm or how would it save the firm money, which could be used to make more money.

After 2008, Dodd-Frank, EMIR and Basel III, reporters started to add a third uncomfortable question: “How will this investment keep the company from being fined by regulators and appearing on the evening news?”

Over the past six years, I have not heard many technologists discuss how IT investments drive business growth. Instead, they have returned to the bearish mantra of doing more with less while throwing available resources at the middle and back offices.

It’s no longer a matter of capturing alpha, but controlling costs and improving internal efficiencies. Hence, why hosted-platforms, outsourcing, cloud computing and their management are the topics of the day.

Looking at my inbox, emails pitching trade reporting, margin management and risk analytics outnumber trade-execution pitches on  low-latency messaging, trading algorithms or smart order routing, at least six or seven to one.

Until some level of volatility comes back to the markets, most firms are left treading water and updating their middle and back offices and it will not change until the US Federal Reserve and the other central banks take their feet off the interest-rate brakes. Then we will see the pendulum swing back to greater investments in the front office.

Am I wrong?

Let me know.

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The global frontier markets are mature enough to give the emerging markets a run for their money, according to Aite Group’s Danielle Tierney and Gabriel Wang.

The industry analyst firm recently published a research note, Frontier Markets: Emerging World: Exploring the New Frontier,  in which the authors examine the macroeconomic and fundamentals of 65 frontier markets and found reasonable valuations, low volatility and low correlation between developed and emerging markets.

Usually I am not interested in the straight economic research, but the authors tossed in chart showing that roughly a third of the frontier markets had deployed Nasdaq OMX’s X-stream multi-asset trading platform since 2008.

I’m sure other exchange technology providers like Deutsche Bourse, London Stock Exchange and the New York Stock Exchange had similar wins over the same period, but since I’m not paid for writing this blog let us just take it as a given.

That is about time I started to notice that a rash of press release announcing the various contact wins. It came after assigning one of my favorite stories about the Iraq Stock Exchange’s paper-based trading and had a T+30 settlement cycle (circa 2006) and the post-Regulation NMS exchange consolidation.

As these markets continue to invest in electronic trading, the more efficient they should become.

However, I doubt that it will become much easier for foreign investors to trade directly in the markets due to the standard local market regulations and currency control issues.

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I know Wall Street’s grapevine is second to none when it comes to job changes and departures, but I’d like to update those who have not heard the news: After a few months at Asset International as the first joint US editor for The TRADE and Global Custodian, I’m back to freelancing.

The role always was an experimental one and not all experiments work out, hence the term.

There are some great people on both publications and I’ll miss working with them daily.

In the meantime, I finally can give this blog the attention that it deserves.



The Securities Industry and Financial Market Association (SIFMA) published its recommendations for changes to the US cash equities market structure that promises enough pain for broker-dealers as well as exchanges and alternative trading system operators.

Since reporting on it earlier this week, I am still trying to wrap my brain around the impact SIFMA’s proposed changes would have if the market adopts them.

Besides implementing kill switches, expanding the reporting requirements to the Financial Industry Reporting Authority and reducing/eliminating maker-taker fees, SIFMA recommends that the securities information processors (SIPs), the organizations that gathers all of the market data for NYSE- and Nasdaq-listed stocks from each exchange and reporting facility and aggregates it into consolidated feeds, should first update their data processing infrastructures “so that the SIPs provide the fastest commercially available services for data aggregation and distribution.”

After the SIPs make the necessary upgrades, SIFMA suggest throwing all of it out- baby, bathwater and all- in favor of having it replaced by competitive vendors, which would replace the SIPs with their own aggregated offerings. It would be similar to how the US Securities and Exchange Commission (SEC) retired the out-date Intermarket Trading System (ITS) in favor of private direct links between exchanges as part of its 2005 Regulation NMS market reforms.

Besides being an industry owned and operated market utility, that is where the similarities between the roles of the ITS and SIPs end. The ITS was a network, whose function easily could be replaced with another network provider. The SIPs are not just making an aggregated market data feed. They are making THE aggregated market data feed. You know, the one to which the regulators always refer.

Take that away then what will take its place?

Aggregating market data is not a clean business. It needs to be scrubbed and have any data outliers addressed. It is not possible for two market data aggregators to deliver feeds that are completely consistent tick by tick, much less half a dozen of them.

This is not to say that the SIPs have implemented the perfect method to aggregate market data feeds. They have not, but at least they are industry owned and not operated as for-profit businesses, which makes them perfect as the objective record for the market.

Any other arrangement would open up a regulatory can of worms.

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