February 23, 2006

Tokyo Stock Exchange to Spend $27 Million on Improvements

As part of its efforts to rebound from recent technical difficulties, Tokyo Stock Exchange announced that it will invest approximately $27 million to improve its trading systems. The improvements are intended to increase volume capacity and are scheduled to be completed by May. TSE's trading system will be improved to handle 12 million orders per day, up from the current limit of nine million per day. The clearing system will also be upgraded to process seven million executions per day, up from five million.

Last month, TSE appointed Yoshinori Suzuki to the newly created CIO position and charged him with the repair of TSE's failing systems.

Most recently, trading was halted 20 minutes early in mid-January when trading volume surged over capacity in response to news that Internet company Livedoor had its offices raided by Japanese prosecutors.

December saw the Exchange fail to cancel a botched trade from Mizuho Securities, a mistake that may cost the brokerage upwards of $225 million, leading to the resignation of three of the TSE's board of directors, including President and CEO Takuo Tsurushima.

The first major malfunction in TSE's trading system was a glitch caused by a software upgrade that paused trading for over four hours on November 1.

Credit Derivatives Processing Improving, Says Fed

The financial services industry has made progress in improving the credit derivatives infrastructure, said the Federal Reserve Bank of New York last week. After meeting with representatives from major market participants, the Fed issued a statement noting the progress made addressing the issues associated with processing credit derivatives.

Fourteen major dealers met with the Fed in September 2005 and in a letter agreed to improve industry practices and confirmation backlogs. The Fed notes that the group members have fulfilled their commitments.

Specifically, the group participants have implemented the new ISDA protocol for the novation of trades, increased the use of electronic processing of confirmations, reduced the backlog of unconfirmed trades, and has worked toward improving the credit default settlement process.

All 14 of the major dealers in the group have met the commitment to reduce the number of confirmations outstanding by more than 30 days by 30 percent. As a group, the reduction was 54 percent. Further, nearly all active clients have been added to an electronic confirmation platform, increasing the total electronically confirmed trade volume from 46 percent in September to 62 percent in the month of January.

The Fed expects the group to submit a plan by the end of the month that will improve confirmation processing times for credit derivatives over the coming months and outline a set of conditions that would define acceptable market practices for post-trade processing of OTC derivatives.

Capco Hires Two for European Services

Capco announced two senior appointments in its managed services business. In response to increasing demand on behalf of European financial institutions for managed services, Antwerp-based Eric Bohner has been named head of managed services sales for Europe. In addition, reference data industry veteran Neil Innes joins as a product manager within Capco Reference Data Services, based in London.

In his new role, Bohner, a founding partner of Capco, is responsible for European sales within the Managed Services Division. Prior to his current role, Bohner managed key relationships with strategic clients in the Benelux region and served select clients there in the firm's operations transformation offering.

"It is exciting to see a growing interest in Managed Services from the European banking industry. ... I look forward to the opportunity to contribute to the continued success and growth of Capco's managed services offerings in the European market," commented Bohner, in a release.

Before joining Capco, Innes was with Deutsche Bank for seven years. His most recent role included the implementation of the company's global reference data strategy. "To pursue dynamic and flexible operations strategies, clients are increasingly turning to outsourced managed services to achieve the competitive advantage they need. Eric and Neil's expertise will not only ensure the success of our product and sales strategies for Capco Managed Services offerings, but also guarantee that the new solutions we develop and deploy target our clients' most emerging needs," said Predrag Dizdarevic, partner and executive vice president, in the statement.

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