Wall Street Letter VOL. XLV, NO. 30 - Sept. 23, 2013 | Page 9

26 SEPTEMBER – 2 OCTOBER 2013

TRADING FIRMS

Buy-side execs: Caution, buy-in key to successful biz expansion

W

hile buy-side firms are steadily pushing into new markets
and asset classes, executives caution that successful
expansion still requires buy-in from clients and a cautious approach, according to comments from executives participating in
a panel discussion at AdventConnect 2013 held in San Francisco
last week.
Jonathan Blome, chief financial officer at CBRE Clarion
Securities, explained the firm tends to open up new areas for
business when clients request it or add certain functionality if
new business would stretch the firm’s existing system.
As an example, he noted an existing client wanted to start
entering total return equity swaps contracts and as part of the
effort needed to more effectively manage its equity portfolio
dividend stream.
“That was something where we had to take that back and
form a working group on it. It had to be a cross-discipline
working group because we needed to understand what this does
to the complexity of how we would process a trade, execute it,
settle it and report it into [Advent Portfolio Exchange],” he said,
noting the process must be applied globally and in a regimented
way in order to be effective
Separately, other panelists cited buy-in as a key factor to deciding whether to add functionality, even as it relates to buy-in
outside the company. Both Chris Bowen, head of operations and
chief compliance officer at New Amsterdam Partners and Eva

ity, automated bond trading is more
popular than before, he said, and
asset managers are starting to get in
on the advancements, too.
“This is far from the [high-frequency trading] world of equities or FX,
but is all about efficiency of execution
as the market has evolved,” he added.
REGULATION

SEC cracks down
on short selling
violations
The SEC announced last week it has
taken action against 23 firms for short
selling violations, according to WSL
sister publication HFMWeek.
The firms charged in the cases
allegedly failed to comply with Rule

Petramale, director of trading at Miller/Howard Investments,
noted traders in their shops want to use FIX connectivity for allocations but not enough of the brokers or custodians their firms
work with use the messaging standard.

Bowen added traders are much more reliant on their more
automated connectivity options than they have been in the past.
“Connectivity is almost everything when it comes to trading.
When we lose connectivity, traders say, ‘Now what do we do?
How do I trade?” he quipped.

105 by participating in public stock
offerings after selling short those
same stocks.
The issue is one the agency is placing under increasing scrutiny – the
SEC’s National Examination Program
simultaneously issued a risk alert to
highlight risks to firms that don’t
comply with Rule 105.
The actions are being settled by
22 of 23 firms charged, resulting
in more than $14.4m in monetary
sanctions. Among them was D.E.
Shaw, which agreed to pay a penalty
of around $201k, as well as around
$448k disgorgement and prejudgement interest of around $18k. Fellow
hedge fund firms Deerfield and
Manikay paid the largest penalties,
while Hudson Bay and Peak6 were
also on the list of 23.
“The benchmark of an effective

enforcement program is zero tolerance for any securities law violations,
including violations that do not
require manipulative intent,” said
Andrew Ceresney, co-director of the
SEC’s Division of Enforcement.
“Through this new program of
streamlined investigations and
resolutions of Rule 105 violations,
we are sending the clear message that
firms must pay the price for violations while also conserving agency
resources.”
The move accompanies increased
concern about regulatory action on
short selling – managers have spoken
out against emergency short selling
bans that are accompanied by no
notice period and the need for disclosures of convertible long positions
to prevent misinformation in the
market.

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