Tag Archives: Hong Kong

“The Sexiest Girl in the Class”

While US and European politicians talk about how to curb it, trading based on algorithms is not going away. In fact, it is spreading faster than ever, as emerging markets like Brazil, India , Russia and China, are now catching on to its potential. Ordinary traders are being replaced by coordinators of algorithms. But that’s just half the story.

“If you have the fastest network, you’re the sexiest girl in the class, you’re the top boy. It’s as simple as that.”

Fraser Bell

As pointed out in earlier post; there is a very clear parallel here to what happened between 2000 and 2005 with the rapid build-up of the more or less unknown market of financial derivatives. Only this time it’s more technical…

In the financial centres of Europe and the US, where the practice began, the people responsible for policing the markets are getting worried about their ability to cope.

But while they talk about how to curb it, trading based on algorithms is not going away. In fact, it is spreading faster than ever, as emerging markets catch on to its potential, BBC News reports.

“The Bric (Brazil, Russia, India and China) countries are where it’s at right now,” says Dr John Bates, executive vice-president and chief technology officer of Progress Software, a company that has pioneered new techniques in what are known as quantitative trading programs.

“We’ve seen it grow very quickly in Brazil. It’s done what happened in London and New York much more quickly. Now we’re seeing the same trend in India and China and even, embryonically, in Russia.”

According to Dr Bates, in the past two to three years, Brazil has already run through a cycle of development that took far longer in London and New York, with algorithm-based trading now available in equities, futures and foreign exchange markets.

Brazil’s Bovespa stock exchange has invested in new technology, boosting the proportion of algorithm-based equity trades from 4% to 12% in the past year.

“The adaptation is faster and they can leapfrog the mistakes that have been made in other places,” he says.

Dr Bates says India is already following suit and will see even more automated trade in the next few years: “The market’s gone very electronic there.”

Indian analysts reckon that as many as a quarter of all trades in the country now involve algorithms, still mainly in equities, whereas up to half of all transactions in Europe and nearly two-thirds of US transactions are estimated to come from high-frequency and algorithmic trading.

Taxing, Limits and Supervision

France is the first of the worlds major economies to impose special taxes on High-frequency Trading (HFT).

And according to head of France’s AMF watchdog, Jean-Pierre Jouyet, the French are also considering speed limits and some kind of supervision.

As Dr. Bates told the Asian Financial Forum in Hong Kong in January:

“As there is a rush towards reducing transaction time in the name of high-frequency trading, the question we need to ask is what purpose are we serving by reducing trading time to eight microseconds or even two microseconds. Is this justified?”.

Well, I guess that depends on who you ask?

The Sexiest Girl

It is kinda obvious that the financial industry would not be upgrading its technology by 90 billion dollar this year  if they didn’t think it was worth it.

“If you have the fastest network, you’re the sexiest girl in the class, you’re the top boy,” says Fraser Bell, managing director of BSO Network Solutions. “It’s as simple as that.”

BSO operates its own international network covering the UK, the US and 16 other countries, including the main European financial markets, Hong Kong, Singapore, Brazil and Russia.

It prides itself on being able to send data from London to Hong Kong and back in just 174 milliseconds.

“There’s a massive global drive for speed,” says Mr Bell, who sees himself as locked in a “race to zero” with rival network operators.

Read the full article at BBC News here.

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French Senate Start Taxing High-Frequency Trading In January

According to a report by Ulrika Lomas of Tax-News.com, the French Senate, with its left-wing majority, has approved plans to establish a tax on automated transactions in France, to curb the rapid rise in high frequency trading.

“This form of trading merely serves to derail the markets and lamented the lack of visibility for both investors and issuers and the lack of contribution to the country’s real economy.”

Nicole Bricq

Proposed by general budget rapporteur Nicole Bricq, the tax had been adopted by the Senate finance committee recently, highfrequencytrading911.com writes.

The new initiative proposes to impose from January 1, 2012, a tax on certain investment service providers in cases where daily cancellation rates for orders for buying and selling financial instruments on public markets exceed 50%.

Bricq warns that this form of trading “merely serves to derail the markets and lamented the lack of visibility for both investors and issuers and the lack of contribution to the country’s real economy.”

Commenting on its decision to back the plans at the time, the Senate finance committee pointed to the “flash crash” stock market crash of May 6, 2010 in the US and to the stock market crash in Europe in August of this year, which, it argued, served to fuel the controversy surrounding both the impact and the usefulness of high frequency trading.

And the controversy continues….

 

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Citibank Hacked: 200.000 Credit Card Numbers Stolen, May Affect 20 Million Customers

Citigroup Inc says computer hackers has breached the bank‘s network and accessed the data of about 200.000 bank card holders in North America, the latest of a string of cyber attacks on high-profile companies. The data theft may affect more than 20 million customers.  How many incidents like this do we need before the industry and it’s regulators realize what we’re up against?

“For the security of these customers, we are not disclosing further details.”

Sean Kevelighan

According to Financial Times did the data theft happen in early May this year. And like Sony, Citigroup have not bothered to tell their customers and the public about it before now – about a month later. Well, Nasdaq Stock Exchange waited a whole year before they told their customers that their computer system had been compromised….

Citigroup – once the largest financial firm in the world – says the names of customers, account numbers and contact information, including email addresses, were viewed in the breach, Reuters writes.

However, the bank points out that other information such as birth dates, social security numbers, card expiration dates and card security codes (CVV) were not compromised.

“We are contacting customers whose information was impacted. Citi has implemented enhanced procedures to prevent a recurrence of this type of event,” Sean Kevelighan, a US-based spokesman, says in an email.

“For the security of these customers, we are not disclosing further details.”

In the brief email statement, Citi do not say how the breach has occurred.

Very comforting, indeed.

Reuters also quote another Citi spokesman, James Griffiths in Hong Kong, saying that the breach has affected 1 percent of North American card customers, which the bank’s annual report totals 21 million.

So, what is it? 200.000 or 20 million? It kinda makes a little difference, don’t you think?

And like the Japanese electronics and entertainment group Sony, which declared several security breaches of its networks earlier this year, Citi might come under fire for not telling customers sooner.

“It may be the bank’s business, but it’s the consumer’s personal information so consumers deserve to be told about security breaches immediately,” Dan Simpson, a spokesman for Australia’s Consumer Action Law Center, an advocacy group, says in a comment.

“It’s hard to see any reason why this sort of breach couldn’t have been disclosed much sooner.”

Read the full story at Reuters.

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