Asset Management « FiNETIK – Asia and Latin America

October 19, 2011 • 2:01 am 0

Brazil: High Frequency Trading in Brazil: Mirage or Miracle?

Christian Zimmer, Head of Quantitative Trading and Research, and Hellinton Hatsuo Takada, Quantitative Trader, of Itaú Asset Management reveal the truth about high frequency trading in Brazil.

Conference panels, discussions and articles on High Frequency Trading (HFT) generally start with its definition. The term HFT is like ‘Cleopatra’ – sexy and mysterious and everyone is keen to know more about it. But the term HFT speaks for itself, so is it wasting time to go over it again?

Probably, because the term ‘high’ only has meaning relative to an external point of reference, just like cold, hot, sweet or other adjectives. This subjectivity is all the more interesting, as it is extremely difficult to measure an investor’s brief holding period in most financial markets and, therefore, determine if it really is ‘high’. Unlike in the US, where the exchanges do not register the origin of the trade, Brazilian regulation allows BM&FBOVESPA to identify the final client on every trade. Consequently, it is much easier to measure the holding period of an investor for each asset. Also, this rule is the means by which the exchange determines whether an investor’s trade is classified as a ‘day trade’ and is thus eligible for reduced fees.

Naturally, BM&FBOVESPA does not classify a trader opening a position in the morning and closing it at the end of the day as a high frequency trader. There should be far more trading than this to qualify as HFT. But how much more? It depends on the exchange’s criteria and reference point for ‘high’.

Figures for HFT published by BM&FBOVESPA in their April 2011report show 3.9% of the BM&F segment is high frequency and 5.9% of the BOVESPA segment. Consequently, the reduced fees are presented to the Brazilian trading community as less of an issue, as they say there is evidence of HFT taking hold. But HFT volume is not really increasing and is still far off the US figures which are often cited at around 60-70%. After carefully observing BM&FBOVESPA market prices, it is easy to conclude that it would take some time (possibly hours) to have a change in the prices sufficiently large enough to pay the transaction costs.Remember that HFT strategies are very sensitive to transaction costs.

Our suggestion is to step away from making subjective references to ‘high frequency’. Instead, one should look at the underlying trading strategies. The incentives an exchange should create to attract flow must be adjusted to the strategies that are really needed. Each strategy deserves a different set of policies and this will help the diversification of the traders’ strategies.

A trader using a market maker strategy can live with exchange fees as long as the bid-ask spread is sufficiently high. If the spread narrows, the costs become crucial and the exchange must lower the fees in order to keep this client in the market. On the other hand, a directional trader has different issues; if the fees are high, a trader must wait longer for a relevant price move so that they can capitalize on their position. Contrary to the market maker, the directional trader loves to see narrow bid-ask spreads. There would be no need to lower fees when the spread is close. The same is true for the statistical arbitrage traders.

When looking at the third party analyses of HFT in the international markets, we often see that the most common strategy is the market maker approach. This fact is strongly influenced by market fragmentation, which we do not have in Brazil. Fragmentation creates new intermarket trades, which could qualify as arbitrage trades, but not necessarily as market maker trades. Fragmentation also makes exchanges and other venues compete for the customers that provide liquidity and, as a result, give incentives to market makers. As mentioned above, Brazil does not have a fragmented market and BM&FBOVESPA does not see it necessary to ask for more liquidity. At least not as long as international capital flows are strong and increasing. Liquidity is needed in second tier shares and below.

It remains to be seen whether the inventive BM&FBOVESPA program to exempt the officially designated market makers from exchange fees will be enough to stimulate other participants to trade. At least theoretically, this provides an entry/ exit point for statistical arbitrage traders. However, as long as the allowed spreads can be as large as 1%, the strategy might not be necessarily profitable. At this moment it is worth noting that most of the Brazilian statistical arbitrage trades are longshort trades in stocks focusing on preferred-common stock relationships (in Brazil they are known as PNON, with PN standing for preferred stocks and ON for common ones).

It is also interesting to look at statistical arbitrage trades that are latency dependent, i.e. true arbitrage trades. Are these the ‘true’ high frequency traders? If there are only a few trading opportunities per day, it does not seem as if BM&FBOVESPA could classify them as high frequency. Latency sensitive traders typically use what the exchange refers to as the DMA3 (clients directly sending orders through a connection to the exchange) or DMA4 (co-location) categories. Trades through these categories can easily be measured. Unfortunately, the ability to measure the latency sensitive flow is lost because the DMA3 category is also used for any direct sponsored customer trades, so all that remains is to measure the flow from the co-location model.

If we use the DMA4 numbers as the reference point for HFT, then we reach a HFT participation figure of 2.8% in the BM&F segment and about 2% in the BOVESPA segment (as at April 2011). The BM&FBOVESPA DMA4 measurements are significantly lower than their HFT percentages. This suggests they accounted additional strategies into this pool, such as market making strategies. Theoretically market makers could have contributed to this figure, but because of a very narrow spread in the high volume stocks and high fees, it is reasonable to assume that the market making strategy does not contribute too much to the HFT volume.

One might argue that there are still the directional trades. Yet, as this strategy needs a certain price move before it can make money and the number of trades per day is limited. On the other hand, the number of traders that might be using this strategy is not limited, as the models are nearly all different. There are only about ten Brazilian players able to successfully run intraday directional trades. Perhaps we should conclude that the international players have better models or a better understanding of the market?

Recently, BM&FBOVESPA announced a new pricing model for high-frequency traders, which uses the Average Daily Trading Value (ADTV) to calculate fees in its equity market. Fees range from 0.019% for R$20 million ADTV up to 0.01% for firms trading over R$500 million ADTV. Ironically, almost no firms were able to qualify as ‘high frequency’ players within the exchange’s cost reduction program.

Source:FIXGloabalTrading, 15.06.2011

Free FGlobalTrading Magazin subscription at http://fixglobal.com/subscription

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, Trading Technology, Algo Trading, Asset Management, BM&FBOVESPA, Brazil, Capital Markets, Christian Zimmer, DMA Direct Market Access, Exchanges, Fees and commissions, FIX, Hellinton Hatsuo Takada, HFT High Frequency Trader, Itau Securities, Latin America, Low Latency, Market Analysis, Trade Connectivity

April 9, 2011 • 1:05 am 0

Buy-Side Platforms: Nirvana in the Front-Office

Centralized, cross-asset trading on a single platform may avoid compliance and risk nightmares. (Round-up industry story on OTC derivatives quotes CRD Managing Director-Global Tom Driscoll and Product Manager Karl Kutschke. The complete story follows.)

As regulators close the gap between the over-the-counter and exchange-traded markets, order management system and specialist OTC suppliers are gearing up provide the buy side with a single, centralized platform for OTC and listed instruments – a possible Nirvana for the front-office.

Ultimately, the new rules of the road for the nearly $600 trillion OTC market will give the buy side a long “to-do” list.

The vendors may have some breathing space. In the US, the regulatory changes are in a state of flux and are likely to miss their mandated deadlines. The Securities and Exchange Commission and the Commodity Futures Trading Commission are moving to set up swap execution facilities, which are exchange alternatives for OTC instruments; OTC clearing platforms with collateral requirements; and swap data repositories.

The regulators are also likely to issue rules that will lead to changes in back office operations, intended to capture and calculate risk to comply with new, forthcoming margining rules. The driving force behind these changes, the Dodd-Frank Act, also allows OTC trades to be transacted on futures exchanges. European regulators are expected to enact similar reforms later this year, which is when the new rules from US regulators are likely to take effect.

The new regulatory environment will mean new connectivity to SEFs, extra transparency into the risk profile of their counterparties, and more transparency into OTC instruments via additional analytics and risk controls. They will need a broader view of the exposure that OTC instruments pose to portfolios. Some of these steps, however, run counter to the push for platform consolidation.

Step 1: consolidation

Many mid-to-large sized shops are using as many as seven different trading systems to cover cash, foreign exchange, proprietary trading, equities, and fixed income, says Gavin Little-Gill, global head of asset management product strategy for Linedata Services, maker of the Longview OMS. In many cases, the OTC desk is not yet automated.

”How do you run compliance that way? How do you understand what your counterparty risk is? How do you truly measure your exposure?” Little-Gill asks. “In that environment, it’s very difficult to do so.”

One way around this problem is for front-office platforms to do a much better job of capturing the “cleanest possible portfolio data as soon as possible,” Little-Gill says. Users also want the data to be validated to avoid data scrubbing later, he says.

Multiple, isolated systems can arise from firms that have taken a do-it-yourself or a best-of-breed approach, says Robin Strong, director of buy-side market strategy for Fidessa, which offers the LatentZero Minerva OMS/execution management system. These siloed systems have frequently been long and costly implementations. Firms often wind up with a harsh realization that “they can’t actually do pre-trade compliance because half of the trades are in one system and half are in another,” Strong says.

Moving to centralized, cross-asset trading on a single platform could help avoid compliance and risk nightmares. ”I’d say the nightmare is trying to get a consolidated risk picture,” says David Kelly, director, credit products at Quantifi, a provider of analytics, trading and risk management software for the OTC markets. The strengths of OMS platforms are in equity and bond transactions, not OTC, he says. “Throw a CDS at them and forget it,” Kelly says. “What risk system do you overlay on top of these execution/order management systems that allow you to consolidate a picture of your risk?”

To avoid nightmares, user firms have to first organizationally change the siloed mentality, says Sang Lee, co-founder and managing partner at Boston-based market research firm Aite Group. “The best approach to providing cross-asset compliance via OMSs would be to make sure that all transactions across the different asset classes get funneled through the OMS so that the compliance module can keep track from a centralized position,” Lee says.

Converging assets and technologies

In addition, OMS platforms will need more inroads into the OTC environment, says industry analyst Stephen Bruel, an analyst at market research firm TowerGroup. As the OTC market starts to resemble the futures space, “the OMSs will have to make some changes to be able to handle the nuances of the OTC book”, he says.

”At the same time, there are some OTC derivatives providers such as Misys, Calypso and Murex that perform a lot of these front-office trading functions from an OTC perspective and they’re going to need to modify their technology so that they look and act like something that trades futures because that’s how the trading is going to evolve,” says Bruel, adding that the OTC providers lack the real-time data management capabilities that “you see more on the listed side”.

OMS vendors also have to recognize that there will be no “one-size-fits-all” problem set that they can use to model their cross-asset platforms, says Rob Agne, director of product management at ConvergEx’s Eze Castle Software. The North American, European and Asia-Pacific markets will be distinct as will the asset classes. “Different asset classes will be traded on different SEFs,” he says. Counterparties may choose to specialize. Amid the maze of new rules and regulations, customers will need help finding increased levels of liquidity and transparency, not to mention support for new file formats and reporting requirements.

“You can see how this just perpetuates into somewhat of a difficult environment,” Agne says. “We’re not rushing out to connect to everyone. Part of what we’re trying to do is listen to what our clients are asking for.” Agne says he’s hoping for more standardized, extensible APIs that can serve as a kind of insurance against a likely shakeout among the SEFs and related venues. He is also hoping for standardized contracts via the SEFs.

However, Agne cites one key benefit of moving OTC transactions to trading venues – the generation of market data. “As a technology vendor, we’ll need to have adapters to bring in that real-time market data for our clients to take advantage of. As these are traded on exchanges, there will be more data for us to process and that’s something we need to consider. We’re working on it.”

Before vendors launch the single platform for all, they will have to resolve “off the charts” customer demands for compliance and regulatory support, says Chuck Giessen, senior vice president and general manager for the financial markets group of SS&C Technologies, maker of the Antares OMS. “The issue in our industry now is the increasing requirements for transactions,” Giessen says.

A case in point is the 11 million Finra-mandated Order Audit Trail System reports processed per month by the SS&C Antares platform, Giessen says. In addition, Antares supports reporting procedures for exchange-traded equities governed by Mifid in Europe and by regulators in Australia.

“As reporting requirements start to include other asset classes, there is a general issue in the transaction sequencing numbers and how you report them and how things are centralized,” Giessen says. Firms will have to grapple with the issue of principal trading books and how to tie them to their underlying options via time sequencing.

”It’s a massive issue for our clients so we’re doing significant work for them,” Giessen says. “All of which argues for increased spending for IT in an environment where people have less money to spend. And that’s the squeeze. I think that’s the dilemma – everybody knows they need more, but they just aren’t sure how to pay for more.”

Going to market

When they do go to market, the buy side will find the vendor space a lot “more crowded over the next 12 months,” Bruel says. “We may even see some partnership activity.” For the moment, some vendors are skipping the partnership step. Calypso Technology, for instance, is readying an OTC OMS (See “Calypso to build ‘OTC OMS’”, page 32) while Charles River Development has its own analytics.

In fact, Charles River will not be partnering with a specialist OTC provider, says Tom Driscoll, the global managing director at the firm, maker of the IMS platform. “We’ve poured tens of millions, if not more, into the support of these types of instruments,” he says. ”We’re building out our capabilities on analytics and there’s risk management as well,” says Karl Kutschke, product manager, fixed income and derivatives at Charles River. Users will be able to watch a trade’s progression through its lifecycle, including its impact on portfolios.

Providing analytics, risk and compliance support will be differentiators among OMS vendors because the pain points have shifted to pre-trade elements, Driscoll says. “A couple of years ago, pre-trade compliance and risk may have been as ‘nice-to-haves,’ “he says. It’s really more of a must-have now.” Driscoll acknowledges that specialty systems can excel at certain tasks. However, they may miss broader elements such as non-derivative asset classes. “Many of them are good on the risk side but with compliance rules that’s been a challenge,” says Driscoll, who adds that working with a third party contradicts the push for platform consolidation.

Dan Matthies, global head for the Asset and Investment Manager OMS from Bloomberg, says he agrees that pre-trade compliance has become more important for OTC derivatives processing, which is why AIM offers calculations. “If you’re creating a credit default swap on Bloomberg, you’re setting up the deal terms whether they’re captured electronically or created manually,” Matthies says. The deal terms are entered into a calculator before the transaction is sent to AIM.

Quantifi might consider partnerships with OMS vendors, despite the fact that their product scope is “very limited to cash equities and bonds,” Kelly says. “There’s not a whole lot of analytics in the equities space unless you’re doing charting, which we don’t do.” Quantifi may have more interactions with the OMS providers once they start sending OTC instruments to SEFs.

As for the single platform for all, Kelly says it is nonexistent. “I would argue that if there were such a system it would have a monopoly position in the vendor space,” he says. “In my 20 years in the business, I’ve not seen it created – mostly because the spectrum is so broad.” Other vendors express a more qualified support for a centralized platform.

Mattheis says that, while AIM comes very close to being the complete platform, “there’s always going to be something that any system or platform doesn’t do as a result of the market continuing to reinvent itself.” The key is to work with “the biggest community” of diverse firms trading across different asset classes and regions who can then serve as development partners, he says.

“It depends on the requirements of the firm,” Driscoll says. “If you do it across multiple asset classes, finding a system that’s perfect in every asset class is probably not realistic.” However, Driscoll argues that a module that supports 90% of an instrument’s operation and is connected to a unified platform is superior to an isolated system that does 99 percent of the job but costs millions of dollars to integrate. The end users will ultimately decide if they are willing to make that kind of a trade-off for Nirvana.

Source; April 8, 2011; Banking Technology

Filed under: News, Risk Management, Trading Technology, Asset Management, Compliance, CRD Charles River Development, Data Management, Derivatives, Order Routing, Risk Management

January 12, 2011 • 11:30 am 0

China Asset Management Automates QDII Investment Operations and Electronic Trading with Charles River IMS

Single platform allows straight-through processing for company’s Beijing and Hong Kong QDII investment hubs

January 12, 2011 – Charles River Development (Charles River), an award-winning provider of financial software and services to the global investment community, today announced that China Asset Management Company (China AMC) is live on the Charles River Investment Management System (Charles River IMS). China AMC is China’s largest fund manager. China Asset Management has implemented the latest Version 9 release of the Charles River IMS, which fully integrates order and execution management capabilities (OEMS) on a single platform. The implementation, delivered on time and on budget, also includes the Charles River Post-Trade module, which centralizes confirmation, trade matching, and settlement workflow and automates the post-trade process.

China AMC’s investment operations for assets managed under the Qualified Domestic Institutional Investor (QDII) scheme are now fully automated. QDII allows Chinese asset managers to invest in international assets on behalf of their clients. Users in the company’s main offices in Beijing and Hong Kong are currently using Charles River IMS. Charles River IMS interfaces with a number of third-party applications, including a Chinese domestic back-office system, and integrates with various proprietary systems.

“We looked at multiple solutions through a detailed evaluation process with the view to having a solution to support our assets in order to streamline and automate our front office investment platform,” said Lu Xiaoye, General Manager, Information Department, China AMC. “The Charles River IMS provides us with a platform that smoothly meets our current investment requirements.”

“China Asset Management is our first client in the region to automate operations with Charles River IMS Version 9, our most recent release,” said Cameron Field, Managing Director, Asia Pacific, Charles River Development. “As the QDII market in China is becoming increasingly competitive, Chinese fund managers are seeking greater efficiency and control in running their investment operations. They want to scale their business and support increasingly sophisticated products.”

In Asia Pacific, Charles River serves approximately 100 client sites across 14 Asian Pacific countries and is headquartered in Melbourne, with offices in Tokyo, Singapore and Beijing and regional presence in Brisbane, Sydney and Hong Kong. A team of fifty specialists, many of them bilingual Japanese/English and Mandarin/English speakers, provide investment managers with local implementation, consulting and support services.

Source: Charles River, 12.01.2011

Filed under: China, FIX Connectivity, News, Trading Technology, Asset Management, China Asset Management, China 中国, CRD Charles River Development, FIX, Investment, Order Routing, QDII, Risk Management, Trading Network

November 12, 2010 • 1:38 am 3

Shenzhen Financial Services and Fund Management Study and Network Tour 3-4 December 2010

Gain deeper knowledge of Shenzhen, China Financial Industry

The study tour is coordinated with the local Shenzhen government support to view the latest mega-development in Shenzhen that would be of interest to business people and visitors alike. Participants will get an orientation of Shenzhen and gain a clear perspective of the importance of Shenzhen in the master plan of the centrally planned economy of China.

Benefits of the Study Tour:

Gain first-hand exposure to the current growth climate in Shenzhen
Gain an insight into the vibrant economic sectors in Shenzhen
Explore ways to capitalize on various initiatives and activities undertaken within Shenzhen
Meet and exchange views with the industry’s experts on various challenges and prospects in investing in Shenzhen
Create networking and business match-making opportunities among senior executives and those interested in business and investment.

Shenzhen today is the leading manufacturing hub of China and the master plan from the Central government which was announced recently is to keep Shenzhen growing for the next 30 years with the building of the “Manhattan” of China at Qianhai, Shenzhen.

Does this news catch your eye?

Sept. 3 (Bloomberg) — The southern Chinese city of Shenzhen plans to invest 40 billion yuan ($5.88 billion) in its Qianhai area to make it the “Manhattan” of the Pearl River Delta, the Securities Times reported today, citing the local government. The investment in the 15 square kilometer area of the city will be made over the next three years, the Shenzhen-based newspaper reported. The government is looking at the possibility of offering a low tax regime similar to Hong Kong’s and of allowing free convertibility of the yuan in the area, according to the report.

ATIC@Shenzhen 2010 will bring together a group of international participants consisting of fund managers, private equity investors, high-net-worth investors, directors of securities brokerage firms as well as senior executives of global stock exchanges to Shenzhen for an in-depth look at the Shenzhen capital market, as well as to network with Shenzhen government officials, fund managers, securities brokerage firms and listed company CEO’s and companies looking to expand overseas This platform provides a timely and strategic platform to convene investors to discuss strategies, leverage opportunities and explore potential cross-borders business partnerships. Participants will be able to network, mingle and make fruitful contacts to improve their business bottomless.

WHO SHOULD ATTEND?

This is a strategic, informative and concise program designed for Investors, Business Owners, Senior representatives or professionals with Financial Services Organizations such as Fund Management Houses, Securities Brokerage Firms, Securities Exchanges and other finance-related institutions.

Don’t get left behind. Come join us and take this incredible opportunity and advantage to reach your top prospects and grow your business.

Shenzhen Study Tour & Investment Summit Package Price	*Early Bird	Individual	Group (Min 2 persons)
Shenzhen Study Tour & Investment Summit Package Price	USD750	USD1,000	USD800

*Limited period only.

Package price includes of one study tour luncheon and one exclusive networking and dinner on 3 December 2010. Participation is on a first-come-first-serve basis and interested delegates are encouraged to submit an early registration in order to avoid disappointment.

For more information, please visit http://www.theatic.net/ or contact us at:

Hong Kong office : Ms Winnie Kong (Email: winnie.kong@kornerstone.com.hk, Tel: 852-2116 3328)
Malaysia office: Mr Michael Tee (Email: michael.tee@nextview.com, Tel: (603) 2770 9388)
Singapore and China offices: Ms. Jingmin Lan ( Email: jingmin.lan@nextview.com, Tel: (65) 63231663)

Filed under: China, Events, Exchanges, News, Asset Management, ATIC, Capital Markets, China 中国, Exchanges, FX Foreign Exchange, Investment, Retail Investors, Shenzhen, SZSE Shenzhen Stock Exchange, TheNextView, Trade Connectivity

November 9, 2010 • 1:57 am 0

Charles River Development Wins Buy-Side Technology’s “Best Buy-Side OMS” Award for 4th Consecutive Year

Single, consolidated platform streamlines workflows and lowers costs and risks for buy-side firms

Charles River Development (Charles River), a front- and middle-office investment software solutions provider, today announced that the Charles River Investment Management System (Charles River IMS) has won the Buy-Side Technology Award for “Best Buy-Side Order Management System” for the fourth consecutive year.

“Once again, this award validates Charles River’s commitment to empower portfolio managers, traders and compliance officers with advanced tools that improve efficiencies and reduce risk and costs,” said Peter Lambertus, President and Chief Executive Officer, Charles River Development. “Our continued investment in research and development delivers flexible, scalable solutions to support requirements of both large and small firms.”

Judges for the Buy-Side Technology Awards 2010 included leading buy-side-focused technology consultancy firms. These experts selected Charles River IMS as a multi-asset, multi-currency solution for automated decision support and portfolio management, real-time pre- and post-trade compliance and global FIX trading.

The Buy-Side Technology award follows Charles River’s recent recognition for “Best Buy-Side Technology Firm” by Asia Asset Management Best of the Best Awards and the “FinTech Top 100,” American Banker/Financial Insights 2010.

Source: Charles River Development, 08.11.2010

Filed under: Asia, Brazil, FIX Connectivity, Latin America, Mexico, Risk Management, Trading Technology, Algo Trading, Asia, Asset Management, Compliance, CRD Charles River Development, Currency, DMA Direct Market Access, FIX, Fixed Income, Investment, Latin America, Order Routing, Risk Management, Trading Network, USA

October 29, 2010 • 12:16 am 1

LatAm Hedgefunds: Comprehensive Report and Webinar November 10th

Alternative Latin Investor is proud to present our combined LatAm Hedge Fund Report and Webinar to be hosted by Hedgehogs.net CEO, Ken Yeadon, on November 10th at 1pm EST. Early-bird price till Nov. 2nd is 175.00USD after which price is 199.00USD. This price includes digital edition of report with directory as well as attendance to webinar.

REGISTER HERE

We have interviewed several industry professionals; mostly fund managers, to create a comprehensive overview of the LatAm fund market. We also look at the existing LatAm fund indexes and the legal aspects of funds. Included is a profile of 30+ funds with a directory of contacts, email or phone, for over 300+ funds

Industry Overview
Growth of Industry
Legal Aspects
LatAm Fund Indexes
Changes in Legal Aspects
30+ Fund Profiles
300+ Directory
The Economist on Hedge Funds

Webinar

Topics to be discussed

LatAm funds versus Global Macrofunds or Emerging Market funds with LatAm exposure
New investor demographics, or the same? And who are they?
Institutional Participation?
Has there been a change in global opinion of LatAm funds due to crash of US/Euro markets?
Has this created a vacuum for LatAm to fill?
With the developed world seemingly on the path of competitive devaluation vs. emerging markets, how do the panel see Latin American investments being impacted?
Asian countries, in particular China, are increasingly looking to secure commercial rights over global supply chains for resources. (e.g. recent headlines over global supply of Rare Earths, a critical commodity input to green energy technologies and mobile devices). How is this impacting Latin America, and are any Latin American countries following similar strategies (via Sovereign Wealth Funds for example) to exploit their natural resource advantages? Does this represent an investable theme for Latin American funds?

Host

Ken Yeadon - CEO of Hedgehogs.net, a social application platform for the hedge fund and investment industry and those who serve it.

Ken is the former head of trading, sales and e-commerce for HSBC Asia-Pacific. He has a successful track record in angel and venture investing in financial technology, and in high frequency trading, stat-arb and quantitative/arbitrage trading. He has also managed several liquidity management infrastructure and financial CRM projects for banks, brokerages and technology vendors. Ken has an MBA from John Cass Business School and a BA in Economics from Nottingham University.

Expert Panel

Sonia Villalobos Co-portfolio manager of the LV Pacific Opportunities Fund
She was formerly Head of Latin American Equities at Larrain Vial AGF. A Brazilian citizen, she has more than 25 years of experience in the LatAm capital markets. She was Head of Research at Garantia in Sao Paulo from 1989 to 1996 and Vice President at Bassini, Playfair & Associates from 1996 to 2002. She holds a Bachelor and Master’s degree in finance from the Fundación Getulio Vargas in Sao Paulo. In 1994 she obtained her CFA, the first person in Latin America to achieve it.

Andres Azicri President and Founder of Convex Management
Prior to founding Convex, Andres Azicri was a Managing Partner of Cima Investments and the senior portfolio manager of the Cima Aconcagua Fund. Before joining Cima, Mr. Azicri was the head of Asset Management at MBA, prior to which he headed the Proprietary Desk for Latin America at Bankers Trust in New York (1997-1999) and the Emerging Markets Fixed Income Research Department at Oppenheimer & Co., in New York (1995-1997). Mr. Azicri is an economist from the University of Buenos Aires (1988), and is currently a professor of finance at CEMA University and the University of Buenos Aires.

Carlos Rojas Portfolio Manager Compass Perú
Portfolio Manager of the Peru Special Investment Fund. He joined Compass in 2006 after working for 12 years in the financial industry. In his previous role he managed over US$ 300 million for the Rimac Group and was also an investment advisor for the Brescia Group. Previously he performed roles in M&A operations, financial structures, derivatives, and trading. Mr. Rojas has a BA in Business Administration from Universidad del Pacífico in Peru.

Andrew Cummins Founder and Chief Investment Officer of Explorador Capital Management, LLC.
Previously, Andrew worked for Emerging Markets Investors Corporation, focused on investments in Argentina, Chile, Peru and Ecuador. Andrew holds an M.B.A. from Harvard University and a B.S. from the University of California at Berkeley. He has lived and traveled in Latin America over the last 20 years. Andrew serves on the Board of INPAR, a publicly traded Real Estate company in Brazil.

Webinar:

Date: November 10th

Time: 1pm EST

Price: USD 175.00 early bird till Nov. 2nd

USD 199.00

REGISTER HERE

Filed under: Argentina, Banking, Brazil, Central America, Chile, Colombia, FiNETIK Events, Latin America, Mexico, News, Peru, Risk Management, Services, Trading Technology, Wealth Management, Alternative Latin Investor, Argentina, Asia, Asset Management, Brazil, Capital Markets, China 中国, Colombia, DMA Direct Market Access, Emerging Markets, Hedge Fund, LATAM Strategy, Mexico, Peru

October 22, 2010 • 5:36 am 1

Mexico’s Scotiabank Inverlat, Automates Mutual Fund Operations with the Charles River Investment Management System

Streamlines workflows; ensures compliance for all local/international securities and debt instruments

October 21, 2010 – Charles River Development (Charles River), a front- and middle-office investment software solutions provider, today announced that Scotiabank Inverlat, S.A. (Scotiabank Mexico), one of Mexico’s largest banking groups, has implemented the Charles River Investment Management System (Charles River IMS) across its Scotia Fondos subsidiary. The multi-phased project, delivered on-time, is part of Scotia Fondos’ initiative to automate its domestic and international mutual fund (Fondos de Inversion) operation with 16 different portfolio options on a single, consolidated platform.

Scotia Fondos’ users benefit from advanced decision-making and analysis tools, automated portfolio management and trading, and real-time, pre-trade compliance monitoring for all asset classes, including equities, money market, mutual funds, as well as Mexican corporate and government fixed income instruments, such as Bonos, CETES and UDIBONOS. During the initial project, Charles River automated Scotia Fondos’ equity portfolio management and trading operations, as well as compliance monitoring. The second phase consolidated capabilities across the firm’s fixed income operations.

“We required a state-of-the-art system and a vendor with proven experience in supporting the needs of Mexico’s asset managers; Charles River delivered both,” said Ernesto Diez, Director General, Scotia Fondos. “Our portfolio managers can now stay ahead of the market by analyzing and rapidly implementing changes to portfolios. We can also validate that our portfolios comply with all mandates – at any time and for any asset class.”

Support for Mexico’s numerous local market requirements was critical to the project. Charles River IMS allows Scotia Fondos to manage and execute trades for all Mexican government and corporate debt instruments. The firm’s mutual fund traders can also execute stock lending, support repurchase agreements and rebalance against Mexican indices. In addition, Charles River’s open architecture makes it easy for Scotia Fondos to integrate with its proprietary accounting system, as well as back-office providers, such as Bloomberg for real-time pricing, and Mexican Stock Exchange-owned Valmer for risk data.

Charles River IMS supports region-specific security types and associated workflows, including Mexican corporate and government bonds. In the near future, Scotia Fondos will continue with the implementation of Charles River IMS’ advanced derivatives exposure calculations and coverage functionality helping clients comply with Mexican regulations, such as Comision Nacional Bancaria y de Valores (CNBV) rules, by monitoring and managing pre- and post-trade exposure to derivatives instruments. Charles River’s pre-built compliance libraries contain over 1,700 regulatory and general example rules across 35 regulatory bodies of 20 countries, including comprehensive rule libraries for Mexico.

“Charles River offers asset managers in Mexico sophisticated, yet easy-to-use solutions for expanding their operations into new asset classes and markets – delivering a competitive advantage that supports business growth,” said Spiros Giannaros, Vice President of Sales, Americas, Charles River Development.

Charles River supports five client firms in Mexico, and serves over a dozen firms across Brazil, Chile, and Panama.

Source: CRD, 21.10.2010

Filed under: News, Latin America, Mexico, Brazil, Chile, Risk Management, FIX Connectivity, Latin America, BMV Bolsa Mexicana de Valores, Mexico, Compliance, Asset Management, Fixed Income, Regulation, Equity, Scotia Inverlat, CNBV Comision National de Bancos y Valores (Mexico), CRD Charles River Development, CETES, UDI Bonos

August 9, 2010 • 12:16 am 0

VAM: Vietnam Market Analysis July/Agust 2010

Market Update - This month Fitch downgraded Vietnams debt rating to B+ with a stable outlook from BB- citing inconsistent government policy, low foreign exchange reserves and a weak banking system. The move came as a surprise to many commentators who looked at Vietnams ever improving macro condition as reason for optimism. We also share this opinion, as the move was somewhat unjustified and does not reflect the efforts of the government in stabilizing the macro environment and the countrys currently improving key macroeconomic indicators. VAM_Monthly_Newsletter_Jul_2010

In July, industrial production and retail sales were up 13.5% and 26.4% year on year respectively. Although year to date up 17.5% when comparing to the same period last year, export turnover this month declined 8.8% MoM as subdued European demand made its impact which contributed to Julys monthly trade deficit of $1.15bn or $7.4bn year to date, equivalent to 19.4% of export turnover. However, capital inflows can adequately compensate the deficit with FDI disbursement being recorded at $6.4bn year to date and overseas remittances showing an increase of 24.5% year on year in the 1H 2010, achieving $3,9bn. It should also be noted that ODA flows and external borrowings have not yet been taken into account.

Foreign reserves are expected to increase by $2bn to $17bn by the end of this year. Credit growth for the first 7 months was 12.97% highlighting the importance of recent reductions in bank lending rates in realizing the governments effort to achieve its target of 25% for the year. Continued low inflation has also given the government room to increase the money supply in order to push lending rates lower.

The VN-Index continued its sideways path during the month as mixed second quarter earnings failed to support a change in stagnant retail sentiment. However, the downgrade did prompt net buying from foreign investors to decline towards the end of the month. The VN-Index closed the month at 493.91 or a decrease of 2.61% MoM.

Our View – By end of July, most corporates have disclosed their 2Q 2010 earnings results which have been quite mixed with consumer sector looking good while property and materials sectors seeming weak. Despite first half year business results being in line with expectations and macro economy experiencing positive signals in the month, they were not supporting enough to drive the bourses upwards as investors remained skeptical about new capital flows injected into economy via credit growth policies.

For August, we expect the markets movement to be mainly driven by factors such as selling pressure, investors confidence and a break-through in easing monetary policies of the State Bank of Vietnam (SBV). Concerns on the oversupply of shares in the market (particularly from banks in order to meet the minimum charter capital requirements) will also create a lot of pressures on the VN-Index. As the market has followed a bearish trend recently, specific and comprehensive actions from the SBV via credit growth policies will be an important catalyst in bringing back investors confidence.

Currently, we still uphold our interests in telecommunication, oil & petrochemical, dairy product, pharmaceuticals and banks. Moreover, we will be continually keeping an eye on news on the global economy and monthly government meetings to closely observe the trend of macro and monetary policies in the near term.

Source: VAM, 08.08.2010

Filed under: News, Risk Management, Services, Vietnam, Wealth Management, Agriculture, Asset Management, Currency, Exchanges, FX Foreign Exchange, HaSTC Hanoi Stock Exchange, HOSE Ho Chi Ming Stock Exchange, Index, Investment, PetroVietnam, Risk Management, VAM Vietnam Asset Management, Viet, Vietnam

July 22, 2010 • 2:49 am 0

BlackRock Q2 2010: Profit 98% up / Ganacias se elevaron 98%

Black Rock second quarter financial report Black Rock Q2 10 EARNINGS RELEASE

Black Rock segundo trimestre reporte financiero - sumario en español

Las ganancias trimestrales se elevaron 98% respecto del mismo periodo del año pasado.

BlackRock atribuyó las ganancias del trimestre al incremento en los activos netos y a la recuperación de los mercados internacionales.

Los ingresos netos aumentaron a $432 millones de dólares, un 35% más comparado con el mismo periodo de 2009.

En el primer semestre del año, BlackRock obtuvo una utilidad de 855 millones de dólares, un aumento de 183% respecto del año pasado, y un incremento en sus ingresos de 99.7%, hasta 4,027 millones de dólares.

El director general de la firma, Laurence D. Fink, comentó que los resultados del segundo trimestre son “un testimonio de la resistencia” de la plataforma de negocio de la firma.

Los activos bajo administración (“AUM”) totalizaron los $3.151 billones de dólares (trillion) al 30 de junio de 2010.

“La integración de nuestros programas continua de acuerdo a lo programado, junto con los aspectos clave de la integración cultural. La semana pasada anunciamos diversos nombramientos importantes, lo cual representa la culminación de una revisión intensiva, post-adquisición, de nuestra estructura organizacional. Creo que tenemos el mejor liderazgo del sector, y gracias al impulso de nuestro negocio podemos exigir de nuestro equipo y plataforma lo mejor. Apenas hemos empezado a apuntalar nuestras amplias capacidades para servir mejor a nuestros clientes, comentó Laurence D. Fink.

Fuente: Carral Sierra / BlackRock, 21.07.2010

Filed under: News, Services, Wealth Management, Asset Management, BlackRock, ETF, Fund Industry, Investment, Performance Report, Wealth Management

June 10, 2010 • 11:00 pm 3

Alternative Assets in Latin America: Expert Panel Discusses June 15, 2010

Please join Alternative Latin Investor and Focus Point Press June 15th for a round table webinar of industry experts discussing alternative assets in Latin America. http://www.alternativelatininvestor.com/Webinar/AlternativesAssetsInLatAm.pdf

Our Panel:

Brigitte Posch
PIMCO Executive Vice President and Portfolio Manager in its emerging markets group. Prior to joining PIMCO in 2008, she was a managing director and head of Latin American securitization and trading at Deutsche Bank.

Will Landers
CFA, Managing Director, Senior Portfolio Manager, is the portfolio manager for the BlackRock Latin America Fund, the BGF Latin America Fund, the BSF Latin American Opportunities Fund and the BlackRock Latin American Investment Trust PLC.

Andrew Cummings
Founder and Chief Investment Officer of Explorador Capital Management, LLC.

Eric Saucedo
Partner at Tricap Partners & Co., an investment banking firm focused on early-stage and middle market growth companies.

Topics:

-How alternative investment vehicles are faring in this recovery phase of the crisis
-What strategies performed the better than others
-What regions, sectors and vehicles are looking good for the coming year
-New players to the region who we should keep an eye on
-Growth of regulation in the alternative space
-Where new capital to Latin America is coming from
-Participation of both, foreign and domestic institutional investors
-How LatAm stacks up against other emerging markets
-The effect of Chavez on investor confidence in LatAm investments
-How sustainable is Brazil
-Countries to watch

Date: Tuesday, June 15
Time: 1pm EST
Price: 89.00USD
Register at http://www.regonline.com/Checkin.asp?EventId=866305

For more information please see,
http://www.alternativelatininvestor.com/Webinar/AlternativesAssetsInLatAm.pdf

Filed under: Argentina, Banking, Brazil, Central America, Chile, Colombia, FiNETIK Events, Latin America, Mexico, News, Peru, Services, Venezuela, Wealth Management, Alternative Latin Investor, Asset Management, BlackRock, BM&FBOVESPA, BMV Bolsa Mexicana de Valores, Brazil, Chile, Currency, Emerging Markets, Explorador Capital, FX Foreign Exchange, Investment, Investment Bank, Latin America, Mexico, Panama, PIMCO, Risk Management

February 2, 2010 • 11:30 am 0

Santander starts marketing Latin American funds in Asia

Banco Santander, a Spanish bank with a large presence in Europe and Latin America, has created a new role in Hong Kong to develop its asset-management business in Asia.

With the necessary licences in place, Alexander de Laiglesia will concentrate on selling funds manufactured by Santander Asset Management in Latin America and Europe to Asian wholesale distributors and asset managers.

De Laiglesia, a managing director, has been with the firm for 20 years, starting in Tokyo as a deputy branch manager. He returned to Japan from Madrid in 2002 with a secondment to Shinsei Bank. He moved to Hong Kong last year, and has been developing the asset-management role for the past several months. De Laiglesia has also worked in Hong Kong and the Middle East in the 1980s with Standard Chartered Bank, and he speaks Japanese.

Santander pursues a universal banking model in its core markets of Spain, Portugal, the UK and the countries of Latin America, including Brazil, as well as the US. The bank has built investment teams in those countries.

The group mainly provides local products to its local investors. It cross-sells some products to provide these local customers with international exposure and may also provide third-party funds. Worldwide, Santander Asset Management manages €120 billion ($168 billion) of assets.

Asian markets are not core to this business. “We are not here to manage assets,” says de Laiglesia. “We are here to channel investments from Asia to our core markets.” That means competing in the niche of selling Latin America funds to Asian wholesalers and domestic fund houses. Santander will also seek to develop sales to institutional investors as well.

“We are the largest regional asset manager in Latin America, with big investment teams in markets such as Brazil, Chile, Mexico and Argentina,” de Laiglesia says.

Santander has already notched up business in Japan as adviser to a couple of Brazil equity funds launched by Daiwa Asset Management, and in Korea, where Industrial Bank of Korea sells a Latin America equities product. Japan, in particular, has wealth, its investors are comfortable with Brazilian securities and that’s an asset class where domestic asset managers do not have a local presence, de Laiglesia says.

Santander is flexible with regard to the type of relationship it will pursue with Asian distributors; it may act as an investment adviser, a provider of white-label products or a provider of mutual funds from its Luxembourg range. The firm will also seek segregated mandates from or sales of its Luxembourg funds to Asian institutions.

In addition to applying for regulatory licences, de Laiglesia is still researching which markets to focus on and which thematic products to highlight. Japan is the priority, but the region’s other large markets — Australia, Greater China, Singapore and South Korea — are also important.

Source: AsianInvestor.net, 02.02.2010

Filed under: Asia, Australia, Banking, Brazil, China, Colombia, Hong Kong, Japan, Korea, Latin America, Malaysia, Mexico, News, Peru, Services, Singapore, Wealth Management, Asset Management, Brazil, Hong Kong, Japan, Korea, Latin America, Mexico, Private Banking, Retail Banking, Santander, Singapore, Taiwan, Wealth Management

January 29, 2010 • 11:20 pm 0

UK asset managers lack confidence in reference data quality – survey

Over a third of UK-based asset managers and banks are not confident in the quality of reference data they use to support trading activity, according to a survey from IT services firm Patni.

The survey of 100 company representatives found that 91% of asset managers do not have a single supplier of reference data, with the remainder admitting that they were not sure of their source at all. Respondents say that an average of six per cent of trades fail as a result of poor reference data.

Yet just half of those questioned say they have not considered outsourcing the management of their reference data to a third party, due to fears of a potential loss of control and security breaches. Meanwhile, the overwhelming reason cited for considering outsourcing is the potential for cost savings, followed by higher levels of accuracy.

Philip Filleul, product manager, reference data, Patni, says: “Many buy-side and sell-side firms are now uncomfortably aware of both the time and costs they devote to purchasing, cleansing and distributing reference data, as well as the risks that arise when these tasks are not performed effectively, among them failed trades and lost revenue opportunities.”

“The twin pressures of achieving regulatory compliance and straight-through processing have highlighted substantial redundancy and duplication of effort in the area of reference data management.

“One in ten trades fail on first settlement attempt – and of these, 60 per cent -70 per cent can be attributed to poor data management. “

Research from the Tower Group, which was cited by the report, showed that nearly two thirds of failed trades did so due to inaccurate data.

Source: Finextra, Bobsguide, 29.10.2010

Filed under: Corporate Action, Data Management, Market Data, Reference Data, Risk Management, Standards, Asset Management, Asset Manager, Corporate Action, Data Management, Data Strategy, Market Data, Reference Data, Risk Management, Standards

January 7, 2010 • 6:38 am 0

China Merchants receives QDII approval despite ING troubles

China Merchants Fund Management will test domestic appetite for global resources investments with a new fund, for which shareholder ING is a sub-advisor.

China Merchants Fund Management — a joint venture between China Merchants Bank, China Merchants Securities and ING Investment Management — has secured approval for a qualified domestic institutional investor (QDII) product.

The China Securities Regulatory Commission (CSRC) has approved the Shenzhen-based firm’s product plan to launch a global commodities fund, with ING IM as the sub-advisor. The Dutch firm will be responsible for supplying investment research and strategic and tactical asset-allocation advice to the fund. The product will most probably be structured as a fund-of-funds.

“Currently we have no resources fund or strategy into which this fund will invest,” says Edmund Lacis, regional head of wholesale and business development at ING IM in Hong Kong. “We will be leveraging our existing global knowledge and expertise to develop a new strategy for this fund.”

Grant Zhang, portfolio manager at China Merchants, tells AsianInvestor he will act as the fund’s manager. He started as a securities analyst at China Merchants Securities.

The QDII approval comes on the heels of a recent QDII fund launch by Guangzhou-based E-fund, which began fundraising for a self-managed Asian equity strategy on December 7. E-fund has yet to announce how much money it has attracted. Up next, Penghua has an $800 million quota for a manager-of-managers strategy with shareholder Eurizon Capital, while Changsheng has a $700 million quota for a pending Goldman Sachs-advised product.

Sources say Guotai also secured a $700 million quota for a tracker fund based on the Nasdaq 100 yesterday.

The State Administration of Foreign Exchange (Safe) only resumed quota handouts in October, after a 17-month hiatus.

The CSRC’s approval of China Merchants’ product plan has raised concerns among some industry observers. The green light has been given despite the uncertainty over ING IM’s future ownership due to the European Commission-mandated break-up of its parent. In October, ING was told to offload its investment and insurance businesses by 2013. Institutional investment consultants Watson Wyatt and Mercer have since withheld their ‘buy’ recommendations for the group for that reason.

Even before the ruling, ING had been seeking buyers for its businesses in Asia and the US, to raise funds to repay the bailout capital it has received from the Dutch state. In Asia, it has already sold off its Taiwanese insurance, Australian wealth management and Asia-wide private banking businesses.

In a Financial Times interview on December 21, new global chief investment officer Jan Straatman outlined a plan to break up ING’s 300-strong investment team in Europe into 14 different boutiques. These units will be organised by the asset classes they invest in. Straatman is quoted as saying that the same structure will be applied in the Asia-Pacific region and the Americas, despite admitting that he has not consulted local staff on the decision.

The plan appears to contradict previous goals set when ING Group split the investment management and real estate investment business from the main balance sheet and combined them to improve synergies by centralising back-office functions and combining sales roles. The firm is facing increasing difficulties in retaining talent.

These variables are viewed as a risk to the management of China Merchants’ fledgling QDII fund and to its future investors.

That said, an overseas commodities fund will be a novelty to investors on the QDII scene. China Merchants has a positive house view on the long-term global demand for commodities. Having gained CSRC approval, the next step for ING and China Merchants is to secure a foreign exchange quota from the State Administration of Foreign Exchange.

China Merchants’ move will mark a potential point of differentiation in the sector. Its global resources theme will be a first. Of the 10 existing QDII mutual funds in the market, the main asset types have been global equities, Hong Kong H-shares, red chips and Chinese concept stocks in Asian equities.

Moreover, the launch will be backed by the distribution prowess of China Merchants, China’s third largest brokerage. China Merchants Bank and China Merchants Securities are among the most successful private wealth management providers in penetrating the growing Chinese middle class. The bank went public in an IPO in 2006, followed by the securities arm last November.

Shanghai-based consultancy Z-Ben Advisors believes the group’s IPO last year has distracted it from the business of fund management. Based on assets under management, China Merchants’ ranking slipped 11 places from 18th in 2008 to 29th last year, with Rmb35.6 billion ($5.2 billion) in AUM as of December 31. This can be partially explained by the string of portfolio managers it lost last year, including You Hai, Hao Jianguo and Huang Shunxiang.

According to data from investment consultant Morningstar, of China Merchants’ 11-strong investment team, eight have been with the firm for less than three years, and four of those have less than one year of service. CIO Zhang Bing has been with the firm for about four years.

The most experienced person at China Merchants Fund, Yang Yi, does not manage funds. He has been there since 2003, but his expertise is only available to institutional investors or high-net-worth clients who have signed up to China Merchants’ segregated accounts.

Z-Ben Advisors analyst Zhang Haochuan expects demand for the new fund to be weak. China Merchants has freshly finished a round of sales totalling Rmb2.6 billion for its small- to medium-cap fund, so customers’ appetite for further China Merchants products may be subdued.

In addition, notes Zhang, Chinese investors don’t need to go offshore for commodity investments. “Unless there are additional derivatives involved, investors will probably get higher exposure by investing in local commodities companies,” he says. “They don’t hedge [their books] as much.”

Source:AsianInvestor.net, 07.01.2010 by Liz Mak

Filed under: Banking, China, News, Risk Management, Services, Asset Management, China Merchants Bank, China 中国, CSRC China Securities Regulatory Commision, GF Securities, Guotai Junan, QDII, Risk Management, SAFE State Administration of Foreign Exchange

December 18, 2009 • 11:01 pm 0

Ten Trading Technology Trends and Tools for 2010

Despite the continued economic downturn, many buy- and sell-side firms still opened their wallets in the search for best-of-breed technology solutions. In order to decrease latency and increase speed, countless firms both big and small, bulge-bracket and boutique, have upgraded trading platforms, invested in latency management solutions, or set themselves up at co-location facilities.

But the race to have the best technology that will slice latency down to microseconds—and eventually, nanoseconds— is far from over. In interviews with Securities Industry News, industry experts pointed at technology solutions the buy and sells sides are expected to spend their dollars in the New Year.

Networking (both intra- and inter- data center). Growing market data message rates and shrinking latency have made networks a key focus of the sell side, said Kevin McPartland, senior analyst with the Tabb Group. “Upgrades of data center network equipment and purchases of long distance bandwidth will accelerate driven by current bandwidth requirements and future capacity planning,” explained McPartland. “And looking beyond bandwidth and transmission speed, reliability is tremendously important as downtime in today’s market is unacceptable.” The core goal: Reduce the number of hops or other factors that introduce network inefficiencies.

Multi-asset-class platforms. Mutating asset classes is the future – different ways to trade traditional asset classes, going electronic, and new types of listed derivatives and structured products will be the norm, said Lloyd Altman, a senior executive in Accenture’s Capital Markets Industry division. “The multi-asset class problem is really affecting the buy side more than anyone else,” he said. “[There are traditional institutional asset management and hedge funds that are employing multi-asset strategies in order to generate alpha… everyone on the buy side is multi-asset class at this point. The question is will they need to replace what they have with something that’s new, or will they continue to modify what they have—it depends on the nature of how they use technology and whether they view themselves as technologists.”

Commoditizing high-frequency trading. Turnkey high-speed algorithmic trading systems will be a trend in 2010 as more players enter the high frequency trading business, explained Paul Zubulake, senior analyst with Aite Group. “We’re seeing a lot of people leaving large broker dealers and starting up their own small businesses related to trading,” he said. “If you’re a new group and want to start out on your own it’s not that easy to just dive into that business, so what’s happening is there are a few firms out there selling their technology and setting you up to trade… it’s an interesting story for next year.”

Latency management. The quest to squeeze more latency and provide more throughput is still creating opportunities for network, data center, and niche technology providers, said Accenture’s Altman. “It feels at times like squeezing a toothpaste tube to find one more use, and it is asymptotic on the latency front as we approach zero,” added Accenture’s Altman. “Whoever can advertise that they can get their first with the trade wins, and they can charge for that as a service. At some point it will not matter anyone, but we’re not there yet.”

Co-location. “Putting trading systems under the same roof as matching engines “is at the top of our priority list,” said Frederick Scuteri, senior vice president of prime brokerage services at institutional brokerage Cuttone & Co. “We’re seeing a lot of interest in many buy-side firms, especially the black box/high frequency trading shops looking for sponsored access to the different exchanges and alternative trading systems (ATSs). That game itself is a low-latency game, and co-location is a very big component of the success of that business. That’s something we’re full throttle on both with the NYSE and some other vendors and exchanges as well.”

Risk management for sponsored access. This ties in with the whole co-location story, said Feargal O’Sullivan, managing director of high performance messaging with NYSE Technologies, the commercial technology arm of NYSE Euronext. “Risk management for sponsored access is the idea of being able to allow buy side firms to use a broker ID and get access to markets directly without having to go through the broker systems but with the risk management that’s required before you allow them to do that,” explained O’Sullivan, noting that NYSE Technologies offers a risk management gateway. “It’s an additional step of latency that’s required to ensure that traders are not taking unjustified risks and bring the market down.” Added Aite’s Zubulake: “Pre-trade risk management in all asset classes will become a pre-requisite, or regulatory mandate, for trading.”

Central clearing. Over-the-counter, or OTC, products are going to central clearing, which will increase the demand for proper data management, said Zubulake. This is a trend that is already happening, with the Chicago Mercantile Exchange having begun clearing credit default swaps through CME Clearing on Dec. 15. “You’re taking a business that was purely a voice business… and now instead of having a one-to-one trade you’re going to have the trade done on that basis but it will be cleared through the central clearer. There will be multiple counterparties.”

Data loss prevention (DLP) technology. DLP, which is made up of systems that identify, monitor and secure data whether it’s in use, is on the upswing, according to Jim Routh, KPMG’s chief information security officer. Several major vendors including Symantec and McAfee have emerged as leaders in this relatively new market and are currently selling these offering as integrated suites rather than individual products.

Data profiling. Data profiling, which examines data in an existing database, collects statistics and information about that data and determines if it can be used for other purposes, provides a deeper, broader and speedier insight to data analysis than the more traditional approaches. Garry Katz, a senior vice president and information architect at SmithBarney/Citigroup, says this technique is getting increasing play, becoming an “essential tool’’ in trading.

Virtualized solutions. JP Morgan Chase & Co. is currently deploying technologies, which create “virtual desktops” within its network – and even virtual networks within its overall network capacity. The selling points here include reduced support costs, improved security, greater agility and more streamlined application deployment. As a result of its virtualized network, JP Morgan’s data centers will evolve “from application-based silos to unified fabrics that allow for greater agility and utilization while improving the bottom line,” said Cory Shull, VP of investment architecture at JP Morgan, in a statement.

Source: Securities Industries, 17.12.2009

Filed under: Corporate Action, Data Management, Market Data, News, Risk Management, Services, Trading Technology, Asset Management, Clearing and Settlement, Co-Location, Data Management, HFT High Frequency Trader, Low Latency, Pronósticos, Risk Management, Trading Network, Trading System

December 11, 2009 • 1:53 am 2

ETF Securities: Commodity ETC Assets Triple Over Past 12 Months To $17bn As Demand For Gold, Energy, Agriculture And Other Hard Assets Surge

Record breaking year for commodity ETCs, with assets up over $11bn to $17bn
ETCs tracking agriculture and industrial metals show highest buy/sell ratio
Physically-backed precious metal holdings – gold, silver, platinum, palladium – reach historic highs
ETFS Copper (COPA) up 118% in 2009 to end-November, the best performing ETC, followed by ETFS Physical Palladium (PHPD) up 96% and ETFS Zinc (ZINC) up 81%
ETFS Industrial Metals (AIGI) best performing commodity basket in 2009, up 67% YTD
ETFS Forward All Commodities DJ-UBSCI-F3SM (FAIG) up 268% over the past 10 years, the top performing major asset class over the period

Commodities bounced back strongly this year following the recent credit crisis, with ETFS Forward All Commodities DJ-UBSCI-F3SM (FAIG) up 20% year-to-date and 268% over the past 10 years based on data to the end of November. ETFS Industrial Metals (AIGI) was the best performing ETC, with YTD growth of 67%. Industrial metals significantly outperformed developed market equities, outperforming the Dow Jones Euro STOXX 50 by 37 percentage points since the start of 2009. Industrial metals have also outperformed bonds, cash and real estate over the same period as the global recovery has become more entrenched and market appetite for plays on the recovery has accelerated. The precious metals sub-sector was the next best performing major sector, with ETFS Physical Silver (PHAG), ETFS Physical Platinum (PHPT) and ETFS Physical Palladium (PHPD) all returning over 60% YTD.

Commodities remain the best performing major asset class over a 10 year horizon, with ETFS Forward All Commodities DJ-UBSCI-F3SM (FAIG) registering cumulative growth of 268%, compared to a 10% rise in the Dow Jones Euro STOXX 50, a 13% rise in the FTSE 100, a 6% rise in property1 and 75% return on bonds2. This outperformance was achieved with lower average annual volatility than equities over the same period (see table below).

Asset Class Returns Compared (YTD, and Past 10 years)

	YTD	10 Years	Volatility³
ETFS Industrial Metals	67%	178%	23%
ETFS Forward All Commodities DJ-UBSCI-F3^SM	20%	268%	15%
FTSE 100	37%	13%	23%
Dow Jones Euro STOXX 50	30%	10%	24%
US Tracker 1-10 Yrs Bond Index	0%	75%	4%
UK EPRA Real Estate Index	21%	6%	25%

Source: Bloomberg
1 Property: proxied by the UK EPRA Real Estate Index
2 Bonds: Proxied by US Tracker 1-10Yrs Bond Index
3 Calculated using the annual volatility of daily returns from 30th November 1999 to 30th November 2009

2009 has been a record breaking year for commodity inflows, with assets under management (AUM) in ETF Securities’ ETCs and ETFs rising over $11 billion to $17 billion over the past 12 months. Physical gold and long natural gas ETCs have seen the largest investment demand YTD, with inflows of $2 billion and $1 billion respectively since the start of 2009.

In terms of investor positioning, agriculture ETCs such as ETFS Agriculture DJ-UBSCISM (AIGA) had the highest buy/sell ratio of any sector in the 11 months ended November with a ratio of 3.2. This is consistent with steady inflows into agriculture ETCs in 42 of the 48 weeks to end-November. Industrial metals had the next strongest buy:sell ratio at 2.7, coinciding with the sharp rise in industrial metal prices in 2009. Although energy ETCs have seen the second largest inflows in 2009 YTD, their buy/sell ratio was one of the lowest at 1.8 as extremely strong oil inflows in the first four months of the year and the surge of inflows into natural gas ETCs since May were partially offset by outflows in May and June from ETCs tracking shorter-dated oil futures returns.

Source: ETF Securities

Industrial metals were the strongest performing sector in 2009, up 67% to the end of November. Gains were led by a 118% rise in ETFS Copper (COPA) and an 81% rise in ETFS Zinc (ZINC). ETFS Aluminium (ALUM) remained the weakest of the industrial metals, but still managed a 24% return in the 11 months ended November. Flows into industrial metals accelerated in 2009, taking industrial metal assets to almost twice their previous peak level seen in H1 2008. Robust Chinese demand, coupled with stronger manufacturing activity in developed economies, has underpinned investor interest in industrial metals.

Top 10 Long and Short ETC Performance

Top 10 Longs	YTD (End November 09)
ETFS Lead* (LEED)	125.8%
ETFS Copper (COPA)	118.3%
ETFS Physical Palladium (PHPD)	95.9%
ETFS Zinc (ZINC)	80.8%
ETFS Gasoline (UGAS) ETFS Physical Silver (PHAG) ETFS Industrial Metals DJ-UBSCI^SM (AIGI) ETFS Silver (SLVR) ETFS Physical Platinum (PHPT) ETFS Sugar (SUGA)	74.4% 68.1% 67.3% 62.4% 60.6% 56.5%
Top 10 Shorts	YTD (End November 09)
ETFS Short Natural Gas (SNGA)	69.1%
ETFS Short Lean Hogs (SLHO)	16.1%
ETFS Short Livestock DJ-UBSCI^SM (SLST)	14.5%
ETFS Short Live Cattle (SLCT)	9.3%
ETFS Short Wheat (SWEA) ETFS Short Corn (SCOR) ETFS Short Energy DJ-UBSCI^SM (SNRG)ETFS Short Grains DJ-UBSCI^SM(SGRA) ETFS Short Agriculture DJ-UBSCI^SM (SAGR)ETFS Short All Commodities DJ-UBSCI^SM (SALL)	8.6% -2.7% -6.9% -9.7% -16.3% -19.3%

Source: ETF Securities

* ETFS Lead saw 126% growth based on simulated returns based on the underlying DJ-UBS Lead Sub-IndexSM. This product was listed in November 2009.

Within precious metals, the best performing commodities were metals tied to the industrial cycle, with ETFS Physical Palladium (PHPD) up 96%, ETFS Physical Silver (PHAG) up 68% and ETFS Physical Platinum (PHPT) up 61%. Gold prices reached fresh historic highs in 2009, breaching the $1200/oz mark by the start of December. Interest in physical gold holdings was extremely strong, up 1.9 million ounces (31 %) in the 11 months to the end of November. This marks the second year of rapid growth in physical gold holdings, which have more than doubled (up 4.2 million ounces, or $5 billion at current gold prices) since the start of 2008. Total assets in ETF Securities’ physically-backed gold ETCs stood at $9.5 billion by the end of November 2009, making them the largest ETF/ETC holdings in Europe and the second largest ETC/ETF holding in the world. Other physical precious metal ETC holdings also posted new historic highs in 2009, with physically-backed silver, platinum and palladium ETCs seeing their metal holdings (in ounces) reach the highest levels since inception by the end of November.

The energy sector saw mixed performance over 2009, with a 74% rise in ETFS Gasoline (UGAS) and a 44% gain in ETFS Brent 1mth (OILB) offset by a 57% drop in ETFS Natural Gas (NGAS). In H1 2009 sharp falls in oil prices attracted almost $1 billion of inflows into long oil ETCs between January and May. There was some profit taking on these positions subsequently, coinciding with $1.4 billion in inflows into long natural gas ETCs. These flows suggest some rotation in investor positioning within the sector as natural gas prices have underperformed their oil counterparts.

Agriculture saw a sharp divergence in returns with ETFS Softs (AIGS) up 34% in the 11 months to the end of November, compared to a 1% gain in ETFS Grains (AIGG). ETFS Softs were boosted by a 57% rise in ETFS Sugar (SUGA) and a 29% rise in ETFS Cotton (COTN). ETFS Soybeans (SOYB) was up 25% while ETFS Wheat (WEAT) was down 20% and ETFS Corn (CORN) was down 9%. Agriculture saw the most consistent and third largest inflows (behind energy and precious metals in 2009 totalling over $1 billion YTD. Historically low levels of inventories, together with a number of weather-related crop disruptions this season, have helped underpin investment demand in agriculture in 2009.

Nicholas Brooks, Head of Research and Investment Strategy, commenting on the 2009 performance numbers said: “Demand for commodity ETCs has been incredibly strong in 2009. ETF Securities assets under management nearly tripled to $17bn over the past 12 months on the back of strong and steady demand for gold and other physically-backed precious metal ETCs as well as energy, agriculture and industrial metal ETCs. Assets under management are now over 70% higher than they were in July 2008 before the financial crisis broke out. Most of the demand has been for long exposure, with investors’ building their holdings of “hard assets” both for their potential price-supportive long-term supply-demand fundamentals, as well as their potential to hedge against inflation and currency debasement risks as government finances deteriorate and central banks keep the liquidity taps open.

Source: MondoVisione, 09.12.2009

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