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Some Like It Hedged

BNP Asset Management's Pojarliev discusses a variety of options to address foreign currency exposures. Although there is no single best-practice solution for addressing foreign currency exposures, institutional investors have three main choices, he says.

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September 30, 2001

Preparing for T+1

By Editorial Staff

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Under pressure to automate from regu lators, brokers and management, buyside desks are increasingly turning to their brokers for help. At CAPIS, a Dallas-based agency brokerage, Jim Morrow, first vice president of electronic trading, and his three-person staff spend much of their time guiding the firm's institutional clients through the maze of issues surrounding electronic connectivity.

That boils down to the transmission of orders, indications, reports, as well as allocations between sellside and buyside order management systems in the FIX protocol.

Morrow's involvement with electronic connectivity began in 1993 at a time when brokers' DOT-boxes were piled high on buyside desks. CAPIS clients complained they wanted to trade with all of their brokers through one system.

Because a significant portion of CAPIS' business is soft-dollar brokerage, Morrow said the firm has experience in helping clients to acquire appropriate technology and forge strong links to the vendor community.

Morrow took some questions from Traders Magazine technology editor Peter Chapman.

Traders: Next-day settlement is looming. Should traders be concerned?

Morrow: Oh, yes. Much of the automation will be done by the custodians and the clearing firms, but to get the trade and account information to these people there will have to be electronic connections - real-time communication with the trading desk. That means the electronic delivery of orders back and forth and the electronic delivery of allocations with the orders. Without it, you won't be able to allocate the next day.

Traders: What is the actual deadline?

Morrow: T+1 is expected to go into effect in June 2004, although that date has not been mandated. The regulators have said they will mandate it at least two years in advance, so we should hear something in the next nine months.

Traders: What is your role?

Morrow: We help [institutions] wade through those issues associated with T+1. Because we know the broad market we help them narrow their choices.

Traders: When buying systems?

Morrow: Right. We don't take these decisions on OMSs and allocation systems through the buying process with them. But we'll give them some advice as to what they should ask the vendors. We'll also set up appointments with vendors, but at that point, we step out of the discussion.

Traders: Helping clients leads to more order flow?

Morrow: If they are existing clients we suggest they feed us a little more business. If they are prospects, we ask them to throw us a few trades. Also, if it's a client that does soft-dollar brokerage, we can help them to buy the part of the OMS that can be soft-dollared.

Traders: Any other benefits?