Sifma Technology Conference Preview
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Risk, Liquidity, E-trading Headline Sifma Tech Show
June 9, 2008
As many as 8,000 people are expected to pack into the New York Hilton this week for the U.S. securities industry's largest annual technology conference. For most of them, two topics that have been garnering recent headlines are probably top of mind--risk and liquidity--and that is certainly reflected in the conference program and speaker lineup.
Those attending the Securities Industry & Financial Markets Association's (Sifma) 28th Technology Management Conference and Exhibit--the second since the merger of its predecessor organizations, the Securities Industry Association and Bond Market Association--will be able to listen to a slate of speakers that includes Seth Merrin, founder of Liquidnet, Larry Leibowitz, EVP of U.S. markets and global technology at NYSE Euronext, and IBM Software Group SVP and group executive Steve Mills.
The traditional exchanges continue to lose liquidity--Bloomberg recently reported that trading on the New York Stock Exchange has reached its lowest point since 2001. "The NYSE is losing liquidity not to overseas exchanges, but to hidden and alternative pools," says Merrin, who will speak at the conference's opening session. But the alternative trading systems (ATSs) and electronic communication networks don't have the whole answer, notes Merrin, adding that "most dark pools fail because they can't reach a crucial mass of liquidity."
The traditional exchanges supply the ATSs with price discovery, but the platforms don't have "quantity discovery," which is what financial institutions need, says Merrin. Retail investors, he adds, have always gotten a better price because they can buy without moving the market and affecting a stock's price. With quantity discovery, he asserts, institutional investors can get the same price.
Most alternative venues execute 600-share orders, according to Merrin, while Liquidnet has an average execution size of 56,000. "Now you have price discovery next to quantity discovery so it supports both retail and institutional investors." Merrin will no doubt have more to say on the issue on Tuesday afternoon.
Risk management is expected to be an equally popular subject at the show, thanks in large part to the credit market debacle. Phil Venables, managing director and chief information risk officer of Goldman Sachs and head of Sifma's risk committee, will on Wednesday morning lead a breakout session on information technology risk convergence. Daniel Geer, principal at consultancy Geer Risk Services, will also participate in the four-person panel discussion.
On Wednesday afternoon, Julio Gomez, CEO of consulting firm Gomez Markets, will conduct a workshop on enterprise risk management, covering the three pillars of risk--credit, market and operational. Gomez, who until March was VP and global head of research at Financial Insights, will discuss the state of risk management capabilities at securities firms, the impact of regulations on the development of risk management systems, and his vision for combining disparate systems.
"In many ways enterprise risk management is a holy grail," says Gomez. "No one yet has achieved a true comprehensive enterprise view of risk. But there have been enough advances in SOA [service-oriented architecture] technologies and data integration as well as analytics to make significant progress toward that vision."
The topic of another Wednesday afternoon panel is capacity planning, an area that has come to the fore after the volume spikes last summer. Industry stalwarts Tom Jordan, president and CEO of consultancy Jordan & Jordan, Jacob Granek, managing director at Depository Trust & Clearing Corp., and Michael Boston, principal at Banc of America Securities, will talk about raising system capacity for peak trading days.
