Where have all the traders gone? - Rey Husain

This article discusses the impact computers have on the investing world. Investors have realized that the processing speed and volume that a computer offers has led to a “quiet revolution” throughout the financial world. Today Investors are in what is called an arms race among other investing firms to develop the best algorithmic trading systems. These trading systems help decides which trades are the most profitable and then executes the deals.
When looking back at the market, ten years ago algo-trading barely existed, but according to research done by a Boston-based consulting firm called the Aite group, one third of all trading decisions in the U.S. markets are now made by machines. The Aite group predicts that by 2010 more than half of trading decisions will be made this way. One really interesting statistic that I mentioned in class was that Deutsche Bank in London has over 70 percent of spot trades carried out each day without any human intervention. The impact of algo-trading is that even if an individual does not own any shares, more than likely shares within your pension fund are being bought and sold using algo-trading.
Algo-trading is an efficient practice considering that computers can make multiple trades, monitor thousands of stocks and do it all at a remarkable speed. Another point is that transactions made by machines can also be done without anyone even noticing! Considering that the market is also reacting to purchases and sales of one another, there is significant profit potential when transactions are not noticed. When a person sees a stock change price, they might react in a few hundred milliseconds. A computerized trader is at least 10 times faster! These few hundred milliseconds might seem trivial, but if the price changes by a fraction of a percent in the split-second before a trade worth several millions, it could mean a difference of tens of thousands of dollars. Ideally a computerized trader offers a trader low latency market access, which means that there is little delay between placing an order and seeing it fulfilled.
Another advantage to an increase in computerized trading is the use of Stealth- trading. Many of the leading brokerage firms now have computers running volume-weighted average price (VWAP) algorithms. The algorithms break up big transactions into significantly smaller and separate transactions so that the rest of the market does not detect what a company may be doing. In an attempt to diffuse the use of these algorithms, Pattern-Spot software works to detect algos trying to sneak in transactions. This type of software also attempts to determine what is going on with these algos by studying the size of transactions.
The final point of this article which I found to be the most interesting were recommendations on how to beat algo-trading in markets. One of the most important concepts is to go with your gut feeling by making predictions in regards to where the market will be going. This of course means using some computerized data to help distinguish additional data needed. Another strategy suggested is looking for signs of liquidity. This means looking for the presence of buyers and sellers for specific stocks can open up a chance for a trade ahead of algo-trading. Unfortunately, signs of liquidity have also opened the door for new types of algo-trading called “sniper” algos which wait for a suitable buyer or seller to emerge and then conduct the trade as fast as possible, before the price can be affected by other traders.
After reading this article, it amazed me to see how much of an impact computerized algorithms have on the stock market. However, one important thing to realize is that human traders can make up for lack of data with instinct and experience. These components are what essentially designed these type of programs in the first place.


Matthews, Robert. "Where have all the traders gone?." New Scientist 194,260602 June 2007 42-45. 13 Noc 2007 .

Phil- Google fails to win EU approval for DoubleClick deal

Shannon, Victoria. "Google Fails to Win EU Approval for DoubleClick Deal." Herald Tribune 13 Nov. 2007. 14 Nov. 2007

The article talks about how Google was trying to buy DoubleClick, which is an Internet advertising company. Google was prepared to buy the company, but the European Commission refused to approve Google's $3.1 billion purchase. The reason why this deal did not go through was because the European Union was concerned about competition and it need more time to think over the impact such a merger would have on the Internet advertising business. Also, they are waiting on approval from the U.S. Federal Trade Commission. Furthermore, Internet regulators in Australia and Brazil have approved the deal.

Privacy issues also come into play in this article because since Google is can gather a lot of data in terms of demographics. Having a large advertisement company like DoubleClick use the information to make a marketing entity would be like having direct information from the IRS. ComScore performed a study of Internet searches and discovered that almost 57 percent of Internet searches are done through Google. Since that is true the information Google collects through their search references people use. That information could be used to place advertisements on the sites owned or run by Google. Since the European Commission rejected the merger between Google and ComScore, it is still unknown what Google will do.

I am kind of glad this merger did not work with the European Commission because what is searched on the Internet is the customers choice and that information should not be used to help companies figure out what what advertisements to make. Even though people with stocks in Google would have loved if the merger worked out. It would have probably would increased Google's revenue. Google could still be able to get ComScore because the U.S. Federal Trade Commission still has not given their opinion about it.

Banking 2.0

Sorry guys, I just saw Rawan posted this same article but I had already written mine up before I went to the site...here's my take on it:

Social Networking, Web 2.0, and Banking

No discussion of business today is complete without the mention of Web 2.0 or some form of social networking. Banking is not exempt from this trend.
Banks are especially eager to make a connection with young customers who may not have an existing relationship with another financial institution. Building loyalty early on is key to developing valuable lifelong customers. It is more difficult for banks to establish this “cool quotient” as a part of their brands compared to companies in other industries because banking is often perceived as boring and dull. Innovators in the industry are looking to Web 2.0 resources to change this.
Wells Fargo created Stagecoach Island. It is a virtual world where users can interact, and engage in fun activities, but also learn about money management. Royal Bank of Canada (RBC) created a special p2p forum for young people to exchange financial advice in one common area. TD Bank runs several blogs and established a Facebook profile early on.
All of these are aimed at making stronger connections with their customers. Virtual worlds have gained in popularity so Wells Fargo figured they would establish their name as a part of it. RBC knew young people already looked to their peers for financial advice so they decided to facilitate this discussion. TD sought out the ways they knew young people communicated and spent their time and looked to establish a presence in these networks. The common theme in these three initiatives was not to push specific bank products, but to just engage the customers.
Marketers understand the viral nature of the internet, or, simply how fast ideas can spread between people. This goes for good or bad opinions. While there is an amazing opportunity to reach a large audience, there is also an increased aspect of reputational risk at hand. It is critical for banks to know what the online community is saying about them. Wells Fargo VP of Social Marketing combs blogs each day to find posts on his company and often responds to any postings. The opinions voiced by bloggers and circulated through prominent networks have a large impact on how any brand or product is perceived.
Web 2.0 is a unique challenge for any business. It forces executives to adjust to a new set of expectations and deliver to consumers or face being left behind. Banks know the key to success in their business is engaging their customers as much as possible and developing long-term relationships. New media is a great opportunity to do this and you will undoubtedly see more banks embrace the methods used by those in this article soon.

http://www.banktech.com/features/showArticle.jhtml?articleID=202801088

“China’s E-Tail Awakening”

Deepak Shahani

New online-payment systems are drawing wary consumers into the world of Web commerce.

BusinessWeek, p.44, Nov. 19, 2007.

In this article, it discusses the increased use of online payment systems in emerging economies such as China. In China, people are more willing to use online payment methods similar to PayPal, rather than using credit cards. Credit card penetration in China is low, as compared to other countries such as India, where their financial systems is more deregulated and more developed, aided by the infiltration of foreign banks.

In China there is an interesting phenomenon, where the citizens are more comfortable with paying for everything by cash. It is difficult to change consumer habits, but this is changing slowly. The article mentions that the skepticism about the use of credit cards is because they are: “afraid of online fraud, so they don’t use them.”
As a result, online commerce or e-retailing has been facing many challenges in China. Nevertheless with the growth in online payment companies, they are seeing increasing growth in the industry: “Consumer e-commerce in the country will top $1 bn in 2007.” It is also expected that the industry will grow at an average of 34% in the next three years.

Online payment methods has greatly affected e-commerce in China, and has provided a solution to the security issue faced in the minds of the Chinese people. Many businesses are experiencing increasing sales from their online sections of their business such as Joyo Amazon and Taobao company which uses AliPay. AliPay is the number 1 online payment service in China with a market share of 50% of the market. AliPay has greatly increased the confidence of online shoppers. A method to increase security, enforce contractual obligations, and reduce the problem of trust, is where online payment to a seller is only made when a buyer has received the merchandise.

Lower-tech methods of payments still need to be provided as not all citizens are comfortable with online payments. Therefore businesses need to train staff in recognizing counterfeit bills at cashiers and face the risk of its delivery people to carry large amounts of cash. Chinese businesses prefer customers to pay through more secure methods such as by credit card or online payments because it is more efficient and less risky. Yet as the saying goes, old habits die hard, and the Chinese have a habit for paying for most things with cash.

Junichi - Blackboard and Sony Partner to Offer Contactless Card Technology in U.S. Education Market

November 7,
http://www.lexisnexis.com.proxyau.wrlc.org/us/lnacademic/results/docview/docview.do?risb=21_T2496218431&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T2496218441&cisb=22_T2496218440&treeMax=true&treeWidth=0&csi=8054&docNo=1

Nowadays in Japan, there is no need to carry wallet with you when you go shopping or ride a train. The only thing you need is your cell phone. “Invisible money” which is called “electric money” has widely spread all over Europe and Asia.
The Japan's largest mobile phone service provider, DoCoMo, became the world's first mobile phone operator to offer its own branded platform for mobile phones incorporating a credit card and a contactless payment capability. It utilise Japanese software vendor Sony's FeliCa near field communications system. The FeliCa chip enables mobile devices to store multiple forms of data including bank account numbers and balances, credit account information, transport service passes and personal identification. The FeliCa system was first adopted by East Japan Railway in November 2001 for its Suica contactless transit card and now Moble Suica has appeared in early 2007. Stated quite simply, it is like there is a “credit card” and “Smart Trip” inside your cell phone. In Moblie suica, process will be conducted as follows. First, holder have to "charge" e-money to cards before using them and how much they can pay with the cards depends on how much they have charged them. The electronic money which is charged to a mobile telephone will be settled an account by the credit card which holder registered. After, you charge it, you just put your cell phone above the receiver and it will settle account immediately which is about 0.1 second.
However, there is a security problem. When registering the credit card, all you need is holder’s name, birthdates, and credit card information such as card number. In this registering process, you don’t need your PIN number. And there is a possibility that people abuse the card information that they obtained illegally and register since only one part of the information of the card company being collated with member information.
As mentioned above e-money has been widely spread all over Japan, but not in U.S. yet. However, this is likely to change in a very near future. On Nov 7, Sony Corp. said it has inked a deal allowing U.S. education systems developer Blackboard Inc. to use "FeliCa" contact-free integrated circuit chips in its student identification card system. Blackboard's current student ID card system, dubbed Blackboard Commerce Suite, uses magnetic cards; however, by using Felica IC chips, Blackboard will be able to add electronic money functions to the cards.
With this, using e-money will be common among the university student. The biggest issue to popularize e-money would be advance of security problem and establishment of receiver. Even though the Blackboard supply card with e-money function, you need a receiver to use it. Therefore they should increase the company number which adopts e-money. I think that the faster the problem (security, receiver etc) will be dissolved, the sooner the life without wallet will become reality in U.S.

Rawan- Banks Are Creating a New Kind of Customer Intimacy With Web 2.0 and Social Networking

By Nancy Feig
Bank Systems & Technology
November 01, 2007
http://www.banktech.com/news/showArticle.jhtml?articleID=202801088

With the advance in social networking technology, banks are looking at their strategies to create competitive advantages in social networking, which shapes about 72% of active teens using social networking. Banks are going to introduce Web 2.0, which is the second generation for World Wide Web, including: Myspace, Gmail, Facebok, etc. The banks that are leading the way: Well Fargo, RBC, and The Toronto-Dominion Bank.
In this article it stresses out the importance and the rapid speed of technology in social networking. Banks are realizing how different the new generation is communicating, and they have to find a strategy to meet their needs. For example: Well Fargo realized that people are more approached through social media, with them studying into that they came up with a blog; with more experiment that choice topics like: “student LoanDown,” and Stagecoach Island blog. In the other hand, RBC, other than using blogs, they also engaged in facebook, and podcasts. They also came up with RBC p2p, which is for student, and it is also done by students. They would learn more about budgeting and saving, or anything they are interested in.
With this increase in the use of Internet and high tech the article also states that this new generation has little or no association with financial institutions, and having more potential. I found it very interesting how banks are getting to the new generation, and never realized that the use of social networking when that far too fast. It also seemed that they are assembling social networking a priority to the new generation of customers. Apparently, social media is the new strategy to maintain customers.

The bad news about online insurance-- Jess Roper

http://www.insurancenetworking.com/protected/article.cfm?articleId=3685

http://www.globalchange.com/insurance.htm

Between the two articles that I read, I found that online insurance is not the best idea. The global change article points out the multitude of problems that come along with having online insurance: from not actually having a binding contract to no firm price. The article went into how online insurance could work for people in certain countries, but not other countries. Meaning, if you are an American citizen and you drive into Canada or Mexico and get into an accident, the insurance will not cover you because you are no longer in the United States and the insurance is not valid in any other country.

Even aggregators of insurance companies are not necessarily fair to individual customers. They give the price of only certain insurance companies: those who are willing to give them a commission to advertise their company online.

Another problem with online insurance companies is that they do not necessarily care who you are or if the information that you gave is accurate. They do not have people that could come and check up on you. They do not know if the address or phone number that you gave is necessarily correct unless they check up on you and many online companies think that if the credit card information you gave is correct (meaning that the payment went through), the other information is correct. This can be a big problem when it comes to getting a claim check. If you accidentally switched two numbers in your zip code or something similar, then you may never get the check.

The second article goes into customer satisfaction of online transactions. 49% of customers surveyed had problems with online insurance. Almost half of the people were not happy with their online insurance. While that means that half is happy, there is a very large chance that you will not be happy either.

With all this information, you would think that I have a very pessimistic view of online insurance. I do to an extent. I think that all online companies are risky and probably a bad idea. There is no reassurance that they will be here tomorrow. However, without the costs of a physical location, they most likely have lower rates than traditional insurance companies. Traditional insurance companies who have gone online to streamline their service are a very good thing. There is reassurance that they will be there tomorrow because they have the physical locations. It is also nice to be able to walk into their offices or call the office and speak to a human.

Jeremy Kraner - Advantage WaMu

Source:  Advantage WaMu:  The Check Isn't In the Mail

J Nicholas Hoover, InformationWeek; 9/17/2007 Issue 1154, p71-72, 2p

This article discusses and examines how a strong emphasis on IT development has allowed Washington Mutual, otherwise known as WaMu, to become one of the most successful banks in the country.  Having one a large number of awards for applying newer forms of IT to make online banking easier for consumers, WaMu is often times used as a model for how other banks can improve their IT.  Whereas, however, most banks have complicated views of e-commerce, WaMu takes a far more simple approach when attracting consumers.

The article also examined WaMu's Enterprise Decision Engine, a group of systems used to determine if a customer should get a loan, and if so, for how much.  This engine is built upon six different systems that calculate everything from credit scores, risks, to appropriate lines of credit.  It then compounds all of this information onto one single platform.  Since the implementation of this engine, loan decisions have been made far more quickly and consistently.  This is because all decisions are based upon the same credit risk information instead of other methods that often relied upon human intuition.  Before, where a decision could take anywhere from weeks to over a month, now a small business loan decision can be made in as little as 16 seconds.  This is all due to the Enterprise Decision Engine.

Unlike many other banks, WaMu is always looking to upgrade and overhaul its website in order to better attract consumers.  Whereas other banks are more hesitant to change their websites, WaMu is always trying to make their more easily accessible and navigated.  For instance, just two years after the previous website overhaul, WaMu is planning for yet another overhaul.  When asked as to why another overhaul was planned so quickly, especially in the light of all the recent awards, WaMu's director of e-commerce was quick to comment "Well, that's innovation".  One of the more popular "innovations" recently implement was a blog run by Stephen Rotella, chief operating officer of the bank, which received over 4500 replies in its first four months of operation.  This is all made even more impressive by the fact that the e-commerce team is made up of just over 200 employees, which is noticeably smaller than some of its competitors.  

Overall, I found myself very interested and impressed in the steps taken by WaMu to improve their IT.  These days, more and more banks are far more concerned with spending money on appearance and prestige as opposed to focusing more of their funds on advancing their technology and making it easier for consumers to access the banks features.  However, WaMu seems to be more focused on making online banking far simpler and allowing its customers greater freedom.  I believe more banks should follow WaMu's lead by pushing the envelope a bit more instead of relying on older technologies to carry them through an ever changing online community.  Maybe then, other banks wouldn't have to try so hard for their e-commerce to be like WaMu.

John Robinson III Open Access

Open Access
Anita Hawser. Global Finance. New York:Jun 2007. Vol. 21, Iss. 6, p. 37-39 (3 pp.)
http://proquest.umi.com.proxyau.wrlc.org/pqdweb?did=1294726761&Fmt=4&clientId=31806&RQT=309&VName=PQD

The article explains how Sarbanes Oxley has made companies push for more transparency when documenting their finances. To help manage their treasuries companies have put together treasury management systems (TMS). The TMS helps companies manage their cash, cash forecasting, finance and investments, ensures sufficient funds for acquisitions, and interest rate and FX management functionality. TMS seems like a great tool for companies because the IT allows more control and away to forecast or choose projects a company should invest in. In addition, TMS is suppose to replace excel spreadsheets.
I think TMS is a great tool for companies looking to get an edge in their perspective industry. However, with all the new financial tools emerging it seems companies will have to expand their IT budgets. It seems like every few months there is a new financial tool coming out and companies are forced to go out and purchase it to maintain transparency and to abide by the Sarbanes Oxley Act. In addition, if TMS is suppose to replace spreadsheets companies are going to have to spend more money on training their employees to run the system and it could lead to the lost of jobs and creating new jobs.
To help companies who may not have the funds to support TMS a company called Salesforce.com started delivering software applications via the Internet through a system called ASP, which means software on demand. Companies can go online and use the different software applications to help maintain their financial departments without drastically cutting into their IT budget. Furthermore, if a company has faulty software they can determinate the service or uninstall the software immediately. It is basically a pay as you go approach.
Even Wall Street is investing in the ASP systems. The Wall Street Sytems invested millions in upgrading the infrastructure and enhancing its capabilities. The ASP system has over 30 custormes including Adidas and other MNC. Moreover, ASP providers are experimenting with offering separate application model. It allows companies to use many different hardware resources but it is shared among many companies. The problem that arises is that not all of the applications differ among the ASP. It is hard to maintain the connectivity between the applications. SunGrad and AvantGrade found a solution called eTreasury eXchange (eTX). eTX allows for the connectivity between banks and corporations uses the software. The problem that I see is security. How are they going to maintain a secure connection between banks and corporations using the software? Banks and Companies are dealing with trillions and trillions of dollars everyday and someone could hack the system and steal pennies here and their right under the ASP systems nose.

Fatou Coulibaly - "Paving The Way For E-Invoices"

Paving The Way For E-Invoices
Adam Rombel. Global Finance. New York: Mar 2007. Vol. 21, Iss. 3; pg. 21, 2 pgs
http://proquest.umi.com.proxyau.wrlc.org/pqdweb?did=1240499851&sid=5&Fmt=4&clientId=31806&RQT=309&VName=PQD

This article mainly discusses the increasing introduction and adoption of e-invoicing by companies not only the United States, but also worldwide, with the example of Europe. According the Entrepreneur.com’s definition of invoices, they represent “an itemized list of goods shipped or services rendered, stating quantities, prices, fees, shipping charges, etc. Also known as a bill."

More specifically, the article refers to the use of corporate Electronic Invoice Presentment and Payment (also called EIPP) which constitutes the e-invoicing system that mostly large companies are acquiring. If the introduction of EIPP was not as successful and rapid as it was thought to be at the beginning (because “businesses still receive more than four of five invoices in paper format and make two-thirds of their payments with a check.”), this trend is changing now. I believe more companies (large businesses) are making use of EIPP because of the various advantages it offers compared to traditional invoicing. It is said to have become an indispensable tool because “companies are using e-invoicing to obtain reductions in labor, paper, printing, postage, delivery and other costs associated with manually processing invoices.” These companies are also benefiting of more efficient payment routing and approval processes as well as high-speed dispute resolution with e-invoicing. There has been some evidence that they significantly reduced their processing costs, and invoice-related expenses with EIPP (these expenses can result for instance from trying to reissue misdirected, misplaced or lost invoices.)

I strongly agree that due to the fact that there are a lot of companies that are better managing their cash flows, with greater amount of dollars (millions) transactions through account payables, providers of business-to-business e-invoicing services are noticing the growing number of buyers and suppliers. For example, the specific OBIO e-invoicing network states that it has 80 buyers and 40,000 suppliers in both of its headquarters in Europe (London) and the US (San Francisco). Other networks such as OB10 provide e-invoicing technology to great companies such as HP, Procter & Gamble, Johnson & Johnson, and General Motors just to name a few, that generate substantial annual revenues averaging $800 million. The article mentions couple of more networks of technology vendors such Ariba, Pleasanton, and Bottomline Technologies that are all considerably increasing their number of suppliers and business-to-business transactions, and thus their revenues because of the growing e-invoicing’s success.

Since it is more economical to receive invoices electronically, I believe it shouldn’t be only large companies that can use e-invoicing (even if they have been until now the primary and single users). I find that it would be very beneficial for smaller -to mid-sized corporations as well to acquire the EIPP features. These companies express apparently barriers such as the lack of financial abilities to afford such a technology. But hopefully with the use of Accountis company’s ebPrinter which is the Electronic Business Printer, it is certain that “EIPP is gradually making its way down to smaller firms” according to Thayer Stewart, the Vice President of Marketing and Business Development at OBIO.

Ajai Murali - Chinese Banks Head for the US

Source:

Tachang, Chi Chu. "Chinese Banks Head for the US." Businessweek 12 Nov. 2007: 28-30.

UCBH Holdings is a San Francisco based bank that servers a large Chinese-American customer base. Recently, it needed $205 million for an acquisition, so it teamed up with Minsheng Bank in China, which took up 9.9% ownership in UCBH. Chinese banks are starting to eye the US for expansion and an increased global presence as a provider of various financial services. It is an interesting phenomenon, especially since China only joined the World Trade Organization in 2001. The CEO of Minsheng Bank says it is eyeing the US simply because it’s cheaper. It’s almost a reverse outsource, if you will. Soon after Minsheng’s deal, Citic Group based in China bought 6% ownership in Bear Sterns.

US Regulators face a problem with the interest of Chinese banks to buy into US banks. While it encourages investments from overseas and it must approve all deals involving ownership greater than 5%, it is facing a different situation with Chinese banks. This is because of the regulatory environment that existed in China until very recently, and still exists in some cases. The regulatory environment is known to be lax and tends to engage in more corrupt practices than any US bank. The US regulators are supposed to be welcome to cross-border deals, and are certainly very involved when a US bank has interest in a Chinese bank. Eight of the twenty five largest bank-holding companies in the US by total deposits are owned by foreign companies, as we see global cross-border investments increasing.

China has been doing a lot of cleanup work to help privatize a lot of its institutions including banks as they moved away from centralized institutions. As Chinese banks become more knowledgeable, they are buying into countries in which their existing customers did business. Then, they are moving to areas where they are comfortable—such as Minssheng’s comfort with the Chinse-American management team at UCBH. China’s 3 top banks rank among the top 20 in the world as far as market value. Their average price to earnings ratio is 41.3, whereas US banks average 10.6. Investments in the US are brave ones, since the recent subprime credit problems as well as home loan defaults have made it a more turbulent market than usual. It helps the Chinese banks that the US dollar is as weak as it is, but not as much as the article reports because I believe the Chinese Yuan is pegged to the US dollar. It is important that the US change its attitude towards business practices in China, since China’s business practices have entirely changed. Each country must be given same treatment when it comes to investing in America.

This article is interesting because it plays a reverse role on the famous outsourcing to China trend. The Chinese banks are taking advantage of a vulnerable US market and US dollar, and will continue to invest here as long as the Fed continues to approve. It is also interesting that Chinese banks are looking to become full service financial centers, as we have seen transformations of big firms such as Schwab and Merill to try to become a full financial powerhouse as well. Foreign competition is healthy, but ultimately the chief banking regulator of China reports that if the US continues to cooperate, China will raise its caps on foreign investment. It will be interesting to see how this all plays out, and how different communication, currency, and management barriers are overcome. Of course, the IT is all there and there will be a technology transfer as more Chinese banks invest in the US.

Michael Moronta- The Importance of IT security

INTERNET LAW - Data Privacy and Data Security: The New Imperative

http://www.ibls.com/internet_law_news_portal_view.aspx?s=latestnews&id=1904

This article stresses the importance of IT in the survival and flourishing of a company. IT over recent years has ruled the business world, and it makes businesses a lot more efficient and integrated. Companies that continue to evolve and make advances use IT as a competitive advantage, while those that do not, see their way slowly going out of business. This electronic information which contains the companies backbone (assets, trademarks, key information etc.) is essential. If this information were to get in the wrong hands it could be devastating to a company. Some of the consequences may include damage of reputation, lawsuits, and severe financial penalties.

The importance of IT to a company makes it even more crucial that a company protect there electronic information from those who may try to sabotage it. This may include employees, hackers, or competitors. I believe that in order for company to survive in a competitive business world they must set aside a hefty budget just for the improvement and monitoring of IT systems in the business. Monitoring an IT system from potential attacks has grown to be a very difficult task than in past times. The systems must be monitored on a daily basis insuring the confidentiality of a companies information.

The article states that a regular auditing committee will not be effective in surveillancing the IT systems because their strength is in financial statements. I agree with the article in that the best method to monitor systems is creating a committee that comprises of specialized technology personnel with limited oversight by an auditing committee. The personnel in the specialized technology committee will be the best suited for the task because they understand the systems and know how to work with them. The difficulty lies in selecting individuals that are trustworthy. This proves to be not as easy as it sounds because many people are driven to improve their own situations.

Nonetheless, IT is a critical part of a company. Its constant evolution and monitoring are the keys to success in a company. Many companies that have failed to do this have suffered dearly. For instance, ChoicePoint suffered a 15-20 million dollar loss in sales because of a data breach. Companies must make IT a priority if they do not wish to suffer the same fate.

Jessica Davison "Offshoring Fortunes Fluctuating" & "Offshoring in Reverse"

Kenney, Brad. "Offshoring in Reverse." Industry Week Vol. 256. Issue 10. Oct 2007 41-42. 9 Nov 2007 .

Murray, James. "Offshoring Fortunes Fluctuating." IT Week. 7 May 2007 19. 9 Nov 2007 .

I chose two related articles in order to look at the influence of currency fluctuations on IT firms. Specifically, these articles examined the business model of Indian IT firms and how recent U.S. currency fluctuations have the potential to change Indian IT firms’ business models. These changes may lead to dramatic changes for U.S. firms as well.

“Offshoring in Reverse” discussed that Indian IT firms are starting to hire U.S. firms in order to capture more U.S. market share. This additional investment is worth it to these firms to gain market share. “Offshoring fortunes fluctuating” pointed out that one of the major reasons for this change is the weakening dollar and the relative appreciation of the Indian rupee. As of May 2007, the rupee had increased in value by 10% relative to the dollar; the most dramatic improvement ever. The article stated that if the trend continued, U.S. firms would likely pay the price because Indian firms would increase their prices in order to maintain their 25% profit margins.

These articles also discussed that since most of Indian firm’s expenses are in rupees, but now those expenses are increasing since the rupee is appreciating; the additional expense of hiring U.S. IT professionals is declining for these Indian firms. To me this demonstrated the important role that foreign exchange markets play in business. Prior to the weakening dollar, the reason that Indian firms were able to be so profitable was because the rupee was valued so low, so expenses were less; yet the Indian firms were billing in dollars which were worth substantially more. I never really thought about how Indian IT firms were so profitable because only the lower labor costs are what are publicized.

I thought these two articles were extremely interesting. Lately on the news it seems that every day the dollar is weakening in value. Although it is fairly obvious that this has tremendous implications for the U.S., I did not ever think about the connection to IT. In this respect, I thought these articles were interesting because it now appears that Indian IT firms that are used by U.S. companies are now hiring more and more U.S. IT professionals. It seems to me that if the U.S. companies were more aware of this trend, they might shy away from outsourcing this function to the middle man (in this case the Indian firms) and just hire U.S. IT professionals directly. However, either way this trend seems to present a good opportunity for U.S. IT professionals since they are now being sought after instead of being replaced by other less expensive professionals from abroad.

I also thought that these articles were interesting because both discussed that this trend is not just important for the U.S. but for other countries as well. One example given was the importance this has for the U.K. and Europe. Since the value of the pound and Euro are still strong, Indian IT prices have not risen; however, European countries have noticed the trend that is emerging in the U.S. and is on alert for future currency fluctuations that could affect them directly.

It also struck me as very interesting that the Indian IT firms were not willing to cut into their bottom lines even though this industry averages a 25% profit margin in India. It made me wonder if these companies are basing their business model off of past trends of U.S. companies. I kept thinking about Exxon Mobil’s profits last year – the highest ever despite record oil prices. Perhaps the Indian IT firms have observed that record profitability can still be realized even when the costs are passed on to customers.

Deepak: Setting Sights on China

By Jim Middlemiss

http://www.wallstreetandtech.com/showArticle.jhtml;jsessionid=MMCMY42Y0Q0QCQSNDLPSKH0CJUNN2JVN?articleID=59301331

In this article, the author explores the growth opportunities and challenges faced by China’s stock market. China as with many rapidly developing economies, is experiencing growth in its stock market, yet it needs vital technology to support its growth. The growth in the Chinese stock market is because the country of 1 billion people is experiencing an industrial revolution with an annual economic growth rate of 10%, and a more free-market capitalist approach to business. With six stock exchanges currently in operation in China, there are great opportunities and need for western companies to offer their IT services in maintaining a well-functioning capital market. For example, an opinion expressed in the article was that there is a multitude of opportunities for technology firms to offer “the latest and greatest in trading solutions.” When China first developed its trading platforms it was on a “proprietary basis.” This is changing however, and they realize the benefit they could gain by partnering and contracting out the work to experienced foreign financial firms.

A key player in providing the technology and platform to support such market activity are companies like Accenture and its partner Deutsche Borse, who provided technology to the Shanghai Stock Exchange. For example, Accenture and Deutche Borse, used its Xetra trading system as a platform and then adapted it for the Chinese market. Accenture’s vision was to create a “robust, scalable trading platform for future innovations and new products.” It won the contract from the Chinese, over IBM, Hewlett-Packard and AtosEuronext.

China also uses western technology, in its Securities Trading Automated Quotations System (STAQ). STAQ is based on the Nasdaq and National Electronic Trading System (NET). Technology provided by western firms, have also benefitted China’s foreign exchange market. The China Foreign Exchange Trade System (CFETS) chose Reuters to help develop its global foreign exchange system.

China’s technological infrastructure is conducive for growth, as major financial corporations find it easy to setup and get their office running, with the availability of internet technology with high speed lines. For example, in the article it mentions “Depository Trust and Clearing Corp,” which heavily relies on technology for its security business, which had no trouble in setting up its operations in Shanghai. The company developed an internet-based system to handle corporate actions such as stock splits, elective dividends and tender offers.

Although China can be seen as a great growth opportunity in expanding financial markets globally, it is still relatively regulated by the Chinese Government and investment by foreign investors is limited to Joint venture (JV) companies. It is however creating opportunities for foreign firms in transforming China’s ambitions into a reality. They need the skills, expertise and technological know-how of western companies to expand its financial markets. With a limited stake in ownership of 33%, foreign companies can partner with local companies through a joint venture. Morgan Stanley and Goldman Sachs for example, are able to penetrate the Chinese market through such measures. They can partake in IPO deals, underwriting, advisory services and creating trading programs. However, the brokerage services industry is not accessible to foreign firms, as the article mentions, it is strictly reserved for the “approximately 120 licensed domestic broker-dealers.”

In the article, I found conflicting views, in that some companies view China as an easy place to do business in terms of its technological infrastructure, and later in the article, traders, describe the volatile situation of China’s trading business, because they are lacking in their internet technology. Bob Ray, senior vice-president of business development at the Chicago Board of Trade (CBOT) believes that there is still an area of weakness in China’s telecommunications infrastructure. Another interesting fact, highlighted in the article, was that the Chinese authorities do very well is their ability to learn from overseas companies and leverage the IT skills that foreign firms can bring. I believe that the Chinese financial markets have greatly benefitted and will continue to benefit from the technology developed by western firms, which have more experience and know-how from developed markets such as the NYSE, Nasdaq and CBOT.

Rey- Little Green Lies

Elgin, Ben. "Little Green Lies." BusinessWeek 29 Oct 2007: 45-52.
http://www.businessweek.com/magazine/content/07_44/b4056001.htm?chan=search

The Article that I found identifies that making a company environmentally friendly cost effective and profitable is becoming questionable. The featured individual of this article is person named Auden Schendler. Schendler worked as a junior researcher at the Rocky Mountain Institute, which is a think tank in Aspen Colorado. He worked for a well-known author named Amory Lovins who co-wrote “natural capitalism”. Lovins’ ideas embrace the notion that “going green” can help companies increase profits while saving the planet.
This notion of “going green” has become a centerpiece for corporate image crafting. Companies such as General Electric identify that they spend nearly their entire multimillion-dollar advertising budget on green driven projects and products. Other companies such as Google and Yahoo pledge to have all of their offices carbon free by 2008.
The idea of pledging to improve the environment has become a standard for forward thinking corporations. However, the biggest issue for organizations is being able to stay profitable along with implementing new environmental friendly projects. The most common solution to this issue is the use of Renewable Energy Credits (REC’s). REC’s are a type of financial arrangement that companies use to justify assertions that they have reduced their net contribution to global warming. These REC’s should be used to promote the use of third party pollution free energy. However, companies such as Staples, Fed Ex and Johnson and Johnson merely use REC’s as justifications for their overall energy consumption. The issue with these statements is that organizations are continually consuming more energy, but are using REC’s as their excuse for their overall energy usage.
This article also identifies specific firms who have actually moved towards legitimate environmental gains. Walmart has given top billing for energy saving fluorescent light bulbs even though incandescent bulbs are more profitable for the company. Office depot have replaced all of their lighting in more than 600 stores, which has caused a 10% decline in the release of heat – trapping gases.
In 2006, Johnson and Johnson spent one million dollars on credits, which are equivalent to 400,000 tons of emissions. Based on this purchase alone, J&J received praise from the Environmental Protection Agency and the World Wildlife Foundation. J&J have claimed to have reduced their contribution to global warming by 17% since 1990. Dennis Canavan who is the company’s senior director of global energy stated that REC’s don’t really reduce J&J’s pollution, but somewhere along the line they do encourage new projects.
The economics behind REC’s is vague do to lack of market makers for the credits. REC’s are purchased roughly at $2 a megawatt hour, however normally wind developers usually receive roughly $91 per megawatt hour from selling their electricity to utilities and from government tax breaks and incentives. This leaves little room for expansion for green energy companies because another $2 does not offer the amount of capital needed to develop their technologies. To sum up this situation, REC’s are currently the system available to offset Carbon Dioxide for green companies. Even though REC’s may help to invest in new projects, in the long run they do not encourage further development or growth of green technologies.

John-Speed Killed The Floor Trader -- Wall Street's quest to process data at the speed of light relies on the physical proximity of servers to overcom

http://proquest.umi.com.proxyau.wrlc.org/pqdweb?did=1281832421&Fmt=3&clientId=31806&RQT=309&VName=PQD

This article discusses the increase in electronic trading and the emergence of collocation of a firms system running their algorithms. Firms are hoping that the close proximity of their systems will eliminate time lags in area networks. In addition, firms are moving to electronic trading because they want their transactions executed instantly. For example, if a client wants to purchase 100 shares of Google stock trading at $600, and decides to call his consultant to purchase the stock it will take a while for the order to be executed and the price could jump up to $650 by the time the transaction takes place. Furthermore, firms are turning to electronic trading because a 1-millisecond advantage in trading applications can be worth millions of dollars a year to a major brokerage firm.

Collocation has allowed firms to execute transactions within seven milliseconds traveling from New York to Chicago. Furthermore, transactions taking place from East Coast to the West coast it only takes 35 milliseconds. Speed is extremely important to firms looking to obtain the best prices, which is why firms are paying high prices to have their servers placed in both the NYSE and the NASDAQ. The article explains how the servers in shared data centers are usually connected to Gigabit Ethernet. The Gigabit Ethernet uses the ultrahigh-speed switching fabric called InfiniBand increasingly used for the same purpose to support the servers and allow transactions to take place at such high speeds. InfiniBand is a high-speed input/output technology that speeds up the transfer of data-intensive files across servers, storage devices, and networks. Companies are looking to use InfiniBand because it will help reduce latency as a result from wires, switches and other equipment. Even though speed is important, how much faster can we go? Moreover, do we have the equipment that has the capability to support the speed?

Furthermore, while electronic trading sounds great it is putting floor traders out of work but is opening opportunities for ECNs to emerge. The stock market is now moving from a financial sector to an IT sector with the increase in efficiency and technology to execute trades and the elimination of latency.

Ajai - Financial services will be India's next growth engine

URL: http://indiapost.com/article/techbiz/1267/

India’s growth across many sectors has triggered the attention of many investors across the world. In a developing nation with a population over one billion, like China, investors want to jump in and see how they can make India a useful resource for business, and wish to help India grow into a fully developed nation. Part of India’s attractiveness is its education system which produces millions of students with a sophisticated education, and also its purchasing power parity, which allows for a lower wage rate. This article talks about general economic growth across India, and how financial services are becoming more important to India’s growth.
Mumbai, a rapidly growing city in Northern India, is looking to be a large international financial center. Though India currently purchases around $15 billion in financial services annually, the minister wishes to make India a leader in providing financial services as well. The finance minister noted that the stock market movements in India have been doing significantly better than the Nasdaq or Dow Jones. He mentions also that market capitalization in the Bombay Stock Exchange exceeds the aggregate deposits in the banking system.
The Indian securities markets are not only growing rapidly, but are also heavily regulated. According to the finance minister, they are amongst the best regulated markets in the world. He also notes that the financial instruments and markets use the latest technology. He points out that there are winners and losers with the movements towards independent financial markets. New companies willing to adapt to competition and improve efficiencies are winners, whereas family-owned businesses that opposed liberalization have lost. Sectors that have been privatized and thrown into competition such as telecommunications, information technology, banking, and insurance have gained tremendously.
India is here to stay in the global competitive scope of business. The finance minister reassures us that India is now governed by law, is a democracy, and is more open to foreign investment than ever. With this growth, India can make more capital investments on infrastructure and address issues such as disease, poverty, and ignorance.
This is an interesting article because India is completely changing the nature of its business environment. Ever since the move to liberalization and privatization, tremendous gains have been seen and India now has a bolstering middle class with white-collar jobs that have increasingly been in the financial and technology sector. Just like China, or even the USA before it was fully developed, India is taking steps to become more competitive and is doing so to try to address issues that have brought it down in the past. It will continue to grow, and soon enough, be one of the leading nations of the world.

Junichi - SBI Launches an After Hours Trading System

http://www.lexisnexis.com.proxyau.wrlc.org/us/lnacademic/results/docview/docview.do?risb=21_T2330125292&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T2330125295&cisb=22_T2330125294&treeMax=true&treeWidth=0&csi=8351&docNo=1

Many people think that stock trades are conducted during the day which is usually 9 am to 5 pm. However, there are trading going on during the night time too. This article discusses about After Hour Trading System launched by SBI holdings in Japan. Before reading this article, I didn’t know about the After Hour Trading System at all and it was surprising to me to know about it. In Japan, prior to SBI holdings, Monex Inc. and kabu.com Securities Co. have been offering nighttime trading since 2001 and 2006. A daily market trading amount of Monex is approximately 2 million dollars and Kabu.com is about 1 million dollars. Whereas, SBI holing have a daily trading amount of approximately 5 million dollars which is higher than the sum of preceding 2 company’s market trade amount. Thus, After Hour Trading market scale has almost tripled after SBI launched its After Hour Trading System.

Trading hours for the new proprietary trading system, called Japannext PTS, are weekdays from 7 p.m. to 11:50 p.m. I thought that this After Hour Trading System will make the stock market more borderless. When New York Stock Exchange (NYSE) opens its market, many trades have been still made in Japan. Thus, people do not have to care about time to trade stock. In addition, if the trading hour prolongs, the stock market will expand since more trade will be conducted.

An After Hour Trading has promoted widely these few years, however, its market scales is only 0.03% of Tokyo Stock Exchange (TSE). This is because, there are fewer participants in the night time trading, and it is difficult to form a trade. In spite of this, participants think that After Hour Trading System will allow them to bring innovation to the Japanese equity market, and so do I. In order to make this happen, I believe that they should make every effort to invite attractive companies to join its market and expand its market scale. Since After Hour Trading System has introduced, I am wondering that there might be an introduction of Week End Trading System in the near future.

Is money spent on IT always worth it?

http://www.businessweek.com/technology/content/jan2007/tc20070116_940551.htm "Banks do not spend wisely on IT" Burton, Chris.

Jess Roper

Having up to date technology has always been a problem for all industries. The banking industry is no exception. This article comments that some banks have the misconception that spending the majority of their IT budget on fixing their old systems instead of just buying new technology. However, buying new systems is not always an option for banks. Obtaining a new system not only takes the money it costs to purchase it, but all the cost of training employees on the new systems. There are times when simply upgrading a system is necessary and getting new technology overall would be going over the top. If a bank has only had the technology for a year or two, there is no reason for it to spend the thousands of dollars it might be to replace it, instead it can spend less and upgrade the software or whatever it needs. The article implies that this is a waste of money and that the banks will pay for it in the end when the various systems slow down to an extent that customers get fed up and leave for another bank where the technology is faster.

When you are talking about a normal checking account or savings account, most people have no idea how long it takes the system to process their money. They do not know if it takes five seconds or fie minutes and most do not care as long as the money ends up in their account; if it took 5 hours then the bank would have problems and would definitely need to look into getting new systems. If the article talked about investment banks and transactions tied to investments, where ever tenth of a second counts in the price that the customer would get, that would be different.

Another comment that the article makes is that many banks concentrate more on the physical appearance of the bank than on the IT components that are the really important part of the bank. It claims that the IT behind the bank is much more important than what the bank looks like and how nice the lobby is. However, a balance is important in many cases. Financial institutions have always had to have a good, almost wealthy, appearance so that their customers can be confident that they already have money, so there would be no reason that the bankers or investment professional would steal the customer’s money. If you walk past a financial institution that looks shabby, you will judge it negatively and will most likely not want to put your money in it. Look at Fannie Mae: they have a large, impressive, beautiful building as their corporate headquarters. IT is important too. It does not matter how gorgeous the building is, if a company does not have the systems to back up the look of the building (the walk to back up the talk) the company might get the customers initially but the company will not hold onto them for very long. Customers are smart (to an extent) and look for something that they think will be reliable. If the company that they have trusted their money to turns out to not be able to deliver what they promised, the customer will turn to a competitor. A balance on what the financial institution spends it money on and focuses on must be made.

The article acknowledges that the transition will not be easy for many institutions. There will be banks that are so steeped in tradition of maintaining their old systems until they are about to die or perhaps the bank is small and/or isolated and so they can not afford to update completely. Finding a solution that works is heavily dependent on each individual institution; there can be no blueprint for every company to follow.

Rawan- Northern Rock and how the internet triggered a run on the bank

http://www.itpro.co.uk/blogs/editorial-blogs/chris-green/963958/northern-rock-and-how-the-internet-triggered-a-run-on-the-bank.thtml



Northern Rock, a British bank based in England had an online banking crisis. According to the article, their was an over-dose of people withdrawing their money through the website that resulted in a total of two billion pounds. In contrast, a total of two billion people went to there closest branches and demanding to get there money back, where the bank was running out of it, which stated “only a fraction has left via its branches.” The biggest drain of its disaster was that a large amount of people withdrew through the website.
Even-though a small fraction of people visited branches, a large fraction learned through the Internet that their were problems in he bank, and the immediately transferred/removed their money from their account. I can understand that there would be an unexpected breakout in the computer system, but I believe that their should be a back up server, or there should be a limit of number of people withdrawing at the same time, so that they would not exceed their capacity, or they can limit the amount of withdrawal.
For future recommendation, they have to improve their technology servers, I think they should increase high tech directors to improve their servers, and figure out their problem. If they had limit of amount of withdrawal their should be a notice that states that, so they could be in he save side.
Nevertheless, Northern Rock is running out of money, but they have a lot of duties ahead of them. They have to work out their server, which is very expensive. However, they have to work hard to rebuild up, and fix their problems to gain their reputation back.

Giving it another shot...

Mobile Banking's Second Act
Keith Sniatecki

Seventy percent of Americans own cell phones. That’s over 200 million people. It would seem crazy for any kind of company to ignore a customer base that size. But what is involved in attracting those customers to your service? That is the conundrum faced by bank executives today when considering mobile banking.
In the beginning of the decade, several big financial institutions rolled out mobile banking initiatives, but it seemed neither consumers nor technology was ready. Some people insist that, now in 2007, we are ready to turn the corner. There are several key reasons backing this assertion.
The first is that the actual phones we have today are better. It says handsets today have “microprocessors that rival the power of a late-90s computer.” Second, we are more familiar with the use of cell phones for more than just phone calls. Many people have already purchased online games, ring tones, etc. on their mobiles. The same challenge, however, remains.
The biggest obstacle facing mobile banking is the logistical problems between banks and mobile carriers. Additionally, there is the issue of compatibility with the thousands of models of handsets out there. Unlike the Internet where a bank could host its own site, the banks would be relying on the closed-data networks run by providers such as Verizon or AT&T. While it is attractive for these companies to see people relying on phones more, they would not be willing to let banks use their networks for free. Additional expenditure on the bank side further questions the viability of this already questionable venture. There are some alternative solutions for this.
One option is to have users access a mobile website. A bank would build a separate wireless (WAP) interface that customers navigate to by typing in a Web address. This, however, can be a slow process with even simplified pages. Also, it can get expensive for mobile users constantly paying for internet access. Additionally, security is another major concern.
There are also downloadable or pre-loaded OEM client applications. To use one of these, you would click to launch the application and it would prompt you for an access code. Then you would be able to access your bank information and complete simple tasks like check account balance, pay bills, or transfer money from checking to savings accounts. A concern with this is that since you are downloading information to the phone, it would be a security issue if you lost the phone.
Some major players in the development of this industry would be third-party core system and payment providers. They could act as the middleman between carriers and banks. This is the key to making mobile banking a reality. It is difficult though because banks and carriers are both huge industries that are unaccustomed to compromising their own core capabilities and sacrificing profits.
Despite the complications, mobile banking remains on the table as an in-progress innovation. Earlier this year, many big banks attempted to provide mobile banking services once again. Its attraction is the enormous scope of cell phones these days. Most young people view their cell phones as their most important possession. Banks do not want to lose they young customers and they will continue to pursue ways to attract them. Additionally, using a technology called Nearfield Communication (NFC) would allow debit transactions to made with cell phones instead of traditional plastic cards. This is already prevalent in Japan. No one wants to be left behind in what could potentially be the next wave of e-commerce, but they don’t want to go grow broke trying to catch it either.

John-Speed Killed The Floor Trader -- Wall Street's quest to process data at the speed of light relies on the physical proximity of servers to overcom

Martin, Richard. "Speed Killed The Floor Trader -- Wall Street's quest to process data at the speed of light relies on the physical proximity of servers to overcom." InformationWeek. Wall Street & Technology. New York:Jun 2007. Vol. 25, Iss. 6, p. 41

This article discusses the increase in electronic trading and the emergence of collocation of a firms system running their algorithms. Firms are hoping that the close proximity of their systems will eliminate time lags in area networks. In addition, firms are moving to electronic trading because they want their transactions executed instantly. For example, if a client wants to purchase 100 shares of Google stock trading at $600, and decides to call his consultant to purchase the stock it will take a while for the order to be executed and the price could jump up to $650 by the time the transaction takes place. Furthermore, firms are turning to electronic trading because a 1-millisecond advantage in trading applications can be worth millions of dollars a year to a major brokerage firm.

Collocation has allowed firms to execute transactions within seven milliseconds traveling from New York to Chicago. Furthermore, transactions taking place from East Coast to the West coast it only takes 35 milliseconds. Speed is extremely important to firms looking to obtain the best prices, which is why firms are paying high prices to have their servers placed in both the NYSE and the NASDAQ. The article explains how the servers in shared data centers are usually connected to Gigabit Ethernet. The Gigabit Ethernet uses the ultrahigh-speed switching fabric called InfiniBand increasingly used for the same purpose to support the servers and allow transactions to take place at such high speeds. InfiniBand is a high-speed input/output technology that speeds up the transfer of data-intensive files across servers, storage devices, and networks. Companies are looking to use InfiniBand because it will help reduce latency as a result from wires, switches and other equipment. Even though speed is important, how much faster can we go? Moreover, do we have the equipment that has the capability to support the speed?

Furthermore, while electronic trading sounds great it is putting floor traders out of work but is opening opportunities for ECNs to emerge. The stock market is now moving from a financial sector to an IT sector with the increase in efficiency and technology to execute trades and the elimination of latency.

Jeremy - Smells Like Green Spirit

http://www.wired.com/science/discoveries/news/2007/03/72939

This article discusses the conference held at MIT called Energy 2.0 and how many large companies are looking to increase efficiency and their product base by going green. Despite the fact that many revolutions have occurred the past few decades in technology, companies are using and selling the same materials they were selling back in 1975. It goes on to talk about how unlike previous ears, where the main challenge has been communication and the sharing of information, the large problem facing people today is the issue of consumption of energy.

The article went on to specify how companies are targeting and researching newer forms of previous existing technology, such as batteries. It was discussed that one of the large obstacles stopping hybrid cars that can currently reach 30 to 40 miles per gallon from reaching over 100 miles per gallon is the creation of a lighter, more powerful battery. So, while new technologies and boundaries are being pushed everyday, older technologies are also getting looked at with new perspectives that could indeed help newer technologies take shape.

Fatou Coulibaly - "Identity Solution"

“Identity Solution.” Anita Hawser. Global Finance. New York: Sept. 2007. Vol. 21, Iss. 8, pg. S8, 2 pgs.
http://proquest.umi.com.proxyau.wrlc.org/pqdweb?index=65&did=1339992231&SrchMode=1&sid=1&Fmt=4&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1193186246&clientId=31806

This article is about the imminent necessity to use a cash management security system to ensure and reinforce the security of online transactions in a company. It is because these sorts of operations increased a lot in the past and are still amplifying that companies need to make sure measures are taken to identify people who make payments within these firms. It is the US pharmaceutical company Merck which first introduced the concept of updating the firm’s security of procedures that related to payments effectuated by Merck’s enterprise resource planning (ERP) systems. Due to the fact that any account needs to have all the information about an individual who processed a transaction to be resubmitted in case of a doubt, “there is no central repository to quickly revoke signatory rights if needed.” Thus, every bank has its own complicated or long processes and forms to fill out when such things occur.

It is in this perspective that the CEO of IdenTrust (“a global network of banks including but not limited to Citi, Bank of America, and Deutsche Bank, that issues digital certificates certifying someone’s identity”) noticed that some companies were not aware of the number of bank accounts they possess, and that “25% of case account signatories are wrong.” Therefore it is crucial for such companies to adopt techniques which will enhance their security. For instance, instead of signing payment files at a company identification level, it will now be essential to perform that signing procedure at the individual stage. This means that in general, rather than just knowing that payments were done by employees within the company, now it is going to be more specific because the exact person who effectuated the corporate payment transfer will be identified.

I believe the implementation of this identity management initiative is very good because security will be ensured at its highest level. Employees won’t exchange each other’s passwords and information in order to process payments. Companies will know who is who, and who did what. IdenTrust will help firms to know and “certify that people are who they say they are.” The specific procedure consists of using the certificates in this way: “the certificates bind an identity to a pair of electronic keys, otherwise known as Public Key Infrastructure (PKI), which uses a public and private key to encrypt and sign digital information. PKI-encrypted digital certificates are considered to be one of the strongest means of authenticating someone's identity.”

I strongly approve of the use of IdenTrust’s digital identification signature credentials, not only for firms that have encountered serious security problems, but by all companies because online transactions and payment transfers don’t simply need to be performed with passwords and pin. The identification of the individuals will lead banks and many other companies to authorize their employees to take these important actions related to great amounts of money. I think this ID management solution should be furthermore developed and spread around the world, especially in countries where corruption and fraud are very recurrent. I found that this article was very interesting in terms of the specific processes it describes concerning security issues.

Moronta-Rural E-banking

Uganda and US Co. Launch Rural E-Banking

Ederer, Edith M. "Uganda and US Co. Launch Rural E-Banking." Associated Press 21 Oct. 2007. 23 Oct. 2007 http://ap.google.com/article/ALeqM5h6jErcVy1jTFGtYKzxMR0U22f2KQ.

This article discusses how Uganda's finance minister wants to give every part of the country accesss to the banking system and financial services. Finance Chief Ezra Suruma called upon an American company to help with the infrastructuring of this immense task because Uganda does not how the IT knowledge to take on such a task. The plan is to bring electronic banking to the rural areas in which 85% of the country's 29 million people live. So far, 389 savings and credit cooperatives are functioning and at least a thousand are to be created.

I feel like this decision is taking a big step forward to improve the economic situation of Uganda. Africa is troubled by poverty and turmoil and many of its countries lack stability. Implementing E-banking for all Ugandans will allow all the people who live in rural areas to deposit, manage, and have access to their savings. Many people who live in rural areas do have more money than people think but they can not do anything productive with it. This leaves people with no choice but to stash it in their homes and on their property because they have no where to go with it.

Currently many small banks have been built but they still lack an integrated system that will connect them with the national banking system. Uganda seeks help from foreign companies to help achieve its goals. When this project is finished Uganda should start to see vast changes in every aspect of its society. Many people in rural areas will have bank accounts and in turn will be able to recieve loans to further their local businesses. In the future, Uganands will start to see full-service banking institutions and be able to obtain credit and debit cards and he will also be able to pay bills electronically. Gradually, the economy should improve itself and Ugands will see better times.

Phil - Transformation in banking

Transformation in banking
by Team DNA | Saturday, 29 September , 2007, 11:47

http://sify.com/finance/fullstory.php?id=14535353

The article talks about the global economy in the banking industry, especially in India. Due to the increase in competition, many banks have started to work on chancing delivery channels and their quality of service. This also means to lower costs and to keep the pressure on other banks to adopt state-of-art technology. Privet companies where the first to take advantage over the use of technology then the public sector banks, also known as PSBs.

PSBs used to be known for their rising operating costs, mounting NPAs (Non-Performing Assets), declining profits and unfriendly customer. Now however, with the use of technology, they have been able to be more competitive and revamp the relations with their customers by making them friendlier to use. In India, almost 75% of the financial sector is made up of banking services which plays an important role in the economy. These improvements as M B M Rao, CMD, Canara Bank opines, "Indian banks have emerged stronger in terms of profitability, asset quality and bottom-line growth. Several balance sheet and profitability indicators of the Indian banking sector have inched closer to the global benchmarks. The adoption of international best practices in crucial areas such as prudential norms, capital adequacy, banking supervision, data dissemination and corporate governance have together enhanced the strength and resilience of the Indian banking sector."

Since technology was the driving force for change in the banking sector. Banks now can offer more, such as investment banking, insurance, credit cards, depository services, mortgage financing, securitization, and many other areas. Technology as allowed the consumer to have a larger amount of choices and information at their disposal. PSBs also offer ATMs, internet banking, D-MAT, and plastic money to help there customers access their accounts. The private sector however began to focus more on retail banking and trying to offer better products and make a better financial automation system to increase there customer service. So the future may hold that private banks may buy out some PSBs someday.

Overall the article is mostly about how technology helped increase customer services and appeal of banks through out India. It was also discussed that in the year 2010, the IBA predicted that total deposits in to banks in India will increase from Rs 10,676 to 3,500,000 crore. They believe this will happen because banks in India are striving to meet globally accepted norms for capital adequacy.

Jessica Davison "Online Businesses Face Credit Card Security Deadline"

Bednarz, Ann. "Online Businesses Face Credit Card Security Deadline." Network World 13 June 2005 16 Oct 2007 .

This article focused on the importance of secure online networks for consumers and for businesses. In particular, it focused on the deadline for secure networks that major credit card companies put in place for online retailers. The major credit card companies which included: American Express, Discover, MasterCard, and Visa “jointly created the Payment Card Industry (PCI) data security standard. The PCI standard applied to retailers, payment processors, and financial institutions”.

The PCI standard went into effect on June 30, 2005 and “consisted of 12 technology requirements for securing networks and applications, protecting cardholder data, maintaining a vulnerability management program, and regularly validating compliance via a third-party assessment.” This standard was fairly simple for major e-tailors to comply with because it consolidated the different security requirements of the various credit card companies into a standard set of requirements from all. However, some online retailers were not prepared to meet the new requirements and would face large penalties for non-compliance.

I found this article extremely interesting because we have discussed the importance of IT security throughout the course. This article seemed to be extremely relevant to all of us today, who do a lot of shopping and daily transactions online. I was very reassured to learn that online businesses could “face up to $500,000 in fines per incident if cardholder data is compromised and the merchant or service provider is not PCI-compliant.” Obviously, the financial institutions have recognized the importance of protecting individuals’ personal financial information and are taking security violations very seriously.

However, I also tried to see the security requirements from the perspective of the smaller online businesses. For many, compliance came at a high price depending on what existing security systems were in place. The article estimated that 2 months prior to the PCI requirements going into effect only about 30% of online vendors were up to the standard. “Particularly for smaller merchants, PCI compliance might require purchasing security products, such as encryption, access control, and activity monitoring and logging devices. There are also procedural mandates – such as the need to implement formal security policies and vulnerability management programs – that will require IT resources.”

Although I am extremely grateful that financial institutions recognized the need for standardized IT security practices, I could also see where these new restrictions might have been a tremendous burden for the many very small businesses that were started online. I remember seeing so many news stories of people who started one person operations that were trying to grow their businesses online. With the new IT restrictions I would think the ability to continue these very small ventures would be hindered.

Despite all of this I have concluded that PCI has had a positive long term effect. We all have a better chance of keeping our credit card information safe and the PCI mandates have allowed for new business opportunities for IT firms. These firms helped enable businesses to come into compliance by helping to encrypt and protect the databases that hold consumers valuable information; information that is also critical to the survival of the online businesses.

Data Latency Playing An Ever Increasing Role In Effective Trading

Wall Street’s quest to process data at the speed of light relies on the physical proximity of servers to overcome the technical barriers of data latency.
By Richard Martin, InformationWeek
Wall Street & Technology
May 25, 2007

http://www.wallstreetandtech.com/showArticle.jhtml;jsessionid=MMCMY42Y0Q0QCQSNDLPSKH0CJUNN2JVN?articleID=199702208

This article explores the importance of increased communication and efficiency in the securities markets through electronic trading. Electronic trading is seen by some brokers as a threat, and this is not unfounded since there has been a one fourth reduction in the number of floor traders in the NYSE over the past year. Electronic trading now accounts for 60-70% of trading in the New York Stock Exchange.

Yet overall, automated decision-making and execution systems have increased the efficiency of the trading process and reduces huge swings in the market when a backorder of buy or sell trades are executed. Electronic trading leads to greater smoothening and stability of financial markets.

Richard Martin, the author of the article, also stresses that speed is a major issue for firms in increasing their competitiveness in the market: “a 1-millisecond advantage in trading applications can be worth millions of dollars a year to a major brokerage firm.” Reducing latency is the time it takes for orders to get processed from execution to confirmation. It could mean the difference of securing an order at the best price.

This can be achieved by locating firms algorithmic data and processing centers as close to the exchanges as physically possible. Exchanges have also benefitted from this co-location of servers with exchanges, by charging firms for this service Stock exchanges have seen a 20-30% increase in revenue from such activities.

CEO and founder of BATS (Better Automated Trading System), believes that the goal of latency reduction will continue and will be never-ending. He quotes as saying: “If anybody knows how to get a signal transmitted faster than the speed of light, I'd like to talk with them." He is a big proponent of ultra fast trading and using electronic trading platforms and feels that Wall Street needs a change. Nasdaq has also been forthcoming in its acceptance of using technology platforms and electronic trades.

This article highlights the fact that technology is a key aspect in trading and is the way to the future of stock trading. With the global direction of breaking down barriers to capital markets in terms of “political, geographical, institutional and political barriers” to increase transparent and fair markets, electronic trading is in stride with this goal. Also with technological breakthroughs there could be a possible move to 24 hour trading.

However, there comes a point where there will be diminishing marginal returns in latency reduction from sub milliseconds, and this cannot differentiate your company from the next. Customer service and other old-fashioned techniques such as market know-how will come into play again. Personally, I think electronic trading can stabilize financial markets, reduce transaction costs, and creates a more civilized trading atmosphere other than what is seen in some stock markets in an auctioning environment, where the atmosphere resembles more of a fish market. The US exchanges are in stark contrast to other exchanges around the world such as the Hong Kong Stock Exchange, where there is no auctioning pit. Electronic trading I believe creates more order in stock trading practices.

Still Plenty of Jobs in the Capital Markets

Link: http://wallstreetandtech.com/story/showArticle.jhtml?articleID=201800876&pgno=1

This article discusses the extincting role of traders on Wall St,. since new technology is replacing the human capital. The article talks about how increasing technology is not a threat to wall st, but its changing the role of humans, allowing companies to grow and allowing graduate students to use their analytical skills and leave the clerical work to algorithms. Approximately 500 NYSE traders were let go when the exchange moved to partial electronic trading.

The differences can be seen in different roles that humans play in the stock market. For example: Floor Brokers have transformed in to becoming "quants" reports Credit Suisse Dan Mathisson giving example of his own department where people are working with Algorithms to understand stock patterns and trade better while leaving the execution to a computer model.

The 2nd threat is between Brokers/Advisors Vs. the Web. Websites like Zecco.com are allowing individuals to achieve free trades and ananymous blog advice to trade. This reduces the job of Financial advisors and other brokers. As such, some companies say that the technology is actually helping clients and brokers at the same time. The increase in timely trading and facilitation of the process makes the buy side firms like T-Rowe Price very attractive to compete with the higher Investment Banks.

The other difference arising is between Research Analysts and Software. Companies are always looking for statistical softwares which reduces the jobs of research analysts running numbers. But in the end, what ever is necessary to save costs, whether it is outsourcing, or setting up new software algorithms will be welcome but how it shapes the industry is yet to be seen.

Information Technology vs Insider Trading---Keith Sniatecki

http://www.wallstreetandtech.com/story/showArticle.jhtml?articleID=201801138&pgno=1


When one thinks of information technology in the financial services industry, international offenses and global criminal activity probably do not come to the forefront. Information technology, however, plays a critical role in the 21st century in combating one of the industry’s most serious misdeeds—insider trading.

The SEC mandates firms monitor their employees for concerns of insider trading. There are many ways to do this, but as technology has developed, it has become both easier and more in-depth. This is evidenced by the fact that in the past year, over a dozen i-bankers, analysts, and executives have been faced with charges. There was less than this number in the entire decade of the 90s, and, let’s be honest, insider trading did not just surface in the past year.
Buzzwords associated with the tracking of potential insider trading are “highly sophisticated” and “automated.” While there is still a lot of detective-style investigative work that goes into nailing a suspect, a large part of the case is built upon these computer systems.
For instance, Sherlock Holmes never used complex event processing (CEP). CEP is an ultra-high level analyzer that uses detailed statistical measures such as event streams processing, event correlation and abstraction, and event hierarchies to detect complex patterns among many events and relationships between events. This means that it could detect a high volume of trades going on in a particular stock just before the announcement of a takeover or merger. The Financial Services Authority—the UK’s version of the SEC—just announced it will use a new technology platform to monitor suspicious activity that uses real-time graphical dashboards to provide alerts. Also available and employed by some companies in the US, this is known as an enterprise compliance system.
Another weapon in the fight against insider trading is already used by many companies in a different capacity. It’s great when an IT support person can remotely take control of your computer to fix problems, but that same technology can also be used to monitor activity or retrieve specific data. Ironically, recorded keystrokes on one i-banker’s Blackberry show that the last thing he actually entered before he was arrested on insider trading charges was the phone number to a well-known defense attorney.
We have said that financial services are one of the first adopters of new technology, therefore, it should be no surprise that those tracking misdeeds in the industry are also up on the technology. These new programs and processes prove that it is impossible to escape the long, technical arm of the law. That being said, people will still attempt insider trading. This just means that they will also need to get more sophisticated in their methods and try to hide irregularities even more. I think they will fail, at least eventually. There is such an increased focus on stomping out corporate crime in today’s tightened regulatory environment that the tracking will only increase. In this story, there were multiple law enforcement agencies working together, along with the financial regulatory bodies of each country, and the banker’s employer.