Wall Street Letter VOL. XLV, NO. 36 - December 2013 - Page 14

NEWS 14 Gaining Momentum in Capital Markets?”, is the result of a survey of firms on the buyside and sellside intending to gain insight into the perception of the technology from potential target users. The technology has been around for a number of years but adoption took hold within other commercial industries a lot more quickly than in financial services, according to Louis Lovas, director of solutions at OneMarketData, who spoke to WSL. While many respondents (72.7%) indicated they are not currently using the technology in support of trading activity, more respondents (77.72%) said they expect to increase their use and the overwhelming reason is to cut costs. But Lovas said the cost savings available via cloud are limited for uses like data storage, which is what 78.3% of survey respondents said they consider the most appropriate use of the technology. “I did a bit of analysis comparing sort of an average cost model of data centers to public cloud and it’s not all it’s cracked up to be,” he said. For public cloud services to store 24 terabytes per year, the cost increases exponentially once a user hits the third year, according to the report. Data center costs increase, but at a steadier and less steep incline. For lower volume needs, public cloud can still be cost effective, the report indicates. Future adoption is expected to be a mix of private and public offerings across the board, the report indicates, with just 19.6% of respondents saying they are considering only private cloud options and 26.1% indicating they want to use public cloud services. FIA EXPO 2013 Futures participants caution on order-totrade ratios Some futures industry participants cautioned exchanges implementing EXCHANGES & ATSs CBOE to lay out funds for system enhancements C BOE Holdings plans to allocate more money in the coming year for enhancements to it systems following a glitch in April that delayed its opening, according to comments from executives on its Q3 earnings call. “For 2014, the preliminary indications are that we will increase our capital expenditures next year as compared to this year, as we look for ways to further harden our systems,” according to comments from Alan Dean, chief financial officer, during the call. Dean said he couldn’t provide details on how much money the exchange operator will allocate but said the company is focused on improving performance and reliability. Ed Provost, president and chief operating officer, told analysts that, in addition to participating in market wide discussion about reducing technology issues in the national market systems, it has focused on its internal processes. “We have this year, following our issues back in April, been focused on reviewing procedures for software development testing and hardware configuration and procedures for rolling over to our disaster reco very [site] if necessary,” he explained. Dean also responded to questions about increasing the exchange operator’s revenue per contract, which he noted declined due in part to market share increases. While acknowledging there may be ways to increase RPC, he emphasized the exchange will only go so far. “We will look for opportunities, but won’t do anything we think will alienate our customers or endanger our business.” order-to-trade ratios to set the guidelines carefully to limit the possibility of adding risk to the system, according to comments during a panel at the Futures Industry Association’s 29th Annual Futures & Options Expo in Chicago. The policies have been under consideration across asset classes in a move to limit the number of unnecessary trading messages exchanged across a trading day due to what are considered excessive cancellations. Chris Zuehlke, director of OMS risk management at DRW Holdings, told attendees exchanges should steer clear of penalties simply for cancelling a trade, especially orders that are already resting in the order book. He noted complying with those types of guidelines could result in increased risk to market makers, as an example. Additionally, he said exchanges should ensure the policies don’t penalize firms for cancelling trades that are marketable if the market moves out of favor. “That shouldn’t work against them if it doesn’t trade because the markets moves against them. On the opposite side, it should deter bad liquidity,” he said, using an example of an order that is priced hundreds of ticks off of the current market. “I think that’s a good way to balance making sure liquidity stays while avoiding unnecessary messaging.” Bryan Durkin, chief operating officer at the CME Group, told attendees the exchange operator’s orderto-trade ratio policy “aggressive” and “proactive” and noted the change has had the intended results. “We have reduced messaging overall in the system and have a consequent increase in volumes of transactions as a result of it,” he said. Durkin noted the ratios are recalibrated quarterly but that the group monitoring the ratios may make changes more frequently based on market dynamics.