State Street Strengthens Derivative Servicing Capabilities

Industry Veterans Kevin Sullivan and Neil Wright Join State Street To Focus on Further Developing Derivative Processing Solutions

State Street Corporation (NYSE: STT), the world’s leading provider of financial services to institutional investors, today announced the appointments of Kevin Sullivan and Neil Wright to senior vice presidents with responsibility for overseeing the ongoing development of State Street’s derivative processing capabilities.

Sullivan co-founded Eagle Investments Systems in 1989. The company was acquired by Mellon Financial in 2001, and Sullivan remained to serve as Eagle’s chief technology officer up until 2006. As a product specialist at State Street, Sullivan will be responsible for building the technology infrastructure to support the company’s derivative processing.

Wright joined State Street from Citigroup where he was a director of derivative operations.
Prior to this role, he was senior vice president of asset manager solutions for JPMorgan Chase. As a product expert, he will be responsible for developing strategies to support State Street’s derivative servicing capabilities working closely with the business leaders, derivative specialists and information technology teams.

“These two industry veterans have devoted a considerable portion of their respective careers to developing the most sophisticated derivative processing capabilities,” said Joseph Antonellis, vice chairman, chief information officer and head of State Street’s North American investor services business. “Staying ahead of industry trends and automating the derivative servicing process will be key challenges for service providers. We are delighted to add the extensive experience that Kevin and Neil will bring to our teams and to the development of a derivatives center of excellence.”

Sullivan and Wright will further build on State Street’s derivative servicing capabilities for its customers who are increasingly using derivative instruments as investment tools in their portfolios.

State Street Corporation (NYSE: STT) is the world's leading provider of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $12.3 trillion in assets under custody and $1.8 trillion in assets under management at March 31, 2007, State Street operates in 26 countries and more than 100 geographic markets worldwide. For more information, visit State Street’s web site at www.statestreet.com.

Publish Date: April 19, 2007
Source: Business Wire

Credit Derivatives - At the risky end of finance

The use of credit derivatives has boomed and bemused. These new financial instruments have yet to face their biggest test.

Read the complete article at - http://economist.com/business/displaystory.cfm?story_id=9033348

Publish Date:19-April-2007
Source:The Economist

Isda trumpets progress in credit derivatives while regulators sound alarm

Strong progress has been made in speeding up post-trade processing and cutting the backlog of outstanding confirmations in the fast growing credit and equity derivatives markets, says the International Swaps and Derivatives Association (ISDA).

Post-trade processing of privately negotiated derivatives transactions continues to significantly improve, says Isda, with dealers reducing levels of outstanding confirmations across the asset classes.

Isda's benchmark survey shows the time it takes to process credit derivative trades has fallen to 5.5 days, compared with 16.2 days in 2006, and there has been a reduction to 14 from 50 days for rates products.

Equity levels have fallen to 21 days from around 50, while commodities stand at 7.5 days compared to 23.3 days a year ago.

Among the large firms, over 70% of credit derivatives confirmations are sent out by T+1, up from 50% a year ago.

Commenting on the figures, Robert Pickel, executive director and chief executive officer, Isda, says: "Against a backdrop of robust growth in our business, the industry continues to make real progress in strengthening its operational infrastructure and reducing risk."

But speaking at Isda's annual meeting Jean-Claude Trichet, president of the European Central Bank, called for further market action to improve transparency in global credit derivatives sector and warned that financial markets may have become "excessively complacent".

Reflecting the concerns of regulators worldwide, Trichet warned that credit derivative instruments had not yet been properly "stress-tested", observing that some aggressive investors seemed to display a cavalier risk-­taking attitude even while their balance sheets were not necessarily resilient enough to handle shocks.

Publish Date:19-April-2007
Source:http://finextra.com/fullstory.asp?id=16822

Spending on OTC derivatives IT to hit $1.3bn in 2011 - TowerGroup

Spending on OTC derivatives trading technology by institutional brokers will rise from $915 million in 2007 to $1.3 billion in 2011, a compound annual growth rate of 9.5%, according to the latest TowerGroup forecasts.

But the analyst group says although rapid growth in OTC derivatives is driving technology spending there is currently no "single system" for broker dealers that provides the structure and processing capabilities required.

With the rise in e-trading and automation, TowerGroup says certain "vanilla" OTC derivative products can be handled effectively as they are, but processing of hybrid derivatives is continuing to challenge broker dealers.

In order to improve processing, TowerGroup recommends that firms remove legacy systems that don't support new volumes and products and combine derivatives trading systems with a service-oriented architecture (SOA) to aid in the integration of disparate trading applications. Dealers should also look to harness extra computing power for complex risk measurement through the use of Grid computing.

Firms should also develop a vendor management system, says TowerGroup, and determine which suppliers have developed modules that represent emerging industry standards.

Stephen Bruel, analyst in the securities and capital parkets practice at TowerGroup, says: "Due to the fast moving nature of the OTC derivatives environment, the industry is seeing increased spending on technology as well as increased pressure on technology firms to keep up with derivatives innovation. The successful management of these challenges will enable broker dealers to reap the rewards associated with this high growth, high margin derivatives business."

Last month the Bank for International Settlements called on financial firms to introduce automated systems to cut confirmation backlogs in the over-the-counter derivatives markets.

Publish Date:04-09-2007

Source:http://www.finextra.com/fullstory.asp?id=16765

Algo Takes Credit

A new report predicts algorithmic trading will move into the credit and commodity markets within the next decade, but there is work to be done to ensure success.

The mushrooming market for algorithmic trading will expand into the markets for credit default swaps (CDSes), corporate securities and commodities, according to a new report from Datamonitor, a London-based analyst firm. The report, "Trading System Transformations in Global Markets," predicts that the next generation of algorithmic trading models will penetrate the credit and commodity markets by 2015.

Nii Barnor, an analyst at Datamonitor, says Bank of America, Citi, Goldman Sachs, Lehman Brothers and Morgan Stanley are leading the charge in the evolution of algorithmic trading to meet the demands of traders seeking ever-faster connectivity to new markets. "As the market becomes more standardized, it is expected that algorithms will move into the realm of CDSes and corporate securities. In addition, as commodity exchanges become more electronic, fluctuations in prices will push the demand for mathematical solutions to quickly capitalize on opportunities," the report states.

Datamonitor estimates that global spending on algorithmic trading on derivatives, foreign exchange and commodities will more than double from $31 million in 2006 to $79 million in 2009. However, that figure is still dwarfed by current global spending on algorithmic trading for equities trading, which reached $176 million in 2006.

Read the complete article at http://www.watersonline.com/public/showPage.html?page=435896

Source:http://www.watersonline.com
Publish Date:01-March-2007