News

Complex event processing reaches beyond capital markets

Jim Kim — Fri, 05 Sep 2008 13:54:05 -0400

We tend to think of complex event processing as a trading-oriented technology, an engine that processes multiple streams of market data at very high speeds. But as Bank Technology News makes clear, CEP applications are spreading out in the banking industry. Many banks are starting to deploy the technology for various risk and compliance functions. Perhaps analyzing positions in real time, or analyzing employee access of various accounts. Some are deploying the technology on consumer websites. Salle Mae, for example, uses it to monitor online loan applicants, aiming to "reduce their abandonment rates, improve performance, and do personalized offers." Some think that using such an approach to cross sell applicants also makes a lot of sense. Really anything that involves real-time processing of lots of streaming data is fair game here.

For more:
- here's the BTN article

Rules to help Pink Sheets foreign stocks listings

Jim Kim — Thu, 04 Sep 2008 00:00:04 -0400

We've noted in FierceSarbox that the once reputation-challenged Pink Sheets, run by the Pink OTC Markets, was given new life by Sarbanes-Oxley. Lots of brand-name foreign issues migrated there to avoid the new regulations. Pink OTC Markets launched International OTCQX, to differentiate the foreign ADRs from the 9,000 other issues traded on the electronic bulletin board service. A new SEC rule could make this market even more vibrant, assuming OTC systems can handle them. The SEC has imposed rules that make reporting the same as for non-OTC other stocks. Trades will have to be reported within 90 seconds of execution, and last-sale information will have to be reported in real time, notes Financial News Online.

For more:
- here's the article

Alternative trading services make in-roads in Europe

Jim Kim — Wed, 03 Sep 2008 23:59:17 -0400

The Markets in Financial Instruments Directive (MiFID) fired the starting gun. Now, the great trading race is in full swing. Technology-driven alternative trading venues have begun an assault on Europe, which is pressuring traditional exchanges, notably the London Stock Exchange. Sound familiar? It should; the emerging battle seem to be following the American script. Chi-X, with just 26 employees, launched 14 months ago and has fared well. Turquoise, backed by big banks, will become fully operational this month. And BATS, which has won exchange status in the U.S., will launch its European operations in November. The LSE and Deutsche Bourse have been forced to cut fees. They're also aiming for more algo traders--and working on their own dark pools, just like the Nasdaq OMX and NYSE Euronext in the U.S. The LSE's Baikal is being closely watched.

For more:
- here's a Financial Times article

How to allocate 2009 budgets

Jim Kim — Wed, 03 Sep 2008 23:58:36 -0400

True, the current economic environment is looking bleak. IT budgets are bound to get trimmed. But this is no time to panic, notes Larry Tabb. Instead it's time to strategically invest. The long-term business case for the investment and commercial banks is still strong. You should count on surviving (of course that's what they thought at Bear Stearns). The days where everything can get funded, in any case, may be over. Tabb suggests a decent set of allocation priorities would be: 1) continue to boost trading technology across asset classes and geographies; 2) continue to rationalize your processing platforms to see what can be retired; 3) continue to automate manual tasks in key areas such as over the counter derivatives, including, of course, credit derivatives; and 4) invest in reference data and risk management initiatives.

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

A third competitor in the Wall Street mobile race

Jim Kim — Wed, 03 Sep 2008 23:57:53 -0400

We tend to think of the great hand-held race on Wall Street as being a two-device battle: the undisputed champ, BlackBerry, versus a potential challenger, iPhone. But there is a sleeper out there: Windows-based handhelds. Microsoft made a splash by announcing that Bloomberg Professional users can now use any phone equipped with Windows Mobile 6 to access economic data, pricing, news, messaging, alerts, personalized market monitors and other Bloomberg functions. This is a savvy move by Mircosoft. While Microsoft Mobile still faces an uphill battle, the software giant has moved on several fronts, making connection through firewalls easier for one thing. It touts its Mobile Device Manager as an increasingly IT-department-friendly system, which can make BlackBerry servers unnecessary. Will applications make the difference?

For more:
- here's the article from Financial Planning

Turquoise glitches

Jim Kim — Wed, 03 Sep 2008 00:01:11 -0400

The one thing that can really befoul an alternative trading launch is a big technological snafu. So far, that hasn't happened at Turquoise, though there have been a few glitches. Article

Should banks charge for online bill payment?

Jim Kim — Fri, 29 Aug 2008 12:24:21 -0400

Most people have come to assume that online bill payments are "free," in that there is no explicit fee. Of course nothing is really free--and customers sense that. The costs are tremendous (up to $1 billion a year by 2010) and must be offset someway, somehow. So TowerGroup has come up with a solution. Why not charge an explicit fee to guarantee same-day execution? Customers are often disappointed that it takes so long for these transactions to go through. They just might be willing to pay a fee to expedite. They also might appreciate the "unhidden" fee. TowerGroup predicts that by 2010, fees for expedited payments will generate $40.7 million in revenue for financial services institutions, which amounts to 4 percent of that year's online bill pay costs.

For more:
- here's the release

When will SaaS break out of CRM?

Jim Kim — Thu, 28 Aug 2008 21:00:49 -0400

Wall Street & Technology notes that while financial services firms are active users of software as a service (SaaS), usage is overwhelmingly centered in CRM applications. So the question remains: Will the adoption of SaaS ever break out of that box? Well, the issue has been around a while, but some see a real opportunity these days. Large asset managers and brokers are said to be more interested in embracing SaaS solutions for all-important risk and compliance applications. The budget environment may make them even more attractive. More vendors seem to be rolling out hosted solutions, as well. Specific areas include corporate actions, "approval mechanisms for complying with customer regulations," and anti-money laundering applications, reports the magazine. Other promising areas: wealth management advisory workstations, which can be rented from clearing and software providers.

For more:
- here's the article

Nasdaq to pay for dark pool order flow

Jim Kim — Wed, 27 Aug 2008 21:38:41 -0400

Here's one way to make a splash in the crowded dark pool market: pay for order flow. Starting in September, the Nasdaq will pay rebates of 10 cents per hundred shares for volume to its crossing system, which has been struggling for volume. It offers three crosses in the day and one after hours. Traders notes that Nasdaq's crossing system was launched 14 months ago as a free service. The rebates will last only about a month--an all-out effort to build momentum. In October, the system will revert to being merely free. So will this work? Well, it depends on actual matches. Currently, a lot of people submit orders, but few actually get crosses. So it's really not in the mix. It will be hard to overcome this, so-far, ingrained negative reinforcement, but we'll see.

For more:
- here's the Traders article

What to make of the BATS and DirectEdge News?

Jim Kim — Wed, 27 Aug 2008 21:37:59 -0400

Larry Tabb says this about the news that BATS had received exchange status: it "should send shivers up the spines of existing equity exchange executives." The news that DirectEdge is teaming up with the ISE while it continues to press for exchange status is yet another sign that the ECNs are formidable players in the equity exchange derby. The benefits of exchange status for both are clear: they each would no longer have to quote through other exchanges, they'll be able to better benefit from market data, and they'll get direct access to clearing facilities (which Tabb says could save up to $40 million). So both seem to be big winners in the battle. The losers? Advanced Trading suggests that small exchanges dependent on ECNs for order flow will have a tough time remaining competitive. Indeed, the ISE by aligning with DirectEdge seems to be acknowledging the future.

For more:
- here's Tabb's commentary
- here's the Advanced Trading article

Anatomy of an ATM scam

Jim Kim — Wed, 27 Aug 2008 21:36:55 -0400

We've come to think of financial scammers as computer savvy. A recent string of ATM thefts seems to confirm that: The ring benefited from some hacking that stole card and PIN data as it moved between ATMs and third party processors, Bank Technology News notes. This is a serious issue, one that the industry needs to tighten up on. First Bank of St. Louis lost about $5 million via bad ATM transactions within just 24 hours. The pursuit of the main thief, however, was not strictly a high-tech endeavor. The man was photographed at three locations making large withdrawals and wearing the exact same shirt. The accused thief was also traced via his ICQ ID number to a website, which featured a picture of him wearing the same shirt--it must be his lucky shirt. The man was nothing, if not brazen.

For more:
- here's the article

Related Article:
Hackers go after Citibank

Computer nearly sold on eBay with bank data

Jim Kim — Tue, 26 Aug 2008 21:01:26 -0400

Add another item to the list of weird ways customer data can be compromised. Confidential data for customers of American Express, Royal Bank of Scotland (RBS) and NatWest was stored on a hard drive that wound up being sold on eBay. The sale was not authorized, but that doesn't make the victims feel any better. Article

Dark pools too dark for customers?

Jim Kim — Fri, 22 Aug 2008 11:46:32 -0400

We've noted recently that clients aren't necessarily savvy customers when it comes to the ins and outs of the many dark pools competing for their order flow. The rise of IOIs has thrown a wrench into the process for some. In that vein, a new survey from Greenwich Associates confirms there is a general lack of transparency that troubles some. More than 35 percent said that their broker-dealers don't disclose if a dark pool is completely dark. More than 35 percent also say they are unclear exactly how their orders interact with others. Almost half of the survey's respondents said dark pool providers do not disclose the types of orders they accept, or anti-gaming measures and controls. Here's Greenwich Associates' top 10 questions every institution should ask its dark pool provider:

1. Are you a true dark pool, (i.e., completely anonymous, without any information leakage) or will information regarding my orders be conveyed to potential liquidity providers?

2. Does your platform route orders out of your dark pool or from any other system connected to your dark pool, including your smart order router, to ECNs, ATSs or any other external source?

3. If you allow indications of interest (IOIs), is it an opt-in or an opt-out process, or will this decision be made for me?

4. What information regarding my order will be included in an IOI (symbol, side, size, and/or price)?

5. What type of order flow populates your dark pool (i.e., proprietary orders? retail orders?)?

6. How do you count matched volume (single or double count) in your dark pool for purposes of what is reported to the tape and advertised, and are orders that are routed out of your dark pool and executed by another party counted toward your own volume?

7. Do you match within the spread or at the spread?

8. What anti-gaming controls are in place?

9. Do you have a minimum size limit?

10. How will my orders interact with your proprietary orders in terms of priority?

For more:
- check out the article

How to monetize mobile banking

Jim Kim — Fri, 22 Aug 2008 11:45:54 -0400

If there's one thing that U.S. firms love to market, it's free stuff. Free checking. Free overdraft protection. Free toasters. So customers have been conditioned on this, which is really a problem. It makes them absolutely livid when they start seeing "hidden" fees. Who can blame them. This brings us to mobile banking. The industry already has essentially promised--that's how the public will see it--a free service. So there will be some real anger if fees start cropping up on statements. In the U.K. and New Zealand, some experimentation with per-message and other charges is occurring. Some banks, like HSBC and Lloyd's, charge for text alerts. This makes a lot of sense. U.S. banks will closely watch for backlash, and may have no choice at some point but to start recouping the costs of their investments. It will be tricky, but then again, a lot of ATM services used to be free.

For more:
- here's a Finance Tech article on U.K. banks
- here's a Bank Technology News article on New Zealand banks

A bond dark pool in the making?

Jim Kim — Wed, 20 Aug 2008 17:52:13 -0400

Advanced Trading offers an interesting look at State Street Global Market's FICross, a buy-side to buy-side fixed income crossing platform. FICross has been up and running for a year, the user base has grown to 200 from four. FICross is essentially a web-based service that allows would-be traders to log in and see various indications from others would-be traders. This is not a dark pool in that the sales process is not automated. Customers call the trading desk when they see possible matches and the human process begins. The service is still relatively novel and seems to have made inroads in corporate and asset-backed issues. This raises the question: Will we soon see a killer app along the lines of a truly electronic trading venue? It seems we're heading in that direction, though its unclear if demand is pressing. FICross managers say "work is being done" in that area.

For more:
- here's the article