In the unfolding mobile transaction revolution, there will be winners and losers, and Square seems to be emerging as one of the winners.

According to Bloomberg, Square is in the process of closing a $200 million investment by Rizvi Traverse Management, a deal that will value the company at $3.2 billion. Industry reports hold that Square CEO Jack Dorsey will retain ownership of 26 percent of the company after this round closes. Still, that stake would be worth $845 million.

Coupled with his ownership in Twitter, the famed social media company he founded, Dorsey is now said to be a billionaire. There is a lot of bullishness right now when it comes to Square, as some think that it is perfectly positioned to emerge as a must-have service in the early days of the digital wallet era, holding an edge right now over NFC solution providers and others. It has made great headway in carving out market share among small businesses, and that growth could expand to encompass larger companies in the near future.

For now, it has embraced the card networks, but it just might be able to create its own network someday, smashing the status quo. That would amount to something amazing. As of now, it seems to have earned some real staying power.  

For more:
- here's the article

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A few recent studies have concluded that as equity volume migrates to dark pools, transactions costs rise.

Advanced Trading notes a study by Alex Frino, the chief executive of the Sydney-based Capital Markets Co-operative Research Centre, who found that if 20 percent of trading moves to dark venues, transaction costs on exchanges will climb nearly one basis point. A study done by Rutgers University academics found that rising dark pool volume is correlated with rising spreads.

There was a time when this would have been an unquestioned negative, but when it comes to small stocks---and Frino has been told that 50 percent of small stock volume is handled in the dark---widening spreads may not necessarily be a terrible thing. In some quarters, the whole idea of best execution is start to morph just a bit, as people realize that spreads and commissions certainly matter in terms of long-term liquidity.

While the higher costs are born by investors, there will be some trickle down effects down to the traditional market makers and liquidity takers. No wants to see the price discovery function deteriorate, and that may not necessarily happen in large markets, even with a lot of dark pool volume.

"Our displayed markets -- and to some extent dark pools -- are connected through regulation and technology, which mitigates the dangers of price discovery deterioration.  That said, that connectivity is far from perfect and, for the less-liquid stocks, for which there actually is more off-exchange activity generally speaking, the issue is likely exacerbated," one expert was quoted.

For these stocks, the focus seems to be shifting a bit from best execution solely to best execution with an eye on improving liquidity, which has been a casualty of the modern markets. 

For more:
- here's the article

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More on the NYSE dark pool service
Dark pool reform would be huge win for exchanges

 

The coming implementation of the Consolidated Audit Tool (CAT) looms as a significant technological event for the SEC, and a lot is on the line.

The CAT, if it works as advertised, will represent a step up in terms of the data the agency needs to monitor market trends and systemic issues. The idea is to somehow monitor and analyze enough variables so that regulators can see when big market imbalances are brewing.

The CAT "will contain a time-sequenced record measured in milliseconds…The  financial exchanges and members of the Financial industry Regulatory Authority must work together to develop a centralized database that would store information on every single trade order, execution, and cancellation across numerous equity and options trading markets.  Exchanges and member firms will be required to submit gathered data to a central repository by 8:00 a.m. on the next trading day," explains Forbes, which also suggests that the system will be a huge aid in helping to combat financial fraud.

CAT is positioned to help in tracking the trading activity of suspected illegal insider traders, but the equity market tracking apparatus is fairly significant already. The SROs and the SEC have invested massively in systems that can track anomalous trading, and these systems were key in flagging events in the historic insider trading investigations that have produced so many convictions and guilty pleas.

What I worry about is the type of financial fraud that has moved beyond equities into other asset classes, for example CDSs. There have been just a few cases involving such trading, but who is to say there isn't a lot more illegal activity going on? There's no way to monitor these markets.

In any case, CAT will be a huge help in many ways, but it isn't the complete answer to all regulatory and enforcement issues.

For more:
- here's the article

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Mobile banking is here to stay.

Bank of America has become the latest of the big banks to roll aggressively into this new area, launching a service that allows retail customers to deposit checks by transmitting a photo of the check via hand-held devices. It also launched a P2P program that will allow money transfers via email addresses and mobile phone numbers.

These programs will increasingly be seen as de rigueur. Wells Fargo has already launched a mobile check deposit service for retail customers. Recall also that the clearXchange P2P initiative, involving JPMorgan Chase, Wells Fargo and Bank of America, was also launched earlier this year.

At this point, all retail banks ought to have plans for these sorts of consumer services, but the most interesting part of the new launches may be in the realm of rewards programs optimized for online and mobile banking. Bank of America has announced that it will expand a coupon program that allows customers to access special offers from retailers by clicking on promotions sent to their online banking accounts. The program, called BankAmeriDeals, was tested in January and will be expanding to the entire country by the end of summer. The strategy offers discounts to customers, while encouraging customers to use their Bank of America debit and credit cards.

It remains to be seen whether next-generation rewards programs will be able to fill the shoes of traditional rewards programs, which are in decline. Mobile rewards loom as perhaps the most important niche of all. That's all still being formulated by banks, digital wallet providers and others.

For more: 
- here's a Reuters article

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Bank of America has started to roll out EMV chip technology on bigger chunks of its credit card base. 

EMV cards include a microprocessor that encrypts and stores account information, representing a significant step up from the near ubiquitous magnetic stripe cards in the U.S. As of now, the new EMV cards include both chips and magnetic stripe. That's a good move, because there will be a very long ramp up period to EMV.

According to one expert, there are about 250,000 EMV-capable readers in the field, meaning that mass acceptance into the market is still six to eight years away, reports BTN. Merchants are pondering their options, and lots of vendors are coming forth with solutions aimed at acquiring banks as well. NFC as well as other payment technologies add a layer of complexity to all this.

There are many reasons for the market--including banks, merchants and card networks--to upgrade to NFC and EMV simultaneously, but the issues are not simple. Security remains the top issue. The biggest end-user beneficiaries in the short-term will be foreign travelers, whom Bank of America has targeted. Many countries, especially in Europe, have already embraced EMV.

The bank will soon include the chip technology in all newly issued Merrill Lynch credit cards, U.S. Trust Accolades, BankAmericard Travel Rewards, BankAmericard Privileges, and Virgin Atlantic travel credit cards.

For more:
- here's the article
- here's an American Banker article

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