Case study: Eaton Vance and content management

Jim Kim — Wed, 10 Mar 2010 20:20:00 -0500

Like other financial service providers, Eaton Vance faced a host of imperatives that relate to the flow of paper-based information. There's a natural reluctance to give up on paper whether for internal records or customer interaction (financial cloud computing news). More companies are seeing the light, though every implementation will experience some snags.

At mutual fund company Eaton Vance, EMC's Documentum, Captiva and Centera was being implemented in mid-2007, but the firm was struggling with document ingestion, the process by which data and metadata is recorded and kept internally. A natural solution would be to outsource the process. The problem, according to Wall Street & Technology, was that the firm, despite trying three different vendors, ended up with files that were only 98 percent accurate. Not good enough. So the company brought the process inside.

The pressure was on because of a pending corporate relocation, and the prospect of moving thousands of crates of files. It eventually settled on a vendor eCopy Sharescan, by Nuance Communications, which allowed it to install a system that enabled central batch processing as well as dispersed processing seamlessly with Documentum. The system ingested more than 1 million pages in just six months--in time for the relocation. The benefits were clear across many functions, compliance and physical storage included. The firm apparently aims to expand the system.

For more:
- here's the Wall Street & Technology article

Mobile payment system touts security

Jim Kim — Wed, 10 Mar 2010 20:18:56 -0500

We've long thought that as more mobile applications ramp up to the actual marketing phase, we'll see more firms touting their security features (financial mobile services news). Consumer fear often equates to marketing opportunity. So it's not surprising that Mocapay, based in Denver, has chosen to highlight the security aspects of its new mobile payment software system.

To initiate a transaction, the consumer first opens the Mocapay application on their phone. According to American Banker, Mocapay then checks the account balance and sends to the phone a six-digit code that can be used to make a purchase at the point of sale at a participating merchant. The one-time code expires 20 minutes after it is issued. The consumer gets an SMS message confirming the transactions and updating the account balance. Mocapay settles the transaction via ACH.

One issue is that merchants and consumers must both download software, which may be bothersome even though the merchant download takes only 15 minutes. As of now, few merchants are participating. But it's nice to see the innovation. We'll hopefully see more.

For more:
- here's the American Banker article

The quality of data

Jim Kim — Sun, 07 Mar 2010 09:15:19 -0500

Investment banks and buy-side firms are investing more in projects that address data quality and consistency issues, according to a new survey by Thomson Reuters. Nearly one third say they would increase their spending significantly. The main driver seems to be risk management concerns. One goal is to link data that was previously siloed. Article

Average trade size plunges

Jim Kim — Sun, 07 Mar 2010 09:14:39 -0500

For a glimpse of modern stock trading, look no farther than the size of average trades on the NYSE, Nasdaq and London Stock Exchange. According to new research commissioned by the Financial Times, the average value of stock orders traded on 14 large exchanges has been reduced by 50 percent over the past five years. That holds for futures and options exchanges as well.

On the NYSE, the average size has fallen to $6,400 from $19,400 five years ago (NYSE news). We've come a long way from the days when large block trades were something to brag about, as if they suggested institutional might. Some have suggested that block trades have made a comeback, but the increase in the number of such trades reflects a low comparison point in 2008 and trading in some very low-priced stocks, such as Citigroup.

These days, the most active traders are algorithmically savvy and program-oriented. They slice up orders in savvy ways to executive at the best possible price with minimum ripples. That has fueled the rise of dark pools, which cater to certain traders, often offering handsome rebates (dark pool news). The movement has also fueled a surge in post-trade clearing and settlement costs.

The issue is whether this in any way harms the integrity of the markets. This is a good source of liquidity, but one would hope that liquidity factors in the NBBO set by the markets. Another way of looking at this: Does this handicap other investors? The SEC seems bent on finding answers.

For more:
- here's the Financial Times article

Hedge fund automation

Jim Kim — Thu, 04 Mar 2010 07:57:47 -0500

We've noted that the financial crisis (recession news) seemed to spur automation and the rise of third-party administration in the hedge fund industry (hedge fund news). A recent study by Greenwich Associates for Omgeo has found that more than two-thirds of the hedge funds responding to their survey believe "that operational improvements and automation have a direct and positive impact on their ability to attract investors and assets," according to Wall Street & Technology.

About 40 percent have moved to improve reporting and increase transparency for investors, and about one-third have started to obtain more independent valuations and accounting. In a sense, the goal of all of this is enhanced transparency and greater customer confidence in their funds' operations. It's basically a retention issue these days. You would have to think the most successful funds are the ones that have moved most aggressively down these tracks. For smaller funds, there are some lessons here. If you want to play with the big boys, you need to do all of this as well.

For more:
- here's the Wall Street & Technology article

Rogues turning to Twitter

Jim Kim — Wed, 03 Mar 2010 19:03:14 -0500

Twitter has emerged as handy tool for rogues and hackers. First Direct, an online bank in the United Kingdom , learned this the hard way when hackers took control of the bank's Twitter account to post a host of risqué messages to the bank's 800 followers. The attack was linked to a broader attack that is spreading viral malware across the U.K. "like wildfire across Twitter," according to Finextra.

The bank was eventually able to recover control of its account. In another incident, hackers in Latvia stole some documents from the state revenue services and used Twitter to provide personal details about the salaries of various managers at companies and in government agencies. Apparently, some bank managers have not taken the cuts they promised.

Phishers in general have been using Twitter more to lure people to certain pages that look like official Twitter pages, where they are asked for personal information. The attack seems to be fairly sophisticated. The malicious links have spread mainly through direct messages among Twitter users. Twitter abuse has not been limited to the financial services industry. United Airlines' Twitter account was hacked to send out risqué messages; it has a platform of 57,000 followers. This is something all companies need to get a grip on.

For more:
- here's the Finextra article

Outsourcing trends to watch for

Jim Kim — Wed, 03 Mar 2010 08:43:55 -0500

Are banks ripe for more outsourcing? You might think so given the cost pressures and the sheer level of consolidation that is underway. Over time, the industry has gotten much more accustomed to outsourcing even on a fairly large scale, so it wouldn't be a surprise if more banks were pondering their options.

Consultancy Pace Harmon suggests banks need to take some industry trends into account as they survey the field. For one thing, prices are heading north. Pricing was generous in 2009, but pent-up demand and other factors are switching the balance of power back to the suppliers. Some advice: Banks "should look for outsourcing providers that offer specific banking vertical expertise and avoid one-size-fits-all service offerings."

In addition, there's been a lot of consolidation in the supplier community. This "offers the ability to leverage additional products/services from suppliers or incorporate them in your favor in negotiations." You'll have to carefully evaluate your optimal number of suppliers. Less may be more at the infrastructure level, but, at the application level, a portfolio of suppliers may give you a certain leverage.

For more:
- here's the advice