July 9, 2007 Issue Abstract

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Securities Valuation: Independent Derivatives Valuations Making Gains As Investors Confront Soured Structured Holdings. Rising interest rates are making accurate pricing an increasingly critical element in risk management of structured fixed-income derivatives, including those derived from subprime mortgages and loans in the US.

Industry Alert: Product Expansion Drives London-Italy Bourse Union. The London Stock Exchange’s $2.15 billion takeover bid for the Borsa Italiana, which holds a major interest in the EuroMTS bond trading platform, may not radically transform European fixed-income trading, but it underscores a continuing effort by leading exchanges to diversify their asset base along with their geographical reach.

Regulatory Update: MiFID Preparedness May Be London’s Trump Card. The European financial industry’s readiness for the Markets in Financial Instruments Directive (MiFID) appears to vary from nation to nation, with little likelihood of complete compliance by the November 1 deadline. As a result, MiFID could actually attract more business to London, because the UK is better prepared for compliance.

Spotlight: Andrew Brenner, Managing Director and Head of the ISE Stock Exchange.

Research & Analytics: S&P Backtester Gives Quants a Swift Second Opinion. Standard & Poor’s Backtester, a desktop application that allows portfolio managers to back-test quantitative investment strategies, helps reduce the workload and optimizes research efforts, say managers at securities and investment firms who use the product.

Derivatives Trading: Markit Aims to Reduce Risk With Electronic Matching. With its plans for an electronic matching service for trade affirmations, Markit Group Ltd. is aiming to compress the trade lifecycle to ease risk management, particularly for derivatives trades.

Business Strategies: ATD Deal Arms Citi as Electronic Trading Advances. The acquisition of Automated Trading Desk LLC by Citi for its Global Transaction Services unit will be the biggest of several recent acquisitions by Citi of trading technologies and venues, or investments in them.