As the world is absorbed with the speed of high-frequency trading and how the structure of today's markets affect the capital formation process, a speech was being delivered at MIT's Sloan School of Management that looked at capital formation from another angle--starting small.
In today's fast moving markets, predatory traders drive Ferraris and regulators try to keep up on bicycles.
Last week we profiled New York Attorney General Eric Schneiderman's efforts to crackdown on the millisecond time advantages that high-frequency traders are allegedly able to buy for themselves in the markets. Over the course of this past week, the glare cast on certain high-frequency trading predatory practices gained more wattage thanks to the release of Michael Lewis' new book "Flash Boys" and an accompanying 60 Minutes exposé.
New York Attorney General Eric Schneiderman has been clamping down for months now on the ways that high frequency traders buy themselves millisecond time advantages in receiving market moving information. Last week, he implied that through co-location and other techniques, U.S. stock exchanges and marketplaces might be complicit in the problem.
A recent survey found that the cost of compliance can increasingly be measured in a new way: personal liability. Fifty-three percent of compliance officers feel that their personal liability has increased according to a Thomson Reuters survey of 600 financial services compliance officers.
Just as the promise of good customer relationship management is the ability to paint a complete picture of the customer, a similar approach is developing in the area of fraud. It turns out, marrying big data and fraud prevention may involve applying some of the techniques associated with savvy target marketing toward identifying false identifies and other types of scams.
A recent SAP survey found that 41 percent of financial services organization felt that predictive analytics is more about minimizing risk than exploiting opportunities. The way that statistic is phrased, it may sound like it the financial industry views predictive analytics as a passive tool rather than an active one. But when you consider the risks that the financial industry faces--market risk, credit risk, compliance risk, risk of fraud--minimizing risk in financial services is hardly a passive job.
A few weeks ago, a Wall Street Journal article detailed the milliseconds-long advantage that high-frequency traders were getting from press release dissemination companies Business Wire and Marketwired. Through paying top prices for direct feeds, high frequency traders were getting press releases less than a second before they were released through traditional news outlets like Bloomberg, Thomson Reuters and Dow Jones, but it was early enough for the tech-savvy firms to execute trades before the news was out.
The much anticipated day when certain swaps will be required to be traded on electronic platforms, or Swaps Execution Facilities, is now here. For swaps, today marks the start of a new phase of evolution. Like any evolution, how quickly change occurs will depend on a variety of environmental and behavioral factors.
Will equity research analysts evolve into data scientists, applying big data analytical tools to model markets and stocks? According to an article on Tabb Forum, they will if they have good survival skills.