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As the number of data breaches reported annually continues to surge, costs incurred by companies who report an incident are also increasing, according to a new study by security and privacy research organization, the Ponemon Institute.

With the proliferation of dark pools causing market fragmentation for the buy-side, Pragma Financial Systems LLC and its partner Weeden & Co. LP plan to launch a liquidity management system in January that will allocate orders among over 30 dark pools. While the new system is not aggregating the dark pools, it's applying rigorous mathematics and optimization techniques to help buy-side traders efficiently manage their orders across a comprehensive list of dark pools – while preserving their anonymity.

There was an interesting article in yesterday’s Wall Street Journal (login required):

[SEC Chairman Christopher] Cox also is expected to put up for final vote Wednesday a proposed rule that would enable companies to create online shareholder forums where investors and management could exchange thoughts, establishing a kind of chat room to improve communication. Opposing that model is the AARP, the lobby group for adults 50 and older, which said its studies show that doing so would result in fewer of its members participating in shareholder elections.

A couple of thoughts spring to mind here:

For startup hedge funds and existing hedge funds that would like to have an office in New York City, Eze Castle Integration announced today it's going to start offering "managed suites" at 529 Fifth Avenue and 44th Street (near Grand Central Station) early next year. The company will provide office space, computers loaded with basic office software, market data feeds, Blackberry services, a telecom infrastructure, conference rooms, a receptionist, a 24x7 help desk, a shared data center, disaster recovery via data replication to Eze Castle's Boston data center and even trial-level versions of software from Capital IQ, MarketStream and others.

In the aftermath of the CDO (collateralized debt obligation) crisis, for firms that are ready to dive into securitized credit products again, a new pricing model came out today for valuing exotic credit products such as options on tranches and forward starting CDOs (a forward starting CDO is a single tranche CDO with a specified premium starting at a specified future time).

Security firm F-Secure has warned of an upsurge in attacks against banking sites, using a new generation of malicious codes in a technique called "Man in the Browser".

James C. Perkins is a chameleon. For video segments he's produced for YouTube, Perkins, the founder, CEO and portfolio manager of Thrasher Funds, dons white sunglasses and delivers news tidbits in a hip-hop-and-MTV-influenced staccato style. For an interview with an editor at a conservative trade magazine, he speaks soberly and articulately, using longer words, lengthy and grammatically correct sentences and quickly bringing up a past job as equity analyst at Morgan Stanley.

In the last 24 hours, there has been a spike in malicious attacks against banks, and in particular against C-level executives at financial institutions around the world.

With bird flu outbreaks cropping up from Europe to Asia, scientists say the new pattern of spreading infection makes a worldwide human pandemic more likely. So how well prepared are U.S. financial firms for a pandemic?

Well, 2,775 financial firms recently took part in a drill to try and answer that very question.

Amidst some modestly hopeful signs that Iraqis' quality of life is improving (civillian deaths are down, portions of infrastructure have been restored) and that we're planting the seeds of capitalism in Iraq, the executive director of the Iraq Stock Exchange, Taha Ahmed Abdul-Salam, said today that the exchange will start electronic trading early next year. It will also be open five days a week instead of the current three days.

A couple of days ago, I posted about how Fidelity reps made some hay from E*TRADE's troubles. Now, another firm has sent an interesting marketing email to clients.

StreamBase is announcing today that it's built a Reuters Market Data System-centric edition of its StreamBase Studio complex event processing software. StreamBase Studio itself is both an Eclipse-based graphical development environment and a CEP runtime engine that connects to all the major data feeds and can analyze those data streams in real time. Developers at about 50 Wall Street firms already use StreamBase Studio to build applications that rely on market data streams, such as automated trading, best execution and market data analytics.

Richard Bookstaber, author of the book Demon of Our Own Design, offered some unique advice last night to financial firms that want to survive future crises (like the current CDO fiasco): Be more like cockroaches. Not in the sense of living in drainpipes and scurrying out at night to scare unsuspecting apartment and office-dwellers, as New York City cockroaches do, but in a survival-of-the-simplest ideal. While many "super designed" insects in certain jungles that developed specialized adaptions for only one type of flower or seed pod are now history, the homely cockroach lives on and on.

In their ongoing quest to reduce data latency in the delivery of market data to algorithmic trading programs, Wall Street firms are starting to take data feeds directly from the exchanges, cutting out middlemen like Reuters, Thomson and Bloomberg. IBM's recently-released WebSphere Front Office for Financial Markets 2.0 is one of the few products (Wombat offers another) that can accommodate this. "Customers have told us they're interested in having a platform that can handle data that isn't necessarily tied to a data provider, says Larry Baldauf, director of financial services strategy for IBM's software group. "We can connect to different exchanges and data sources and distribute the data to applications."

The U.S. Securities and Exchange Commission (SEC) brought 14 percent more enforcement cases in fiscal 2007, the first increase in four years, according to official figures released this week.

A new report revealed that 60% of phishing attacks against global banking brands are targeted against U.S. institutions. UK banks trail in second place, although they currently are the victims in just 16% of all cases.

Everyday it seems another financial firm comes forward to admit that it’s facing billions in write-downs due to CDO and sub-prime mortgage exposure. Bank of America, Bear Stearns, Citibank, HSBC, Merrill Lynch, Wachovia and Washington Mutual have all announced huge losses in the past few weeks. The latest addition to this list is E*TRADE. On Friday, E*TRADE disclosed that the losses it anticipated on its mortgage-related assets could be bigger than expected and that the SEC was investigating the firm’s loan and security portfolio. The inevitable analyst downgrades followed, led by Citi’s Prashant Bhatia who said there was a 15% chance the firm could go bankrupt.

A group of investment banks has decided to stop developing their own electronic trading platforms for 144A securities and instead share the single platform launched by the Nasdaq Stock Market. Yesterday the banks announced their intention to form The Portal Alliance, an industry standard facility designed to serve the market for 144A equity securities – referred to as private placements.

In a sign of the rapid globalization of hedge funds, EzeCastle Integration, a provider of outsourced IT services and consulting for more than 450 hedge funds, announced today that it has set up a London operation. "Many of our clients are looking for one provider who can provide consistent service, policies and procedures in all the territories they're located, so they can easily do business across geographies," says Bob Guilbert, managing director. "It's natural for companies that are international to want to consolidate their IT best practices under one roof."

Intel this morning introduced a series of dual-core and quad-core server processors that run faster and consume less energy than previous versions. The new Intel Xeon 5400 server chipset can achieve front side bus speeds up to 1600MHz yet consumes only 80 watts of power.

To combine big-city investment management services with small-town personal service to its affluent clients, Coconut Grove Bank, Miami, announced this week that it has deployed Sungard's WealthStation and Overlay platforms. WealthStation lets investment advisers provide financial planning and investment products through one system, and Overlay provides access to well-known money managers at large institutions. Together, they "help an organization like ours compete with the Citibanks of the world, with a response time that's much quicker than you find in the large organizations," says Barry Givner, executive vice president and senior trust officer for Coconut Grove Bank's Trust and Wealth Management Department.

By the end of this year, State Street Global Advisors should have an end-to-end alternative investment platform that can handle OTC derivatives and swaps, says SSGA Chief Technology Officer Keith Dennelly.

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In a research note released today, Richard J. De Lotto, principal analyst, banking industry advisory services at Gartner, declared that financial firms will step up their focus on green IT through 2012. "Environmental issues will rise up on political, media, enterprise, investor and consumer agendas through 2012," he stated in the note. "The financial services industries will not escape this profound change in stakeholder focus, and their IT departments will bear the brunt of the impact.

Although they don't like to be considered "CMMI zealots," most major Wall Street firms use CMMI methods for software development and require outsourcers to do the same. Today, Carnegie Mellon's Software Engineering Institute, with help from top IT executives at General Motors, the Department of Defense and the Government Accountability Office, rolled out an extension to CMMI, called CMMI for Acquisition, that provides a framework, a standard and a common language for buying (rather than developing) software.

Identity theft and consumer protection are a bigger priority than ever for state legislators, according to a new study by Boston-based Aite Group, which found that more than 200 bills focusing on the issue are currently pending at state level. As a result, financial institutions must keep a careful eye on any changes and be prepared to act on state legislature to avoid costly fines.

The swift ouster and resignation of two powerful Wall Street CEOs within a week of one another shows there is a serious management void in the executive suite of financial institutions that went whole hog into derivatives tied to sub-prime mortgages.

Whether or not to deploy mobile applications is no longer a valid question for the 214 executives attending today’s Financial Mobility Summit in Boston. These execs, from firms such as MFS, Evergreen Investments, American Funds, Eaton Vance and Alliance Bernstein, are all old hands at delivering applications via Blackberry to at least one group of constituents, be they portfolio managers, wholesalers or institutional investment managers.

Complinet, a provider of global compliance solutions, has launched a global networking community for compliance professionals in the financial services industry, enabling peer group information exchange about regulations and compliance.

Good but busy times lie ahead for the wealth management industry – it should grow 30% annually over the next few years according to a PriceWaterhouseCoopers report – and the increasing workload is driving wealth and asset managers to streamline their tasks. One time-consuming and difficult chore is preparing investment proposals, says Bob Skea, chief operating officer of Northstar. "The primary reason it's hard is that the work is manual – they're using PowerPoint, they have to find all the client's fundamental information, they have to collect risk profile data, they need to combine all that with an asset allocation modeling tool, which is often in a different system," he says. "Information about different products — fixed income, SMAs, mutual funds and so forth — all come from different sources." And once all the right information is gathered and a proposal is drafted, it may be noncompliant, because there's no record of how the proposal was generated and where the information came from.

Although its climate is hotter, its industries more diverse and its market smaller, in some respects the Colombia Stock Exchange looks like any U.S. or European exchange. It grapples with the same technology issues -- such as how to get data latency below a few milliseconds and how to build an IT infrastructure that can easily scale and withstand market volatility and surges - that plague any exchange or firm with a large trading floor.

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