NYSE Requests a Four-Week Extension of the Reg NMS Deadline
Although it has been beaten to death by industry analysts and press, the importance of the changes to the U.S. securities industry spurred by Reg NMS cannot be overstated. The industry anxiously awaits full implementation of the regulation in 2007.Why It's Important: Reg NMS is finally here -- maybe. Feb. 5 is the final date for full operation of Reg NMS-compliant trading systems, and by October all stocks will be phased into compliance. But the NYSE has requested a four-week extension of the Reg NMS deadline. At press time, the SEC had not responded to the request, though many believe the SEC is likely to grant the extension. Transitioning into a post-NMS world requires firms to conduct an extensive technological overhaul. Compliance with the trade-through rule is the greatest challenge.
The fallout on market structure will be substantial, with market analysts predicting fragmentation that will level the playing field for crossing networks, regional exchanges, dark pools of liquidity and internal markets. Order flow will be dispersed and competition among trading venues will be fierce.
Where the Industry Is Now: Most firms have been working for quite some time on building their order-routing capabilities and bolstering their infrastructure from the bottom up, as it has been two years since the SEC first proposed the market structure changes. The deadline extension for the trade-through rule has given the industry enough time to complete the development of NMS-compliant routing functionality and the supporting infrastructure.
The stock exchanges all expect to roll out to meet the February deadline, with some having already piloted or launched their new trading systems. Most systems will be fully automated, eliminating floor trading for equities in all exchanges but the NYSE and American Stock Exchange, which will run hybrid models -- for now.
Focus in 2007: The coming year will establish the impact that the expected increase in transaction volume and subsequent reporting requirements will have on the industry infrastructure. Estimates vary widely on the capacity increase that will be required to handle the surge in volume, but analysts agree that although messaging and transaction rates have skyrocketed in recent years, the worst is yet to come. TABB Group estimates that storage capacity requirements for the next several years will experience at least mid to high double-digit growth annually.
Industry Leaders: None of the bulge-bracket broker-dealers have taken a noticeable lead in Reg NMS implementation, nor have any fallen behind. Given the broad swath of changes resulting from the regulation, the industry has been collaborating through industry conferences, events and focus groups to share knowledge.
However, when Reg NMS is fully implemented and market participants develop a clearer picture of the true capacity requirements, large firms will be able to leverage their size and scale to bolster themselves in short order by pouring on the resources. Small and midsize firms may struggle to keep up.
Technology Providers: In a word: everybody. It has been a race to see who can insert the most references to Reg NMS in their press releases, marketing materials and sales pitches. Most vendors are positioning themselves as Reg NMS solution providers because the regulation will impact so many different types of technology. Execution management systems, order routers, market data feed distributors, data aggregators, data centers and networking all are among the many technologies that will be impacted by NMS.
The Price Tag: Industrywide spending on Reg NMS-related technology is expected to reach $125.1 million in 2007, according to estimates from Aite Group. Industry analysts likely will update their projections in the first quarter of the year.
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10 Critical Business Technology Issues for The Street
In 2007, firms will face the daunting full rollout of Reg NMS in the U.S. and the likely beginning of MiFID implementation in Europe while they continue to struggle with data privacy, OTC derivatives, a shortage of talent and the potential of Web 2.0, among other challenges.  more... |
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Data Privacy: Financial Institutions Try to Keep Data Breaches Down in 2007
Several big-name data breaches made 2006 an ugly year for the securities industry, and security and privacy professionals are hoping to bring the problem to a halt this year.
In the Search of Liquidity: The Time Is Now
Now that Reg NMS is finally here, are firms ready to access 30 or more trading venues in their search for liquidity? After a year of investment in technology, firms need to demonstrate that their systems are up to the challenge.
The Buy Side Jumps on Board the Push to Automate OTC Derivatives
Now that traditional buy-side firms and hedge funds are increasingly investing in credit derivatives, the fastest-growing product in the OTC derivatives space, the industry is focusing on automating post-trade processes to reduce operational risk.
Firms Ready to Dive Into China's Financial Markets
The opening of the huge Chinese financial services sector to foreign-based institutions presents a gamut of opportunities -- whether in retail and corporate banking, investment banking or asset management -- for North American and European firms.
The Right Stuff: A Good IT Manager Is Hard to Find
It's going to be a good year to find a new job, as the shrinking talent pool has created a strong job market for IT workers with strong business acumen.
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NYSE Requests a Four-Week Extension of the Reg NMS Deadline
Although it has been beaten to death by industry analysts and press, the importance of the changes to the U.S. securities industry spurred by Reg NMS cannot be overstated. The industry anxiously awaits full implementation of the regulation in 2007.
A Market Turned Upside Down
The European Union's Markets in Financial Instruments Directive (MiFID) is scheduled to go into effect in November 2007. Even U.S.-based firms will need to have a thorough strategic plan for compliance in order to stay competitive in the global markets.
Wealth Managers Turn to Unified Managed Accounts to Better Serve Wealthy Clients
Unified managed accounts and unified managed households are part of a growing trend to electronically aggregate a client's holdings in as close to real time as possible. The goal of such cross-product, cross-institution and cross-individual accounts is superior portfolio management, including tax optimization and risk mitigation.
Web 2.0 Enriches Applications and Services, Making Them More Compelling to Users
One of the hottest buzzwords of late, Web 2.0 refers to Rich Internet Applications (RIAs) that use the Internet as a platform to create interactive user interfaces that resemble PC-based applications. Typically, RIAs emphasize online collaboration among users.
Surging Electronic Trading Volumes and Reg NMS Require Financial Firms to Enhance Underlying Technology Infrastructures
Electronic trading is exploding and firms are rapidly expanding technology infrastructure to handle the increases in trade volumes and associated market data and messaging.
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SPECIAL REPORT
SMS Messaging and Asynchronous Data/Voice Capabilities Will Shape 2007 Wireless Market
SMS and text messaging will take center stage for financial organizations that support wireless access for clients, reports Joseph Ferra, chief wireless officer at Boston-based Fidelity Investments. Those trends, combined with the introduction of asynchronous data and voice capabilities on phones, will drive increased wireless usage for financial transactions.
Putnam's 64-bit Architecture and Outsourcing Strategy Allows IT to Focus on Core Competencies
Boston-based Putnam Investments has leverage outsourcing of certain processes so business leaders and technology professionals can focus on projects that provide specific value to the business, according to Philippe Bibi, Putnam's CTO.
Web 2.0 and Data Privacy Will Define Financial Services in 2007, Says Steve Rapp, SVP & CIO, Nicholas Applegate.
The move to further protect client data and the maturation of Web 2.0 related businesses are two topics that will define financial services in 2007, according to Steve Rapp, senior vice president and CTO at San Diego-based Nicholas Applegate Capital Management.
Mellon Focused on Bank of New York Merger and new Private Wealth Management Platform
Mellon Private Wealth Management looking to take advantage of the Bank of New York's international reach all while launching a new platform that will transform the way wealth managers interact with ultra-high net worth clients' other advisors, according to Tim Tully, SVP & COO, Mellon Private Wealth Management.
Cross-Asset Algorithmic Trading Goes Mainstream, While Software As a Service Gains Traction
More buy-side firms will adopt cross-asset class algorithmic trading in 2007, while software as a service will again be en vogue, as the comfort level with the technology and Web 2.0 functionality help adoption rates, says David Dart, a former managing director and CIO Americas with a large German bank (as of Dec. 31, 2006).
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