Wall Street & Technology: Blog

« September 2007 | Main | November 2007 »

Anyone who even remotely follows technology and the Internet has no doubt heard of Web 2.0. While there does not seem to be one accepted, all-encompassing definition, there are a number of features associated with it: AJAX enabled web pages, reviews, blogs, etc. Although it may be hard to define, as Potter Stewart might have said, "I know it when I see it."

Oppenheimer & Co. Inc. has agreed to pay $1 million to settle charges it produced "flawed, incomplete and untimely data" in breakpoint self-assessment, the Financial Industry Regulatory Authority announced.

Cutting costs and consolidating/virtualizing servers are top priorities for data center managers, who are struggling mightily to meet service level agreements and staff their data centers properly, according to a study Symantec released today. The company polled 800 data center managers at very large, Global 2000 companies who manage an average of 14 data centers each. (Although it's probably better known as a security vendor, Symantec's acquisitions of Altiris and Veritas have turned it into a data center infrastructure provider). Among these data center operators, about one-fifth of whom work for financial companies, data center expenses are growing rapidly – 69% said their expenses were growing at least five percent a year and 11% reported growth of 20 percent or more per year. Although these respondents also reported budget increases – an average of 7.1% -- the 3% inflation rate means these budgets are not keeping pace. These managers also stated that IT spends more than two-thirds of its budget in the data center.

The UK's Financial Services Authority (FSA) is launching a formal assessment of the systems hedge fund managers have in place to prevent market abuse, after being "disappointed" by the controls at firms it visited.

The SEC is stepping up its efforts to fight what a senior official called "rampant" insider trading among Wall Street professionals, and has formed a working group to focus on the crime. Peter Bresnan, the SEC's deputy director of enforcement, said the agency is seeing a trend in larger rings involving more people, international cases, as well as those involving securities professionals and hedge funds.

As order books get bigger – the Tabb Group recently estimated that in just equities and options, the volume of market data messages across the global exchanges will soar from under four billion messages per day in 2006 to nearly 130 billion per day by 2010, as the number and variety of trading venues increases, as trades become smaller (e.g. 100 shares per order), as cancels and replacements accelerate, and as Reg NMS and MiFID make it necessary for firms to prove best execution, the need for an engine that can process and store that order book data efficiently becomes greater.

Wall Street firms are ready to spend on new wealth management technology, according to a report released today by Datamonitor that predicts spending on wealth management IT in North America, Europe and Asia-Pacific will reach $28.5 billion by 2012.

When insurance company John Hancock announced this week that it's outsourcing its separately managed accounts administration to JPMorgan, we saw this as a reflection of three trends: separately managed accounts have become very popular, good operations staff have become hard to find, and firms that experience growth in an investment area are tending to outsource operations for it.

NYSE Euronext has partnered with two European investment banks BNP Paribas and HSBC to develop an electronic block-trading platform for large orders in Pan European stocks in a move that positions the exchange to operate a dark pool under the Markets in Financial Instruments Directive (MiFID).

With the implementation of the Markets in Financial Instruments Directive (MiFID) just days away, a new study has found that a massive 93% of financial services institutions do not believe that MiFID will be consistently implemented and enforced across Europe.

Wachovia has just completed a state-of-the-art data center in the Birmingham, AL area and is 18 months into a 36-month effort to relocate and overhaul many of its data centers for the dual purposes of reducing energy consumption and achieving geographic diversity. "We are being smarter about how we deploy data centers and using technology that's more efficient in terms of power consumption, heat dissipation and cooling," says Thomas Caddoo, vice president, Corporate and Investment Banking Technology at Wachovia. "The big drain is cooling. If you can use technology that dissipates heat out of the main data center environment and into an environment where it can be recirculated or even expelled out of the building, that puts a little less strain on the actual cooling, the HVAC system."

Former SEC acting chairman and commissioner Laura Unger says companies should adopt cutting-edge technology and a best practices approach if they want to keep ahead of the regulators and avoid costly fines.

According to survey results released earlier this month, the recently effective SEC Rule 22c-2 may not be the end-all solution for mutual fund market timing abuses. Rule 22c-2 seeks to curb market timers by imposing short-term redemption fees on trades that fall within certain timing parameters. However, 69 percent of mutual fund directors surveyed indicated their belief that those abuse the market will continue to do so, regardless of these fees.

As we reported back in January, hedge funds are eager to outsource their middle- and back office functions, due to the growing complexity of these functions as hedge funds grow and offer more exotic products, as well as the difficulties of dealing with corporate actions regulations and Sarbanes-Oxley. Surveys over the last couple of years have shown that hedge funds are planning to spend high proportions of their budgets on experienced third party providers.

Bear Stearns is being investigated by Massachusetts securities regulators over whether the brokerage improperly traded with two in-house hedge funds that collapsed last summer, burdening investors with added losses.

Buy side firms will spend $586 million on research technology this year and $1.1 billion in 2010 -- a compound annual growth rate of 22%, according to a report put out today by the Tower Group. The reasons for all this investment are diverse: "Instead of depending largely on broker research, buy-side research has become a complicated process that aggregates internal analysis, broker research, independent research, outsourced, analysis, and use of other research tools," said Dushyant Shahrawat in the report. "Managing this complicated process efficiently and ensuring that client dollars are used effectively requires buy-side firms to develop a new technology infrastructure instead of managing it in Microsoft Word and linked Excel spreadsheeets." Brokers, on the other hand, are investing in new research tools to become more cost-efficient, to distribute research to the buy-side under new commission arrangements, and to work with the changes going on on the buy side.

Earlier this week, Germany’s Deutsche Borse and Chi-X Europe, a Pan European alternative trading system, operated by a subsidiary of Instinet, each said they received regulatory approval to offer a trade reporting service for off-exchange equity trades. With Markets in Financial Instruments Directive going into effect on November 1st, competition is heating up among the various players seeking to offer a trade-reporting service.

The Securities and Exchange Commission (SEC), which recently heightened its scrutiny of the hedge fund industry, is suing a New York hedge fund and its principal, alleging the fund made more than $1.48 million in profits from illegal trading.

This morning we came across a fascinating conversation between Bill Moyers and John Bogle, founder of Vanguard, that took place during an episode of Bill Moyers Journal. To read the entire transcript, click here. Bogle basically asserted that Wall Street is ruining our society.

Trading Technologies, the world's largest technology provider for futures trading, has won a three-year-long lawsuit against eSpeed, the electronic bond trading unit of Cantor Fitzgerald

A jury in the U.S. District Court for the Northern District of Illinois awarded Trading Technologies $3.5 million after finding that certain versions of eSpeed's futures-trading software, last used three years ago, infringed on its patents.

A new competitor called Covestor has quietly rolled onto Wall Street and is hoping to dine on the lunches of mutual fund and hedge fund managers. "We want to de-institutionalize money management and funds management," says Perry Blacher, director of marketing and co-founder of Covestor. "We're taking on the guys in the big corner offices with wood paneling who rely on people's laziness," he says.

Every few years, we review commissions at the firms that we monitor. Given the recent elimination of the "Merrill Rule", it seemed an opportune time to revisit this issue since the default account that clients are being switched into (unless they specify otherwise) are standard commissionable brokerage account.

Morgan Stanley has agreed to pay a $7.5 million fine to settle charges that over a five year period it provided customers with insufficient written trade confirmations for municipal securities and bonds, the Securities and Exchange Commission (SEC) said.

Thomson Financial announced today that nine of Wall Street's leading bond dealers are investing about $180 million to purchase a minority stake in TradeWeb, the electronic trading platform for fixed-income securities and derivatives. TradeWeb will continue to be owned by Thomson and the consortium of broker dealers. The goal of the strategic partnership is to drive TradeWeb's expanson into multi-asset class trading and to create more of a unified platform with integrated processing for the trading of fixed-income, equities and derviatives, according to the release.

At an event yesterday, Intel ran demonstrations of its new vPro chip for business PCs that's starting to be packaged in Dell and HP computers (and will soon be embedded in laptops). The vPro chip contains what Intel calls Active Management Technology that allows computers to be set up, fixed and managed remotely, even if the computers themselves are turned off. This means an IT person in Omaha could troubleshoot and fix the computer problems of a hedge fund manager in Greenwich, CT, even at 3:00 a.m. while the manager is asleep and his PC unplugged or crashed.

The European Commission has opened an in-depth investigation into the $18.4 billion takeover of Reuters by Canadian financial information company Thomson, saying the merger raises "serious doubts" about fair competition in the financial information business.

The New York Stock Exchange (NYSE) fined 15 Wall Street firms a total of $10.4 million for violating rules governing delivery of prospectuses and other information to investors.

Pump-and-dump spam touting particular stocks has become one of the most common type of nuisance e-mail worldwide. But the Securities and Exchange Commission (SEC)’s anti-spam drive, code-named Operation Spamalot, has now caused a massive drop in this type of spam, according to new findings.

The U.S. Securities and Exchange Commission (SEC) has been particularly busy this year, increasing enforcement actions in fiscal 2007 for the first time in four years.

Since 2003, charges brought by the SEC had fallen at an average rate of 5 percent per year. They reached a record high of 679 in 2003, following accounting frauds at Enron Corp. and WorldCom Inc.

Overall, the employment news was good today -- the Labor Department issued a report that found that U.S. employers added 110,000 jobs in September. This followed an increase of 89,000 in American payrolls in August.

Despite the heavy partying that took place last night at SIBOS, more than 1,000 attendees were settled into their seats 7:45 this morning when Nicholas Negroponte, founder and chairman of the One Laptop per Child non-profit association, arrived to give an update on his project -- providing laptops for third world children -- and to offer random critiques about consumer electronics. Although (perhaps because) the topic wasn't core to banking, payments or the capital markets, the audience was riveted and the applause Negroponte received at the end went on for several minutes. Negroponte made the connection to the conference matter this way: better educated people in underdeveloped countries will be able to become banking and capital markets customers. "Growth is all in the developing world," he said.

Wall Street Systems, a provider of treasury, trading and settlement solutions and services, announced at SIBOS this week that it's now hosting its BackOffice software. The company will act as an application service provider for those firms that don't have the interest or resources to develop and maintain software for securities and derivatives operations.

As we discussed in our weekly e-Monitor Update, Fidelity this week updated its Live Chat tool with a new design and format. While the changes were strictly aesthetic, the tool clearly remains an important factor in connecting clients and customer service representatives.

At SIBOS this week, Reuters announced that it has developed an enterprise data management system. Most people are familiar with Reuters Market Data System, the firm's real-time market data platform. What Reuters is adding here is a reference data system (for historical data) and an enterprise integration engine for working with data from other sources.

Despite having almost half of its business come from the securities industry, SWIFT is still having a difficult time getting fund managers to join the network, SWIFT CEO Lazaro Campos told Wall Street & Technology in an exclusive interview at SWIFT's annual conference in Boston. In order to attract fund managers, Campos says SWIFT will focus on ease of use and a better fee structure.

Last week Wachovia and Lloyds TSB Bank announced that Wachovia's Hong Kong operation will take over trade back office processing from the UK bank. Details of the agreement were not released, but Wachovia did reveal that by early next year, it will fully take over trade processing.

In the opening keynote speech at SIBOS today, Kenneth Lewis, CEO of Bank of America, spoke of the state of the financial market, the confidence that has been lost, and how that confidence can be restored, along the way evoking Garrison Keillor's Lake Wobegon.

When you pick up a phone, you usually don't think about how the call gets from your handset to the person on the other end. But as trading requires lower and lower latency, many traders have started to think about how their orders and messages get from point A to B.

Many associate BT with just telephones in Britain, but the London-based company has almost equal in size in the U.S., according to Chris Pickles, manager of industry relations for BT Radianz. BT has 4,500 financial services clients in the US, another 4,500 in Europe and a couple of thousand in Asia, he reports. And, globally, BT handles 100 million messages per second.

Private equity firms are still chasing financial technology companies, especially in the hot electronic trading space. TradingScreen, a global player in the execution management system (EMS) space, has raised over $100 million from two private equity firms to restructure the ownership of the company and to cash out existing investors.

May 2008 Sun Mon Tue Wed Thu Fri Sat         1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Weblogs of Interest Dark Reading: Firewalled Chief Risk Officer: New Era of Risk Management InformationWeek's Blog Digest Parry Aftab, the Privacy Lawyer

Categories Asset Management Wealth Management Authors Cory Levine Greg MacSweeney Ivy Schmerken Melanie Rodier Penny Crosman Compliance Data Latency News Analysis OTC Derivatives Operations Security Podcasts Risk Management SIFMA TMC Trading Archives May 2008 April 2008 March 2008 February 2008 January 2008 December 2007 November 2007 October 2007 September 2007 August 2007 July 2007 June 2007 May 2007 April 2007 March 2007 February 2007 January 2007 December 2006 November 2006 October 2006 September 2006 August 2006 July 2006 June 2006 May 2006 April 2006 February 2006 January 2006