Wall Street & Technology: Blog

MF Global Hires Risk Consultant after Rogue Trader Loses $145.5 million

Mon, 03 Mar 2008 13:04:19 -0500

Brokerage MF Global has hired external risk consultants to review its order entry systems, after a rogue trader lost $141.5 million when he was able to exceed his limit order and place unauthorized trades.

The incident comes just weeks after Soc Gen revealed that a rogue trader lost more than $7 billion by placing unauthorized bets on European stock indexes.

New Model Attempts to Price CDO Options

Mon, 26 Nov 2007 18:54:43 -0500

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).

To Survive the Next Market Crisis, Be Like A Cockroach, Says Morgan Stanley Trader-Turned-Author

Thu, 15 Nov 2007 09:46:08 -0500

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.

E*TRADE Gets Proactive About E-Mail Fraud

Tue, 14 Aug 2007 11:45:31 -0500

Welcome. My name is Mike Ellison and I am the EVP at Corporate Insight. We�re a firm that looks at the retail experience at a number of brokerage, mutual fund, and banking firms. From time to time, I�m going to be blogging on subjects related to wealth management. Much of what I will be talking about will come from our experiences in maintaining live accounts at the firms we follow in our research. When we uncover something I feel would generate some lively discussion, I�ll post it and hopefully you�ll chime in with your opinions.

To open our discussion, we recently received an email from E*TRADE on identifying and avoiding fraud that I think should generate some dialog.

Canaras Capital Protects its Data Against Botnet Threat

Tue, 26 Jun 2007 17:58:01 -0500

If you work for an alternative asset management firm, so much rides on protecting intellectual property, customer data and the reputation of your firm. That is the message from Raffi Jamgotchian, chief information officer at Canaras Capital LLC, an alternative asset manager specializing in credit markets that was founded in 2006.

With botnets and other dangerous forms of crimeware anonymously launching distributed attacks on companies, Canaras Capital set out to protect the firm�s reputation.

Gaming The System: Online Fraudsters Use ACH Efficiency for Illegal Benefits

Tue, 22 May 2007 08:30:56 -0500

What'll the cyber crooks think of next? Well, this isn't a new idea and it certainly isn't the type of flashy heist you will see in this summer's sequel Ocean�s 13 with George Clooney, Matt Damon and crew. But hundreds of account holders have lost funds after a most likely phony firm named Equity First generated random routing and account numbers and tried to deposit one cent. If the one-cent deposit clears, the fraudsters know the account is active and they begin to withdraw funds. And for financial firms, it's just another risk to add to the list.

SIFMA Chief Lackritz Testifies Before Senate

Mon, 21 May 2007 21:02:13 -0500

Marc Lackritz, CEO of the Securities Industry and Financial Markets Association, and the voice of the U.S. broker-dealer community, testified last week in front of the Senate Committee on Banking, Housing and Urban Affairs Subcommittee on Securities, Insurance and Investments. In his testimony, Lackritz reaffirmed SIFMA's support of a single-regulatory force and the adoption of a principle-s based regulatory approach. Being one of the most influential lobby groups on Capitol Hill, SIFMA has considerable sway in regulatory matters, and their staunch support of regulatory reform may yield meaningful change in the way securities firms are governed.

Read the full testimony here (PDF).

Sarbanes-Oxley Costs Take a Nose Dive

Wed, 16 May 2007 17:01:53 -0500

Costs to comply with the Sarbanes-Oxley governance law dropped last year for the third year in a row, largely because managers have been spending less time on reviews.

SEC Imposter Alert

Thu, 10 May 2007 16:53:41 -0500

Not only do companies have to worry about stolen laptops, rogue employees and hackers -- now they also have to worry about fake SEC examiners.

Wall St. Still Unprepared for Pandemic, SEC Mulls Action

Mon, 07 May 2007 21:00:33 -0500

The United States Government Accountability Office released a report (PDF) on its latest year-long study on the resiliency of U.S. financial markets last week, and the results were mixed. After examining seven critical exchanges, clearing organizations, and payment processors, the GAO determined that the financial industry's progress in ensuring resiliency in the face of disaster was promising, but there is still much work to be done. The report's discussion of communications between the GAO and SEC were intriguing, indicating that disaster preparedness in the U.S. may evolve from being a matter of common sense to being a matter of regulatory compliance.

JPMorgan Losing Data and Making Headlines

Tue, 01 May 2007 21:31:16 -0500

Two disturbing reports of carelessness with customer data have surface out of JPMorgan Chase this week. The first is a video posted yesterday on YouTube which allegedly shows customers' in-tact personal financial information being fished out of garbage bags left outside of Manhattan bank branches.

Cuomo Wins Big on Data Privacy

Tue, 01 May 2007 21:02:46 -0500

New York's Attorney General Andrew Cuomo last week obtained the first settlement in court under the state's data breach notification legislation. While the punishment of the exposed company, Chicago-based claims management firm CS Stars, LLC, was relatively light, the development opens up new legal vulnerabilities for firms that do not follow proper procedure in the event of sensitive customer data exposure.

The leak potentially affected 540,000 New York consumers, according to Cuomo's office. New York law requires immediate notification in the event of a security breach involving customer data. CS Stars, complying with FBI instructions, did not announce the breach until 2 weeks after discovery.

Keep An Eye On Your Outsourcers

Tue, 01 May 2007 16:21:51 -0500

One message that rang out loud and clear from some of the compliance discussions today at the SIFMA show was: broker-dealers take outsourcing lightly at their peril. Broker-dealers retain regulatory responsibility for the functions they outsource. One of the regulators scrutinizing securities' firms outsourcing relationships is the NYSE. "There's been controversy over the rule we proposed [NYSE Rule 340]," said Grace Vogel, executive vice president, member firm regulation at NYSE Regulation. "We don't object to outsourcing. Where we see problems is when something goes wrong and a firm says, 'We're not responsible' and points to the outsourcer and says, 'go regulate them.' The outsourcer is outside of our jurisdiction. Firms should outsource functions, not responsibilities."

Signs That A Hedge Fund May Be Trouble

Tue, 01 May 2007 13:23:07 -0500

If your firm is a counterparty to a hedge fund, invests in or partially owns a hedge fund or places clients' money in a hedge fund, it may be somewhat accountable if the fund commits fraud, losses money or goes bankrupt. Of course, not all hedge funds are run by crooks or mismanaged, but hedge funds do have an 8.5% failure rate, and that rate is growing. In 2005, hedge funds lost $1 billion, in other words one dollar out of every thousand.

Does Your Firm Own Too Many Yen?

Mon, 09 Apr 2007 15:51:38 -0500

Are you exposed to too much foreign exchange risk? Most companies don�t know the answer to this question, according to executives at FiREapps, who released version 3.5 of their eponymous corporate foreign exchange management software today. The software sends queries out to a company�s financial systems and analyzes its corporate-wide foreign exchange exposures, based on real-time currency data.