Attention all European readers: I'm coming to London for an exciting reader event on September 9th that will take place at Merchant Taylors' Hall. Please join us for a great discussion about managing risk and latency in this turbulent market featuring a great speaker line up. Following this discussion we will be hosting a a great party for you, the readers! There will be a scotch tasting, open bar, great food and a live band. Please click here to register and pass along to your colleagues. I'm looking forward to meeting all of you for a terrific night of great scotch and great discussion.

As Waters' publisher Incisive Media settles into its new downtown Manhattan office and gets to know its several hundred new colleagues formerly of legal publishing house ALM, one can't help reflect on the challenges of mergers and the sterling work that must have gone on behind the scenes to prepare for the successful integration of two 1,000-person corporate entities.

Merging two companies is a daunting task. From a technical and operations perspective, each company has different systems and processes for doing essentially the same tasks—such as content management, accounting, payroll and human resources. It can be a lengthy and arduous process to streamline these systems, to work out which ones to keep and which to retire, and then to transfer all the data from one system to another.

IT might be managed in an entirely different way from one firm to the other. A smaller firm might keep it informal and have a friendly face on hand at all times to assist with any IT problems. A larger company might have a sophisticated issue-logging system whereby users have to input an incident into an online helpdesk—although I’ve always wondered how people are supposed to do this if their problem is with the Internet connection itself.

Cultural integration is probably even more challenging—as one firm assumes another firm’s brand there is always a sense of lost identity and there will always be people who gripe about change. But change can be good. Mergers offer the opportunity to get a new perspective on the established way of doing things, and for each firm to benefit from the things the other does well.

Mergers and acquisitions have been a permanent feature on Wall Street for many years. But as top-tier banks lick their wounds and work out how to stay afloat after the last damaging year, many are choosing to let some of their acquired businesses go. Today’s Wall Street Journal reports that Lehman Brothers is considering selling off its asset management arm Neuberger Berman Management to private equity bidders, and last week UBS announced plans to separate its wealth management arm from the investment bank. After years of working to integrate, firms are now trying to decouple businesses, bringing about a whole new set of challenges.

Has your company recently undergone these kinds of changes? Waters wants to hear about your experiences.

(This article first appeared as the editor's letter for Waters News, our weekly email news alert. To subscribe to Waters News, please see the Free News Alert sign up tab on the right hand side of our homepage.)

Pinch, punch, the first of the month, and SunGard makes another acquisition.

It's funny how significant things happen just when you least expect them. This time last year, as the industry wound down for the summer, a few hazy reports came out of mid-America about some dodgy mortgages. Few would have predicted in those early August days that the 'sub-prime crisis' would evolve into a global economic downturn.

But back to the rabbit SunGard has metaphorically pulled out of the hat this morning. The mega-vendor certainly has a habit of extending its business through acquisition. GL Trade is no small fish and will add considerably to SunGard's wares. Not only does GL do around 70 percent of its business in Europe (where SG is more US-centric), but it has a particular strength in connectivity to exchanges as well as listed derivatives which will surely prove a boon to SunGard as its seeks to expand its financial business in Europe and deal with market structure changes. It's too early for on-the-record comments from either side and the financial details of the deal are complex. But SunGard has 64 percent of GL's equity under its belt and, barring unforeseen problems, the full acquisition should be complete by 2009. Time will tell exactly what SunGard will do with its latest trophy.

In other news this morning, the London Stock Exchange has made further revisions to its trading tariff as it seeks to stay on top of competition from Chi-X et al. Most intriguingly, the LSE has said that it will "reward liquidity providers for competing more aggressively to offer tighter spreads and greater depth of liquidity." In other words, the exchange appears to be replicating the maker/taker model which incentivizes liquidity provision - a strategy deployed by the majority of MTFs that has already proven successful in attracting new liquidity. Effective from 1st September 2008, the new tariff will remove the 7.5 pence execution charge from both sides and the 1 pence order management charge.

Says exchange CEO Clara Furse in today's statement: “We believe the new shape of this tariff structure will capture the important growth arising from the major shift towards statistical arbitrage and algorithmic trading in UK equity markets." In the September issue of Waters, CIO David Lester will share more thoughts on the LSE and its positioning in the changing European landscape.

Are Wall Street firms doing the unthinkable: Actually returning to Wall Street? The New York Post and New York magazine's web site report that HSBC might move into the new 7 World Trade Center. Not only is the global bank set to leave midtown and lease 300,000 square feet of office space in the newly completed building, HSBC has reportedly put its 452 Fifth Avenue offices on the market.

In other financial giant news: Waters and its sibling publications -- Dealing with Technology and Inside Market Data -- will move down to 120 Broadway in the financial district in the next three weeks. So long, SoHo, we'll miss you.

Hat tip: New York Mag

If weeks had labels in this industry then this week might well come to be called the "Week of the OTC derivative". Sounds enticing, right? Just like buses, announcements about particular niches in the broader financial world tend to come all at once. Regulations, trading venues, order management systems. Chances are if you see one announcement, two more will follow on its coat tails.

No sooner had trade processing specialist Markit gathered the UK's financial press corps together on Monday to make its DTCC partnership announcement than noises started coming from Frankfurt about Eurex's plans to build a European platform for the clearing of OTC derivatives. In the same week that CME Group announced the September launch of CME Cleared Swaps, a facility for OTC interest-rate swaps that will include central clearing; part of its move into the OTC market that was well-documented in the July issue of Waters.

These three announcements all target separate niches and perhaps most intriguing is Markit's marriage to DTCC and the pair's ambition to create "a single gateway for confirming OTC derivative transactions globally". No small ambition, but if anyone can do it then Markit and DTCC seems to be a pretty solid partnership.

It will be interesting to see how the coming months and years pan out in the arena of trade processing. Affirmations and confirmations are hardly the most glamorous part of the investment process, but there seems to be a steady recognition that if these things aren't sorted out and sorted out effectively, the whole industry will suffer. In novations for example, the process by which derivative contracts are transferred to a different counterparty, major banks have reaped the benefits of moving away from email and phone towards automated platforms. Where large numbers of staff formerly had to spend hours picking through emails and responding to post-trade problems, the whole lot can now be managed by an automated platform, with only the anomalies being flagged up. If such automation spreads across asset classes and filters beyond the top-tier banks, then maybe the conversation will soon shift away from trade processing which is certainly now seen to be the bane of the back office.

So good luck to Eurex, CME and Markit/DTCC. The hats are in the ring and the race is on.

All politics is local. And so is the impact of bonuses. New York Governor David Paterson predicts that Wall Street firms will cut bonuses by 20 percent this year. What's it to him? A lot, apparently. The governor predicts that each 10 percent reduction in bonuses costs the state $350 million in tax revenues.

Reuters reports that the Gov also predicted that the Empire State could lose nearly $1.7 billion in taxes due to the sluggish profits for Wall Street's financial firms.

According to Reuters:

Paterson said he was considering lobbying federal officials for aid to entities like Bear Stearns, Lehman Brothers and federally-sponsored organizations, referring to mortgage finance giants Fannie Mae and Freddie Mac.

Bear Stearns this spring was forced into the arms of JPMorgan Chase after investors lost confidence in its ability to cope with subprime losses. Lehman Brothers was later rattled by similar concerns, but remained independent.

Last week, Paterson called on Congress to enact a second economic stimulus package that would give states funds for job-creating projects, like building roads and bridges, and boost its share of Medicaid, the federal-state health insurance program for the poor, disabled and elderly.

With Wall Street on the rocks, more than over-paid traders suffer.

Where have all the good times gone?

Just ask the people who render The Wall Street Journal's iconic stiple drawings of political leaders and CEOs. The Journal has drafted its artist(s) for new portraits of business leaders that are more, er, economically appropriate. Just in time for Citigroup's announcement of a $2.5 billion shortfall, we now have a new image of a seriously baffled CEO Vikram Pandit. In his new dot depiction, Treasury Secretary Henry Paulson looks like he and only he can stare down this recession.

Check out the Columbia Journalism Review's writeup on the new face of seriousness.

Anyone that has not been living under a very large rock for the last year will be painfully aware that these are difficult times -- despite what US presidential hopeful John McCain's advisors might say.

Baby boomers are wondering if they can retire as early as they wanted to, some individuals are getting into debt just to buy groceries and other essentials, and the current oil-price crisis has achieved what once seemed impossible -- more and more Americans are considering buying smaller, more energy-efficient cars. (So the recession might at least prove good for the environment...)

The current economic climate sucks. Badly. So what, apart from laying off their employees left right and center, are financial services firms doing to cut costs and make themselves leaner, now that the sovereign wealth funds that were initially so generous have turned their attention to landmark buildings in New York?

It seems that some overseas operations are finding themselves superfluous. Citi just sold its German consumer banking business to French bank Credit Mutuel in a deal that will earn Citi around $4 billion after tax. Considering the firm's new CEO Vikram Pandit has pledged to sell off $400 billion of assets, you can't help thinking there is still a long way to go... And wondering how much will be left of the banking giant in the end?

One industry source told me that some banks are looking to outsource yet more functions that they have always done in-house. Many global banks for example that have built proprietary FIX networks are now turning to third-party network providers in a bid to remove unnecessary costs from their balance sheets. And proving that it is not just traders that have been affected by job cuts, Barclays recently announced it would axe 1800 UK IT jobs in favor of offshoring the work to centers of excellence around the world.

What else are firms doing to trim themselves down? What extra weight are they throwing overboard to keep their ships afloat? And how far can they take this strategy before they find themselves jettisoning the mast and sails and are forced to abandon ship?

If it's true that misery loves company, then it also must require a great soundtrack.

According to research from a U.K. entertainment Web site TheFilter.com, the number of people listening to snippets of gloomy music or rating the tracks as positive has soared in the last month. In fact, the site has seen well-known downbeat bands like The Smiths climbing its popularity charts 32 percent faster than happier types of music.

More people are willingly listening to depressing music, and who can blame them? The down-and-out greenback, the astronomical price of crude and worsening global food crisis can make anyone whistle a less-happy tune. With no end in sight to the current economic state, I wonder how long it’ll be before all happy beats are wiped off the radio waves.

Now I don’t know if there's research that shows whether listening to cheerless tunes helps people whose mood is marred by monetary woes, but realizing that your discretionary income allows no way to buy the sad songs because the price of food staples has nearly doubled will not help.

Below is the Ten Most Popular Depressing Songs, as rated by The Filter users in order. What do you like to listen to when you’re in the financial dumps?

1. Amy Winehouse - Tears Dry On Their Own
2. The Beatles - Eleanor Rigby
3. The Smiths - Heaven Knows I'm Miserable Now
4. Coldplay - Trouble
5. The Verve - The Drugs Don't Work
6. Pink Floyd - Comfortably Numb
7. Blur - No Distance Left To Run
8. Radiohead - How to Disappear Completely
9. R.E.M. - Everybody Hurts
10. Joy Division - Love Will Tear Us Apart

-- Oksana Poltavets, US Reporter, Dealing with Technology

I was wrong.

In the fallout of the mortgage crisis and the subsequent layoffs on Wall Street and beyond, I predicted a new wave of stiff regulatory initiatives. Like a typical doomsayer, I expected Sarbanes Oxley II: The Return.

So far -- nothing.

There have been a few congressional hearings and today the Fed announced new rules for handing out loans for mortgages, but other diversions have taken center stage. With a fierce presidential contest under way, an unsteady stock market and insanely high gas prices, politicians are hesitant to place new regulations on the securities industry. The last thing this shaky economy needs, you can hear them mutter to themselves, is more restrictions.

The mortgage meltdown had plenty of victims and bad actors. Questionable companies sold mortgages to people who didn’t understand them. The investment firms collected these foul-smelling mortgages and wheeled and dealt them en masse. It seems only Goldman Sachs bit the bullet and offloaded the bad risk just in time. That said, there are still plenty of layoffs happening inside the most secretive investment firm on the planet -- add one part Mafia, two parts Kremlin and a splash of Nixon White House.

One colleague at Waters thinks that people are waiting for the presidential election to be over before deciding what to do next. This makes sense. Presidential elections have a huge psychological impact in this country. No matter who the winner is, some will think it is either four years of the same or a gamble on a new administration. But all in all, voters will be relieved and will want to get back to work in restoring one of the strongest economies on the planet.

In a tight race -- be it presidential or economic -- handing out speeding tickets might not be the best idea.

Note: This first appeared in Waters News, a weekly newsletter for the financial IT community. Subscribe today.