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Today's Top Stories
1. High-frequency traders aim to change public image
2. Buy-side ponders new execution strategies and tools
3. Mobile banking apps lead to new security issues
4. New biometric ATM in development
5. LiquidNet faces its future
Also Noted: ANX
Spotlight On... Does your bank's IT system comply with Dodd-Frank?
ConvergEx to be bought by PE firm; Deutsche Bank loses CIO and much more...
 | Leveraging Predictive Analytics in the Data Center to Manage Performance & Risk - August 9, 12 pm ET
Complex IT environments are generating massive amounts of performance, metric, and alert data every day. It’s becoming increasingly difficult to sort through this information in a timely manner to take actionable steps to manage risk & minimize outages, improve operational efficiencies, or identify new growth opportunities. View this webcast to learn more. |
The news that ISIS--the mobile payments network set up by the AT&T, T-Mobile and Verizon--has partnered with the top card companies was hardly a surprise. A few months ago, the ballyhooed consortium switched gears and said it was no longer interested in setting up a radically new payment system that would challenge the hegemony of Visa and MasterCard at the processing network level. That was lamentable in some ways, as such a network would have marked a supremely aggressive challenge. But ISIS decided that it needed to work within the existing card payments eco-system, and that meant inking partnership with Visa, MasterCard and American Express, which it has now done.
Most people are interpreting the news as a another strike against Google's Digital Wallet program, which as of now only has MasterCard in the truck. That's an understandable way to frame the rise of NFC mobile-phone based systems. Certainly having the big four card networks in its camp is a plus for ISIS. (Discover was one of the original ISIS partners). And when both systems are up and running, we would expect a lot of competition between Google and ISIS for customers, via Groupon-like special offers.
But before we can truly sort out the winner, the NFC market needs to take off. ISIS understands that proprietary networks may not be the way to go. It wisely appears bent on creating interoperability in its new system. The key to success may be its ability to create a system that all so-called trusted service managers can connect to. ISIS intends to generate revenue by inking banks directly to its trusted service network business, but it needs to entice other TSM to connect as well. Banks already have strong TSM relationships and ISIS would be crazy to try to force the banks into an either-or situation. They do not want a direct confrontation with the likes of powerful First Data, which is aligned with Google at the moment. At some point, we would expect other TSMs to connect to ISIS if that's what enough consumers want.
The success of the NFC market also depends on the successful resolution of hardware issue at two levels: the handset level and the merchant POS terminal level.
NFC-enabled handsets will likely become more widely available fairly soon. But that doesn't mean the owner will be suddenly empowered to transact over NFC networks. A transaction depends on the merchant having the right hardware, and right now most of them don't. About 98 percent of all merchant with a card reading terminal currently not equipped to handle NFC-based tap payments.
Google has suggested that one third of U.S. point-of-sale terminals would accept contact-less payment within a year, a penetration rate that might or might not be sufficient for rapid adoption of NFC transactions. But such predictions may be wishful thinking. That would be quite expensive, though we fully expect the likes of First Data to market their FD-20 or FD-30 contact-less readers, both of which easily integrate into existing First Data terminal systems. We'll have to see how fast merchants embrace the idea of paying for more hardware in Utah and in other trials. Discounts may be necessary to draw out the would-be early adopters. Heck, they might have to consider giving some away. - Jim |
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Today's Top News
Companies on the leading edge of financial technology often end up on the wrong side of public opinion. This often is the result of companies not seeking to adequately explain what they do, allowing themselves to be defined by others in the court of public thought. "Dark pool" operators still lament their moniker, as the "dark" suggests a shadowy force at odds with average investors. High-frequency traders are hoping to do a better job of defining themselves.
We've noted that the industry as a whole has formed a few trade groups in the U.S. and in Europe and will seek a higher, less demonized profile with regulators. The New York Times takes a closer look, detailing how high-frequency firms are stepping up their presence in Washington. The Principal Traders Group, which requires that members identify themselves on their web sites, already comprises 31 firms.
"According to data calculated in June, its biggest members spent $690,000 on lobbying last year, more than double what they spent in 2009. They gave more than $547,000 to lawmakers' political campaigns in 2010, on top of the $456,000 they handed out in the last political cycle in 2008."
They have a big chore ahead of them. As the SEC takes up more market structure issues, they'll try hard to paint themselves as a valuable source of liquidity, noting that many are indeed formal market makers who support reform. Many of these firms have hired former SEC regulatory officials to make their case. Arthur Levitt, former SEC chairman, and Richard Lindsey, former SEC director of market regulation, have been advisers to Getco, for example. Playing the revolving door is certainly a time-honored tactic. We'll look to Principal Traders Group to weigh in on the big issues soon.
For more:
- here's the article
- Please attend our free webinar on July 27 on the Future of High Frequency Trading
Related articles:
High-frequency industry matures as regulations loom
Best banks to work at?
|
 | The future of high frequency trading
July 27, 2pm ET / 11am PT
These days, the promise of high frequency trading (HFT) has given way to talk of an industry shakeout and the limits of growth. While some cheer, others are convinced that the HFT business is well-poised for future growth and primed to conquer new markets. HFT firms face some big challenges, from regulatory scrutiny to competitive pressure to a challenging hiring environment. Register Today! |
Mutual funds and other buy-side institutions have long been vexed by high-frequency traders, and that has spawned an interesting movement by the sell-side to launch products that aim to create a more level playing field.
We've noted several of these products. Mutual funds often end up shooting themselves in the feet when trading in a high-frequency environment, especially when the trade is large and when it involves a high-volume stock. Mutual funds can undercut themselves as well when trying to work these orders via traditional methods. As an example of what traditional buy-side firms are dealing with and the options now available to them, consider Pipeline Trading Systems, which has drawn attention for some of its services in this area.
OnWallStreet takes a look at products such as its Alpha Pro, which aims to gives traders strategy recommendations and information about the multiplicity of statistical factors that might affect a trade in a high-frequency environment. Alpha Pro's tool "looks at hundreds of statistical factors that influence stocks. This takes into account whether trading is taking place more heavily on the offer side of the market or the bid side, how much trading is taking place in dark pools and what kind of news has played into results. It then makes a recommendation on a trading strategy, based on its statistical analysis. The recommendation can include whether to ‘front load' the buying or selling at the beginning of the time frame involved, whether to access block trading venues such as Pipeline's own crossing pool or that of Liquidnet, the leading system for block trades-or not. And what percentage of overall trading in a stock should be taken out of the market at an y given moment."
For more:
- here's the article
Related articles:
Interesting moves in Swiss equities dark pool market
Buy-side aims to embrace and guard against high-frequency trading
High-frequency trading may be roiling commodities markets |
When it comes to mobile banking via apps, it's pretty clear that security professionals need to embrace a whole new mindset. No longer can they be content to confine themselves to such well-known "technologies" such as Trojans, bots, phishing methods and the like. They need to understand that the emerging face of fraud will offer whole new challenges.
The issue is already cropping up, as we've noted before. Last year, Citibank's iPhone app was found to be storing customers' data on their phones. Google has pulled a number of anonymously written apps from the Android Marketplace that ended up being fakes that sought to exploit information on users' devices in order to commit banking and card fraud, according to Bank Systems & Technology. Here's how one expert put it: Apps "are not the same as your PC. If you're a programmer and you're writing for your Windows box, you have a general understanding of where your files go and where things fit in place. But on a mobile phone, there's not as much transparency there."
As of now, banks are being more cautious than many assume. Functionality has been limited to what is currently available on web sites, and it may be sometime before we see truly new features. All the angst over app security may be a tad overstated, some say. They argue that while mobile security is indeed a new frontier, mobile devices are generally as safe if not safer than computers that do not sit behind a formal firewall.
For more:
- here's the article
Related articles:
The future of online payments is mobile payments
NFC bridge technologies may be doomed
Banks and the looming security crisis |
We're seeing some interesting research underwa in the automated teller machine industry.
Russia's government-owned Sberbank made headlines recently with its prototype ATM that features lie-detection software as a way to gauge the creditworthiness of potential customers. The ATM also features biometric facial recognition software and records fingerprints. Credit approvals via ATMs are taking off already in some countries, like Turkey.
Now comes word from Scientific America that NCR is developing "a new type of freestanding ATM, shaped like a pillar and featuring a fingerprint biometric sensor, preset cash buttons, a cash dispenser and receipt printer. A user would simply press his thumb on the sensor, push the appropriate, color-coded button for desired denominations and walk away with cash and a receipt." This new ATM is being developed with "under-banked" countries such as India and China in mind. The hope is that these waist-high pillars could eventually introduce a whole new slate of financial services to people whether they are literate or not.
Many people have suggested that mobile banking could likewise be a transformative service. So it's no surprise that NCR is considering future designs that would "enable bank customers to conduct transactions via mobile phones with near-field communications capabilities. In this way, customers would use their phones as a ‘dislocated interface' with the ATM."
For big banks that have designs on these markets, a lot of investment will be required in the core technologies. There's no guarantee as to how all this will play out. But the innovation is welcome.
For more:
- here's the article
Related article:
ATM features voice biometric technology |
The international exchange industry remains in flux. Most people assume that the trend toward globalization is intact and going strong, but then again, we've recently seen the LSE's effort to buy TMX fall apart. And the jury is still out on the Deutsche Bourse-NYSE Euronext proposed merger.
All this is playing out amid an increasing sense of urgency among exchanges, a sense that the future is not guaranteed unless they do something dramatic. In addition to deals, the activity of choice at the moment is to fundamentally rethink their infrastructures, investing in technology to attract volume and make themselves a critical venue for traders. This presents an opportunity for dark pools, which have been suffering from lower volume all year.
LiquidNet, for example, is aiming for more partnerships with overseas exchanges that would provide access to the firm's platform. Liquidnet recently launched a new service with the SIX Swiss Exchange, giving Swiss brokers access to block liquidity via dark pools. According to Wall Street & Technology, "While exchanges are single market focused, this partnership will give the Swiss access to a total of five European markets. Next, Liquidnet is going live with the four next major European markets: The U.K., France, Germany and the Netherlands, and plans to add other markets. Apparently SIX Swiss Exchange had a previous block system and they closed that down."
This globalist strategy seems to be working, and the company is pursuing more revenue in Europe, Asia and Latin America. It is forecasting a healthy bump in revenue from its global operations this year.
For more:
- here's the article
Related articles:
Interesting moves in Swiss equities dark pool market
Liquidnet and the limits of independent dark pools |
Also Noted
| This week's sponsor is ANX. |
 | Whitepaper: IT GRC Turning Operational Risks into Returns
Recent financial upheavals have resulted in a wave of increased regulations. As a result, companies across the spectrum must implement an effective IT governance, risk and compliance (GRC) framework.
Download this white paper to learn how to turn IT GRC processes into strategic assets. |
A new survey has found that buy-side firms in general are not adequately prepared from an IT point of view to comply with Dodd-Frank's OTC derivatives clearinghouse requirements. The survey by SimCorp has found that 77 percent of firms stated that they either do not have or were not sure that they have the right systems in place to support compliance with the law. This is not all together earth shattering given that the final rules have yet to be hammered out. Hopefully, all firms are rough-sketching what they need to do trade legally. Article> ConvergEx to be bought by PE firm. Article
> Another bank sued by hacked customer. Article
> Deutsche Bank loses CIO. Article
> FBI arrests 14 in PayPal hack. Article
> WorldFlow launches new iPad app. Article
> Algo Technologies CEO steps down. Article
> Spending on reconciliation software grows. Article
> State Street pares IT staff. Article
> The costs of AML going up. Article
> Criminals hack ATMs in wake of disasters. Article
And Finally... Developers ponder the PlayBook. Article
> The future of high frequency trading, July 27, 2pm ET / 11am PT These days, the promise of high frequency trading (HFT) has given way to talk of an industry shakeout and the limits of growth. While some cheer, others are convinced that the HFT business is well-poised for future growth and primed to conquer new markets. HFT firms face some big challenges, from regulatory scrutiny to competitive pressure to a challenging hiring environment. Register today!
|
> Questex Media to Launch M3 - Invitation-Only Event for Mobile Industry Executives - November 29-December 1, 2011 - Grand Del Mar, San Diego, CA Questex Media LLC will launch M3, the first invitation-only event focusing on vertical industry segments within the mobile space. This first in a series of mobility events will focus on health, finance and retail within the mobile landscape. M3 promises to be a catalyst to help participants organize, structure and monetize these evolving industry verticals. For further information, contact Jennifer Ware at 203-831-0075, jware@questex.com or visit www.m3mobilityexchange.com.
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> Whitepaper: IT GRC Turning Operational Risks into Returns Recent financial upheavals have resulted in a wave of increased regulations. As a result, companies across the spectrum must implement an effective IT governance, risk and compliance (GRC) framework. Download this white paper to learn how to turn IT GRC processese into strategic assets.
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©2011 FierceMarkets This email was sent to nbrauchitsch@yahoo.com as part of the FierceFinanceIT email list which is administered by FierceMarkets, 1900 L Street NW, Suite 400, Washington, DC 20036, (202) 628-8778.
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