Thinking outside the bank - Banking Tech · 2011 figures show a steep increase Thinking outside the...

www.bankingtech.com

FEBRUARY 2012

Only connectThe complexities of connecting to trading venues

Data dazeBig Data is surrounded by hype, but there is substance too

Lock up your dataEuropean Data Protection rules are about to get a lot tougher

Fraud is on the rise2011 figures show a steep increase

Thinking outside the bank

What can banks learn from other industries about how to create a culture of innovation in technolgy and services?

www.bankingtech.com I 1

ContentsFebruary 2012

4 news

7 news Analysis ■ Staring into the darkness: the latest banking

banana Skins report

17 Cover Focus: thinking outside the bank What can banks learn from other industries

about how to create a culture of innovation in technology and services?

12 news 14 news Analysis

■ Heather McKenzie on interchange fees ■ Celent analysts look ahead ■ european institutions holding back innovation

because of harmonisation fixation

18 news 20 only connect

The complexities of connecting to the multiple trading venues springing up may mean that it’s not worth trading in some markets.

In this issue

3116

14

20

23 news 25 news Analysis

■ CIFaS figures show a sharp rise in fraud.

26 news 28 Lock up your data

New european data protection rules will have a big impact on banks and FS companies.

30 news 31 Data daze

big Data is surrounded by hype, but there is substance behind it after all.

33 Industry columns & comments

36 Appointments

40 out of office

trAnsACtIons & PAYMents

MArkets & InvestMents

rIsk & reguLAtIon

It & oPs

retAIL


eDITORIAL COMMeNTFebruary 2012

editor David Bannister,+44 207 017 [email protected]

Regular Contributors Dan Barnes, Sherree DeCovny, Alison Ebbage, Tom Groenfeldt, Eugene Grygo, Heather McKenzie, Nicholas Pratt, Kristina West, Graham Javis

Production Kosh Naran

Press Releases Send relevant releases to [email protected]

Group Sales Manager Neil Hartley, +44 203 377 5385 [email protected]

Senior Sales executive Leon Thomson, +44 203 377 3493 [email protected]

events Manager Gemma Healy,+44 207 017 [email protected]

Marketing and Circulation Kira McKinney,+44 203 377 [email protected]

Subscriptions and Renewals John Browne,+44 207 017 [email protected]

For Reprints and Web Publishing RightsPlease contact Leon Thomson on+44 203 377 3493

©2012 Banking TechnologyAll rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electrical, mechanical, photocopying, recording, or otherwise without the prior written permission of the publisher.

Banking Technology is published 10 times a year by Informa Business Information, a trading division of Informa UK Ltd, 1-2 Bolt Court, Fleet Street, London, EC4A 3DQ, UK.

Printer: Wyndeham Grange, Southwick, UK.

Subscription enquiries: Customer Service Dept, Informa UK Ltd, Sheepen Place, Colchester, CO3 3LP. Tel: +44 (0)207 017 5540, Fax: +44 (0)20 7017 4614, Email: [email protected] Annual Subscription: UK £690, Europe €860, US/rest of world $1,235.

Member of the Audit Bureau of CirculationAverage net circulation for the period 1st July 2010 to 30th June 2011 – 8,171

ISSN 0266-0865

Goodness me, is that the time? 2012 already? Time whizzes by when you’re having fun.

So, yes, 2012 then; it being the first issue of the year, it’s traditional to say a few words about the year ahead, perhaps to venture a few predictions, express a few hopes …

Here’s a prediction: the suggestion from the european Savings bank Group that there should be a five-year “holiday” from regulation will not be gratefully seized on by the regulators. exhausted as they must be from their efforts of the past few years, the regulators are only just warming up. These people like regulating, and the banking

industry has given them their biggest career boost in decades.It’s pretty simple: regulators are beholden to their political masters, and they, in turn,

are beholden to the voting public. That almost makes me feel sorry for politicians, the voting public being easily persuaded to turn into a baying mob. Want to find the Higgs boson? Get the Sun to run a story saying it causes paedophilia.

We can debate all we like about the effect of a eurozone country dropping out of the single currency, or whether the complexities of connecting to the various swaps clearing systems make it hardly worth trading swaps any more, it won’t matter: no-one can hear us over the noise of fat-cat bankers running down the road with barrow-loads of gold.

They may as well all dress up as Captain Jack Sparrow and be done with it. you don’t have to be the kind of rocket scientist who used to be employed by investment banks to construct complex synthetic derivatives to realise that if you go cap in hand to a government for a billion dollar bail-out you don’t then stuff a couple of million in your pocket.

at best it’s bad manners, like a tramp pinching the cutlery after a free meal at the Salvation army.

In response to that sort of behaviour, 2012 has kicked off with a lot of talk about looking for some new form of capitalism. I’m particularly fond of the suggestion from Nick Clegg – the deputy prime minister of the united Kingdom – that firms should be run along the lines of the John Lewis Partnership, where all the staff are partners and get a share in any profits.

Maybe he’s right: it worked at Goldman Sachs for many years – a staple of the financial pages used to be how much money the cleaners and receptionists there were getting when the annual bonuses were handed out. I rather suspect Mr Clegg would probably want to cap the bonuses there. (unfortunately, the cleaners’ bonuses aren’t covered by the excellent site www.glassdoor.com, but I see a technology analyst in London on £37k average might be in line for a £6k bonus, which strikes me as generous, but not particularly outrageous.)

unfortunately, another suggestion that is likely to go the same way as the eSbG’s proposed regulatory holiday is from JPMorgan chief executive Jamie Dimon. With JPM coming out of the crisis rather less tarnished than others, Dimon speaks with more moral authority than his peers – which is to praise with a faint damn, I realise – but he’s still a banker on a big salary so no-one is going to listen to his rather simple observation.

Speaking at the World economic Forum in Davos last month, Dimon said that the banking industry, the politicians and the regulators are all pulling in different directions. In an interview with CNN, he said: “I think it would be good if we all got together and said, ‘OK, what are we trying to accomplish?’ because I think anything can be accomplished.”

you may say he’s a dreamer … let’s hope he’s not the only one. BT

David Bannister, editor

Wouldn’t it be nice?

1-2 Bolt CourtFleet StreetLondonEC4A 3DQ


Go to www.bankingtech.com for the latest news and comment

IT giant IbM has become the latest member of the banking Industry architecture Network, a consortium

that is promoting the development and use of a service-oriented architecture standard in the banking industry.

Launched in 2008, bIaN is gathering momentum, its supporters say. In 2011, nine new members joined, and the consortium launched its new service landscape. The addition of IbM is seen as something of a landmark.

as well as becoming a full member of the bIaN community, Chae an, IbM’s vice president of financial services solutions, will take a position on bIaN’s board.

“expanding into the uS is one of bIaN’s strategic objectives for 2012, and given IbM’s huge presence in the uS banking space, we are now even better positioned to achieve this goal," said Hans Tesselaar, executive director of bIaN. "We soon hope to welcome the first uS banks as members, joining fellow North american bank, Scotiabank, who joined bIaN in 2011.”

“Many of IbM’s existing clients use bIaN models, and had expressed an interest in aligning more with an open standard, while maintaining their investment in the IbM industry models. For IbM, this is a positive strategic alliance which marks a shift from closed, proprietary standards, to an open interoperable and global environment.”

IbM’s an added: “Open standards create interoperability and accelerate the adoption of new technologies that help industries work more intelligently. bIaN’s collaboration with industry groups such as Object Management Group and Swift demonstrates its commitment to making its banking models more valuable to its members. Through the bIaN community, IbM will work to address the requirements of financial institutions through solutions based on open standards.”

Currently bIaN has 30 members among the banking and software industries, including ING, Commonwealth bank of australia, Credit Suisse, Microsoft, Scotiabank, SaP, Callataÿ & Wouters, Infosys, SunGard and Temenos. BTwww.bian.org

BIAN eyes US as IBM signs up

is also on back-office systems to take information from the wide range of specialist front-office trading systems and provide a comprehensive, cohesive view of business performance and exposure to risk.”

In addition to its broad capabilities and functionality, Inferno is differentiated in the marketplace in several other ways. Firstly it has been designed by practitioners and a multi-disciplined team of developers and accountants, who also support the product. “We are able to deliver very high standards and quality of service rooted in a deep practical knowledge of settlement and trade accounting so are able to solve business as well as technical issues,” Collings said.

“Complex products can cause difficulties for other systems, No-one yet knows where or what will emerge as the next complex market, but Inferno will make it easier for firms to participate at an early stage, not be constrained by inflexible systems and be equipped to rationalise settlements on a global basis.” BT

Swift and SIA/Colt both awarded licences for T2S connectivity

Connectivity to the Target2-Securities settlement system will be provided by Swift and a partnership between telecoms provider Colt and SIa, the Italian payment services provider.

Following a public procurement process run by the banca d’Italia on behalf of the Central banks of the eurosystem, both have been awarded a licence to provide connectivity services to T2S, which is intended to offer a neutral, harmonised and commoditised delivery-versus-payment settlement in central bank money in substantially all securities in europe.

Specifications for direct connectivity to the system by institutions have yet to be finalised, raising the question of whether the larger institutions, hitherto expected to connect using existing networks, will now bother to take that route or connect using either Swift or the SIa/Colt services.

both are predicting that their options will be competitive in cost and service terms with in-house developments.

as a future Network Service Provider, Swift will design, implement, deliver and operate its own connectivity solution for the secure exchange of business information, in ISO 20022 format, between directly-connected participants and the T2S platform.

SaI and Colt plan to develop secure, high-speed connectivity and messaging services in line with the requirements and specifications defined by the eCb. SIa and Colt’s network architecture will also allow CSDs such as Montetitoli, euroclear and Clearstream, central banks and the major banks operating at european level to access the new securities transactions settlement platform.

T2S was conceived in 2008 by the european Central bank and will be managed by four central banks (banca d’Italia, Deutsche bundesbank, banque de France and banco de españa). It will create a single european platform for the settlement of domestic and cross-border securities transactions and integrate post-trading infrastructures, which are still fragmented 10 years after the introduction of the single currency.

Officially pushed back, theT2S platform is now planned for mid-2015. according to european Central bank figures, it will process a daily average of over one million securities transactions with positive effects on the costs of cross-border settlements, where it is forecast there will be a significant reduction.

SIa currently processes a daily average of over three million transactions through a proprietary network infrastructure, SIanet, with two operational hubs, one in Milan and one in London.

“This important success provides confirmation of our central role in europe in the design and creation of infrastructures for financial and central institutions and recognition of a ‘made in Italy’ technology that is on equal terms with that of foreign players,” said Massimo arrighetti, chief executive of SIa. “This result demonstrates our ability to compete on the market with internationally recognised companies. at the same time, it contributes to the creation of a network of excellence aimed at ongoing innovation and system improvement which is the objective of our partnership strategy.”BT

4 I www.bankingtech.com

February 2012

NEWS

A group of former developers and IT staff from KbC Financial products have taken over the

systems they developed at the bank and set up as an independent with what they claim is “the first major release of post-trade securities and derivatives processing software in almost a decade”.

The management team behind Torstone Technology reached an agreement with the KbC Group on a management buy-out of the software and the development and support team. Currently there are some 22 staff globally, largely where the KbC Financial Products operations were, and it is planning to hire as new business comes along.

as a result, although Torstone Technology is a new company, the Inferno system has been widely deployed and proven to support highly complex, structured credit and equity derivatives as well as high volume equity products.

The new business is self-funding, through the support of existing clients in New york, Hong Kong and London, though the team has also taken out a commercial loan. Products processed through Inferno include equities, bonds, convertible bonds, reverse mortgages, warrants, and equity, FX, insurance, credit and fund derivatives.

“Inferno was born out of the shortcomings and inflexibility of other settlement systems to meet the processing requirements of a wide range of instruments, complex trades, multiple venues and the demands of very high volumes,” said brian Collings, Torstone’s chairman and chief executive. Originally it was developed for statistical arbitrage trading environments.

Targeting regional and mid-sized investment banks, asset managers, hedge funds and brokers, the enterprise-level clearing, settlement and integrated accounting application supports multi-asset, multi-currency and multi-location operations. It addresses today’s pressing needs to reduce middle- and back-office costs and support the front office with improved operational efficiency, simplified regulatory compliance, better client service and risk management.

“The financial markets have become so fragmented with increasing numbers of trading venues, centralised counterparties and rules, that middle- and back-office costs and efficiencies are under the spotlight more than ever before. People are asking has it now become more cost-effective for the back office to invest in one application that can address all our needs rather than maintain disparate solutions? The pressure

BBVA goes into the cloud with Google

KBC staff in management buy-out of post-trade systems form new company

Spanish bank bbVa is to adopt Google’s cloud-based collaboration and communication

suite Google apps for business across its operations.

Over 35,000 bbVa workers in Spain will initially use the productivity tools integrated in to the Google apps suite, including Gmail with Google Chat, Google Calendar, Google Docs, Google Groups, Google Sites and Google Video. by the end of this year bbVa expects to migrate 110,000 employees in over 26 countries to Google apps.

bbVa’s new global intranet will be transformed using Google’s collaboration tools, changing it from a corporate communications and process management site to a place where all employees can share, contribute and manage knowledge globally. In addition, bbVa will create a social network to improve communication and explore new ways of working.

“We were looking for a technology that would transform our business operations, not just make our workers more efficient,” said José Olalla, chief information officer at bbVa. “Integrating the Google apps for business suite with our own tools will allow us to introduce a new way of working where employees have access to all the information they need with just one click, no matter where they are, and can reap the benefits of using advanced collaboration tools.”

Collaboration tools such as Google Talk, Google Sites and Google Docs allow users to communicate and share ideas more easily. With Google Docs, for example, many people can simultaneously work on one document.

“Companies of all sizes, including those with tens of thousands of employees, are now embracing cloud computing. It shows that cloud computing is now a reality, and leading organisations are already realising its potential to transform their business,” said Sebastien Marotte, vice president of Google enterprise eMea. BT

Support of existing clients makes Torstone self-fundingby David Bannister

Collings: staff funded buy-out



IT giant IbM has become the latest member of the banking Industry architecture Network, a consortium

that is promoting the development and use of a service-oriented architecture standard in the banking industry.

Launched in 2008, bIaN is gathering momentum, its supporters say. In 2011, nine new members joined, and the consortium launched its new service landscape. The addition of IbM is seen as something of a landmark.

as well as becoming a full member of the bIaN community, Chae an, IbM’s vice president of financial services solutions, will take a position on bIaN’s board.

“expanding into the uS is one of bIaN’s strategic objectives for 2012, and given IbM’s huge presence in the uS banking space, we are now even better positioned to achieve this goal," said Hans Tesselaar, executive director of bIaN. "We soon hope to welcome the first uS banks as members, joining fellow North american bank, Scotiabank, who joined bIaN in 2011.”

“Many of IbM’s existing clients use bIaN models, and had expressed an interest in aligning more with an open standard, while maintaining their investment in the IbM industry models. For IbM, this is a positive strategic alliance which marks a shift from closed, proprietary standards, to an open interoperable and global environment.”

IbM’s an added: “Open standards create interoperability and accelerate the adoption of new technologies that help industries work more intelligently. bIaN’s collaboration with industry groups such as Object Management Group and Swift demonstrates its commitment to making its banking models more valuable to its members. Through the bIaN community, IbM will work to address the requirements of financial institutions through solutions based on open standards.”

Currently bIaN has 30 members among the banking and software industries, including ING, Commonwealth bank of australia, Credit Suisse, Microsoft, Scotiabank, SaP, Callataÿ & Wouters, Infosys, SunGard and Temenos. BTwww.bian.org

BIAN eyes US as IBM signs up

is also on back-office systems to take information from the wide range of specialist front-office trading systems and provide a comprehensive, cohesive view of business performance and exposure to risk.”

In addition to its broad capabilities and functionality, Inferno is differentiated in the marketplace in several other ways. Firstly it has been designed by practitioners and a multi-disciplined team of developers and accountants, who also support the product. “We are able to deliver very high standards and quality of service rooted in a deep practical knowledge of settlement and trade accounting so are able to solve business as well as technical issues,” Collings said.

“Complex products can cause difficulties for other systems, No-one yet knows where or what will emerge as the next complex market, but Inferno will make it easier for firms to participate at an early stage, not be constrained by inflexible systems and be equipped to rationalise settlements on a global basis.” BT

Swift and SIA/Colt both awarded licences for T2S connectivity

Connectivity to the Target2-Securities settlement system will be provided by Swift and a partnership between telecoms provider Colt and SIa, the Italian payment services provider.

Following a public procurement process run by the banca d’Italia on behalf of the Central banks of the eurosystem, both have been awarded a licence to provide connectivity services to T2S, which is intended to offer a neutral, harmonised and commoditised delivery-versus-payment settlement in central bank money in substantially all securities in europe.

Specifications for direct connectivity to the system by institutions have yet to be finalised, raising the question of whether the larger institutions, hitherto expected to connect using existing networks, will now bother to take that route or connect using either Swift or the SIa/Colt services.

both are predicting that their options will be competitive in cost and service terms with in-house developments.

as a future Network Service Provider, Swift will design, implement, deliver and operate its own connectivity solution for the secure exchange of business information, in ISO 20022 format, between directly-connected participants and the T2S platform.

SaI and Colt plan to develop secure, high-speed connectivity and messaging services in line with the requirements and specifications defined by the eCb. SIa and Colt’s network architecture will also allow CSDs such as Montetitoli, euroclear and Clearstream, central banks and the major banks operating at european level to access the new securities transactions settlement platform.

T2S was conceived in 2008 by the european Central bank and will be managed by four central banks (banca d’Italia, Deutsche bundesbank, banque de France and banco de españa). It will create a single european platform for the settlement of domestic and cross-border securities transactions and integrate post-trading infrastructures, which are still fragmented 10 years after the introduction of the single currency.

Officially pushed back, theT2S platform is now planned for mid-2015. according to european Central bank figures, it will process a daily average of over one million securities transactions with positive effects on the costs of cross-border settlements, where it is forecast there will be a significant reduction.

SIa currently processes a daily average of over three million transactions through a proprietary network infrastructure, SIanet, with two operational hubs, one in Milan and one in London.

“This important success provides confirmation of our central role in europe in the design and creation of infrastructures for financial and central institutions and recognition of a ‘made in Italy’ technology that is on equal terms with that of foreign players,” said Massimo arrighetti, chief executive of SIa. “This result demonstrates our ability to compete on the market with internationally recognised companies. at the same time, it contributes to the creation of a network of excellence aimed at ongoing innovation and system improvement which is the objective of our partnership strategy.”BT

Staring into the darknessBanks face multiple threats, but technology isn’t high on the list right now, according to the latest Banking Banana Skins report.

NewS: ANALYSISFebruary 2012

Good news for technologists: technology dependence isn’t high on the list of threats to the global banking system. The bad news is that the outlook is not good for a host of other reasons: the risk of another global recession and a renewed banking crisis is high, according to the Center for Financial Services Innovation’s annual banking banana Skins survey, produced in association with PwC, which puts macro-economic risk at the top of the list of 30 risks.

The poll also shows that anxiety about the outlook for banks is at its highest level since the survey was started 13 years ago. Many respondents expect to see further bank failures and nationalisations. The poll is based on responses from more than 700 bankers, regulators and close of the banking industry in 58 countries.

The main cause of anxiety is the eurozone crisis which contains the threat of sovereign default by several countries. The shock of a euro collapse would hit banks not just in europe but in all major regions of the world. bankers in countries as wide apart as the uS, Canada, China, argentina and australia put the euro crisis at the top of their list of concerns.

The first consequence of a crash would be large credit losses, which appear at Number 2 on the list. but these would be followed by a funding crisis with banks cut off from access to liquidity and fresh capital (Numbers 3 and 4).

Complicating the picture is the increase in political interference (5) and regulation (6) of the banking industry. although regulatory initiatives are intended to bring about a solution to the banking crisis, they are also adding cost and distraction to banks, and making it harder for them to supply credit to the economy.

Concern about the ability of banks to manage their way out of the crisis is also high: weakness in corporate governance (9) and risk management (10) are both seen as Top Ten risks. a fast-rising risk is business continuation (up from 21 to 12), i.e. the ability of the banking system to survive the failure of a major institution.

“The picture painted by this survey is very bleak,” said David Lascelles, the survey’s editor. “It shows a fragile banking system beset by major threats and uncertainties.”

andrew Gray, banking partner at PwC, said: “banks are clearly worried about the dangers posed by continued turmoil in the eurozone, the threat of a further credit squeeze and uncertainty created by continued regulatory changes. against this backdrop many banks will struggle to generate adequate returns across their business. banks will be forced to reshape their businesses and further job losses across the sector seem inevitable as banks seek to drive down costs.”

While dependence on technology is not seen as a risk per se, several respondents pointed out that it is a key factor as banking becomes more technology driven. One Japanese respondent said: “The banking industry is effectively a technology industry.”

Geographically, this was a concern in the Far east, notably China, which is perhaps related to another issue that was raised: the rise of hacking and cybercrime.

In general, the concerns expressed about technology risk centred on the adequacy of banks’ plans to deal with failure in a high impact, albeit low probability, area and the level of management understanding.

another concern was a perceived high

Banking Banana Skins 2012(2010 ranking in brackets)

1 Macro-economic risk (4)2 Credit risk (2)3 Liquidity (5)4 Capital availability (6)5 Political interference (1)6 Regulation (3)7 Profitability (-)8 Derivatives (7)9 Corporate governance (12)10 Quality of risk management (8)11 Pricing of risk (9)12 Business continuation (21)13 Back office (24)14 Management incentives (16)15 Change management (28)16 Hedge funds (19)17 Interest rates (14)18 High dependence on technology (18)19 Currencies (11)20 Business practices (22)21 Equity markets (10)22 Emerging markets (17)23 Rogue trader (20)24 Criminality (27)25 Sustainability (25)26 Commodities (13)27 Fraud (15)28 Human resources (-)29 Reliance on third parties (-)30 Payment systems (26)Source: CSFI/PwC

dependence on a few key people. One respondent said that “too many process critical IT staff are being fired [as a result of] short term-focused management decisions”.

Many respondents expected that the robustness of bank technology would be severely tested by the current banking conditions. There was “an increased risk at present due to a nervous and volatile market background amplifying the consequences, though not the probability, of failure”, said one.

For the first time, the survey shows the risk outlook to be better in the emerging economies than the industrialised world. respondents from regions such as Latin america, africa, asia and the Far east ranked their prospects more positively than North america and europe thanks to stronger growth, though they felt vulnerable to global banking shocks. However, the survey also showed mounting concern about the prospects for China as its economy slows. BT


Sour

ce: C

SFI/P

wC


Go to www.bankingtech.com for the latest news and commentNewsFebruary 2012

A pilot of the Swiss Terravis electronic real estate business transaction service has begun in the Canton of Thurgau and will run until the end of June. The system allows transactions between land registries, notary offices and banks through a single interface. Credit Suisse, Raiffeisenbank, Thurgauer Kantonalbank and UBS are taking part in the pilot, which is part of the eGRIS project and is being carried out under the supervision and with the approval of the Federal Office of Justice, the Cantons of Thurgau and Uri and the Swiss National Bank.

Cashflows, part of the Voice Commerce Group and provider of business payment solutions, has become a member of swift. The relationship builds on Cashflows' existing membership of the Visa and MasterCard schemes and extends the scope of its global payments network through the use of its own IBAN number – CAsH GB2L – which will be used in all messaging. Voice Commerce Group was the first fully authorised Payment Institution to qualify under the 2nd electronic Money Directive in the UK.

Asset Control, a provider of financial data management systems, has integrated the DTCC Solutions Global Corporate Actions Validation Service into its AC Plus data management product as a standard function. This gives direct connectivity to DTCC’s pre-validated corporate actions data. The interface allows clients to populate their in-house repository with DTCC Solutions’ data and link to various other data types, including instrument and pricing data.

Fundtech has partnered with Dataline, an Australian payment solution and services company, to offer electronic invoice presentment and payment and related financial supply chain services to corporate customers in Asia Pacific. Dataline’s products complement Fundtech’s Accountis eIPP service. working together, the pair will offer a complete range of financial supply chain solutions, which includes outbound and inbound e-invoicing, AP workflow automation, data scanning, e-payments support and online expenses management.

euclid Opportunities, ICAP’s early stage financial technology fund, has invested in London-based software firm Model Two Zero, which is developing new matching, reconciliation and data-translation technologies. A number of Model Two Zero clients are now using this technology to validate, enrich and reconcile volumes of complex trading and transactional data.

Oman International Bank, a leading retail and commercial bank in Oman, has selected sunGard’s Ambit Treasury Management, ALM and Credit Risk Management software to help integrate treasury operations, reduce operational costs and perform real-time regulatory reporting. The bank plans to establish a centralised front-to-back-office treasury operation providing support for multiple asset classes. with Ambit ALM, OIB can perform funds transfer pricing and multi-dimensional analyses of the balance sheet by modelling customer behaviour, economic valuation, interest rate scenarios, and a range of other variables.

sIX Telekurs is to make 70 redundancies in Belgium, Luxemburg, Switzerland, the UK and US in early 2012, including some 25 positions at the company’s headquarters in Switzerland. The move comes in the wake of a decision to renew its existing outsourcing contract with Capgemini for data production centres in Poland and India, to which it will shift additional manual data input from the in-house locations.

software company CsC is using application modernisation, testing and management solutions from Micro Focus technologies to offer end-to-end enterprise software for banking, cards, payments and lending across a broader range of platforms and operating systems. CsC’s Celeriti suite makes use of Micro Focus server enterprise edition, which allows customers to select operating platforms based on their particular total cost of ownership, security, high availability and transaction volume requirements. Using server enterprise edition, Celeriti is able to provide Linux, Unix and windows platforms for midsize and small banks, third-party processors, and global banks wanting multiple, in-country deployments using a single codebase.

swift has chosen business intelligence software from Microstrategy as the basis of improvements to its BI service offering that is used by participating banking organisations, securities institutions, and corporate customers worldwide. MicroStrategy will be used to track and analyse interbank payment message traffic flowing through the Swift network, to monitor underlying value and currency flows, allowing users to “better understand their position in the market, track sales performance, manage counterparty risk, and enhance operational efficiencies by identifying targets for cost savings”.

Misys is to incorporate IBM business analytics, information management and application server software, including Business Process server, into its BankFusion platform, allowing users to tailor complex workflows without custom programming using BankFusion and IBM’s library of automated business processes. Misys is also adopting IBM’s Information Framework and will work to ensure that the processes developed within its BankFusion solutions follow the framework’s comprehensive business and data models. This will enable Misys to accelerate the development of new banking processes.

QuantHouse has added a feed handler for the Hotspot FX ECN, allowing algorithmic trading firms sub-millisecond access Hotspot FX’s program trading applications. The ultra-low latency QuantFEED, captures raw data from the exchange, performs sub-millisecond decoding and delivers normalised data through a single API.

Post-trade services provider Omgeo reports a 38% year-on-year increase in the number of investment managers and broker/dealers using its Central Trade Manager, for the central matching of cross-border and non-Us domestic equity and fixed income transactions. It now has over 950 clients worldwide, including the addition of 265 investment managers. same-day affirmation rates on Omgeo CTM average 93%, versus locally matched trades with same-day affirmation rates averaging only 72%, it is claimed.

Sofgen, the international banking and IT consulting group and New Access, a provider of front office solutions for banks, have announces a global services partnership. New Access will use Sofgen’s international network of 18 offices to provide implementation services and, where required, localisation and customisation. Sofgen delivers IT solutions to the banking and related financial services industry, with a focus on private banking and wealth management. New Access’ Front Office solutions offer an integrated platform for relationship managers, as well as portfolio, client relationship and document management solutions. BT

Staring into the darknessBanks face multiple threats, but technology isn’t high on the list right now, according to the latest Banking Banana Skins report.

NewS: ANALYSISFebruary 2012

Good news for technologists: technology dependence isn’t high on the list of threats to the global banking system. The bad news is that the outlook is not good for a host of other reasons: the risk of another global recession and a renewed banking crisis is high, according to the Center for Financial Services Innovation’s annual banking banana Skins survey, produced in association with PwC, which puts macro-economic risk at the top of the list of 30 risks.

The poll also shows that anxiety about the outlook for banks is at its highest level since the survey was started 13 years ago. Many respondents expect to see further bank failures and nationalisations. The poll is based on responses from more than 700 bankers, regulators and close of the banking industry in 58 countries.

The main cause of anxiety is the eurozone crisis which contains the threat of sovereign default by several countries. The shock of a euro collapse would hit banks not just in europe but in all major regions of the world. bankers in countries as wide apart as the uS, Canada, China, argentina and australia put the euro crisis at the top of their list of concerns.

The first consequence of a crash would be large credit losses, which appear at Number 2 on the list. but these would be followed by a funding crisis with banks cut off from access to liquidity and fresh capital (Numbers 3 and 4).

Complicating the picture is the increase in political interference (5) and regulation (6) of the banking industry. although regulatory initiatives are intended to bring about a solution to the banking crisis, they are also adding cost and distraction to banks, and making it harder for them to supply credit to the economy.

Concern about the ability of banks to manage their way out of the crisis is also high: weakness in corporate governance (9) and risk management (10) are both seen as Top Ten risks. a fast-rising risk is business continuation (up from 21 to 12), i.e. the ability of the banking system to survive the failure of a major institution.

“The picture painted by this survey is very bleak,” said David Lascelles, the survey’s editor. “It shows a fragile banking system beset by major threats and uncertainties.”

andrew Gray, banking partner at PwC, said: “banks are clearly worried about the dangers posed by continued turmoil in the eurozone, the threat of a further credit squeeze and uncertainty created by continued regulatory changes. against this backdrop many banks will struggle to generate adequate returns across their business. banks will be forced to reshape their businesses and further job losses across the sector seem inevitable as banks seek to drive down costs.”

While dependence on technology is not seen as a risk per se, several respondents pointed out that it is a key factor as banking becomes more technology driven. One Japanese respondent said: “The banking industry is effectively a technology industry.”

Geographically, this was a concern in the Far east, notably China, which is perhaps related to another issue that was raised: the rise of hacking and cybercrime.

In general, the concerns expressed about technology risk centred on the adequacy of banks’ plans to deal with failure in a high impact, albeit low probability, area and the level of management understanding.

another concern was a perceived high

Banking Banana Skins 2012(2010 ranking in brackets)

1 Macro-economic risk (4)2 Credit risk (2)3 Liquidity (5)4 Capital availability (6)5 Political interference (1)6 Regulation (3)7 Profitability (-)8 Derivatives (7)9 Corporate governance (12)10 Quality of risk management (8)11 Pricing of risk (9)12 Business continuation (21)13 Back office (24)14 Management incentives (16)15 Change management (28)16 Hedge funds (19)17 Interest rates (14)18 High dependence on technology (18)19 Currencies (11)20 Business practices (22)21 Equity markets (10)22 Emerging markets (17)23 Rogue trader (20)24 Criminality (27)25 Sustainability (25)26 Commodities (13)27 Fraud (15)28 Human resources (-)29 Reliance on third parties (-)30 Payment systems (26)Source: CSFI/PwC

dependence on a few key people. One respondent said that “too many process critical IT staff are being fired [as a result of] short term-focused management decisions”.

Many respondents expected that the robustness of bank technology would be severely tested by the current banking conditions. There was “an increased risk at present due to a nervous and volatile market background amplifying the consequences, though not the probability, of failure”, said one.

For the first time, the survey shows the risk outlook to be better in the emerging economies than the industrialised world. respondents from regions such as Latin america, africa, asia and the Far east ranked their prospects more positively than North america and europe thanks to stronger growth, though they felt vulnerable to global banking shocks. However, the survey also showed mounting concern about the prospects for China as its economy slows. BT


Sour

ce: C

SFI/P

wC

requires risks to be taken. banks therefore often face huge obstacles before they can even begin to think about innovating their products, services and processes by using technology and other means. This perhaps unfairly leaves behind a perception that banks are slow behemoths that react only when non-banking players like PayPal and apple heave into sight.

yet he is right in saying that there is the innovator’s dilemma to consider. He explains that this means that the incumbent player “looks at having a high performance threshold, but a low level of innovation”. The trouble is that it eventually becomes too late for the incumbent to respond to market changes, but this leads to the organisation operating at a lower performance level.

So banks that don’t keep ahead of change may find that they are painting themselves into a corner, and at worst he suggests that they could die if they don’t embrace change. He also warns that banks shouldn’t look at the incumbents to find ideas for innovation; they may only wish to adapt to new market demands, and this includes exploring how the generation gap alters customers’ attitudes to technology. They should also look internally as well as outside the industry for inspiration. younger members of staff, for example, can be a source of inspiration as they can speak for how their own generation uses technology and present fresh ideas to their senior executives.

Darren armitage, head of technology innovation at HSbC, agrees with this opinion: “Innovation is creative, so of course a company looking to innovate needs to look outside its own industry, and financial services is no different in this respect.” He adds that financial services customers don’t exist in isolation. each one of them interacts with a wide range of technologies and services each hour of the day. He believes that this means HSbC needs to keep innovating to keep up with the changes in their lives and with their expectations. armitage also believes that mobile technology will bring the bank and its customers closer to each other, while enabling the customer to control how they access their own banks accounts wherever they are with the help of mobile banking and location-based services.

yet should they wait for customers to decide how the banks should use technology to innovate their experience of using or buying financial products and services from the banks? apple’s late chief executive, Steve Jobs, is reported to have said that there is not much point in waiting for focus groups of customers to decide what they want because they don’t always know what they want or need and they are likely to ask for something they are already used to having in their lives. There is still a sense that the banks are reacting to change rather then driving it, and that innovations in things like payment systems have been coming from outside the industry.

To this charge George Kelsey, chief of integrated architecture at royal bank of Scotland, says that it is not the bank’s job to lead technological innovation. “It is our job to look at what’s happening in the technology landscape in relationship with what our customers want, and I welcome technical innovation.” He says that apple is seen as the organisation that “has set the bar for using mobile applications, and there are


others like SaS and Teradata that are looking at how you process and gain insight from the vast quantities of data that we have on our customers”. So the customer is at the forefront of his mind, but is he missing a trick from Steve Jobs’ book? Maybe, but it’s true to say that without apple’s iPhone, mobile banking would not be what it is today.

Paul Say, head of marketing at HSbC’s First Direct telephone banking subsidiary, thinks innovation in the banking sector should be about ripping up the rule book to avoid getting stuck with outdated practices. He argues that taking a step back from adopting a traditional approach can reveal new opportunities – ones that might not have been previously considered, and ones which mean that banking will be truly social in the future. a large part of this comes from mobile technology, which he claims is a very effective marketing channel as just about everyone in the uK has a phone about them. His colleague aden Davies, who works with HSbC Technology Services’ innovation >

Royal Bank of Scotland is one bank that is keen to develop its products and services with the help of technological innovation. On the mobile front, it has applications for Apple’s iPhone and iPad, Research in Motion’s BlackBerry and Google’s Android.

George Kelsey, chief of integrated architecture at RBS, thinks this is evidence that the bank is beginning to take charge of technological innovation. “We have successfully deployed a mobile banking application across five of our brands now, and they include: RBS, NatWest, NatWest Offshore and Ulster North and South,” he explains. Customers are apparently enthusiastic, and he describes its uptake as “staggeringly good”. There are now 1.2 million customers using it, and they have used it 102 million times. This equates to the completion of £2 billion in transfers and payments since May 2011, and he claims that these figures are continuing to grow exponentially.

“I call it the ‘one thumb transfer’, and it is the highest rating financial services application,” he says. This is because RBS and the other brands within the group are watching the changing needs of their customers and then matching technology to them. Yet these applications are considered by him to be the start of his bank’s journey because there are also plans afoot to launch similar applications for its business and commercial customers.

Much of the impetus for innovation is being created by a shift in how customers wish to interact with technology, which has been created by the growing proliferation of the smartphone and social media networks like Twitter and Facebook. This trend is supported by Accenture’s research and its reports, Banking 2012: Revenue Growth and Innovation and Achieving Strong Returns in Mobile Banking: Here’s How Leading Banks Do It.

Jonathan Gray, a senior executive in Accenture’s Financial Services practice, explains why this research is important: “The research we have done shows that customers are much more ready to purchase goods and carry out transactions over digital channels, and initial results indicate a big jump in customers using their mobile phones for banking services each month – up from 10% last year to 18% this year.”

Teradata and SAS analytics enable RBS to see what its customers are doing. “The technology landscape is rapidly changing and we need to know ourselves how these shifts could be used to better service our customers,” explains Kelsey. Social media also plays a role, enabling staff to share and vote on mobile applications and other ideas that could eventually be used to improve customer service. Only the good and most popular ideas will see the light of day though. This concept is called the ’App Bank’. With it Kelsey can find ideas that would not otherwise have arisen.

RBS takes charge of innovation


Cover story: InnovatIonFebruary 2012

In recent years banks have been a target for criticism, ridicule and vehemence. They are, for example, said to be slow and reluctant to innovate. but is it all fair?

JP rangaswami, chief scientist of Salesforce.com, has some significant experience in this area – when he was chief information officer at Dresdner Kleinwort Wasserstein, he was involved in the bank’s Digital Markets project, deploying internet technologies and social networking in the trading room. Speaking at a London Financial Services Club session last year, he described some of the difficulties he had trying to persuade the bank to innovate. He said that innovation requires change, but banks are traditionally conservative in nature and it doesn’t come readily to them – at least this was his view at the time.

This doesn’t mean that banks don’t want to innovate, but it does suggest that they often take their time to catch up with their markets and even with their customers. rangaswami doesn’t feel that this is necessarily the fault

of the banks. For example, banks tend to face higher levels of legislation and compliance obligations than non-financial services organisations, which are now entering the market. Their complex back-office systems are also problematic. They too can inhibit innovation.

For example, with regards to the data protection compliance issue, rangaswami says the banks are reluctant to share infrastructure. This means they aren’t taking advantage of the value of the cloud for managing payments, funds transfers and credit-rating information to the extent that they could do. Data compliance issues make them wary of exploring this kind of technology for what is judged to be highly sensitive data. The public cloud is therefore more often considered to be out of bounds to any transactional data. Due to legislation it needs to be tightly controlled.

So, in his view, the markets make it very difficult for banks to innovate and, since the beginning of the financial and economic crisis in 2008, they have been required to be more risk adverse. yet innovation

There is a lot of talk about innovation in financial services, but what is it, and what can banks learn from other industries? Graham Jarvis reports.

Thinking outside the bank

requires risks to be taken. banks therefore often face huge obstacles before they can even begin to think about innovating their products, services and processes by using technology and other means. This perhaps unfairly leaves behind a perception that banks are slow behemoths that react only when non-banking players like PayPal and apple heave into sight.

yet he is right in saying that there is the innovator’s dilemma to consider. He explains that this means that the incumbent player “looks at having a high performance threshold, but a low level of innovation”. The trouble is that it eventually becomes too late for the incumbent to respond to market changes, but this leads to the organisation operating at a lower performance level.

So banks that don’t keep ahead of change may find that they are painting themselves into a corner, and at worst he suggests that they could die if they don’t embrace change. He also warns that banks shouldn’t look at the incumbents to find ideas for innovation; they may only wish to adapt to new market demands, and this includes exploring how the generation gap alters customers’ attitudes to technology. They should also look internally as well as outside the industry for inspiration. younger members of staff, for example, can be a source of inspiration as they can speak for how their own generation uses technology and present fresh ideas to their senior executives.

Darren armitage, head of technology innovation at HSbC, agrees with this opinion: “Innovation is creative, so of course a company looking to innovate needs to look outside its own industry, and financial services is no different in this respect.” He adds that financial services customers don’t exist in isolation. each one of them interacts with a wide range of technologies and services each hour of the day. He believes that this means HSbC needs to keep innovating to keep up with the changes in their lives and with their expectations. armitage also believes that mobile technology will bring the bank and its customers closer to each other, while enabling the customer to control how they access their own banks accounts wherever they are with the help of mobile banking and location-based services.

yet should they wait for customers to decide how the banks should use technology to innovate their experience of using or buying financial products and services from the banks? apple’s late chief executive, Steve Jobs, is reported to have said that there is not much point in waiting for focus groups of customers to decide what they want because they don’t always know what they want or need and they are likely to ask for something they are already used to having in their lives. There is still a sense that the banks are reacting to change rather then driving it, and that innovations in things like payment systems have been coming from outside the industry.

To this charge George Kelsey, chief of integrated architecture at royal bank of Scotland, says that it is not the bank’s job to lead technological innovation. “It is our job to look at what’s happening in the technology landscape in relationship with what our customers want, and I welcome technical innovation.” He says that apple is seen as the organisation that “has set the bar for using mobile applications, and there are


others like SaS and Teradata that are looking at how you process and gain insight from the vast quantities of data that we have on our customers”. So the customer is at the forefront of his mind, but is he missing a trick from Steve Jobs’ book? Maybe, but it’s true to say that without apple’s iPhone, mobile banking would not be what it is today.

Paul Say, head of marketing at HSbC’s First Direct telephone banking subsidiary, thinks innovation in the banking sector should be about ripping up the rule book to avoid getting stuck with outdated practices. He argues that taking a step back from adopting a traditional approach can reveal new opportunities – ones that might not have been previously considered, and ones which mean that banking will be truly social in the future. a large part of this comes from mobile technology, which he claims is a very effective marketing channel as just about everyone in the uK has a phone about them. His colleague aden Davies, who works with HSbC Technology Services’ innovation >

Royal Bank of Scotland is one bank that is keen to develop its products and services with the help of technological innovation. On the mobile front, it has applications for Apple’s iPhone and iPad, Research in Motion’s BlackBerry and Google’s Android.

George Kelsey, chief of integrated architecture at RBS, thinks this is evidence that the bank is beginning to take charge of technological innovation. “We have successfully deployed a mobile banking application across five of our brands now, and they include: RBS, NatWest, NatWest Offshore and Ulster North and South,” he explains. Customers are apparently enthusiastic, and he describes its uptake as “staggeringly good”. There are now 1.2 million customers using it, and they have used it 102 million times. This equates to the completion of £2 billion in transfers and payments since May 2011, and he claims that these figures are continuing to grow exponentially.

“I call it the ‘one thumb transfer’, and it is the highest rating financial services application,” he says. This is because RBS and the other brands within the group are watching the changing needs of their customers and then matching technology to them. Yet these applications are considered by him to be the start of his bank’s journey because there are also plans afoot to launch similar applications for its business and commercial customers.

Much of the impetus for innovation is being created by a shift in how customers wish to interact with technology, which has been created by the growing proliferation of the smartphone and social media networks like Twitter and Facebook. This trend is supported by Accenture’s research and its reports, Banking 2012: Revenue Growth and Innovation and Achieving Strong Returns in Mobile Banking: Here’s How Leading Banks Do It.

Jonathan Gray, a senior executive in Accenture’s Financial Services practice, explains why this research is important: “The research we have done shows that customers are much more ready to purchase goods and carry out transactions over digital channels, and initial results indicate a big jump in customers using their mobile phones for banking services each month – up from 10% last year to 18% this year.”

Teradata and SAS analytics enable RBS to see what its customers are doing. “The technology landscape is rapidly changing and we need to know ourselves how these shifts could be used to better service our customers,” explains Kelsey. Social media also plays a role, enabling staff to share and vote on mobile applications and other ideas that could eventually be used to improve customer service. Only the good and most popular ideas will see the light of day though. This concept is called the ’App Bank’. With it Kelsey can find ideas that would not otherwise have arisen.

RBS takes charge of innovation


Cover story: InnovatIonFebruary 2012

team, believes that companies like apple and PayPal aren’t necessarily doing the job of the banks. “I don’t see apple building complex anti-fraud systems, or systems that track potential terrorist funding,” he says. He also doesn’t think we will see a ‘Facebook Mortgages’ in the immediate future, but who knows? It could happen. Virgin has recently bought Northern rock, and the advent of Virgin Money as a bank is expected to lead to certain kinds of innovation and increased competitiveness in the banking industry. Davies nonetheless thinks that the day might come when the daily experience of customers managing their money has become the domain of Google, apple and PayPal.

There is also the issue of value chain slicing to consider. “PayPal is a great example of this as you don’t need a bank to trade, you just need a reconciliation service, which can be created easily and cheaply,” says Stuart rye, director of financial services at Fujitsu. The effect of this is that banks can end up finding themselves disintermediated, and are “left with expensive payment systems that provide bulk payment at the back end of the process”. rangaswami pointed out in his speech that PayPal is integrated into the current technical infrastructure of the banking industry to allow payments to be deposited into bank accounts.

Disintermediation or a lack of innovation don’t necessarily mean that banks as a whole will die: they still play an integral role in society, and they are very much embedded into its fabric. yet individual banks could lose market share, or some may fade away by becoming less competitive as a result of not exploring technological innovation – wherever it lies internally and externally.

The risks associated with change can be managed, but there can be no improvements without it. a certain amount of risk can therefore be good if it leads to ongoing improvements that benefit the organisation’s stakeholders. be aware of the law of unintended consequences though. If a bank focuses on what might go wrong rather than what might improve as a result of change, then innovation is dead and the bank might find itself being left behind in the market.

andrew bale, chief executive of resilient Networks, thinks that banks are trying to act almost like a telecommunications network operator. In his view they are increasingly dependent on technology to improve the delivery of their products and services. So banks will need to continue to find and implement new technological innovations from IT companies, but they should also think about how they can use, implement and develop technology to innovate from within.

bryan Foss, independent director and visiting professor at bristol business School, is still not sure that “the existence of tactical innovations” like smartphone mobile banking is sufficient “to demonstrate that the banks really ‘get it’, and considerably more needs to be done by their boards to re-emphasise the critical future role of the banks for consumers and businesses”.

The impact of innovation can be clearly seen: the iPhone is a prime example. It reshaped the market and created a new ecosystem with a new device and associated applications that could do everything a PC, laptop or a Mac can do. This galvanised consumer interest in the product, and created a competitive

advantage for apple. This has had a wide-ranging impact on other industries, including banking.

So the key lesson that banks can learn is perhaps not to wait for customers to decide what they want, but to take the lead when it comes to developing new technologies. Companies like apple aren’t sitting and waiting for innovation to happen: they are proactive and their innovation processes never stop.

although apple has faced stiff competition since the advent of Google’s android, it does demonstrate that innovation can help any company – including a bank – to at least temporarily capture a greater share of its market and become a trend-setter than influences other industries. yet there is still an inherent need in the industry for regulators to understand the need of the banks to be able to innovate as prohibitive regulatory practices will also slow them down.

So, with this in mind, were rangaswami’s comments about the conservative attitudes of banks fair? To a degree, yes, but the banks can’t always help being slow. yet they can still learn many lessons from their non-financial sector counterparts. BT

Innovation begins by looking inside one’s own organisation, by analysing what is happening with its market, and by considering other ideas that are being developed in other industries and market sectors. Stuart Rye, director of financial services at Fujitsu, provides six tips that he thinks are fundamental to using technology to innovate in the banking and financial services industries. ■ Innovation is not a fad, or something you do from time to time. It needs to be absolutely constant.■ It needs to be within the culture of the organisation, and this means creating an environment that allows staff to create and test new ideas.■ You have to have a culture that allows you to look outside the organisation at markets and countries to know what they are doing.■ Be absolutely clear about what you want to provide to whom, through which channels and at what prices.■ Understand your supply and value chain.■ Manage and align incentives along the supply chain to deliver the outcome you require.

Learning from others

The Merchant advisory Group, a cross-industry association of large merchants involved in the payments industry has published recommendations for a uS electronic payments roadmap that emphasises the importance of Chip and PIN

adoption. “We believe it is imperative that the united States align with the international standard

of Chip and PIN to ensure global consumer payments interoperability,” said Mark Horwedel, chief executive of MaG. “In today’s uS magnetic stripe-based payments system, MaG members continue to spend millions of dollars to protect against security breaches with significant and deleterious results. Many have lost sales and struggled through customer confusion resulting from international cardholders’ inability to use their Chip and PIN cards in the united States.”

The roadmap makes a number of recommendations:■ The uS payments industry should undergo a coordinated migration to Chip and PIN transactions which should support a broad range of payment types and devices.■ Merchants and issuers should have the right to determine the range of payment types, communication protocols and devices they will support. ■ PIN authentication is a proven means of reducing fraud. Pursuant to an agreed-upon timeline, merchants and issuers that migrate to Chip and PIN should receive the benefit of full liability shift protection. ■ Those who do not invest in Chip and PIN, or who decide to not perform cardholder authentication at the point-of sale for customer convenience reasons, should bear the liability of any fraudulent activity that occurs as a result of their business decisions. ■ To ensure merchant choice in routing transactions and to encourage innovation, Chip and PIN card and system designs must provide an open architecture that is developed with meaningful input from all stakeholders. ■ Chip and PIN deployment in the united States should be done concurrently with integration of technologies that would secure eCommerce transactions and also shift liability to any party that does not adopt the solution. ■ The implementation of Chip and PIN should in no way infringe upon the ability of issuers to choose network affiliations or upon merchant routing opportunities as prescribed under the law.■ The roadmap should acknowledge the diversity of the marketplace by developing collaborative and realistic implementation timelines for all stakeholders including issuers, acquirers, hardware manufacturers and merchants. www.merchantadvisorygroup.org

US merchants advocate co-ordinated Chip & Pin adoption

Automated reconciliation choices

With the advent of hosted solutions, the business case for automation of statement reconciliation has become more persuasive, according to a white paper from Synergy Financial Systems, a uK Swift Service bureau.

“Coupled with operational requirements to accelerate the delivery of business critical information such as daily cash balances and to increase the accuracy of information, for client and regulatory purposes, the business case starts to become compelling,” the company says in a white paper.

Most organisations with high volumes of transactions automated their statement reconciliation processes some time ago, but those with modest transaction volumes (either payments or securities trades) have considered the automation of reconciliation processes hard to justify.

There are many businesses where manual or semi-automated reconciliation processes continue to operate. This can be because they believe that the nature of their business and the volumes involved make a worthwhile business justification for full automation difficult to build. www.synergy-fs.com


Raiffeisen expands First Data deal in Poland

Raiffeisen bank Poland has expanded its relationship with e-Commerce and payment

processing provider First Data, which will provide card payment processing services to support the bank with its implementation of a new contactless card programme.

First Data and raiffeisen bank Poland have co-operated for over 10 years, during which time First Data has delivered a range of outsourcing services for issuing and processing of debit, charge and credit cards. raiffeisen bank’s current customer offering will be expanded to include contactless payments functionality with the introduction of Visa payWave payment cards which are embedded with an antenna and microchip.

The cards can be used by cardholders to make quick low-value cashless payments at thousands of merchant locations across Poland and all over the world. Cardholders simply place the card near a special terminal equipped with a contactless card reader to initiate the transaction. The transaction is executed in a split second.

“Our aim is to understand the needs of our customers and offer innovative cashless payment solutions to meet these needs,” said andrzej Swiech, director of the Individual Clients Department, raiffeisen bank Poland. “Issuing cards, equipped with contactless technology, in cooperation with a trusted provider such as First Data, will enable us to achieve our objective. The addition of Visa payWave cards to our portfolio will also enable us to offer a safe, convenient product to our customers and will strengthen our position as a modern financial institution.”

“The number of merchants offering the convenience of contactless cashless payments, which forgo PIN entry, is gradually increasing,” said Grzegorz Dlugosz, a member of the board at First Data’s business in Poland. “Thanks to this ability to reach new market segments, which previously did not accept cashless payments, contactless cards are becoming increasingly popular in Poland and are another step toward replacing cash payments with payments made using cards.”

“It is imperative that the United States align with the international

standard of Chip & PIN for interoperability.”

TRANSACTIONS & PAYMENTS


February 2012

Adoption of eMV as a card payment standard gained further traction in 2011, with official figures revealing that over 42% of all payment cards and nearly 76% of all terminals in circulation globally are based on eMV technology.

The figures come from eMVCo, the eMV standards body collectively owned by american express, JCb, MasterCard and Visa, and represent the latest statistics from their respective member financial institutions globally. there are now more than 1.3 billion eMV payment cards in global circulation and more than 20 million eMV based acceptance terminals active worldwide.

Patricia Partelow, chair of the eMVCo executive Committee, said: “as the figures demonstrate, eMV technology continues to be deployed globally, creating a truly interoperable chip-based consumer payment infrastructure. adoption of the technology is important as it provides a variety of risk management parameters and cardholder verification methods that reduce fraudulent card payments. In addition to our commitment to enhance payment security, eMVCo also works to identify future requirements and enhance its established infrastructure to deliver a common, robust technology platform that in the future will support contact, contactless and mobile payments.”

To support the adoption of eMV standards, eMVCo has established the eMVCo associates Programme to encourage all payment stakeholders to play a more active role in guiding the organisation’s strategic and technical direction. “The participation framework creates opportunities for interested organisations – including payment card issuers, acquirers, merchants, processors, card and terminal vendors, networks and their representative associations – to provide input into the advancement of existing and creation of future eMV Specifications,” Partelow said. “We recognise that this will further facilitate the global relevance of eMV technology as the marketplace advances to offer new ways to pay for goods and services.”

EMV continues to gain ground as a standard for card payments


Geneva-based Man Brothers Group has selected Brady to handle its trade finance operations. The Brady solution will integrate the bank’s financial instruments, reduce operational risk, improve transparency and support decision making and governance.” “The solution provided by Brady will enable us to follow in full detail all trade operations initiated by our clients and handle all required financial transactions and documentary credit operations in a fully integrated way,” said Haçade Bensalem, chief executive of Man Brothers Group.

Payment services provider Earthport is providing cross-border payment services to Active Management Services, a facilities management company, to support the delivery of payroll services. The service, which is now live, sees Earthport facilitate payroll payments for AMS’s corporate customers. AMS offers corporates the ability to outsource their payroll and account functions.

Basware, a payments systems provider, has acquired German e-invoicing network First Businesspost, known as 1stbp. In 2011 1stbp delivered over 4.5 million e-invoices on behalf of its buyers and suppliers, and total global spend delivered across the Basware and 1stbp networks exceeded €150 billion. 1stbp has particular strength in the automotive sector with customers including Audi, BMW, Daimler, MAN and Volkswagen. One of its core capabilities is its Virtual Printer Driver Technology which helps on-board suppliers. Basware will integrate this technology into its supplier on-boarding.

The IBOS Banking Association, an international banking alliance focused on providing corporate customers with international cash management solutions, has enlisted its newest member, PNC Bank, the sixth-largest depository bank by assets and one of the largest treasury management providers in the US. The IBOS network is based on its 12 members and their subsidiaries, each of which is a supplier of local banking services in their domestic markets. IBOS provides corporate customers access to local services at the IBOS bank in each country, offering local in-country accounts.

Delta Lloyd picks Clear2Pay to build central payments infrastructure

Delta Lloyd’s new group-wide central payments infrastructure is to be built using the Corporate Payment Hub SePa solution from european payment systems specialist Clear2Pay.

The new Central Payment Facility, scheduled to go live in the middle of this year, serves the whole Delta Lloyd Group and acts as a multi-label, multi-bank and multi-risk carrier. at a functional level, and as compliance demands, the Service Oriented architecture of the system enables the various businesses to operate autonomously in terms of processes and client data, while using a single and efficient payment infrastructure and centralise data storage.

Peter Heemskerk, IT director at Delta Lloyd, said: “Clear2Pay’s solution gives us the best of both worlds: optimisation and operational efficiency, yet flexibility in the business where we need it. The already significant and rapidly growing market presence of the Corporate Payment Hub, which we implemented earlier, gave us the confidence to make this move towards full SePa compliance with Clear2Pay’s technology as well.”

Jeroen Faas, vice president of sales for Clear2Pay Netherlands said that Delta Lloyd is “one of the first customers within the corporate domain to enhance the existing platform with the SePa extended edition module”.

“Adoption of the technology is important as it provides a variety of risk management parameters and cardholder verification.”

The Merchant advisory Group, a cross-industry association of large merchants involved in the payments industry has published recommendations for a uS electronic payments roadmap that emphasises the importance of Chip and PIN

adoption. “We believe it is imperative that the united States align with the international standard

of Chip and PIN to ensure global consumer payments interoperability,” said Mark Horwedel, chief executive of MaG. “In today’s uS magnetic stripe-based payments system, MaG members continue to spend millions of dollars to protect against security breaches with significant and deleterious results. Many have lost sales and struggled through customer confusion resulting from international cardholders’ inability to use their Chip and PIN cards in the united States.”

The roadmap makes a number of recommendations:■ The uS payments industry should undergo a coordinated migration to Chip and PIN transactions which should support a broad range of payment types and devices.■ Merchants and issuers should have the right to determine the range of payment types, communication protocols and devices they will support. ■ PIN authentication is a proven means of reducing fraud. Pursuant to an agreed-upon timeline, merchants and issuers that migrate to Chip and PIN should receive the benefit of full liability shift protection. ■ Those who do not invest in Chip and PIN, or who decide to not perform cardholder authentication at the point-of sale for customer convenience reasons, should bear the liability of any fraudulent activity that occurs as a result of their business decisions. ■ To ensure merchant choice in routing transactions and to encourage innovation, Chip and PIN card and system designs must provide an open architecture that is developed with meaningful input from all stakeholders. ■ Chip and PIN deployment in the united States should be done concurrently with integration of technologies that would secure eCommerce transactions and also shift liability to any party that does not adopt the solution. ■ The implementation of Chip and PIN should in no way infringe upon the ability of issuers to choose network affiliations or upon merchant routing opportunities as prescribed under the law.■ The roadmap should acknowledge the diversity of the marketplace by developing collaborative and realistic implementation timelines for all stakeholders including issuers, acquirers, hardware manufacturers and merchants. www.merchantadvisorygroup.org

US merchants advocate co-ordinated Chip & Pin adoption

Automated reconciliation choices

With the advent of hosted solutions, the business case for automation of statement reconciliation has become more persuasive, according to a white paper from Synergy Financial Systems, a uK Swift Service bureau.

“Coupled with operational requirements to accelerate the delivery of business critical information such as daily cash balances and to increase the accuracy of information, for client and regulatory purposes, the business case starts to become compelling,” the company says in a white paper.

Most organisations with high volumes of transactions automated their statement reconciliation processes some time ago, but those with modest transaction volumes (either payments or securities trades) have considered the automation of reconciliation processes hard to justify.

There are many businesses where manual or semi-automated reconciliation processes continue to operate. This can be because they believe that the nature of their business and the volumes involved make a worthwhile business justification for full automation difficult to build. www.synergy-fs.com


Raiffeisen expands First Data deal in Poland

Raiffeisen bank Poland has expanded its relationship with e-Commerce and payment

processing provider First Data, which will provide card payment processing services to support the bank with its implementation of a new contactless card programme.

First Data and raiffeisen bank Poland have co-operated for over 10 years, during which time First Data has delivered a range of outsourcing services for issuing and processing of debit, charge and credit cards. raiffeisen bank’s current customer offering will be expanded to include contactless payments functionality with the introduction of Visa payWave payment cards which are embedded with an antenna and microchip.

The cards can be used by cardholders to make quick low-value cashless payments at thousands of merchant locations across Poland and all over the world. Cardholders simply place the card near a special terminal equipped with a contactless card reader to initiate the transaction. The transaction is executed in a split second.

“Our aim is to understand the needs of our customers and offer innovative cashless payment solutions to meet these needs,” said andrzej Swiech, director of the Individual Clients Department, raiffeisen bank Poland. “Issuing cards, equipped with contactless technology, in cooperation with a trusted provider such as First Data, will enable us to achieve our objective. The addition of Visa payWave cards to our portfolio will also enable us to offer a safe, convenient product to our customers and will strengthen our position as a modern financial institution.”

“The number of merchants offering the convenience of contactless cashless payments, which forgo PIN entry, is gradually increasing,” said Grzegorz Dlugosz, a member of the board at First Data’s business in Poland. “Thanks to this ability to reach new market segments, which previously did not accept cashless payments, contactless cards are becoming increasingly popular in Poland and are another step toward replacing cash payments with payments made using cards.”

“It is imperative that the United States align with the international

standard of Chip & PIN for interoperability.”


Payments: InteRCHanGe FeesFebruary 2012

Last month, Deutsche Bank analyst matthew O’Connor set out the potential financial hit for banks in the Us if they lose a pending antitrust suit over interchange fees. If the fees, which are paid between banks for the acceptance of card-based transactions, were reduced by 75%, he said, uS bancorp could lose $1.2 billion of revenues in 2012, JPMorgan $5.38 billion and bank of america $3.68 billion, to name a few.

The litigation has been initiated by merchants and merchant representative groups on behalf of five million retailers in the uS. Named in the suit are Visa, MasterCard and 13 large banks including Citi, bank of america, Capital One Finance, uS bancorp, JPMorgan, HSbC and barclays.

The plaintiffs allege that, between 1 January 2004 and the present, the card networks and banks conspired to unlawfully fix the price of interchange fees and other fees charged to merchants for transactions processed over the Visa and MasterCard networks. Joint hearings on defendants’ motions to dismiss and plaintiffs’ motions for class certification were held in November 2009, and summary judgement motions were filed in the (northern) spring of 2011.

at present, the interchange fee in the uS is 2%. This is quite high compared with interchange fees elsewhere – in australia they are 0.5% and in europe 0.3%, for example. according to a report by the bloomberg news wire, interchange fees on credit cards in the uS total around $40 billion a year for retailers.

Not surprisingly, MasterCard says the lawsuits are “without merit and a clear demonstration of certain merchants wanting the significant benefits of accepting payment cards without having to pay for the value of the services they receive”. The company also suggests that the lawsuits are being driven by class action lawyers “whose primary motive is to extract enormous fees for themselves”.

MasterCard argues that interchange fees “keep the system in balance and [are] designed to maximise both merchant acceptance and card issuance”. The benefits to merchants of accepting MasterCard are significant, says the

company, and include increased sales and the ability to participate in a payment system that is more cost-effective for them than issuing their own proprietary card or other form of credit.

The uS is not the only country grappling with the issue of interchange fees. In September last year, the european Central bank published a paper on interchange fees in card payments, which reviewed a number of legal assessments of interchange fees from around the european union. The report was made in the context of the development of a single euro payment system for card payments.

among the rulings examined was that of the Latvian Competition Council, which decided in March 2011 that 22 Latvian commercial banks had breached the country’s competition law by participating in a multilateral agreement on the interchange fees for card payments, thereby restricting competition in the Latvian cards market.

In this case, it was ruled that the banks had not provided evidence that the benefits of the multilateral interchange fees counterbalanced the restrictions to competition, but focused on explaining the necessity of card payments. The Council found that a MIF was not considered necessary for promoting the cards market. Moreover, it found that the interchange fee was not related to the issuing banks’ actual costs but constituted an income for them.

In Italy, the Italian antitrust authority decided in November 2010 that MasterCard and eight banks had established agreements restricting competition designed to maintain high

inter-bank fees for payments by credit or debit cards issued by MasterCard, by bundling this type of cost with merchant membership fees, with direct consequences for consumer prices.

The Italy-specific MIF did not contribute to the system’s overall economic efficiency, said the authority, and in fact contained incentives for increases in the fees because this would increase the direct proceeds of the issuer banks, and raise the proceeds of the acquirer banks as the transaction volumes of the scheme increased. Finally an increased number of transactions led to greater brand name exposure for the MasterCard scheme.

The authority ruled that individual banks used the membership mechanism to manifest a unitary agreement with MasterCard in order to promote the scheme’s expansion by passing the MIF on to merchants and, consequently, to the prices effectively applied to consumers.

The authors of the report, anne borestam and Heiko Schmiedel, pointed out that interchange fees are intrinsically tied to card payments. Said the report: “ ... the eCb provides guidance and expresses expectations that further clarity in the framework for interchange fees for card payments is needed so as to foster the creation of an open market environment for card schemes and to take the euro area towards an advanced retail payment market”.

borestam and Schmiedel wrote that interchange fees (if any) should be set “at a reasonable level and should not prevent the use of efficient payment instruments”. a sharp increase in cardholder costs, they argue, could induce consumers to use less efficient means of payment, such as cash and cheques, which would hamper the progress of the SePa project.

“Interchange fees ... should be set to promote overall economic efficiency in compliance with competition rules. The eurosystem recommends that a close dialogue take place between emerging new card schemes and the european Commission on the compatibility with competition law of the MIFS they plan to charge. Guidance in the form of a regulation might even be considered ...”, the report said. BT

Loose interchange Interchange fees are lucrative for banks – and merchants are questioning whether they should be allowed to continue. Heather McKenzie looks at the arguments on both sides.

The baby and the bathwaterThe European approach to regulation risks stifling innovation in payments, according to a white paper published by the European Savings Bank Group. David Bannister reports.

Nearly all governments around the world are convinced that the rapid changes in payments technologies will have profound effects on their economies, and all are reacting to ensure that these are, on the whole, positive effects.

european regulators, however, stand out from their counterparts in the uS, australia and Canada, and are at risk of stifling innovation in their desire to complete the european economic harmonisation project.

This surprisingly robust criticism of the european Commission’s approach to the market comes in a hefty white paper published by the european Savings bank Group. The eSbG is one of the largest european retail banking networks, comprising about one third of the retail banking market in europe. Its stated aim is to “represent the interests of its members vis-à-vis the eu Institutions and generate, facilitate and manage high quality cross-border banking projects”.

In the recently published paper, SEPA or payments innovation: a policy and business dilemma, Norbert bielefeld, deputy director payment systems at the eSbG says: “In europe, however, one cannot but be left with the feeling that the competitiveness goal is secondary to the market integration objective, and that the latter even ranks below european authorities‘ experiments in formulating competition policy.

The paper – 100+ pages of it – provides a comprehensive picture of what policy makers and regulators have to say about payments innovation, what models academics have formulated in this respect, the conclusions they draw, and what aspirations are expressed and solutions introduced by the demand and supply sides of the market.

Covering public policies and related action in the european union, the uS, australia, and Canada, bielefeld asks why policy makers and/or legislators are concerned about payments innovation, how they define payments innovation, and how they see their role in making payments innovation happen.

More unusually, it assesses the effectiveness of the different approaches against the relative efficiency achieved by each payment system as measured in

terms of non-cash payment transactions per capita.

In this regard, europe stands out as an anomaly. “Policymakers and regulators all see payments innovation as instrumental to sustain the competitiveness of their economies,” writes bielefeld. “Some outside europe are concerned of falling behind, which sounds surprising knowing that europe trails the three other countries retained here for comparison purposes in terms of payment system efficiency by 70 to 90%.”

bielefeld says that the concept of innovation in payments has become central to political and economic discussions. “From the everyday life of technology companies it has moved to the agendas of policy makers, who would often see in innovation a way out from the current economic crisis,” he says.

“The payments market is no exception even for the casual observer, that market has been brimming with innovations for several years now, although that same observer may associate innovation with companies whose names wouldn‘t have crossed his/her mind only a decade ago: amazon, Google, PayPal, alipay... but even the european Central bank acknowledges that although banks are often accused of not being very innovative in the field of retail payments, most innovations are offered by banks directly or indirectly.”

He says that there is “a shared intuition” that payments innovation will continue to unfold further in the electronic and mobile areas, but the responses of eu institutions are fundamentally different from the other regions he looks at. “european policymakers and regulators would go as far as sketching the solutions they wish to see, and spell out how they should be delivered, while in the three other countries under review authorities first base their interrogations on thorough market assessment and wide industry and public consultations,” he says baldly.

The paper outlines “steep differences” between policy makers and/or legislators roles in making payments innovation happen.

“In europe, although the european Central bank intends to only be a

catalyst, the european Commission is quick to take on a regulatory mantle. In essence the european regulator not only sets the reform agenda for the banking payment industry but also determines resource allocation, and decides whether resources may be remunerated, or not,” he writes. “In sharp contrast the american, australian and Canadian policy makers take what is mostly a facilitator approach, ensuring that the appropriate issues are debated in the appropriate forum, based on good information, at the right moment, and only legislating when there is consensus about the approach, or in exceptional situations, as a last recourse.”

That political and regulatory bodies should take an interest is not in doubt – as the gap between mobile technology and e-Commerce narrows, there is expected to be a more than doubling of non-cash payments – largely outside the eu’s borders. “This provides a clear indication as to where the attention of developers and software providers will shift to,” but as non-cash payments are good indicators of economic efficiency, this projection also vindicates european policy makers and legislators interest in payments innovation,” says the paper. “but is their approach well-guided? Could europe beat the odds and narrow in the coming years the widening gap with competing economies? Little comfort will be gained when trying to answer this question from the experience of the past decade. In the 10 years since the introduction of the physical euro, in the field of payments no less than two european regulations and one Directive have been promulgated and are in force, with a further regulation soon to be approved by the european Parliament. This massive legislative disruption on one side did nothing to make europe more efficient.”

Looking at it from the perspective of the business and consumers that the eC is seeking to protect and serve, the paper makes a central point: “the demand side is not concerned with payments innovation as such, but rather with the shortcomings experienced, and expectations of mitigating these.”

The full white paper is available at www.esbg.eu


TRANSACTIONS & PAYMENTS: NEWS ANAlYSISFebruary 2012

Innovation and competition heat up in payments Mobile adoption, regulation and activity among the card networks are among the hottest topics in the payments world according to an analysis of 2011 by Boston-based analyst firm Celent.


“The payments industry had a busy 2010, but 2011 proved to be even busier,” says Zilvinas Bareisis, senior analyst with Celent’s Banking Group and co-author of the report, Top Trends in Payments: A Year in Review. “at least at the retail end of the spectrum, payments industry is anything but slow-moving and boring. entrants such as Google and Isis, innovators such as PayPal, and established giants, such as Visa, MasterCard, and amex have all made important steps towards their respective visions for payments in a connected economy. In the meantime, China unionPay, a company less than 10 years old, has become the largest card scheme in the world. We expect that 2012 will be a pivotal year for bedding down many of these changes and innovations.”

In 2011, Celent noted “a sustained pace of payments innovation” – if anything, it says, the innovation pace increased, and the market became even more competitive. Visa and MasterCard continued on a trail of acquisitions and partnerships in their transformation journey from card networks to payments companies and beyond. american express and its enterprise Growth team have been busy launching products and announcing digital initiatives of their own. China unionPay became the largest card scheme in the world.

as expected, mobile provided the story of the year in consumer payments innovation. With Google Wallet up and running and other initiatives in the works, mobile is finally entering the high street. although mobile at the retail POS remains years away from being mainstream, different visions will compete fiercely”.

Security in payments is a must. Mobile devices and increased connectivity are raising the bar for security requirements and create new roles in the payments ecosystem, such as Trusted Service Manager. also, the questions around eMV in the uS are rapidly moving from “if and why” to “when and how.”

Just like security, making use of available data is increasingly a must for a successful payments business. big Data, a buzzword of 2011, has been accumulating ink and conference air time. However, Celent’s view is that enterprise Intelligence, an effective application of customer, business, and transactional

intelligence would be far more effective. When it comes to analytics and data, banks should walk before they can run.

Durbin continued to dominate the debit cards and broader retail banking discussions in the uS. The rules have been announced, and the industry has been busy interpreting, implementing, and responding. However, almost no one is happy, and we think this story is far from over.

In europe, the looming regulatory end date for SePa is expected to force the procrastinating banks to get ready. Not that it will be easy, especially if the impact on corporations is going to be as large as feared.

However, still more regulation and standards seems to be about the only certainty in uncertain times. This, combined with the need to balance product enhancement and operational efficiency, puts most of the IT budgets in transaction banking on a knife edge.

at the infrastructure level, the clear trend is towards faster payments at all ends of the spectrum, including low-value payments. Many countries are either

implementing or planning to implement same-day or near-real time payment processing infrastructure.

In the uS, if NaCHa’s proposal for same day services wins the vote in early 2012, it would become mandatory for all participants, presenting banks a number of challenges to overcome, from technical issues to questions of how to price the payments.

In 2011 Celent has noticed the initial signs of a trend towards a fundamental rethinking of the transactional retail account. although this is not a trend with short-term impact, it should be considered by anyone seeking differentiation from a crowded marketplace and investing in new technologies.

Gareth Lodge, senior analyst with Celent’s banking Group and co-author of the report (pictured), says: “What is interesting is that the issues discussed in the report are global in nature and change, or have the potential to change, the very nature of the business. With pressures on business models due to entrants and technologies, doing nothing is surely not an option; yet the worsening economic conditions suggest tighter than ever budgets. banks will need to take some tough decisions, and make sure more than ever that they are focusing on the right areas.”

The report is part of an annual ritual at Celent where the analysts review the preceding year and take a view on what is likely to happen next.

an alternative insight into what they think is likely to be on the shorter term agenda can be gleaned from the publishing schedule they have set themselves for the first part of this year.

Lodge, for instance, is looking closely at e-invoicing, with a planned primer for banks on what it is and what their opportunities are likely to be. Looking at why e-invoicing needs to be considered on a “big-picture” basis, a related report will look at why the banks ought to consider the multitude of e-invoicing service providers, grouping them by business model and looking at the opportunities and threats each of these pose for banks.

bareisis, on the other hand, will be looking at innovative payment startups, as evidenced by the key themes at Finovateeurope 2012 and an analysis of the start-ups demoing at the event.


“Doing nothing is surely not an option, yet the worsening economic

conditions suggest tighter than ever budgets. Banks

will need to take some tough decisions.”

The baby and the bathwaterThe European approach to regulation risks stifling innovation in payments, according to a white paper published by the European Savings Bank Group. David Bannister reports.

Nearly all governments around the world are convinced that the rapid changes in payments technologies will have profound effects on their economies, and all are reacting to ensure that these are, on the whole, positive effects.

european regulators, however, stand out from their counterparts in the uS, australia and Canada, and are at risk of stifling innovation in their desire to complete the european economic harmonisation project.

This surprisingly robust criticism of the european Commission’s approach to the market comes in a hefty white paper published by the european Savings bank Group. The eSbG is one of the largest european retail banking networks, comprising about one third of the retail banking market in europe. Its stated aim is to “represent the interests of its members vis-à-vis the eu Institutions and generate, facilitate and manage high quality cross-border banking projects”.

In the recently published paper, SEPA or payments innovation: a policy and business dilemma, Norbert bielefeld, deputy director payment systems at the eSbG says: “In europe, however, one cannot but be left with the feeling that the competitiveness goal is secondary to the market integration objective, and that the latter even ranks below european authorities‘ experiments in formulating competition policy.

The paper – 100+ pages of it – provides a comprehensive picture of what policy makers and regulators have to say about payments innovation, what models academics have formulated in this respect, the conclusions they draw, and what aspirations are expressed and solutions introduced by the demand and supply sides of the market.

Covering public policies and related action in the european union, the uS, australia, and Canada, bielefeld asks why policy makers and/or legislators are concerned about payments innovation, how they define payments innovation, and how they see their role in making payments innovation happen.

More unusually, it assesses the effectiveness of the different approaches against the relative efficiency achieved by each payment system as measured in

terms of non-cash payment transactions per capita.

In this regard, europe stands out as an anomaly. “Policymakers and regulators all see payments innovation as instrumental to sustain the competitiveness of their economies,” writes bielefeld. “Some outside europe are concerned of falling behind, which sounds surprising knowing that europe trails the three other countries retained here for comparison purposes in terms of payment system efficiency by 70 to 90%.”

bielefeld says that the concept of innovation in payments has become central to political and economic discussions. “From the everyday life of technology companies it has moved to the agendas of policy makers, who would often see in innovation a way out from the current economic crisis,” he says.

“The payments market is no exception even for the casual observer, that market has been brimming with innovations for several years now, although that same observer may associate innovation with companies whose names wouldn‘t have crossed his/her mind only a decade ago: amazon, Google, PayPal, alipay... but even the european Central bank acknowledges that although banks are often accused of not being very innovative in the field of retail payments, most innovations are offered by banks directly or indirectly.”

He says that there is “a shared intuition” that payments innovation will continue to unfold further in the electronic and mobile areas, but the responses of eu institutions are fundamentally different from the other regions he looks at. “european policymakers and regulators would go as far as sketching the solutions they wish to see, and spell out how they should be delivered, while in the three other countries under review authorities first base their interrogations on thorough market assessment and wide industry and public consultations,” he says baldly.

The paper outlines “steep differences” between policy makers and/or legislators roles in making payments innovation happen.

“In europe, although the european Central bank intends to only be a

catalyst, the european Commission is quick to take on a regulatory mantle. In essence the european regulator not only sets the reform agenda for the banking payment industry but also determines resource allocation, and decides whether resources may be remunerated, or not,” he writes. “In sharp contrast the american, australian and Canadian policy makers take what is mostly a facilitator approach, ensuring that the appropriate issues are debated in the appropriate forum, based on good information, at the right moment, and only legislating when there is consensus about the approach, or in exceptional situations, as a last recourse.”

That political and regulatory bodies should take an interest is not in doubt – as the gap between mobile technology and e-Commerce narrows, there is expected to be a more than doubling of non-cash payments – largely outside the eu’s borders. “This provides a clear indication as to where the attention of developers and software providers will shift to,” but as non-cash payments are good indicators of economic efficiency, this projection also vindicates european policy makers and legislators interest in payments innovation,” says the paper. “but is their approach well-guided? Could europe beat the odds and narrow in the coming years the widening gap with competing economies? Little comfort will be gained when trying to answer this question from the experience of the past decade. In the 10 years since the introduction of the physical euro, in the field of payments no less than two european regulations and one Directive have been promulgated and are in force, with a further regulation soon to be approved by the european Parliament. This massive legislative disruption on one side did nothing to make europe more efficient.”

Looking at it from the perspective of the business and consumers that the eC is seeking to protect and serve, the paper makes a central point: “the demand side is not concerned with payments innovation as such, but rather with the shortcomings experienced, and expectations of mitigating these.”

The full white paper is available at www.esbg.eu



State Street has expanded its global servicing capability for exchange traded funds with new enhancements based on the cloud computing technology investments it has been making over the past few years.

State Street’s TotaleTF servicing solution provides full automation throughout the lifecycle of an eTF from the basket-creation process to trade processing and settlement.

The new cloud-based enhancements provide complete integration with core applications, end-to-end automation and full client transparency via an eTF dashboard available on the company’s client website my.StateStreet.com. additional functionality includes the geographic expansion of State Street’s Fund Connect eTF order management system and a daily performance attribution capability for eTFs.

The eTF dashboard on my.StateStreet.com now allows portfolio managers to monitor the basket in near real time, and geographic expansion of the Fund Connect eTF order management system includes coverage for europe, Canada and the asia-Pacific region. The enhanced daily performance attribution capability also allows for NaV decomposition to break down tracking errors into specific components.

State Street has been moving to a cloud-based architecture as part of a three-year technology migration. In an interview with Banking Technology last year, Chris Perretta, chief information officer, said that the institution is looking to use the cloud model to speed the time to market of new products and services and their continual enhancement (September 2011).

“The line between what we used to call technology and the business almost doesn’t make sense anymore,” he said. “The technology is the physical embodiment of the product we make. It is pretty well embedded and I see new computing paradigms increasing the technology content of financial services exponentially.”

State Street leverages cloud investment to enhance ETF services

SunGard has extended its Valdi trading solutions suite to provide access to BETa, the European Multilateral Trading Facility launched by the Budapest Stock Exchange in November 2011 to serve retail investors. BETa uses the BSE equity trading platform, and offers trading in foreign shares, with market makers supplying continuous liquidity. The BETa product range, initially restricted to Finnish, French, German and Spanish shares, is expected to be broadened in early 2012, with additional products to become available for trading.

MarkitSERV, the electronic trade processing service for OTC derivative transactions, is now transmitting confirmed trade records to the DTCC’s new Global Trade Repository for OTC interest rate derivatives. With client authorisation, MarkitSERV’s trade reporting system automatically transmits confirmed trade records to the GTR in near real time, helping derivatives market participants to fulfil their regulatory commitments for trade reporting. The company has also backloaded approximately three million rates derivative trade records into the GTR, which automatically updates whenever any of those trades change.

Fidessa Intelligence is a new initiative from trading systems vendor Fidessa that will bring together a suite of analysis tools. The first tool, Trader Intelligence, is now available in the US and is designed to help brokers capture, filter, organise and display a wealth of actionable data from a multitude of disparate sources. Integrated into Fidessa’s sell-side order management platform, Trader Intelligence optimises workflow by aggregating a range of data – including market data, trading data, holding data, Opportunity Crossing data, trade adverts, IOIs and execution cost analysis – and presents it as counterparty and trading intelligence.

Citic Bank International, a Hong Kong-based full-service commercial bank, has chosen Pricing Partners’ Price-it Excel, the derivatives pricing solution, for its risk management team. The bank will use the derivatives pricing library to evaluate a wide range of FX structured products.

Infront, a provider of real-time market data and electronic trading solutions, is to house its solutions at Interxion’s Stockholm and City of London data centres in order to provide its customers with faster connectivity to exchanges and key liquidity venues. The company has over 9,000 customers in Europe spanning large institutions and private investors.

NYSE Technologies opens latest Liquidity Center in Toronto

NySe Technologies, the commercial technology division of NySe euronext, has opened its latest Liquidity Center installation in Toronto as part of its development of a set of trading, data and connectivity applications that

enable traders to quickly and easily enter global markets that were previously difficult or expensive to access.

Toronto is viewed as a top global trading destination by NySe Technologies, which cites a 40% growth in trading activity, multiple alternative Trading Systems and specialists in the energy and mining sectors as key indicators of its importance. The Toronto facility joins existing liquidity centres in the uS, London and, most recently, Tokyo. additional centres are planned for other international locations.

“We are very pleased to have our Toronto Liquidity Center fully operational and available for customers,” said Stanley young, chief executive of NySe Technologies. “It continues the realisation of our virtual capital markets community strategy designed to provide customers with high-performance access to key global markets and services that empower them to trade more effectively at a significantly lower cost with greatly reduced friction. Through this Toronto hub, we can deploy our core NySe Technologies services to equalise market accessibility through simplified connectivity, ultra low-latency data products and world-class technology solutions.”

From each of these facilities, NySe Technologies will offer many of its core services, including the risk Management Gateway, which provides low latency, risk-managed access to markets; SuperFeed, a high-performance market data ticker plant and distribution system; and Marketplace, a FIX-based trading community with more than 1,200 market participants.

“The line between what we used to call technology and the

business almost doesn’t make sense anymore,”


MARKETS &INVESTMENTS


February 2012

The first fruits of the Market Model Typology industry project, intended to form the basis for a consolidated european market data service, have appeared with the availability of the official MMT 1.0 mapping release.

a broad spectrum of the industry, Federation of european Stock exchange members, the London Stock exchange, baTS Chi-X europe, Markit boat and market data vendors – Thomson reuters, bloomberg, Fidessa, NySe Technologies and SIX Telekurs – have built on the trade reporting standards for OTC trade reporting initiated by a joint industry working group under the auspices of the Committee of european Securities regulators, now the european Securities and Markets authority.

MMT provides a translation between legacy trade reporting flags to a newly defined single market standard. The translation is being adopted by MMT participating vendors on behalf of investors who seek clarity in monitoring market activity.

The MMT translations have been developed and are being maintained by MMT exchanges and trade reporting venues on behalf of market participants until these standards are adopted natively by each venue.

This MMT initiative provides an immediate solution for users of consolidated data from the participating regulated Markets and MTFs through the various applications provided by the participating data vendors.

already underway are further efforts by exchanges to adopt MMT natively within their datafeeds allowing direct feed users to benefit and to avoid market data vendors having to apply MMT translations on behalf of users. Future announcements on native adoption progress by FeSe members will be communicated in due course.

according to the CeSr Joint Industry Working Group the most significant remaining work involves the definition and implementation of trade reporting requirements for OTC market participants. This, the group says, is necessary work that was not accomplished by the working group within the mandated timeframes. “This effort requires the industry and regulators to work together to ensure that the standards for trade data are consistently applied during trade reporting by OTC market participants and validated by trade reporting venues,” said a FeSe statement announcing the progress. “FeSe will participate actively in these efforts and FeSe members who operate trade reporting platforms will also support these efforts and develop the necessary validation capabilities. Further updates will be posted on our website.”

European markets move closer to consolidated tape with MMT mapping


Saudi Fransi Capital has implemented an asset management system supplied by Advent Software to help it provide enhanced services to clients. Saudi Fransi is one of the largest brokers in the Saudi Stock Exchange and a leading Saudi Arabia-based provider of brokerage and investment banking services, including corporate finance, asset management and advisory investment management. “We needed better automation capabilities and a decrease in manual intervention in our operations,” said Yasir Al-Rumayyan, chief executive of Saudi Fransi. “Advent allowed us to improve core functionality while fulfilling business requirements.”

From the middle of February National Settlement Depository, Russia’s only settlement depository servicing the full range of debt and equity securities of Russian issuers, will settle transactions made within the RTS Money system in line with the two exchange groups’ integration plans. RTS Money is a new service for execution of FX trades using a single trading platform on which FORTS and RTS Standard operate. At present the settlements on the transactions are held using rouble and foreign currency accounts.

Fujitsu has entered into a partnership with Natterbox to offer its network-based recording and retention management solution for mobile devices to comply with the FSA mobile communications recording regulation, which came into force last November. A secure web portal allows administrators to set recording, retention, retrieval, blocking and re-direction policies for their mobile user base, groups of users and individual users. The same portal can also give nominated administrators audited access to mobile recordings via configurable approval workflows.

Panopticon Software, a provider of visual data analysis software for real-time, Complex Event Processing and historical time series data, has released a new version of its software that includes native support for several of the more popular Complex Event Processing systems and tick databases on the market, including Thomson Reuters Velocity Analytics, OneTick from OneMarketData, Oracle CEP and the Sybase Event Stream Processor.

Buy-side firms unsure of data quality from disparate systems

More than 40% of buy-side firms are not confident that the data they are receiving from disparate systems is consistent and of high quality, and more than two-thirds (67.4%) say that there is significant effort involved in

reconciling data between disparate systems and sources. The results come from a survey of North american buy-side firms carried out on

behalf of investment systems vendor SimCorp.“The statistics are distressing,” said Matt Samelson, principal at Woodbine

associates, the Connecticut-based consulting firm that carried out the work. “according to these numbers, 40% of those surveyed are making investment decisions based on poor quality data, and nearly 30% do not have a near real-time view into their exposure, making it impossible for these firms to be agile and respond to shifting market dynamics. We, as a community, need to galvanise change in order to restore investor confidence.”

Some 22% of respondents indicated that it would take days to generate a report calculating their firm’s exposure/performance across all holdings, including derivatives. Nearly 8% responded that this would take weeks.

State Street has expanded its global servicing capability for exchange traded funds with new enhancements based on the cloud computing technology investments it has been making over the past few years.

State Street’s TotaleTF servicing solution provides full automation throughout the lifecycle of an eTF from the basket-creation process to trade processing and settlement.

The new cloud-based enhancements provide complete integration with core applications, end-to-end automation and full client transparency via an eTF dashboard available on the company’s client website my.StateStreet.com. additional functionality includes the geographic expansion of State Street’s Fund Connect eTF order management system and a daily performance attribution capability for eTFs.

The eTF dashboard on my.StateStreet.com now allows portfolio managers to monitor the basket in near real time, and geographic expansion of the Fund Connect eTF order management system includes coverage for europe, Canada and the asia-Pacific region. The enhanced daily performance attribution capability also allows for NaV decomposition to break down tracking errors into specific components.

State Street has been moving to a cloud-based architecture as part of a three-year technology migration. In an interview with Banking Technology last year, Chris Perretta, chief information officer, said that the institution is looking to use the cloud model to speed the time to market of new products and services and their continual enhancement (September 2011).

“The line between what we used to call technology and the business almost doesn’t make sense anymore,” he said. “The technology is the physical embodiment of the product we make. It is pretty well embedded and I see new computing paradigms increasing the technology content of financial services exponentially.”

State Street leverages cloud investment to enhance ETF services

SunGard has extended its Valdi trading solutions suite to provide access to BETa, the European Multilateral Trading Facility launched by the Budapest Stock Exchange in November 2011 to serve retail investors. BETa uses the BSE equity trading platform, and offers trading in foreign shares, with market makers supplying continuous liquidity. The BETa product range, initially restricted to Finnish, French, German and Spanish shares, is expected to be broadened in early 2012, with additional products to become available for trading.

MarkitSERV, the electronic trade processing service for OTC derivative transactions, is now transmitting confirmed trade records to the DTCC’s new Global Trade Repository for OTC interest rate derivatives. With client authorisation, MarkitSERV’s trade reporting system automatically transmits confirmed trade records to the GTR in near real time, helping derivatives market participants to fulfil their regulatory commitments for trade reporting. The company has also backloaded approximately three million rates derivative trade records into the GTR, which automatically updates whenever any of those trades change.

Fidessa Intelligence is a new initiative from trading systems vendor Fidessa that will bring together a suite of analysis tools. The first tool, Trader Intelligence, is now available in the US and is designed to help brokers capture, filter, organise and display a wealth of actionable data from a multitude of disparate sources. Integrated into Fidessa’s sell-side order management platform, Trader Intelligence optimises workflow by aggregating a range of data – including market data, trading data, holding data, Opportunity Crossing data, trade adverts, IOIs and execution cost analysis – and presents it as counterparty and trading intelligence.

Citic Bank International, a Hong Kong-based full-service commercial bank, has chosen Pricing Partners’ Price-it Excel, the derivatives pricing solution, for its risk management team. The bank will use the derivatives pricing library to evaluate a wide range of FX structured products.

Infront, a provider of real-time market data and electronic trading solutions, is to house its solutions at Interxion’s Stockholm and City of London data centres in order to provide its customers with faster connectivity to exchanges and key liquidity venues. The company has over 9,000 customers in Europe spanning large institutions and private investors.

NYSE Technologies opens latest Liquidity Center in Toronto

NySe Technologies, the commercial technology division of NySe euronext, has opened its latest Liquidity Center installation in Toronto as part of its development of a set of trading, data and connectivity applications that

enable traders to quickly and easily enter global markets that were previously difficult or expensive to access.

Toronto is viewed as a top global trading destination by NySe Technologies, which cites a 40% growth in trading activity, multiple alternative Trading Systems and specialists in the energy and mining sectors as key indicators of its importance. The Toronto facility joins existing liquidity centres in the uS, London and, most recently, Tokyo. additional centres are planned for other international locations.

“We are very pleased to have our Toronto Liquidity Center fully operational and available for customers,” said Stanley young, chief executive of NySe Technologies. “It continues the realisation of our virtual capital markets community strategy designed to provide customers with high-performance access to key global markets and services that empower them to trade more effectively at a significantly lower cost with greatly reduced friction. Through this Toronto hub, we can deploy our core NySe Technologies services to equalise market accessibility through simplified connectivity, ultra low-latency data products and world-class technology solutions.”

From each of these facilities, NySe Technologies will offer many of its core services, including the risk Management Gateway, which provides low latency, risk-managed access to markets; SuperFeed, a high-performance market data ticker plant and distribution system; and Marketplace, a FIX-based trading community with more than 1,200 market participants.

“The line between what we used to call technology and the

business almost doesn’t make sense anymore,”


or through an agent. The customer may appoint the foreign dealer, SeF, clearing house or another party as its agent. but when a uS bank enters into a transaction with a foreign bank, the uS bank must report to uS authorities while the foreign bank must meet its regulator’s requirements.

Firms are still unclear exactly what data they have to provide and when they need to provide it. Does it have to be sent in near real time? Dodd-Frank specifies that counterparties are required to report trades for the purpose of real-time price dissemination as soon as technologically practicable, but that has not been fully defined yet. On average it takes eight minutes for an interest rate swaps trade to be fully confirmed on MarkitServ. electronic confirmation in other asset classes may take more than 15 minutes. another question that needs to be answered is whether reporting must be done strictly by way of digital feeds, or can be communicated by voice.

The technology exists to make all the necessary connections to comply with the regulations. but the lack of clarity from the regulators, and uncertainty about what the market will look like, is taking a toll on market participants. When senior managers ask their IT staff what resources are needed to comply, the best they can do is offer a price range. They have a conceptual understanding of what must be done, but they do not know the full scope of the project.

Theoretically, once a trade is completed electronically on the SeF, the confirmation and collateral requirements will be sent automatically to the counterparties and reported to the CCP and SDr. When a voice trade is done, an electronic version will have to be created. but firms need to agree who is responsible for reporting the transaction to the SDr. under Dodd-Frank, if a dealer is trading with a non-dealer customer, and both are uS domiciled, the dealer has the reporting obligation. If the transaction is between two uS-based dealers, at least one of them has to report. If the transaction is between two non-dealers, the obligation is decided according to a hierarchy.

Cross-border transactions are more complicated. When a trade is transacted between a foreign dealer and a uS domiciled non-dealer customer, the uS customer has an obligation to report either directly


>

“Ultimately there’s going to be a lot of money that will be spent to comply with this stuff, but the actual flows will not differ.”

John Jay, Aite


SECURITIES: TRADING & SETTlEMENTFebruary 2012

Regulatory changes around the world are creating a plethora of new venues for trade and post-trade activity. Choosing which to connect to is a problem for business as well as IT and operations. Sherree DeCovny untangles the issues.

Only connect

The new regulations in the US and Europe require banks to make several new connections to Swap Execution Facilities and Organised Trading Facilities, central counterparty clearing houses and swaps data repositories. The complicated logistics behind connectivity is likely to have an impact on the business, operations and technology, so banks will need to figure out the optimal way to restructure their groups for the new environment.

under the uS Dodd-Frank rules, standardised derivatives will have to be traded on an exchange or SeF and centrally cleared. europe is introducing a trading venue similar to SeFs that will be known as the Organised Trading Facility. Trade data must be reported to a Swaps Data repository, regardless of whether the transaction is bilaterally or centrally cleared.

To this end, a web of new connections has to be established. The SeFs will have to connect to the CCPs, and the CCPs will have to connect to the SDrs. In addition to connecting to the SeFs, OTFs, SDrs and CCPs, banks will need to connect to their counterparties. Simple, isn’t it?

“you would assume – especially in europe with this new definition of OTF – that there would be a large number of new venues for everybody to at least consider to connecting to,” says bob Fuller, director at connectivity provider Fixnetix. “So it’s just the sheer complexity of the web that gets created that becomes a problem.”

Traditionally OTC derivatives have been traded over the phone, but most communications will be done electronically in the future – at least that is what the regulators are advocating. The cost of establishing electronic connectivity has to be built into the business case for participating in a given market segment. This is not trivial given that each connection could cost over $1 million, and the total industry spend may run into the billions.

“If you’re in the OTC market, you probably operate under a phone and/or hybrib system where you have some sort of electronic communications plus voice,” says John Jay, a senior analyst at aite Group. “It’s going to come down to ‘how much can we make in a given marketplace, and how much is it going to cost us’.”

The Volcker rule in the uS and the corresponding rule proposals in europe could potentially stop brokers from creating products, limit the number of new trading venues and significantly curtail liquidity. assuming that does not happen, several SeFs, OTFs and SDrs could emerge on both sides of the atlantic. In europe, the best execution rules require brokers to scour the market for the best price for the customer, so they are likely to have to connect to all the OTFs. best execution does not apply to OTC derivatives in

the uS, but competitive pressures may still force firms to connect to all the SeFs.

Firms run the risk of establishing many connections to new entities only to find they are not doing enough transactions through some of them to justify the investment. Moreover, a significant number of them may not survive over the long haul.

Some observers believe the new regulations will present new opportunities for growth, but aite Group is sceptical. unlike equities, the OTC market is customised and speed is not the priority. a factor input, such as a curve, may change so the dealer cannot pull the trigger immediately. In addition, it is not a many-to-many market. There are perhaps a couple of dozen dealers in the world who are willing to make a market and take on the risk in these products. as a result, the market does not necessarily lend itself to a central order limit book model.

“In my mind it’s very analogous to the fallacy of build it, they will come,” says Jay. “at the end of the day, it really begins and ends with the actual market need. What I believe will happen is ultimately there’s going to be a lot of money that will be spent to comply with this stuff, but the actual flows will not differ.”

The shift from predominantly voice to electronic trading will have a fundamental impact on front-office workflow and back office operations, and staff will need time to adjust to the new environment.

or through an agent. The customer may appoint the foreign dealer, SeF, clearing house or another party as its agent. but when a uS bank enters into a transaction with a foreign bank, the uS bank must report to uS authorities while the foreign bank must meet its regulator’s requirements.

Firms are still unclear exactly what data they have to provide and when they need to provide it. Does it have to be sent in near real time? Dodd-Frank specifies that counterparties are required to report trades for the purpose of real-time price dissemination as soon as technologically practicable, but that has not been fully defined yet. On average it takes eight minutes for an interest rate swaps trade to be fully confirmed on MarkitServ. electronic confirmation in other asset classes may take more than 15 minutes. another question that needs to be answered is whether reporting must be done strictly by way of digital feeds, or can be communicated by voice.

The technology exists to make all the necessary connections to comply with the regulations. but the lack of clarity from the regulators, and uncertainty about what the market will look like, is taking a toll on market participants. When senior managers ask their IT staff what resources are needed to comply, the best they can do is offer a price range. They have a conceptual understanding of what must be done, but they do not know the full scope of the project.

Theoretically, once a trade is completed electronically on the SeF, the confirmation and collateral requirements will be sent automatically to the counterparties and reported to the CCP and SDr. When a voice trade is done, an electronic version will have to be created. but firms need to agree who is responsible for reporting the transaction to the SDr. under Dodd-Frank, if a dealer is trading with a non-dealer customer, and both are uS domiciled, the dealer has the reporting obligation. If the transaction is between two uS-based dealers, at least one of them has to report. If the transaction is between two non-dealers, the obligation is decided according to a hierarchy.

Cross-border transactions are more complicated. When a trade is transacted between a foreign dealer and a uS domiciled non-dealer customer, the uS customer has an obligation to report either directly


>


John Jay, Aite

RETAILFebruary 2012

The Co-operative banking Group has renewed its 17 year-old IT services deal with Steria, extending it till “at least” May 2014 as it continues its Group Transformation programme and prepares to integrate 600-plus branches of

Lloyds, for which it is the front-runner.Jim Slack, business leader of IT operations and development at the bank, said:

“Our partnership with Steria is based on trust. Our relationship with Steria has already delivered many successful business-critical projects and services, including a number of highly strategic undertakings. both parties remain committed to continually drive out cost and improve productivity, innovation and quality.”

Gavin Chapman, chief operating officer of Steria uK, said:”we recognise that the need to continually improve is more critical than ever in these challenging financial times. Steria will continue to help reduce risk through our knowledge of the bank’s systems and strategy. In particular we are continuing to work hard to ensure the success of the Co-operative banking Group Transformation Programme.”

The bank’s Financial Transformation Programme began in 2008 and involves the replacement of its core banking systems and complete overhaul of its payments systems with the installation of a Clear2Pay Payment Hub.

as part of its core Financial Transformation Programme, the Co-operative banking Group is installing a centralised Teradata data warehouse platform to re-engineer the bank’s accounting processes.

Teradata won the contract in partnership with Microgen, which develops specialist software that will be used to feed financial data into the data warehouse, which integrates credit risk and accounting data into a single environment. Predicted benefits include increased usability of data, reduced management overheads and improved time efficiency.

The bank wanted to augment this new operational environment, which has already been delivered in its corporate banking business, with a business intelligence environment, for which it chose Teradata and its Financial Services Data Model as a solid foundation for credit risk and accounting-based business intelligence. The model is expandable to the entire enterprise so that other functional business intelligence can be added in the future.

Within the programme, the Microgen accounting Hub and Microgen aptitude is used to feed the general ledger and the Teradata data warehouse with finance information.

Co-op extends IT deal with Steria


LCL to add coin deposit and banknote recycling to ATM estate

Crédit agricole subsidiary le Crédit Lyonnais is to replace its network of deposit-enabled aTMs with new machines from Diebold featuring banknote recycling and coin deposit capabilities in a replacement cycle beginning with pilot installations

during the summer.“We were among the first in France to offer our shopkeeper and artisan customers

automated banknote and coin deposit terminals, installed in dedicated areas,” said Luc Julien, head of the aTM and fiduciary department at the bank. “Diebold’s Opteva 328 recycling capability leads to further thoughts on future transition to full recycling.”

In addition to crediting users’ bank accounts in real time, deposit automation will reduce time spent on handling cash by bank employees, enabling staff to offer value-added products to customers. With its immediate recycling of selected banknotes, the Opteva 328 delivers efficiency and security in branches, while decreasing the total cost of ownership by reducing cash handling and cash management costs.

The Opteva 324 enables a coin deposit option for merchants and consumers featuring a receipt itemising totals, quantity and coin value. bulk coin deposit alongside bulk cash and cheque deposit functionality rounds out the self-service features offered to consumers.

Following a first pilot installation this summer, the Opteva 328 and 324 aTMs will be deployed throughout and some 90 sites across France beginning in October 2012.


Voice security has role in mobile banking

Voice biometrics has the potential to play an important role in addressing the security risks

associated with the increased use of smartphones for payments and banking, according to a study, led by Dan Miller, senior analyst at Opus research.

The report, Voice Biometrics Authentication Best Practices, overcoming obstacles to adoption, evaluates previous voice biometric projects as well as the current industry landscape in order to identify a number of best practices to rolling out the technology and taking the industry forward. It was sponsored by ValidSoft, a supplier of fraud prevention, authentication and transaction verification.

“Voice biometrics strikes the right balance of strong authentication and usability,” said Miller. “It is a powerful tool for preventing fraud and promoting empowerment through self-service, and will in the long run help financial institutions save money from fraudulent transactions and reduced administration costs. The security industry should adopt best practices when introducing voice biometrics to their customers.”

Increasing incidences of data theft, and increasing awareness of fraud, highlight the need for banks, businesses and governments to take another look at methods of authenticating end users. It is no longer sufficient to merely secure hardware end points. Organisations want assurances that the individual at that end point is the person he or she claims to be, the report says.

The general public is becoming more familiar with using voice for mobile search, device control and dictation and the study says that with the proper approach, voice authentication with soon follow. Voice biometrics can act as a part of a multi-layer authentication process to help reduce fraud and to confirm that the endpoint user is genuine. Opus research predicts that the global number of registered voiceprints will increase from 10 million today to over 25 million in 2015.

More to the point, it takes time to build out a connectivity solution, so firms need to think of ways to streamline the process and hire the right staff.

“banks often hire people who don’t understand the product or the process,” warns Sonia Goklani, chief executive of Cleartrack, which offers OTC clearing tools and advisory services. “ultimately, they end up running into problems with compliance.”

In most firms the clearing, bilateral trading and prime brokerage businesses each have their own technology silo, and they are very different in the way they manage the process flow, reporting, market data, pricing and risk. Without synergies, they cannot achieve economies of scale and service clients properly. The large players in the OTC derivatives markets are struggling with this while HSbC, bNP Paribas and Commerzbank, which do not have a legacy technology problem, are gearing up to capture market share.

Once the new regulations take effect, the SeFs will need to send pricing and market data to the banks. Then the banks have to figure out how to leverage their infrastructure to allow these pipes to communicate.

“either you build separate connections and get the market data connections to talk to the SeF connections, or you build totally new connections for the market data and SeF prices,” Goklani explains. “banks need to decide whether to build a whole new pipe so they get both together for derivatives, or leverage the existing pipe they have.”

Legacy technology is not scalable enough to extend the pipe, and building a new one is expensive. Cloud computing may be a solution, but then banks must figure out how to retain, manage and mine the data in real time. They need skilled technologists to support that effort, which adds to the cost.

Goklani believes banks initially should implement a short-term technology strategy to cope with the demands of the immature market structure. They can use excel macros, access and SharePoint to semi-automate transaction processing and on-board clients. Meanwhile, they should dedicate resources to figuring out how to build a framework for all the functions pertaining to connectivity, margins, limits, collateral and data repository reporting. as the market matures and new CCPs, SeFs, OTFs and SDrs emerge and fall by the wayside, banks can implement a formalised technology platform to support the business in the long term.

“With a flexible, adaptable framework, if I build the connectivity to TradeWeb for CDS today, it should be easy for me build the connectivity for interest rate swaps or variance swaps tomorrow,” says Goklani. “but banks are not thinking that way at this point in time. They’re thinking only in terms of building


individual connections. It’s a mindset problem.”ultimately, some banks may decide to outsource.

Outsourcers such as Fixnetix already connect multiple brokers to exchanges, and they can use their network to allow brokers to talk to each other.

“even for the likes of a Goldman Sachs, a very large trading house, it’s going to become very difficult to create that broker network and make it pay for itself,” says Fixnetix’s Fuller. “So you’ve got to start looking at an outsourcing model ... plugging into networks where other people are already connected.”

according to aite’s Jay, the top tier banks are further advanced in their preparations than the smaller firms that have to start building their infrastructure from the ground up. They also have the greatest voice when it comes to influencing the regulators. but that is not to say the larger banks have a smooth ride ahead.

banks will need to figure out how to align their clearing and executing brokerage businesses, which are separated by a Chinese wall, and the individual desks within them. The products that will be affected are foreign exchange, listed derivatives including futures and options, credit and rates. Some clients may want to hedge their trades across multiple desks: they may want to do a single name credit default swap and hedge it with futures and options, for example. Firms will need to manage their exposure to clients across multiple desks from a margining and credit perspective as well as report their position to multiple regulators.

restructuring groups is a political issue. The traders on different desks do not always see eye to eye and the traders, operations and technology staff may not have a strong relationship. yet a coordinated approach is critical to client retention. according to Goklani, JPMorgan has achieved some success in this area, but it remains a challenge for Citi and Deutsche bank.

“banks need to come up with an incentive-based mechanism so the business, technology and operations people work together just like they do in consulting firms,” she suggests. “Deloitte has a point system to encourage its partners to work together. If they do well, they get a higher compensation at the end of year.”

at this stage, the industry is beyond questioning whether the new rules make sense. Market participants are simply awaiting more guidance from the regulators so they can make strategic plans and allocate resources. They want to get on with it and start making money again. Some may decide that participating in the OTC derivatives market is no longer worth the cost and hassle. Clearly, as they move forward in their journey, connectivity will play a key role in their decision making. BT

SECURITIES: TRADING & SETTlEMENTFebruary 2012

“Banks need to decide whether to build a whole new pipe so they get

both together for derivatives, or leverage the existing pipe

they have.”Sonia Goklani, Cleartrack

RETAILFebruary 2012

The Co-operative banking Group has renewed its 17 year-old IT services deal with Steria, extending it till “at least” May 2014 as it continues its Group Transformation programme and prepares to integrate 600-plus branches of

Lloyds, for which it is the front-runner.Jim Slack, business leader of IT operations and development at the bank, said:

“Our partnership with Steria is based on trust. Our relationship with Steria has already delivered many successful business-critical projects and services, including a number of highly strategic undertakings. both parties remain committed to continually drive out cost and improve productivity, innovation and quality.”

Gavin Chapman, chief operating officer of Steria uK, said:”we recognise that the need to continually improve is more critical than ever in these challenging financial times. Steria will continue to help reduce risk through our knowledge of the bank’s systems and strategy. In particular we are continuing to work hard to ensure the success of the Co-operative banking Group Transformation Programme.”

The bank’s Financial Transformation Programme began in 2008 and involves the replacement of its core banking systems and complete overhaul of its payments systems with the installation of a Clear2Pay Payment Hub.

as part of its core Financial Transformation Programme, the Co-operative banking Group is installing a centralised Teradata data warehouse platform to re-engineer the bank’s accounting processes.

Teradata won the contract in partnership with Microgen, which develops specialist software that will be used to feed financial data into the data warehouse, which integrates credit risk and accounting data into a single environment. Predicted benefits include increased usability of data, reduced management overheads and improved time efficiency.

The bank wanted to augment this new operational environment, which has already been delivered in its corporate banking business, with a business intelligence environment, for which it chose Teradata and its Financial Services Data Model as a solid foundation for credit risk and accounting-based business intelligence. The model is expandable to the entire enterprise so that other functional business intelligence can be added in the future.

Within the programme, the Microgen accounting Hub and Microgen aptitude is used to feed the general ledger and the Teradata data warehouse with finance information.

Co-op extends IT deal with Steria


LCL to add coin deposit and banknote recycling to ATM estate

Crédit agricole subsidiary le Crédit Lyonnais is to replace its network of deposit-enabled aTMs with new machines from Diebold featuring banknote recycling and coin deposit capabilities in a replacement cycle beginning with pilot installations

during the summer.“We were among the first in France to offer our shopkeeper and artisan customers

automated banknote and coin deposit terminals, installed in dedicated areas,” said Luc Julien, head of the aTM and fiduciary department at the bank. “Diebold’s Opteva 328 recycling capability leads to further thoughts on future transition to full recycling.”

In addition to crediting users’ bank accounts in real time, deposit automation will reduce time spent on handling cash by bank employees, enabling staff to offer value-added products to customers. With its immediate recycling of selected banknotes, the Opteva 328 delivers efficiency and security in branches, while decreasing the total cost of ownership by reducing cash handling and cash management costs.

The Opteva 324 enables a coin deposit option for merchants and consumers featuring a receipt itemising totals, quantity and coin value. bulk coin deposit alongside bulk cash and cheque deposit functionality rounds out the self-service features offered to consumers.

Following a first pilot installation this summer, the Opteva 328 and 324 aTMs will be deployed throughout and some 90 sites across France beginning in October 2012.


Voice security has role in mobile banking

Voice biometrics has the potential to play an important role in addressing the security risks

associated with the increased use of smartphones for payments and banking, according to a study, led by Dan Miller, senior analyst at Opus research.

The report, Voice Biometrics Authentication Best Practices, overcoming obstacles to adoption, evaluates previous voice biometric projects as well as the current industry landscape in order to identify a number of best practices to rolling out the technology and taking the industry forward. It was sponsored by ValidSoft, a supplier of fraud prevention, authentication and transaction verification.

“Voice biometrics strikes the right balance of strong authentication and usability,” said Miller. “It is a powerful tool for preventing fraud and promoting empowerment through self-service, and will in the long run help financial institutions save money from fraudulent transactions and reduced administration costs. The security industry should adopt best practices when introducing voice biometrics to their customers.”

Increasing incidences of data theft, and increasing awareness of fraud, highlight the need for banks, businesses and governments to take another look at methods of authenticating end users. It is no longer sufficient to merely secure hardware end points. Organisations want assurances that the individual at that end point is the person he or she claims to be, the report says.

The general public is becoming more familiar with using voice for mobile search, device control and dictation and the study says that with the proper approach, voice authentication with soon follow. Voice biometrics can act as a part of a multi-layer authentication process to help reduce fraud and to confirm that the endpoint user is genuine. Opus research predicts that the global number of registered voiceprints will increase from 10 million today to over 25 million in 2015.

Fraud reaches record levels in the UKAusterity Britain is facing a sharp rise in fraud as economic gloom grips the country


RETAIL: ANALYSISFebruary 2012

Fraud rose sharply during 2011, according to figures from CIFAS, the UK’s Fraud Prevention Service, which show a 9% increase in the overall level of fraud compared to 2010.

Other findings suggest that the economic climate is driving the increase as formerly law-abiding people turn to fraud, though there is still plenty of evidence that career criminals are exploiting both new technology and consumer gullibility.

“With the cost of living increasing, pay levels frozen for many, and tax and VaT changes taking effect, perhaps it is unsurprising that fraud has rocketed again,” said CIFaS chief executive Peter Hurst. “Prevention, however, remains better than cure, and it is time for all organisations and consumers to start reviewing their approaches to preventing fraud rather than trying and failing to recover losses. Not investing in proper fraud prevention systems and approaches, from online security to data sharing, is tantamount to leaving an open till unguarded. It is the same whether you are a private sector organisation, a public sector body or a charity. It will lead to only one thing: financial loss.”

according to the latest numbers, more than 236,500 frauds were identified during the year – the highest number ever recorded by CIFaS members. In more than half the cases there was an individual identifiable victim.

Specific types of fraud broke down into three main categories:■ Identity fraud continues to be the biggest problem, accounting for 48% of all frauds, with over 113,000 reported cases, a 10% increase from 2010 levels.■ There was an 18% surge in facility takeover fraud, where a fraudster gains access and fraudulently uses a victim’s account such as a credit card, bank account or mobile phone. This type of fraud has grown by nearly 300% in just five years.■ Misuse of facility fraud, where an account or other facility has been legitimately obtained but is later used fraudulently, grew 13%.

“It is vitally important to remember that fraud and economic crime are offences with a range of motivations. Many will undoubtedly be committed by organised criminal elements, but many will also be committed by people who seemingly feel that their circumstances leave them no choice,” said richard Hurley, CIFaS communications manager. “equally, financial desperation leaves many susceptible to potential scammers. untangling the mess that fraud causes, irrespective of motivation, however, is time-consuming, damaging and costly to businesses, to the public sector and to individuals. rather than being the ‘victimless crime’ it is sometimes heralded as, fraud actually makes victims of us all.”

The fraudulent use of identity details (either those of an innocent victim or

completely fictitious ones) continues to be the biggest fraud threat. Nearly half of all frauds identified during 2011 relate to the impersonation of an innocent victim or the use of completely false identities.

This picture becomes more disturbing when viewed in conjunction with facility takeover fraud, where the fraudster gains access (e.g. through computer hacking, interception of post details, social engineering through popular websites etc) to another person’s account details and takes over the account. This type of fraud increased by 18% during 2011, which means that the two data driven frauds (identity fraud and account takeover) now account for over 58% of all frauds identified. Furthermore, the number of victims of both types of fraud has – when combined – risen by 10% from the levels in 2010, underlining the very real cost of these crimes.

“The value of personal data to fraudsters has never been questioned, but the continued increases in the levels of identity fraud and account takeover warn us all that not enough is done to combat fraudsters,” Hurley said. “all organisations must recognise this threat, and review how they try to prevent such frauds: whether that is by reviewing their security procedures and increasing identification requirements when dealing with applications, or by ensuring that individuals regularly change passwords and PIN numbers. It is obvious that fraud relating to personal data is an immense criminal trade so, fundamentally, it’s time for every one of us to start treating data in the same way that we would guard a prized possession; as something to be secured and protected without complacency.”

One of the most disconcerting fraud types, says CIFaS, remains misuse of facility fraud, where a legitimately obtained account is used fraudulently (such as to receive stolen funds, or evade payment of monies owed). CIFaS has previously highlighted that a substantial proportion of such frauds bear the hallmarks of ‘money mule’ activity (where a fraudster recruits another – often innocent – party to use his or her account to launder money on the fraudster’s behalf), demonstrating that organised criminals now have a three pronged attack on their victims’ identities: impersonating them, hijacking their accounts or tricking them into using their own details as a shield for criminal activity. equally true, however, is that financial insecurity and the economic pinch will have been motivating factors for many of these frauds.

2010 2011 ChangeFraud cases identified 217,385 236,516 8.8%Fraud Type

Identity Fraud: Successful 66,680 69,761 4.6%Identity Fraud: Unsuccessful 35,992 43,498 20.9%Identity Fraud: Total 102,672 113,259 10.3%

Application Fraud: Successful 7,605 12,599 65.7%Application Fraud: Unsuccessful 37,075 30,664 -17.3%Application Fraud: Total 44,680 43,263 -3.2%

False Insurance Claim 537 396 -26.3%

Facility Takeover Fraud 21,226 25,070 18.1%

Asset Conversion 539 532 -1.3%

Misuse of Facility 47,731 53,996 13.1%

Victims of Impersonation 89,470 96,611 8.0%

Victims of takeover 21,322 25,250 18.4%


Global spending on retail banking technology will increase by $3.6 billion (3.2%) in 2012, and will hit $135 billion over the next five years, according to Ovum. This bucks a trend in IT spending predicted by other analysts (see page 30).

In a new forecast, the technology analyst says that banks in emerging economies in the asia-Pacific region will grow the fastest, at a rate of 8.3% in 2012, hitting $10.2 billion by the end of the year. Meanwhile, Western europe will have the lowest growth of all the regions (1.9%), despite being the second biggest market in terms of overall spend, reaching $44 billion by the end of 2012.

“The technology investments will be mainly driven by the need to grow revenues but the changing regulatory compliance will also contribute significantly,” says Jaroslaw Knapik, Ovum financial services analyst and author of the forecast. “returning revenues to pre-recession levels will be a priority for a number of institutions, as too will be the focus on improving customer trust and increasing sales and servicing effectiveness.”

This will lead to accelerated investment in channel technology, predominantly online banking, which will become the fastest growing area globally in 2012, rising 5.3%, to hit $8.3 billion by year end. elsewhere, mobile will see an increase of 5% globally in 2012, reaching $3.3 billion, while management information systems and multi-channel integration/customer information systems will also see high growth rates.

“Technologies that allow ‘smarter’ selling and servicing, such as customer analytics and customer data management, are expected to remain hot areas in the near future,” said Knapik. “as sales activities are expected to be on the rise again, banks will also boost investments into operations as the ability to sell products faster and service customers’ better will continue to be a competitive differentiator in the retail market.”

With risk and compliance permanently on the agenda, ever-increasing regulatory expenditure, which in 2012 will be predominantly related to Dodd-Frank and basel III, will drive investments into technologies that reduce costs, such as data management, business process management, business intelligence, and analytics.

Global spending in areas such as risk management, anti-fraud, compliance, and performance management, will experience growth of 4.6%, hitting $6.1 billion by the end of 2012 and $7.6 billion over the next five years. However, emerging economies in asia-Pacific will experience the highest growth, at 8.8% to hit $521 million by year end, although North america will grow the fastest by volume, an increase of $95 million, reaching $2.2 billion.

“regulatory demands are forcing banks to invest in their core systems. While in many cases tight compliance timescales lead to the ‘quick-win’ type of enhancement strategies, the on-going nature of regulatory demands, together with the need to revamp the wider bank to allow the adoption of newer business models, is now driving significant interest in core system transformation,” said Knapik.

Compliance issues drive IT spending in retail banks against the downward trend

Travel industry targeted by fraudsters as they move to customer not present scams

Hotels and the travel business now top the list of fraud targets, according to research by FICO a provider of analytics and decision management technology. Overall, it found that counterfeit fraud fell by 60% between March

2009 and March 2011.analysis done on 55 million active credit cards represented in the FICO Falcon

Fraud Consortium for europe showed that card-not-present fraud accounted for 69% of all accounts victimised by fraud and 72% of all fraud losses. The top 10 merchant categories accounted for 30% of the total fraud losses, led by hotels/lodging, travel agencies and aTMs.

“Our analysis of the data shines a spotlight on the tremendous change that has occurred in europe’s fraud landscape,” said Martin Warwick, FICO’s fraud chief in europe, the Middle east and africa. “Chip and PIN technology has radically driven down counterfeit and other forms of ‘card present’ fraud in the uK, which just three years ago accounted for some 60% of europe’s credit card fraud. In response, criminals are operating across borders, targeting countries such as Germany that have weaker detection and prevention capabilities, and shifting their attention to card-not-present schemes such as online fraud.”

RETAILFebruary 2012


Customers are willing to pay for digital services

Digital banking is set to overtake branch networks as the main way customers interact with their

bank by 2015 according to PwC – and customers are willing to pay for it.

For a new report, The New Digital Tipping point, PwC research found that most consumers are willing to pay up to £10 a month for digital banking services if they believe they offer value.

The research shows that customers are willing to pay for social media notifications, an electronic wallet for loyalty cards and financial tools provided by banks. In the uK, almost two thirds (65%) of respondents said they are willing to pay just over £4 a month for their bank to store loyalty card information and convert accumulated points into cash. This amounts to annual fee income of approximately £50 per customer.

“Despite customers’ appetite for new and innovative digital banking offerings, and the fact they are willing to pay for these, the majority of banks still only provide basic mobile and internet banking services. banks are clearly missing a trick if they don’t start to invest in their digital offerings and only see digital as a way to reduce costs,” said Stephen Whitehouse, retail and commercial banking partner at PwC. “banks have generally been too slow to embrace the digital innovation customers now expect from other industries, such as retail or travel. This needs to improve if banks are to hold on to their existing customers and attract the next generation, as the quality of a bank’s digital offering will become an increasingly important factor for consumers. “The lack of investment is perhaps even more surprising considering banks are struggling to grow revenues at a time of increased regulation and a difficult economic environment. Digital products are a significant opportunity for banks to grow revenues.”

The research reveals that more and more consumers are using online and mobile channels to access financial products. 69% of those surveyed said they currently use the internet to purchase financial products. While a lower number of respondents (33%) currently use mobile banking it is expected to follow a similar usage curve to internet banking.

Fraud reaches record levels in the UKAusterity Britain is facing a sharp rise in fraud as economic gloom grips the country


RETAIL: ANALYSISFebruary 2012

Fraud rose sharply during 2011, according to figures from CIFAS, the UK’s Fraud Prevention Service, which show a 9% increase in the overall level of fraud compared to 2010.

Other findings suggest that the economic climate is driving the increase as formerly law-abiding people turn to fraud, though there is still plenty of evidence that career criminals are exploiting both new technology and consumer gullibility.

“With the cost of living increasing, pay levels frozen for many, and tax and VaT changes taking effect, perhaps it is unsurprising that fraud has rocketed again,” said CIFaS chief executive Peter Hurst. “Prevention, however, remains better than cure, and it is time for all organisations and consumers to start reviewing their approaches to preventing fraud rather than trying and failing to recover losses. Not investing in proper fraud prevention systems and approaches, from online security to data sharing, is tantamount to leaving an open till unguarded. It is the same whether you are a private sector organisation, a public sector body or a charity. It will lead to only one thing: financial loss.”

according to the latest numbers, more than 236,500 frauds were identified during the year – the highest number ever recorded by CIFaS members. In more than half the cases there was an individual identifiable victim.

Specific types of fraud broke down into three main categories:■ Identity fraud continues to be the biggest problem, accounting for 48% of all frauds, with over 113,000 reported cases, a 10% increase from 2010 levels.■ There was an 18% surge in facility takeover fraud, where a fraudster gains access and fraudulently uses a victim’s account such as a credit card, bank account or mobile phone. This type of fraud has grown by nearly 300% in just five years.■ Misuse of facility fraud, where an account or other facility has been legitimately obtained but is later used fraudulently, grew 13%.

“It is vitally important to remember that fraud and economic crime are offences with a range of motivations. Many will undoubtedly be committed by organised criminal elements, but many will also be committed by people who seemingly feel that their circumstances leave them no choice,” said richard Hurley, CIFaS communications manager. “equally, financial desperation leaves many susceptible to potential scammers. untangling the mess that fraud causes, irrespective of motivation, however, is time-consuming, damaging and costly to businesses, to the public sector and to individuals. rather than being the ‘victimless crime’ it is sometimes heralded as, fraud actually makes victims of us all.”

The fraudulent use of identity details (either those of an innocent victim or

completely fictitious ones) continues to be the biggest fraud threat. Nearly half of all frauds identified during 2011 relate to the impersonation of an innocent victim or the use of completely false identities.

This picture becomes more disturbing when viewed in conjunction with facility takeover fraud, where the fraudster gains access (e.g. through computer hacking, interception of post details, social engineering through popular websites etc) to another person’s account details and takes over the account. This type of fraud increased by 18% during 2011, which means that the two data driven frauds (identity fraud and account takeover) now account for over 58% of all frauds identified. Furthermore, the number of victims of both types of fraud has – when combined – risen by 10% from the levels in 2010, underlining the very real cost of these crimes.

“The value of personal data to fraudsters has never been questioned, but the continued increases in the levels of identity fraud and account takeover warn us all that not enough is done to combat fraudsters,” Hurley said. “all organisations must recognise this threat, and review how they try to prevent such frauds: whether that is by reviewing their security procedures and increasing identification requirements when dealing with applications, or by ensuring that individuals regularly change passwords and PIN numbers. It is obvious that fraud relating to personal data is an immense criminal trade so, fundamentally, it’s time for every one of us to start treating data in the same way that we would guard a prized possession; as something to be secured and protected without complacency.”

One of the most disconcerting fraud types, says CIFaS, remains misuse of facility fraud, where a legitimately obtained account is used fraudulently (such as to receive stolen funds, or evade payment of monies owed). CIFaS has previously highlighted that a substantial proportion of such frauds bear the hallmarks of ‘money mule’ activity (where a fraudster recruits another – often innocent – party to use his or her account to launder money on the fraudster’s behalf), demonstrating that organised criminals now have a three pronged attack on their victims’ identities: impersonating them, hijacking their accounts or tricking them into using their own details as a shield for criminal activity. equally true, however, is that financial insecurity and the economic pinch will have been motivating factors for many of these frauds.

2010 2011 ChangeFraud cases identified 217,385 236,516 8.8%Fraud Type

Identity Fraud: Successful 66,680 69,761 4.6%Identity Fraud: Unsuccessful 35,992 43,498 20.9%Identity Fraud: Total 102,672 113,259 10.3%

Application Fraud: Successful 7,605 12,599 65.7%Application Fraud: Unsuccessful 37,075 30,664 -17.3%Application Fraud: Total 44,680 43,263 -3.2%

False Insurance Claim 537 396 -26.3%

Facility Takeover Fraud 21,226 25,070 18.1%

Asset Conversion 539 532 -1.3%

Misuse of Facility 47,731 53,996 13.1%

Victims of Impersonation 89,470 96,611 8.0%

Victims of takeover 21,322 25,250 18.4%


UBS turns to RepRisk for ESG data

UbS is to use environmental, social and corporate governance data supplied by reprisk to enhance risk management and control in customer on-boarding and transaction due diligence.

The ubS compliance database will now also incorporate reprisk’s comprehensive environmental and social risk information on controversial companies. The bank will use the information on a global scale for client vetting within all divisions, including Wealth Management and Swiss bank, Global asset Management and the Investment bank. reprisk data will be used in the on-boarding process to screen potential new clients and suppliers, as well as for periodic client review processes and to check on risks related to transactions.

“reprisk has been a trusted business intelligence partner of ubS for five years. The integration of this data into our existing compliance and risk processes is a key component in the systematic implementation of ubS’ environmental and social risk standards, and will help ensure that our due diligence processes are comprehensive and standardised at a global level,” said Liselotte arni, head of environmental and social risk at ubS.

reprisk draws from third party sources including print media, government sites, NGOs and think tanks, as well as other independent websites, newsletters and blogs. On a daily basis, it detects environmental, social and corporate governance criticism about companies and projects in 13 languages.

OpenLink to plug Dodd-Franks compliance gap with enhancements

Trading and risk software vendor OpenLink Financial has scheduled a range of product developments focused on accelerating compliance with Dodd-Frank regulatory milestones scheduled for 2012.

Dodd-Frank changes regulation of the uS OTC derivatives market, with the goals of improving transparency, reducing systemic default risk, and promoting market integrity.

“Our suite of regulatory compliance solutions will enable clients to leverage their technology investment in OpenLink to comply with these new requirements and the accompanying changes that will transform the derivatives trading landscape,” said Phil Wang, senior vice president of product management at OpenLink. “The goal has been to facilitate compliance with cost-efficient solutions that can be rapidly deployed and flexible enough to adapt to forthcoming changes as they are introduced.”

OpenLink’s Dodd-Frank compliance initiatives include:■ Dodd-Frank Regulatory Compliance Reporting Package – a suite of reports for regulatory reporting, including the CFTC Large Trader report for Physical Commodity Swaps. These position reports will facilitate compliance with CFTC reporting regulations.■ CFTC Position Limits Monitoring – real-time limit monitoring to comply with CFTC position limits in aggregate for both OTC and exchange-traded products. These limits can be monitored at various aggregation levels and reporting perspectives, such as a firm’s own positions and/or its clients’ positions.■ Swap Data Repository Reporting – gateways for real-time reporting to SDrs available by asset class. alternatively, standard FpML and FIX gateways can facilitate internal connectivity initiatives. Standard workflows are included for determination of trade eligibility for reporting, as well as block/large trades handling.■ OTC Clearing Workflows – OpenLink’s trade processing workflows have been extended for the lifecycle of OTC-cleared derivative products, from execution, to confirmation, matching and clearing. Post-execution processes, such as amendments, terminations, assignments and option exercise, are fully supported. Connectivity options to CCPs and clearing houses are also available.

“The integration of this data into our compliance and risk processes is a key component in UBS’ environmental and social risk standards.”

Martin Wheatley, managing director of the Financial Services authority, has

outlined a “new orthodoxy” and approach for the future of conduct regulation based on getting a fair deal for consumers.

Wheatley, who is also chief executive designate of the Financial Conduct authority, one of the bodies that will take over from the FSa next year, told a meeting at the british bankers’ association that it was time for a new approach to get the right outcomes for consumers.

“We need to develop a new orthodoxy and a new regulatory approach … I want the culture in your firms, from your product governance to your sales, to be aligned with the best interests of your customers. I don’t want to see any of the failings the FSa has had to deal with in the last few years,” he said. “but I want to emphasise this is not all about regulated firms. Consumers of course have a role to play, and we need a cultural change at the regulator as well. The FCa will need to ask tougher questions, and they need to be the right ones, if we are really going to discover what lies at the heart of your firms’ successes and failures. The FCa then needs to make better, bolder, faster decisions.”

The FCa, Wheatley said, will build on the experience of the FSa but will aim to strike a balance recognising that firms, the regulator and the consumer all have responsibilities.

“If a consumer makes a fully informed decision that subsequently goes wrong, then that is down to them. but we have to be realistic. and what this is about is balance,” he said. “We have to realise that consumers aren’t always in a position to take responsibility, because of their lack of financial knowledge and because we have to take a reasonable approach to what a normal person can understand about complicated products and risks.”

That said, Wheatley emphasised that this doesn’t mean the new regulator will be taking a hands-off approach. “What the FCa won’t be doing is lying back then letting the market get on with it,” he said.

FCA will aim for balanced conduct regulations

RISK &REGULATION


February 2012


Algorithmics, now part of IbM, has partnered with axioma, a provider of multi-factor equity models, to offer data derived from axioma’s multi-factor equity models as part of the algo risk Service, its hosted portfolio construction, risk

and reporting service.axioma risk models offer a wide range of regional and style-base models that are

recalibrated daily, with re-estimations and production-of-factor exposures, covariance matrices, and asset specific risks. This is an important differentiator for this partnership in a market where monthly recalibration of equity factor models is the norm. With axioma data available through algo risk Service, algorithmics’ clients can draw on reports from axioma’s multi-factor equity models to improve equity coverage and consistency between front and middle offices.

Sebastian Ceria, chief executive of axioma, said: “The benefits of working with algorithmics are very clear. Most clients want to achieve modelling consistency between the risk-focused middle office and investment-oriented portfolio managers in the front office; our collaboration with algorithmics provides that consistency of equity risk. axioma’s front-office clients will enjoy consistent modelling with their middle-office risk departments.”

andrew aziz, executive vice president of buy-side risk solutions at algorithmics, said: “axioma’s reputation as an innovator in equity modelling complements algorithmics’ commitment to innovation. For our clients, this relationship with axioma offers modelling across all asset classes and the convenience of having the model as part of algo risk Service. Importantly, it also gives clients the flexibility to introduce patented equity modelling as part of their custom solution while maintaining consistency with the axioma models used by their front offices. as we evolve our solutions for the buy side, we continue to recognise the importance of being able to offer customisable solutions to meet our clients’ needs.”

Algorithmics and Axioma add multi-factor equity model data to Algo Risk

eDHeC-risk Institute has addressed the question of the true risks of exchange Traded Funds in europe in the light of issues raised by financial regulators and international organisations, and concluded that any discussion of the risks inherent in eTFs “should go beyond merely hypothesising about potential risks, and should also take into account the empirical evidence provided by the existing academic research on eTFs, which has documented various benefits in terms of liquidity and price efficiency”.

The vast majority of european eTFs are managed within the uCITS framework and as such have the same levels of security and the same risks as any uCITS fund. “Highlighting the supposed risks of eTFs therefore makes little sense, and even less so in matters of retail investor protection in that eTFs represent but a fraction of the products sold to the general public in europe and competing investment vehicles typically do not benefit from the same level of protection as that provided by the uCITS framework,” it said.

The institute concludes that “the massive marketing and media relations campaigns implemented by some eTF providers in an effort to promote counterparty-risk-based distinctions between physical and synthetic replication eTFs are misleading”.

Indian core connectivity specialist Ideal Invent has signed a distribution agreement to sell and implement Financial Studio, the finance, risk and compliance solution from FinArch, in the Nordic countries, the Baltics, Poland, CIS and Russia. The pair have previously collaborated on a number of projects in these arreas.

Fiserv has enhanced its Asset Liability Manager, Data Management System and Funds Transfer Pricing systems to create higher levels of transparency and accuracy and enable financial institutions to reduce risk and increase regulatory compliance. New features include: daily liquidity modelling; loan fees at the instrument level ensuring compliance with the FAS 91 Rule; scenario analysis improvements; and scenario reporting. The new versions are available for Windows 7, Windows Server 2008 R2 and 64 bit environments.

Otkritie to use cloud surveillance systems from Nice Actimize

Otkritie Capital has selected Nice actimize to provide cloud-based market abuse surveillance and anti-money laundering solutions in support of its cross-asset Direct Market access platform and broker dealer activities.

Services will be hosted by Nice actimize from its uK data centre. Otkritie will use Nice actimize’s cloud-based technology for its trading practices

compliance programme to detect and report potential market abuse and money laundering activities across its european business. a combined global team based in London, Moscow and Frankfurt will coordinate delivery of the services.

Nice actimize provides cloud-based solutions in addition to on-premise support as an alternative delivery mechanism, with hosting in a secure data centre. The cloud-based delivery minimises deployment time, reduces total cost of ownership and speeds return on investment.

“Otkritie Capital conducted a rigorous search with stringent criteria before choosing Nice actimize for the automation of our regulatory compliance initiatives in trading and fixed income,” said Nils Jahn, managing director of global electronic trading at Otkritie.

amir Orad, president and chief executive of Nice actimize, said: “as the needs of the securities market evolve, we remain committed to providing cloud-based solutions that enable rapid deployment, offer minimal business disruption, and which ease the burden of regulatory compliance.”

“Clients want modelling consistency between the

risk-focused middle office and investment-oriented

front-office.”

EDHEC examines true risk of ETFs


UBS turns to RepRisk for ESG data

UbS is to use environmental, social and corporate governance data supplied by reprisk to enhance risk management and control in customer on-boarding and transaction due diligence.

The ubS compliance database will now also incorporate reprisk’s comprehensive environmental and social risk information on controversial companies. The bank will use the information on a global scale for client vetting within all divisions, including Wealth Management and Swiss bank, Global asset Management and the Investment bank. reprisk data will be used in the on-boarding process to screen potential new clients and suppliers, as well as for periodic client review processes and to check on risks related to transactions.

“reprisk has been a trusted business intelligence partner of ubS for five years. The integration of this data into our existing compliance and risk processes is a key component in the systematic implementation of ubS’ environmental and social risk standards, and will help ensure that our due diligence processes are comprehensive and standardised at a global level,” said Liselotte arni, head of environmental and social risk at ubS.

reprisk draws from third party sources including print media, government sites, NGOs and think tanks, as well as other independent websites, newsletters and blogs. On a daily basis, it detects environmental, social and corporate governance criticism about companies and projects in 13 languages.

OpenLink to plug Dodd-Franks compliance gap with enhancements

Trading and risk software vendor OpenLink Financial has scheduled a range of product developments focused on accelerating compliance with Dodd-Frank regulatory milestones scheduled for 2012.

Dodd-Frank changes regulation of the uS OTC derivatives market, with the goals of improving transparency, reducing systemic default risk, and promoting market integrity.

“Our suite of regulatory compliance solutions will enable clients to leverage their technology investment in OpenLink to comply with these new requirements and the accompanying changes that will transform the derivatives trading landscape,” said Phil Wang, senior vice president of product management at OpenLink. “The goal has been to facilitate compliance with cost-efficient solutions that can be rapidly deployed and flexible enough to adapt to forthcoming changes as they are introduced.”

OpenLink’s Dodd-Frank compliance initiatives include:■ Dodd-Frank Regulatory Compliance Reporting Package – a suite of reports for regulatory reporting, including the CFTC Large Trader report for Physical Commodity Swaps. These position reports will facilitate compliance with CFTC reporting regulations.■ CFTC Position Limits Monitoring – real-time limit monitoring to comply with CFTC position limits in aggregate for both OTC and exchange-traded products. These limits can be monitored at various aggregation levels and reporting perspectives, such as a firm’s own positions and/or its clients’ positions.■ Swap Data Repository Reporting – gateways for real-time reporting to SDrs available by asset class. alternatively, standard FpML and FIX gateways can facilitate internal connectivity initiatives. Standard workflows are included for determination of trade eligibility for reporting, as well as block/large trades handling.■ OTC Clearing Workflows – OpenLink’s trade processing workflows have been extended for the lifecycle of OTC-cleared derivative products, from execution, to confirmation, matching and clearing. Post-execution processes, such as amendments, terminations, assignments and option exercise, are fully supported. Connectivity options to CCPs and clearing houses are also available.

“The integration of this data into our compliance and risk processes is a key component in UBS’ environmental and social risk standards.”

Martin Wheatley, managing director of the Financial Services authority, has

outlined a “new orthodoxy” and approach for the future of conduct regulation based on getting a fair deal for consumers.

Wheatley, who is also chief executive designate of the Financial Conduct authority, one of the bodies that will take over from the FSa next year, told a meeting at the british bankers’ association that it was time for a new approach to get the right outcomes for consumers.

“We need to develop a new orthodoxy and a new regulatory approach … I want the culture in your firms, from your product governance to your sales, to be aligned with the best interests of your customers. I don’t want to see any of the failings the FSa has had to deal with in the last few years,” he said. “but I want to emphasise this is not all about regulated firms. Consumers of course have a role to play, and we need a cultural change at the regulator as well. The FCa will need to ask tougher questions, and they need to be the right ones, if we are really going to discover what lies at the heart of your firms’ successes and failures. The FCa then needs to make better, bolder, faster decisions.”

The FCa, Wheatley said, will build on the experience of the FSa but will aim to strike a balance recognising that firms, the regulator and the consumer all have responsibilities.

“If a consumer makes a fully informed decision that subsequently goes wrong, then that is down to them. but we have to be realistic. and what this is about is balance,” he said. “We have to realise that consumers aren’t always in a position to take responsibility, because of their lack of financial knowledge and because we have to take a reasonable approach to what a normal person can understand about complicated products and risks.”

That said, Wheatley emphasised that this doesn’t mean the new regulator will be taking a hands-off approach. “What the FCa won’t be doing is lying back then letting the market get on with it,” he said.

FCA will aim for balanced conduct regulations



John Jay, Aite

The European Commission’s directive include two legislative proposals: a regulation setting out a general EU framework for data protection and a directive on protecting personal data processed for the purposes of prevention, detection, investigation or prosecution of criminal offences and related judicial activities.

Key changes in the reform include: ■ A single set of rules on data protection, valid across the EU. Unnecessary administrative requirements, such as notification requirements for companies, will be removed. This will save businesses around €2.3 billion a year, according to the Commission.■ Instead of the current obligation of all companies to notify all data protection activities to data protection supervisors – a requirement that has led to unnecessary paperwork and costs businesses €130 million a year – the regulation provides for increased responsibility and accountability for those processing personal data. ■ For example, companies and organisations must notify the national supervisory authority of serious data breaches as soon as possible (if feasible within 24 hours).■ Organisations will only have to deal with a single national data protection authority in the EU country where they have their main establishment. Likewise, people can refer to the data protection

authority in their country, even when their data is processed by a company based outside the EU. Wherever consent is required for data to be processed, it is clarified that it has to be given explicitly, rather than assumed. ■ People will have easier access to their own data and be able to transfer personal data from one service provider to another more easily (right to data portability). This will improve competition among services.■ A ‘right to be forgotten’ will help people better manage data protection risks online: people will be able to delete their data if there are no legitimate grounds for retaining it. ■ EU rules must apply if personal data is handled abroad by companies that are active in the EU market and offer their services to EU citizens. ■ Independent national data protection authorities will be strengthened so they can better enforce the EU rules at home. They will be empowered to fine companies that violate EU data protection rules. This can lead to penalties of up to €1 million or up to 2% of the global annual turnover of a company.■ The new directive will apply general data protection principles and rules for police and judicial cooperation in criminal matters. The rules will apply to both domestic and cross-border transfers of data.

What the Commission wants to do: the highlights

reporting mechanism in place will need to implement measures to be able to flag breaches in time.”

among the data security vendors, however, the reaction was surprisingly positive.

“rather than suffering from the financial and reputational damage that comes as a result of a data breach, surely it would be more beneficial for businesses to take steps to prevent data breaches from ever occurring in the first place,” said aziz Maakaroun, managing partner of Outpost24 uK, a vulnerability management specialist. “The cost of implementing security measures to proactively protect corporate information from potential data breaches and attacks is far less than the ultimate cost of a data breach. by identifying any potential vulnerabilities in their corporate network or websites, businesses can protect their customer data to ensure that they never fall foul of these new data protection laws and therefore never have to go through the costly consequences of having to announce that a breach has taken place.”

David Gibson, director of strategy at Varonis, a company that specialises in unstructured data, was almost sanguine. “Many IT security professionals have expressed concerns about the technical problems associated with managing, protecting and auditing access to their growing data stores.” “While these concerns are understandable, the reality is that with the correct technology in place these issues can easily be solved,” he said.

“yes, there will be a lot of moaning and groaning about the new rules, but I predict that – as we have seen with the PCI DSS governance rules – after a short while, they will become the accepted business practice and part of the data protection and management landscape. and that is a significant move forward for everyone.” BT


RegULATION: PeRSONAL DATAFebruary 2012

Europe’s revision of data protection laws will add more burden for firms handling personal information, like banks. David Bannister reports on the range of reactions to the proposals.

Lock up your dataA comprehensive reform of the european 1995 data protection rules to strengthen online privacy rights and boost europe’s digital economy will have significant impact on the banking and financial services industries, though it is intended to reduce the cost of administrative burdens in the longer term.

The european Commission is proposing a new set of rules in reaction to technological changes and the fact that the 27 european union Member States have implemented the 1995 rules differently, resulting in divergences in enforcement.

The eC says that a “single law will do away with the current fragmentation and costly administrative burdens, leading to savings for businesses of around €2.3 billion [£1.9 billion] a year”. The initiative will help reinforce consumer confidence in online services, providing a much needed boost to growth, jobs and innovation in europe, it says.

“Seventeen years ago less than 1% of europeans used the internet. Today, vast amounts of personal data are transferred and exchanged, across continents and around the globe in fractions of seconds,” said eu Justice Commissioner Viviane reding, the

Commission’s Vice President. “The protection of personal data is a fundamental right for all europeans, but citizens do not always feel in full control of their personal data. My proposals will help build trust in online services because people will be better informed about their rights and in more control of their information. The reform will accomplish this while making life easier and less costly for businesses. a strong, clear and uniform legal framework at eu level will help to unleash the potential of the Digital Single Market and foster economic growth, innovation and job creation.”

The reaction of most seems to be that the intention of the regulation is welcomed, but the practical outcome is that it will add to the pain and cost of compliance in the medium term.

“We see no reason for such a radical overhaul, when existing data protection legislation remains fit for purpose,” said Matthew Fell, director for competitive markets at the Confederation of british Industry.

The question of adding to the regulatory burden was echoed by Lisa banyard, data protection leader at PwC. “Implementing the proposals will present an increased administrative burden for businesses. under the changes, organisations would be operating under a tougher regime where they would face increased accountability and heavier fines which could add up to 2% of worldwide turnover for the most serious breaches. In a move clearly aimed at those operating on the internet, organisations dealing with personal data about eu citizens would be accountable even where they are located outside the eu,” she said.

Margaret Tofalides, a specialist in privacy and data protection at law firm Manches, said: “The proposals will change the basic DNa of online businesses, refocusing data protection to the centre of what they do through much tougher monitoring and reporting requirements and with explicit consent requirements, and greater rights for data deletion. In addition, the pressure on firms with more than 250 employees is now the need to employ a data protection officer. In addition data processors will now be directly liable for any breaches. Fines and penalties for violations are significant, as is the focus on the regulator taking action.”

Tofalides, who works closely with the uK Information Commissioner’s Office, said that firms will have to demonstrate to regulators, when they report breaches, that they have contingency plans in place to notify customers, cure IT system defects and contain damage or they could face enormous fines. “This is a major change,” she said.

PwC’s banyard added: “The introduction of compulsory breach notification means companies have to report losses to the Data Protection authority within 24 hours and that’s going to be tough for some companies to adhere to. Those that don’t already have a well-oiled

The new proposed European data protection law has considerable implications for smaller concerns, according to Matthew Norris, e-risk and privacy expert at specialist SME insurer Hiscox.

“The data loss notification aspect of the new proposed law is part of a wider picture of increasing pressure on companies to be able to detect and respond to data breaches quickly. Some businesses have suffered high profile data losses in the past year and the speed and response in such cases is crucial in limiting the adverse effects of a breach,” he says.

“The proposed law directs that certain internet businesses need to contact regulators within 24 hours after an attack, and data subjects “as soon as reasonably feasible”, but it can be challenging for a company to be able to report on a complicated data breach within that time. Realistically many breaches will still be in the process of being forensically investigated at this stage, making it all the more essential to have an incident response plan agreed and in place. This means the business will be able to respond with as much detail as possible in as short a period as possible. This is especially important to minimise damage to the brand and avoid potential penalties.”

Norris says that it is essential for businesses to have a resilient incident response plan to minimise the damage in the case of a data breach. In preparation for a breach such a plan would include:■ Nominating an individual who is responsible for swiftly initiating contact with the forensic company in the case of a breach ■ Determining when it is appropriate to involve a lawyer, for example to maintain legal advice and litigation privilege if the forensic report reveals adverse facts ■ Nominating a forensic company to work with in the case of a breach ■ Agreement with the forensic company on the type of instructions and contract it requires to start work ■ Agreement of the hourly rates from the forensic company as part of the contract

The insurer’s view: planning for privacy



John Jay, Aite

The European Commission’s directive include two legislative proposals: a regulation setting out a general EU framework for data protection and a directive on protecting personal data processed for the purposes of prevention, detection, investigation or prosecution of criminal offences and related judicial activities.

Key changes in the reform include: ■ A single set of rules on data protection, valid across the EU. Unnecessary administrative requirements, such as notification requirements for companies, will be removed. This will save businesses around €2.3 billion a year, according to the Commission.■ Instead of the current obligation of all companies to notify all data protection activities to data protection supervisors – a requirement that has led to unnecessary paperwork and costs businesses €130 million a year – the regulation provides for increased responsibility and accountability for those processing personal data. ■ For example, companies and organisations must notify the national supervisory authority of serious data breaches as soon as possible (if feasible within 24 hours).■ Organisations will only have to deal with a single national data protection authority in the EU country where they have their main establishment. Likewise, people can refer to the data protection

authority in their country, even when their data is processed by a company based outside the EU. Wherever consent is required for data to be processed, it is clarified that it has to be given explicitly, rather than assumed. ■ People will have easier access to their own data and be able to transfer personal data from one service provider to another more easily (right to data portability). This will improve competition among services.■ A ‘right to be forgotten’ will help people better manage data protection risks online: people will be able to delete their data if there are no legitimate grounds for retaining it. ■ EU rules must apply if personal data is handled abroad by companies that are active in the EU market and offer their services to EU citizens. ■ Independent national data protection authorities will be strengthened so they can better enforce the EU rules at home. They will be empowered to fine companies that violate EU data protection rules. This can lead to penalties of up to €1 million or up to 2% of the global annual turnover of a company.■ The new directive will apply general data protection principles and rules for police and judicial cooperation in criminal matters. The rules will apply to both domestic and cross-border transfers of data.

What the Commission wants to do: the highlights

reporting mechanism in place will need to implement measures to be able to flag breaches in time.”

among the data security vendors, however, the reaction was surprisingly positive.

“rather than suffering from the financial and reputational damage that comes as a result of a data breach, surely it would be more beneficial for businesses to take steps to prevent data breaches from ever occurring in the first place,” said aziz Maakaroun, managing partner of Outpost24 uK, a vulnerability management specialist. “The cost of implementing security measures to proactively protect corporate information from potential data breaches and attacks is far less than the ultimate cost of a data breach. by identifying any potential vulnerabilities in their corporate network or websites, businesses can protect their customer data to ensure that they never fall foul of these new data protection laws and therefore never have to go through the costly consequences of having to announce that a breach has taken place.”

David Gibson, director of strategy at Varonis, a company that specialises in unstructured data, was almost sanguine. “Many IT security professionals have expressed concerns about the technical problems associated with managing, protecting and auditing access to their growing data stores.” “While these concerns are understandable, the reality is that with the correct technology in place these issues can easily be solved,” he said.

“yes, there will be a lot of moaning and groaning about the new rules, but I predict that – as we have seen with the PCI DSS governance rules – after a short while, they will become the accepted business practice and part of the data protection and management landscape. and that is a significant move forward for everyone.” BT


IT & OPS: BIG DATAFebruary 2012

Big Data suffers from conceptual misunderstandings and more than a little hype, but it has great potential in fianancial services, writes Tom Groenfeldt.

Data daze

Big Data is coming, heralded by a bit of noisy hype – but many experts think it is hype that will be fully realised very shortly. accel Partners, a global venture capital firm, is betting on it – the firm has established a $100 million big Data fund.

“big Data is one of the biggest transformational changes in the data centre and IT landscape,” Ping Li, an accel partner, recently told a conference in Silicon Valley.

big Data is more than simply a way of handling a lot of data – it is also about handling a lot of data in new ways quickly, and making links between sets of unstructured data.

an example of big Data was supplied by Steve Hillion, chief product officer at alpine Data Labs in San Mateo, who said that Salt Lake City-based Zions bank found some unusual patterns among its high-end customers by using big Data analytics.

The data showed a small cluster of customers who owned small businesses and generated a lot of value. The individuals within the group showed similar behaviour, but the group itself was so small that the individuals wouldn’t have appeared in a structured, aggregated view where some of the data would have been truncated or discarded. In a big Data environment, where the information remains in raw form rather than being aggregated, the bank was able to discern some faint patterns, and once the customers were identified it could target them with small business products.

The ability to use this additional data offers the opportunity to make a lot of money through micro-targeting groups that may not otherwise have been identified, Hillion concluded. Leading users of big Data are trying to develop inventive stratification of consumers to target them in a much narrower way than they do now. That requires what he called unsupervised

learning where the user doesn’t know a model or key variable in advance but waits to learn it from the data.

Keith Collins, vice president and chief technology officer at SaS, said big Data can be useful in fighting fraud, which has increased sharply in years. SaS turns the links in social analysis upside down to spot patterns and anomalies, sometimes running over a long time, that can indicate fraudsters working together.

randy Lea, vice president of the aster Data Center of Innovation at data specialist Teradata, said marketers need to know what a customer has been doing over time and across channels. Most know what a customer has been doing on their website, but how did they get there – was it an email marketing campaign or a click-through on a search engine ad? a cookie can identify his return, and if he clicks on a newsletter, the marketing department gets his email and perhaps Facebook or Twitter links. a week or two later he returns to browse some more and the bank can present a targeted offer.

This is not, in Lea’s opinion, big Data but simple application of the tools Teradata offers.

While there is debate over whether we are talking about big Data in the sense that a computer scientist might think of the topic, data volumes are growing rapidly, generated by social networking, mobile internet, geographic information and sensors.

McKinsey Global Institute, in a widely cited paper from last May, estimated that by 2009 nearly all sectors in the uS economy with companies of more than 1,000 employees held an average of 200 terabytes of data, twice the size of Wal-Mart’s data warehouse in 1999 – which at the time was considered one of the seven wonders of the IT world.

The definition of big Data is fairly loose: one general definition says it is data that can’t be processed in >

IT & OPS


February 2012

Total bank IT spending across North america, europe and asia Pacific will grow to $173.3 billion in 2012 – up 2.8% from 2011, but largely fuelled by a 6% growth in asia Pacific, indicating that IT spending growth is slightly on the decline.

In a new report, IT Spending in Banking: A Global Perspective, analyst firm Celent says that spending by banks in asia Pacific will grow by 6% in 2012 to $59.4 billion. This growth will continue in 2013 to reach $62.3 billion. North american banks, particularly uS banks, are reporting more dismal forecasts, with spending set to grow by “a mere” 2.4% in 2012 to $54.7 billion. This figure will increase gradually to 2.9% in 2013 to $56.3 billion.

european banks are in far deeper trouble and are reporting little to no growth. Spending by european banks will grow 0.3% in 2012 to $59.2 billion. european spending growth will continue to be flat through 2013, increasing by just 0.4% to $59.5 billion.

“From an IT spending perspective, the next couple of years are going to be rocky,” said Jacob Jegher, senior analyst with Celent’s banking Group and co-author of the report. “The good news is that a slight turnaround is in sight. When examining the sum of the three regions, IT spending is expected to grow by 3.1% in 2013 and 3.4% in 2014.”

banks are not alone in this, however. according to a global survey of CIOs by Gartner, IT organisations will have to deliver on multiple priorities without an increase in their IT budget, as IT budgets are expected to be flat, increasing just 0.5 per cent, with declining IT budgets in North america and europe.

“Technology’s role in the organisation is increasing. This does not mean, however, that the role of the IT organisation is increasing,” said Mark McDonald, group vice president for Gartner executive Programs and Gartner Fellow. “CIOs concentrating on IT as a force of operational automation, integration and control are losing ground to executives who see technology as a business amplifier and source of innovation. effective leaders use technology, which includes IT, to strengthen the customer experience and eliminate costly internal distortions. They are using technology to ‘amplify’ the enterprise.”

CIOs increasingly see technologies such as analytics/business intelligence, mobility, cloud and social in combination rather than isolation to address business priorities. Changing the customer experience requires changing the way the company interacts externally rather than operates internally.

analytics/business intelligence was the top-ranked technology for 2012 as CIOs are combining analytics with other technologies to create new capabilities. For example, analytics plus supply chain for process management and improvement, analytics plus mobility for field sales and operations, and analytics plus social for customer engagement and acquisition.

European banks’ IT spend flatlining, say analysts from Celent and Gartner


Accenture is to acquire Neo Metrics Analytics, a Spanish consulting firm specialising in optimisation and predictive analytics. Neo Metrics’ modeller solution will enhance Accenture’s capabilities in this area. It also brings new social network analysis capabilities such as the ability to identify hierarchies within online customer communities. The acquisition will enable Accenture to further develop advanced analytical models across all industries and business functions including sophisticated models and techniques for pricing optimisation, quality and fraud management, and demand forecasting.

Cable & Wireless Worldwide and data centre specialist Equinix are collaborating to “become a one-stop shop for global enterprises that require best-of-breed data centre services”. C&W Worldwide will deliver a comprehensive suite of services, such as co-location, managed hosting and cloud computing services to global customers. It will have access to Equinix’s 99 global data centres.

SunGard has bought Syntesys, a European Swift service bureau and network of business and technical experts dedicated to serving the Swift community. The Syntesys acquisition will strengthen SunGard’s AvantGard Ecosystem Communication Hub – Echos – by expanding service bureau delivery capacity and locations as well as adding a suite of SwiftReady services. Echos provides managed connectivity for corporations and financial institutions with access to a suite of services such as electronic bank account management, statement aggregation and bank fee analysis. The management and staff of Syntesys will join SunGard.

TwoFour, a provider of real-time financial software solutions and consultancy in capital markets, has launched a rapid development platform that offers a .Net and C#-based core development architecture. Called Foundation, it allows development projects to use proven system components, letting developers focus on building functionality. The core architecture includes a security and user authentication component, a rules-based workflow engine, an automated process scheduler, a modern user interface, an integrated client web portal, a user-configurable interface gateway for systems communications, a user-configurable reporting tool, and data access features.

Infosys claims new performance benchmark for e-banking system

Infosys has benchmarked the latest version of its Finacle e-banking solution on the Oracle platform, performing more than 550,000 online transactions and supporting more than 2.8 million web page visits in a 30-minute window. The benchmark, reviewed by ernst & young, measured the online processing

window, loaded with 33,000+ concurrent users, on a large retail banking deployment consisting of 26 million registered users and 46 million accounts.

During the benchmark, the solution supported more than 195,000 user log ons within a 30-minute window delivering sub-second average response time. The transaction workload mix consisted of viewing balance summaries, fund transfers, payments, account transaction histories and making credit card payments.

The systems under test included Oracle’s Sparc T3-1 and T3-2 servers for the web and application tiers, with Finacle deployed on a multi-node WebSphere application server cluster. at the back-end, Oracle Database 11g was deployed on Oracle’s SParC enterprise M-Series system with the latest quad-core SParC64 VII+ 3GHz processors.



Big Data suffers from conceptual misunderstandings and more than a little hype, but it has great potential in fianancial services, writes Tom Groenfeldt.

Data daze

Big Data is coming, heralded by a bit of noisy hype – but many experts think it is hype that will be fully realised very shortly. accel Partners, a global venture capital firm, is betting on it – the firm has established a $100 million big Data fund.

“big Data is one of the biggest transformational changes in the data centre and IT landscape,” Ping Li, an accel partner, recently told a conference in Silicon Valley.

big Data is more than simply a way of handling a lot of data – it is also about handling a lot of data in new ways quickly, and making links between sets of unstructured data.

an example of big Data was supplied by Steve Hillion, chief product officer at alpine Data Labs in San Mateo, who said that Salt Lake City-based Zions bank found some unusual patterns among its high-end customers by using big Data analytics.

The data showed a small cluster of customers who owned small businesses and generated a lot of value. The individuals within the group showed similar behaviour, but the group itself was so small that the individuals wouldn’t have appeared in a structured, aggregated view where some of the data would have been truncated or discarded. In a big Data environment, where the information remains in raw form rather than being aggregated, the bank was able to discern some faint patterns, and once the customers were identified it could target them with small business products.

The ability to use this additional data offers the opportunity to make a lot of money through micro-targeting groups that may not otherwise have been identified, Hillion concluded. Leading users of big Data are trying to develop inventive stratification of consumers to target them in a much narrower way than they do now. That requires what he called unsupervised

learning where the user doesn’t know a model or key variable in advance but waits to learn it from the data.

Keith Collins, vice president and chief technology officer at SaS, said big Data can be useful in fighting fraud, which has increased sharply in years. SaS turns the links in social analysis upside down to spot patterns and anomalies, sometimes running over a long time, that can indicate fraudsters working together.

randy Lea, vice president of the aster Data Center of Innovation at data specialist Teradata, said marketers need to know what a customer has been doing over time and across channels. Most know what a customer has been doing on their website, but how did they get there – was it an email marketing campaign or a click-through on a search engine ad? a cookie can identify his return, and if he clicks on a newsletter, the marketing department gets his email and perhaps Facebook or Twitter links. a week or two later he returns to browse some more and the bank can present a targeted offer.

This is not, in Lea’s opinion, big Data but simple application of the tools Teradata offers.

While there is debate over whether we are talking about big Data in the sense that a computer scientist might think of the topic, data volumes are growing rapidly, generated by social networking, mobile internet, geographic information and sensors.

McKinsey Global Institute, in a widely cited paper from last May, estimated that by 2009 nearly all sectors in the uS economy with companies of more than 1,000 employees held an average of 200 terabytes of data, twice the size of Wal-Mart’s data warehouse in 1999 – which at the time was considered one of the seven wonders of the IT world.

The definition of big Data is fairly loose: one general definition says it is data that can’t be processed in >


CommentFebruary 2012

there is no doubt that 2011 was the year of high-frequency trading, the practice of using computers to analyse real-time market information such as stock prices to implement proprietary trading activity in milliseconds. according to a recent study carried out by the bank of england, HFT’s share of the uK equity market has grown considerably since 2005, rising from a tiny portion of the uK equity market to now represent more than 35%. In the current economic climate, HFT is attractive because it can deliver profit with lower margins.

Now an established trading method, HFT has had two main effects on the markets. Firstly, there are larger volumes of trades than ever before. a recent report from Thomson reuters and the London Stock exchange said that more than £1.9 trillion was traded in the first half of 2011 – representing more than one trillion trades. Secondly, this growth has resulted in a large jump in the volume of data moving between exchanges which has increased the networking and storage resources required to deliver the information between exchanges. This has in turn led to the practice of locating servers in close proximity to the data centre of the exchange, the most effective way of limiting latency, to enable traders to provide pricing bids faster than their competitors.

moving to other asset classes Moving forward, we expect to see more and more asset classes, such as energy and commodities, catching the high-speed trading bug. No asset class is out of bounds: if there is liquidity available, it is likely that someone will come up with a complex algorithm to exploit it. While traditionally, high-speed traders have exploited the listed derivatives markets such as those of CMe, eurex and LIFFe, we are now witnessing HFT trading models emerging in foreign exchange, specifically in key liquidity centres in Secacus, New Jersey. The new uS Dodd-Frank act and the forthcoming european union Markets in Financial Instruments regulation legislation will create new brand OTF and

SeF ‘exchanges‘ to trade what were once over-the-counter instruments, such as credit default and interest rate swaps, and all potentially at low latency.

It is interesting to note that this activity is not just limited to derivatives. High-speed trading is also moving into the commodities market, specifically metals, with traders looking to arbitrage the physical commodity against the futures market. Foreign exchange has also been

a target for high-speed traders this year. This is supported by recent analysis from the aite Group, confirming that over 20% of high-frequency firms are now moving into FX, following the growing popularity of commodity derivatives.

It is easy to understand why this trend is occurring. The potential for more assets to be sold without causing a significant movement in the price and no real loss to its original value is an attractive proposition to any trader, regardless of the market. This year, we have already seen the Latour trading group, a small New york-based proprietary trading house that is purely electronic, overtaking investment banking giants such as Goldman Sachs and Morgan Stanley in trading volumes. brokers are making money by trading the firm’s own assets and not those of their clients. The group has traded 484.6 million shares in principal strategies over the past quarter – an attractive place to be.

For organisations such as Latour to continue their successful high-speed trading model, the issue of regulation has to be addressed in the coming year. In spite of the ubS scandal and the mini FX flash crash in Japan that saw liquidity grind to a halt back in March, a global

agreement addressing how markets are monitored has yet to be reached. The question for 2012 is how can markets be kept secure as the complexity and speed of trades continues to increase? There are many different theories, some point towards circuit breakers, a limit put in place to reduce market volatility and panic selling by program trading computers. ubS recently found that pre-trade risk checks are very important. However, an

over emphasis on “the dangers” can hold the benefits of high-speed trading back.

The new eu MiFIr regulations from brussels are aimed at forcing OTC trading in derivatives, such as credit default swaps (CDS), onto new “exchange like facilities”. This is long overdue. until recently, reporting of OTC was almost impossible because trades could occur in private, without activity being visible on any exchange. New regulation means that new pools of liquidity will be created. With

these new pools available, it is only a question of when, not if, high-speed traders will follow, demanding connectivity to these pools.

at the same time that confidence in the fairness of markets is being put to the test under new regulatory measures, a combination of general public anger towards financial services and negative press has created a mood of distrust around high-speed trading. as we move into 2012, it is imperative that both governments and regulators introduce smarter rules to try to prevent further high-speed market abuse, without restricting the practice.

In summary, increased levels of regulation will only restrict the benefits of HFT. When new laws such as MiFIr come into play, it is imperative the aforementioned benefits around HFT are not lost, particularly as the practice begins to grow in new asset classes such as energy. a balanced approach of smarter regulation and greater connectivity is what regulators and financial institutions should be striving for in 2012.

tony moulange is business development manager at Colt.

High-speed trading in 2012 tony moulange, Colt

“As we move into 2012, it is imperative that both governments

and regulators introduce smarter rules to try to prevent further high-speed market abuse, without restricting the practice – increased levels of regulation will only restrict the

benefits of HFT.”


memory and must be distributed and processed in parallel.

Sceptics say that this still too broad. rasmus Wegener, a partner in the IT practice at management consultancy bain, defines big Data as a significant amount of structured and unstructured data that needs to be analysed at the same time, requiring complex very fast computing operations. He figures finance, electric grids and a few internet companies such as yahoo and Google that are analysing users in real time so they can deliver targeted adverts are big Data. Computing massive amounts of complex data to deliver a credit decision within seconds is big Data – delivering the results overnight is just Large Data that users can run through Oracle, Teradata or SaS. Indeed, a Teradata consultant said that more than 25 of the firm’s clients were running over a petabyte on Teradata systems.

understanding the difference can be worth millions. a cruise ship line that bain worked with wanted to improve its pricing on 300 trips a week with about 3,000 passengers per ship. It must be big Data, said the business side, tossing it to IT; IT proposed using the apache Hadoop software library, which is designed to allow distributed processing of large data sets across clusters of machines, and came up with a project budget of $1 million. bain recommended the firm simply concentrate several of its scattered business analysts into a team, hire a director, and work on pricing. adjusting the prices for rear-facing cabins generated $5 million in new revenue in the first year, without Hadoop.

Whatever their differences on the definition of big Data, experts agree on the value of multi-disciplinary teams including experts in large scale mathematics, statistics, computer science and deep knowledge of the business.

anand rajaraman, senior vice president at Wal-Mart Global e-Commerce and co-founder of @WalmartLabs, said big Data doesn’t just break through hardware and software, it also breaks down traditional analytics. Many people know how to work with data, but that doesn’t mean they are ready to work with big Data. “The tools are very different. Many of the fundamental algorithms for predictive analytics depend crucially on keeping the data in main memory with a single CPu to access it. big Data breaks that condition. The data can’t all be in memory at the same time, so it needs to be processed in a distributed fashion. That requires a new programming model,” he said.

Whether that requires someone with a degree in the new field of data science or merely teaching the best business analysts in the company how to use the newest tools remains, predictably, a subject of debate.

One ray of hope in all of this is that alpine’s Hillion thinks that the new tools coming over the next few years mean that ordinary business people will be working with big Data, even if they aren’t statisticians.

“We need to demystify this a bit, remove the cloud of obfuscation and make big Data available to people,” he said. BT



there is no doubt that 2011 was the year of high-frequency trading, the practice of using computers to analyse real-time market information such as stock prices to implement proprietary trading activity in milliseconds. according to a recent study carried out by the bank of england, HFT’s share of the uK equity market has grown considerably since 2005, rising from a tiny portion of the uK equity market to now represent more than 35%. In the current economic climate, HFT is attractive because it can deliver profit with lower margins.

Now an established trading method, HFT has had two main effects on the markets. Firstly, there are larger volumes of trades than ever before. a recent report from Thomson reuters and the London Stock exchange said that more than £1.9 trillion was traded in the first half of 2011 – representing more than one trillion trades. Secondly, this growth has resulted in a large jump in the volume of data moving between exchanges which has increased the networking and storage resources required to deliver the information between exchanges. This has in turn led to the practice of locating servers in close proximity to the data centre of the exchange, the most effective way of limiting latency, to enable traders to provide pricing bids faster than their competitors.

moving to other asset classes Moving forward, we expect to see more and more asset classes, such as energy and commodities, catching the high-speed trading bug. No asset class is out of bounds: if there is liquidity available, it is likely that someone will come up with a complex algorithm to exploit it. While traditionally, high-speed traders have exploited the listed derivatives markets such as those of CMe, eurex and LIFFe, we are now witnessing HFT trading models emerging in foreign exchange, specifically in key liquidity centres in Secacus, New Jersey. The new uS Dodd-Frank act and the forthcoming european union Markets in Financial Instruments regulation legislation will create new brand OTF and

SeF ‘exchanges‘ to trade what were once over-the-counter instruments, such as credit default and interest rate swaps, and all potentially at low latency.

It is interesting to note that this activity is not just limited to derivatives. High-speed trading is also moving into the commodities market, specifically metals, with traders looking to arbitrage the physical commodity against the futures market. Foreign exchange has also been

a target for high-speed traders this year. This is supported by recent analysis from the aite Group, confirming that over 20% of high-frequency firms are now moving into FX, following the growing popularity of commodity derivatives.

It is easy to understand why this trend is occurring. The potential for more assets to be sold without causing a significant movement in the price and no real loss to its original value is an attractive proposition to any trader, regardless of the market. This year, we have already seen the Latour trading group, a small New york-based proprietary trading house that is purely electronic, overtaking investment banking giants such as Goldman Sachs and Morgan Stanley in trading volumes. brokers are making money by trading the firm’s own assets and not those of their clients. The group has traded 484.6 million shares in principal strategies over the past quarter – an attractive place to be.

For organisations such as Latour to continue their successful high-speed trading model, the issue of regulation has to be addressed in the coming year. In spite of the ubS scandal and the mini FX flash crash in Japan that saw liquidity grind to a halt back in March, a global

agreement addressing how markets are monitored has yet to be reached. The question for 2012 is how can markets be kept secure as the complexity and speed of trades continues to increase? There are many different theories, some point towards circuit breakers, a limit put in place to reduce market volatility and panic selling by program trading computers. ubS recently found that pre-trade risk checks are very important. However, an

over emphasis on “the dangers” can hold the benefits of high-speed trading back.

The new eu MiFIr regulations from brussels are aimed at forcing OTC trading in derivatives, such as credit default swaps (CDS), onto new “exchange like facilities”. This is long overdue. until recently, reporting of OTC was almost impossible because trades could occur in private, without activity being visible on any exchange. New regulation means that new pools of liquidity will be created. With

these new pools available, it is only a question of when, not if, high-speed traders will follow, demanding connectivity to these pools.

at the same time that confidence in the fairness of markets is being put to the test under new regulatory measures, a combination of general public anger towards financial services and negative press has created a mood of distrust around high-speed trading. as we move into 2012, it is imperative that both governments and regulators introduce smarter rules to try to prevent further high-speed market abuse, without restricting the practice.

In summary, increased levels of regulation will only restrict the benefits of HFT. When new laws such as MiFIr come into play, it is imperative the aforementioned benefits around HFT are not lost, particularly as the practice begins to grow in new asset classes such as energy. a balanced approach of smarter regulation and greater connectivity is what regulators and financial institutions should be striving for in 2012.

tony moulange is business development manager at Colt.

High-speed trading in 2012 tony moulange, Colt

“As we move into 2012, it is imperative that both governments

and regulators introduce smarter rules to try to prevent further high-speed market abuse, without restricting the practice – increased levels of regulation will only restrict the

benefits of HFT.”



eMIr and Central Securities Depositories. Given that some of the revised regulations, including those on trade transparency and reporting, have already led to some objections, there is also the lingering possibility that once companies have put these regulations in place, they will be subject to yet further change.

regardless of any anticipated changes, the focus needs to be on enhancing the processes and systems for electronic trading, risk management, transparency and transaction reporting (across more asset classes), compliance and investor protection. MiFID includes a number of measures aimed at protecting investors in the context of the provision of investment services. However, modifications and improvements are clearly needed to strengthen the framework for the provision of services – whether broadening the scope of the directive to cover financial products (like Structure deposits), services and entities which are currently not covered, modifying conduct of business and strengthening organisational requirements for the provision of services to investors, such as adopting and consolidating internal controls.

another consideration is around data consolidation and dissemination. The reporting, publication and consolidation of trade data needs to be addressed due to problems with its formatting, cost, quality and reliability, with many issues highlighted by the european Commission.

To minimise the impact of all such changes, and given how often this can change, a carefully planned and phased approach for MiFID II compliance is vital. IT plays a pivotal role in allowing this change to happen smoothly, so it is important businesses think carefully about how they work with their technology teams when implementing these across the entire enterprise.

as it stands, the sell-side firms in their capacity as liquidity providers arguably have one of the biggest challenges to overcome with the introduction of MiFID II. Most of these were using pre-trade transparency waivers provided in the original MiFID, to avoid the public dissemination of bid and ask prices and depth of interest creating dark pools, which encouraged buy-side firms to use their services. With these waivers under review as part of the pre-trade

transparency proposal in MiFID II, liquidity providers will need to reassess their service strategies in attracting buy-side clients. Similarly with the proposal on regulating the automated trading and high frequency trading practices, sell-side firms employing alternative exchange venues, for example broker crossing, will swiftly need to adapt their systems and processes.

another point to note is around the proposal of bringing all standardised trading instruments, such as commodity derivatives, under the ambit of the directive. Sell-side firms already engaged in this business will need to establish systems and processes to meet the reporting and compliance regulations that are currently applicable on equity-related instruments. additionally, the enhanced requirements for collaterals in the OTC segment, put in as part of risk control enhancement in MiFID II, could reduce the market interest in these instruments, thereby affecting the sell-side firms involved in the OTC segment both in terms of business and changes required in risk monitoring systems.

Finally, since MiFID II’s main focus is on breaking the vertical integration in the sector, with the aim of increasing competition by freeing the clearing service from the trade service, sell-side firms can no longer hope to sell exclusive, fully integrated investment services to their clients. This could represent a significant change to their business model.

The full impact of MiFID II on the capital markets and the financial services players can only be ascertained once the legislation is fully in place relative to other regulatory reforms such as eMIr and Dodd-Frank. Firms also need to take view of their front to back office infrastructure and have a holistic view of all regulatory impact on business and infrastructure, rather than taking a standalone approach to MiFID II.

Some firms will re-evaluate what businesses (and products) still make sense. Others will use this opportunity to upgrade their IT infrastructure and ensure a flexible approach to take advantage of the market benefits MiFID II could bring.

tony Virdi is vice president and head of the Banking and Financial Services Practice for the UK and Ireland at Cognizant.

Preparing for MiFID II tony Virdi, Cognizant

Since the markets in Financial Instruments Directive was enforced back in november 2007, the economic landscape has changed dramatically. Competition between trading venues has increased while investor choice has improved, due to enhanced availability of financial instruments, reduced transaction costs and increased integration.

as a result of the 2007/2008 financial crisis, both regulators and the G20 are demanding better execution, greater transparency, risk management and regulation of more opaque markets such as OTC derivatives. To meet these demands, the european Commission announced MiFID II in October 2011. While not yet passed as legislation, MIFID II will require significant change for financial services firms amid the need to comply with other eu regulatory reforms, as well as uS Dodd-Frank reforms.

MiFID II is the latest in a long line of regulations that require major changes in both internal infrastructure, and how companies conduct their businesses on a day-to-day basis. The eC’s own estimates for one-off compliance costs for MiFID range between €512 million – €732 million and ongoing costs of between €312 million – €586 million. The challenge for companies, aside from the significant cost burden in an extremely challenged market, is to ensure they don’t fall foul of the regulators – much easier said than done given how quickly regulation is prone to change.

The potential advantages are the harmonisation of rules but it will also be viewed as providing uK entities with less flexibility, especially for more specialised areas such as commodities. as necessary as this is, the continuation of changing regulation is placing pressure on financial institutions, particularly the sell-side firms, who need to pay close attention to how they adapt their systems and processes to adhere to strict transparency and reporting regulations.

There is little doubt that, for capital market segments, the impact of MiFID II will be felt strongly across all areas of the business and the different operating functions. The revised directives and regulations in MiFID II cover a vast amount of ground and, in addition, the full impact has to be analysed alongside other closely related regulations such as


derive access, and what level of permissions they have■ Which folders and sub folders within a file server are accessible by any selected user or group, as well as the specific permissions for the folder (Microsoft NTFS permissions, share permissions, SharePoint permissions, etc.) ■ Filtered views that allow queries based on username, group name or folder/data name ■ automated updating of views to reflect changes or new data within active Directory (i.e. user to group membership) as well as within the file server (i.e. new data, deleted data, renamed data, access control list changes) ■ any solution for unstructured data management must include all mechanisms to define, test, update and reverse file and folder permissions changes. Specifically the system needs to provide: ■ The means to “push” or commit changes to access permissions directly onto the file server or directory service (e.g. active Directory). The mechanism should include an option to push changes explicitly with system administrator intervention or in an automated fashion via a scheduler.

What If? capabilities, otherwise known as a sandbox where changes to folder permissions can be simulated in order to determine what, if any, the impact to access will be. For instance, the system shall allow the revocation of an entire group’s permissions in a sandbox. The system should indicate clearly which legitimate users will be affected negatively and allow for mitigation of that condition prior to live push.

a detailed audit trail must be provided for all aspects of data use (such as opens, creates, deletes, moves, email sent, received, etc., modifications to content, permissions, or group membership). The presentation of the information should be easily comprehensible, sortable, searchable and available as on-demand and scheduled reports.

a system for unstructured data governance needs to provide an automated means for the revocation of data permissions. Specifically the system should identify by name all users whose access to a given data set should be revoked, re-compute revocations as changes to active Directory and file servers occur, provide the means to test the recommended revocations prior

to enacting on the servers for enforcement, provide recommendations with accuracy greater than 99.9%.

any proposed solution for unstructured data management should not impede the performance of file servers, the user access experience or business traffic flow. Specifically, the system should not require native operating system auditing on traditional distributed systems (Windows auditing, unix/Linux auditing) in order to deliver its core functionality for data control.

because most organisations add additional file servers over time and unstructured data grows very rapidly, the system has to provide room for growth. a data governance solution should be able to scale to accommodate unstructured data growing by more than 50% volume every year.

a practical data protection solution cannot disrupt business operations or traffic flow. a solution should install quickly (e.g., within five business days), without the need for specialised professional services, and without assigning dedicated IT staff.

a solution should not require specialised off-site training in order to operate. any necessary training should be simple, and something the vendor can deliver on-site. Of course, the user interface should be intuitive and consistent across each platform. Managing permissions comes down to users, data and level of access—whether on windows or unix file shares, SharePoint sites and libraries, or exchange mailboxes and public folders – and the interface should provide a clear, unified view over all platforms.

Data protection solutions need to support a range of file servers and storage devices including Windows Servers, unix/Linux servers, SharePoint, exchange, and network attached storage (NaS) from leading NaS vendors.

a solution for data protection has to demonstrate quantifiable benefits in time and resource savings. be sure to look for automation in the following areas, which are often the most manually intensive: Data permission revocations, permissions reporting, data audit report generation, data entitlement review, stale data identification, data business owner identification, and data migration.

David Gibson is director of technical marketing and strategic sales at Varonis.

Finding sensitive data before the hackers do David Gibson,

Varonis


With data growing at a rate of 50% a year and the demand for access to data from employees, partners and customers at an all time high, it’s no secret to It that the complexity of managing and protecting data is growing faster than the available resources.

Certainly there is some benefit to quarantining sensitive data – taking it off the network entirely, or restricting access to only a very few people. However, there is an enormous amount of data that resides in file servers and other unstructured repositories because it’s needed for execution of business processes, and can’t be quarantined – some level access is required by business units and collaborative teams. Secure collaboration with valuable digital assets requires optimising and automating authorisation, and proactive monitoring of authorised use. New technologies are needed to keep up with the explosive growth of unstructured data and collaboration requirements.

While there are a number of software solutions focused on data management and protection, only a select few effectively employ metadata framework technology, which can identify sensitive data 90% faster than traditional classification methods. Data governance software that provides dynamically available metadata allows IT to answer questions like: ■ Who has access to a data set?■ Which data is sensitive?■ Where is my sensitive data overexposed, and how do I fix it?■ Who has been accessing it?■ Which folders need an owner?■ Who is the likely data owner?■ Who has unnecessary permissions to each data set?■ What data is unused?

When considering software automation that leverages metadata framework technology, measuring the effectiveness of a solution is simplified by ensuring the following critical data protection features are facilitated by the solution. ■ any solution for data management and control must provide a clear visual representation of data access controls (permissions) as they are currently defined in the existing file system hierarchy. This visual must show, in an aggregated and searchable fashion:■ all users with access to any folder, SharePoint site, etc., from which groups they



eMIr and Central Securities Depositories. Given that some of the revised regulations, including those on trade transparency and reporting, have already led to some objections, there is also the lingering possibility that once companies have put these regulations in place, they will be subject to yet further change.

regardless of any anticipated changes, the focus needs to be on enhancing the processes and systems for electronic trading, risk management, transparency and transaction reporting (across more asset classes), compliance and investor protection. MiFID includes a number of measures aimed at protecting investors in the context of the provision of investment services. However, modifications and improvements are clearly needed to strengthen the framework for the provision of services – whether broadening the scope of the directive to cover financial products (like Structure deposits), services and entities which are currently not covered, modifying conduct of business and strengthening organisational requirements for the provision of services to investors, such as adopting and consolidating internal controls.

another consideration is around data consolidation and dissemination. The reporting, publication and consolidation of trade data needs to be addressed due to problems with its formatting, cost, quality and reliability, with many issues highlighted by the european Commission.

To minimise the impact of all such changes, and given how often this can change, a carefully planned and phased approach for MiFID II compliance is vital. IT plays a pivotal role in allowing this change to happen smoothly, so it is important businesses think carefully about how they work with their technology teams when implementing these across the entire enterprise.

as it stands, the sell-side firms in their capacity as liquidity providers arguably have one of the biggest challenges to overcome with the introduction of MiFID II. Most of these were using pre-trade transparency waivers provided in the original MiFID, to avoid the public dissemination of bid and ask prices and depth of interest creating dark pools, which encouraged buy-side firms to use their services. With these waivers under review as part of the pre-trade

transparency proposal in MiFID II, liquidity providers will need to reassess their service strategies in attracting buy-side clients. Similarly with the proposal on regulating the automated trading and high frequency trading practices, sell-side firms employing alternative exchange venues, for example broker crossing, will swiftly need to adapt their systems and processes.

another point to note is around the proposal of bringing all standardised trading instruments, such as commodity derivatives, under the ambit of the directive. Sell-side firms already engaged in this business will need to establish systems and processes to meet the reporting and compliance regulations that are currently applicable on equity-related instruments. additionally, the enhanced requirements for collaterals in the OTC segment, put in as part of risk control enhancement in MiFID II, could reduce the market interest in these instruments, thereby affecting the sell-side firms involved in the OTC segment both in terms of business and changes required in risk monitoring systems.

Finally, since MiFID II’s main focus is on breaking the vertical integration in the sector, with the aim of increasing competition by freeing the clearing service from the trade service, sell-side firms can no longer hope to sell exclusive, fully integrated investment services to their clients. This could represent a significant change to their business model.

The full impact of MiFID II on the capital markets and the financial services players can only be ascertained once the legislation is fully in place relative to other regulatory reforms such as eMIr and Dodd-Frank. Firms also need to take view of their front to back office infrastructure and have a holistic view of all regulatory impact on business and infrastructure, rather than taking a standalone approach to MiFID II.

Some firms will re-evaluate what businesses (and products) still make sense. Others will use this opportunity to upgrade their IT infrastructure and ensure a flexible approach to take advantage of the market benefits MiFID II could bring.

tony Virdi is vice president and head of the Banking and Financial Services Practice for the UK and Ireland at Cognizant.

Preparing for MiFID II tony Virdi, Cognizant

Since the markets in Financial Instruments Directive was enforced back in november 2007, the economic landscape has changed dramatically. Competition between trading venues has increased while investor choice has improved, due to enhanced availability of financial instruments, reduced transaction costs and increased integration.

as a result of the 2007/2008 financial crisis, both regulators and the G20 are demanding better execution, greater transparency, risk management and regulation of more opaque markets such as OTC derivatives. To meet these demands, the european Commission announced MiFID II in October 2011. While not yet passed as legislation, MIFID II will require significant change for financial services firms amid the need to comply with other eu regulatory reforms, as well as uS Dodd-Frank reforms.

MiFID II is the latest in a long line of regulations that require major changes in both internal infrastructure, and how companies conduct their businesses on a day-to-day basis. The eC’s own estimates for one-off compliance costs for MiFID range between €512 million – €732 million and ongoing costs of between €312 million – €586 million. The challenge for companies, aside from the significant cost burden in an extremely challenged market, is to ensure they don’t fall foul of the regulators – much easier said than done given how quickly regulation is prone to change.

The potential advantages are the harmonisation of rules but it will also be viewed as providing uK entities with less flexibility, especially for more specialised areas such as commodities. as necessary as this is, the continuation of changing regulation is placing pressure on financial institutions, particularly the sell-side firms, who need to pay close attention to how they adapt their systems and processes to adhere to strict transparency and reporting regulations.

There is little doubt that, for capital market segments, the impact of MiFID II will be felt strongly across all areas of the business and the different operating functions. The revised directives and regulations in MiFID II cover a vast amount of ground and, in addition, the full impact has to be analysed alongside other closely related regulations such as

developing the firm’s insights into the retail banking and mortgage market, and will provide strategic consulting advice to Deloitte’s clients.

The Depository Trust & Clearing Corporation has appointed Mark Davies as vice president, data business development, a new position focusing on DTCC’s involvement in the Legal entity Identifier programme in europe. DTCC is the proposed facilities manager for the LeI project, with responsibility for gathering, validating, storing and distributing various data on each legal entity.

Davies will be based in London and will be responsible for strategy and liaison activities in europe regarding the LeI project. This will include participating in the development of a distribution strategy, serving as a subject matter expert on the LeI business with regulators and industry committees and representing DTCC in customer meetings, customer forums and regulatory meetings. He will report directly to ronald Jordan, DTCC managing director and chief data officer, who is based in New york.

Davies joined DTCC from the royal bank of Scotland, where from 2008 he was head of reference Data within the bank’s Shared Services unit, heading a global team of 90 and managing the legal entity database for rbS across its divisions. He also managed all datasets required for reporting in the group risk Platform, and set strategy for reference data involving legal entities and risk data.

Prior to rbS, Davies was associate director for shared data services at barclays Capital from 2000 to 2008, managing the group’s central counterparty database.

before barCap, he was manager of the client reference data division and supervisor for the strategic projects team for Credit Suisse First boston.

GoldenSource, a provider of enterprise Data Management systems, has opened an office in Singapore and appointed David Chew as sales director with responsibility for growing and developing the company’s presence in the region. Prior to joining GoldenSource, Chew was responsible for development within the aPaC region for SmartStream and was country manager for China. He has also held senior sales positions with Siebel and Oracle.

Tom Regent is to replace Andy Nicholson as president of BT’s Global Banking & Financial Markets unit.

Nicholson is “leaving bT to pursue other opportunities”, according to a statement from the company. regent joined bT in November 2010 as president of global sales and marketing. In his new remit, he will also be responsible for bT Global Service’s global banking and financial markets customers across the world. He reports directly into Jeff Kelly, chief executive of bT Global Services.

Wolters Kluwer Financial Services, a compliance and risk management specialist, has hired Dharpan Koul to its FrS Global business as head of professional services, India. based in bangalore, Koul was previously vice president at core banking and business intelligence provider iCreate Software where he led its africa operations. Prior to that role, he worked at Oracle Financial Services, where he held posts as delivery manager, project manager and team leader across multiple countries in asia, europe and africa.

Plus Markets Group has named Gavin Bridge as head of business development at Plus Derivatives exchange. He has over 20 years’ experience with financial derivatives, joining from ICaP energy where he worked with renewable energy, emissions markets and oil derivatives. Previously, bridge worked in New york on the interest rate swap desk at interdealer brokerage firm Tradition.

lCH.Clearnet has appointed lisa Rosen as group head of compliance and public affairs. In this newly created role, rosen will oversee LCH.Clearnet’s regulatory and lobbying activities. Previously she was managing director and global head of regulatory affairs at barclays Capital in London. She joined barclays Capital after 10 years at Merrill Lynch, most recently as first vice president, head of litigation and contentious regulatory matters for europe, Middle east & africa.

as part of a recent expansion into europe from its North american home market, Clairmail, the mobile banking and payments vendor, has appointed otto Neuer as its first vice president of sales for central europe. based in Germany, Neuer has over 20 years’ experience of IT and business software solutions having previously worked at HP, Seagate Software, Cognos and most recently Informatica. He will cover Germany, austria, Switzerland and other central european states in his new sales role. BT


events

22-23 FebruAry 2012Correspondent & relationship banking,LondonNow in its 20th year, IIR’s Correspondent & Relationship Banking continues to serve as the annual gathering of the global correspondent banking community. It is the only event that focuses specifically on the full range of relationship and correspondent banking issues, particularly focusing on the key role correspondent bankers play in creating value throughout the bank.Topics for 2012 include: the evolution of correspondent banking, emerging markets, new banking models, Trade Finance developments, and new Global Trade Finance Routes.www.informaglobalevents.com/FKW52328bt

mArCh 12 -15 2012international payments summit, LondonThe 20th annual IPS event will be looking at the effect of the Single Euro Payment Area beyond Europe and features a new expanded exhibition.www.informaglobalevents.com

mArCh 25 – 28 2012isitC Annual industry Forum and Vendor show, bostonISITC brings together broker/dealers, custodians, investment managers, vendors/utilities and other industry professionals to develop proposed standards to enhance efficiencies in trade processing and related communications. In 2012 it will be asking – 2020 Vision: Cloudy or Clear?www.isitc.org

mAy 15-16 2012ebAday 2012, edinburghNow running over two days, the EBAday payments event will be held in Scotland.www.ebaday.com

June 19-21 2012siFmA Financial services technology Leaders Forum and expo, new yorkThe old SIA Show continues to remodel and rebrand as it regains its former pre-eminence as the event for securities industry technologists.www.sifma.org/events

oCtober 29 – noVember 2 sibos, osakaMore details are expected to be announced during March.www.swift.com


PeoPleFebruary 2012

Appointments

3d Innovations, a data management consultancy specialising in market, reference and derived/computational data, has appointed market data veteran Roderick Manzie as chief operating officer. He will manage the legal, commercial and financial aspects of the company. Co-founder of MSb Consultants in 1990, Manzie was responsible for finance, commercials and administration from start-up mode to the firm’s ultimate multi-million pound acquisition by New era of Networks.

ClS Group Holdings has added four new members to its board of directors, including VocaLink chairman Sir John Gieve and former HSbC chief technology and services officer Ken Harvey. along with Christine Mead, former chief financial officer at Safeco Corporation and Travelers Insurance Group, and Bryan osmar, managing director and head of market infrastructure at royal bank of Canada Capital Markets, this brings the number on the CLS board to 23 directors. Other than rbC’s Osmar, the new members are outside directors who are not affiliated with any of the Settlement Members that use the CLS settlement service.

TRG Post Trade Services has hired Mark Profeti as head of strategic consulting. His new role also encompasses industry initiatives in Counterpart Default Management Systems delivery and recovery and resolution Planning. Profeti joins TrG after a banking career with F&C and abN amro. He also consulted both with braxxon and independently,

providing strategic consultancy and change management support including pan-european CCP clearing and on-exchange settlement services for capital markets and securities trading firms. TrG provides consultancy on regulatory change, compliance, audit, process flows, trade reporting and operational risk.

Independent financial research company Defaqto has appointed Asitha Rodrigo as chief technology officer. He joins from Standard & Poor’s where he was senior director for eMea systems for more than four years. rodrigo has over 15 years’ experience in technology and change leadership in financial services, media and e-commerce, having held senior technology-related roles at Deloitte, Morningstar and Money Marketing.

Financial outsourcer HMl has appointed Richard Hennah as sales director. Hennah joins after nearly 12 years with KPMG where he was a sales director in the financial services division and sold professional services primarily to global banks and insurance companies.

Geo Networks, a provider of dedicated fibre networks, has appointed Carol Nash as sales director for the finance sector. With over 25 years’ experience in the City, Nash’s previous positions include senior level roles at organisations including reuters and Cable & Wireless. She has previously worked with clients such as Deutsche bank, barclays and Lloyds. In her new role, Nash will be responsible for driving Geo’s customer growth in the financial services sector.

Industry veteran Ian Hillier-Brook has joined Two Four Consulting, which provides global technology and consultancy solutions for treasury and capital markets, as uK sales director at its newly opened London office. Hillier-brook was most recently involved with the Wocu world currency unit, and has worked for a number of market data and analytics firms in the financial technology market, including Market Data Services, a time-series analytics specialist that was sold to Dow Jones Telerate.

Market data and trading infrastructure services provider MarketPrizm has hired Jon Yates as head of sales and marketing. He will report to chief executive Tanuja randery, and have responsibility for all commercial activities relating to market strategy, sales, presales, marketing and sales operations. yates has more than 18 years’ experience in the financial services industry with a focus on front office trading floor technologies. He joins from Thomson reuters where he spent 17 years in a variety of sales and business development roles, most recently head of the eMea Trading Division at Thomson reuters. Prior to that he led the uK and Ireland sales division.

Deloitte, the business advisory firm, has appointed Michael Coogan as a strategic adviser to its financial services practice. Coogan was director general of the Council of Mortgage Lenders for almost 15 years. at Deloitte he will work closely with the retail banking and building Society advisory group, focussing on

HSBC veteran Rumi Contractor is moving to barclays as chief operating officer for uK retail and business banking, charged with driving “customer service innovation and technology across ... from product design to improvements to the branch network and customer contact centres”.

Since 2008, Contractor has been global head of service delivery and chief executive of global resourcing. apart from short stints in New york with bankers Trust and Citibank in 1998-2000, he has worked at HSbC since 1987, when he joined as a programmer.

When he returned in 2000 it was as chief information officer for South america, based in brazil, and he has since been CIO at HSbC Securities and Investment bank, New york; chief executive of the bank’s software development centre in Pune, India, and CIO for the uK and europe.

He will report to ashok Vaswani, chief executive of barclays uK retail and business banking, who described him as “a recognised leader in financial services operations and technology”.

“rumi is a highly seasoned business leader with a strong track record for strategic thinking, hands-on execution and building strong teams who collaborate and innovate to improve the customer experience,” said Vaswani. “He is a great addition to our senior executive team.”

HSBC loses IT veteran to Barclays

developing the firm’s insights into the retail banking and mortgage market, and will provide strategic consulting advice to Deloitte’s clients.

The Depository Trust & Clearing Corporation has appointed Mark Davies as vice president, data business development, a new position focusing on DTCC’s involvement in the Legal entity Identifier programme in europe. DTCC is the proposed facilities manager for the LeI project, with responsibility for gathering, validating, storing and distributing various data on each legal entity.

Davies will be based in London and will be responsible for strategy and liaison activities in europe regarding the LeI project. This will include participating in the development of a distribution strategy, serving as a subject matter expert on the LeI business with regulators and industry committees and representing DTCC in customer meetings, customer forums and regulatory meetings. He will report directly to ronald Jordan, DTCC managing director and chief data officer, who is based in New york.

Davies joined DTCC from the royal bank of Scotland, where from 2008 he was head of reference Data within the bank’s Shared Services unit, heading a global team of 90 and managing the legal entity database for rbS across its divisions. He also managed all datasets required for reporting in the group risk Platform, and set strategy for reference data involving legal entities and risk data.

Prior to rbS, Davies was associate director for shared data services at barclays Capital from 2000 to 2008, managing the group’s central counterparty database.

before barCap, he was manager of the client reference data division and supervisor for the strategic projects team for Credit Suisse First boston.

GoldenSource, a provider of enterprise Data Management systems, has opened an office in Singapore and appointed David Chew as sales director with responsibility for growing and developing the company’s presence in the region. Prior to joining GoldenSource, Chew was responsible for development within the aPaC region for SmartStream and was country manager for China. He has also held senior sales positions with Siebel and Oracle.

Tom Regent is to replace Andy Nicholson as president of BT’s Global Banking & Financial Markets unit.

Nicholson is “leaving bT to pursue other opportunities”, according to a statement from the company. regent joined bT in November 2010 as president of global sales and marketing. In his new remit, he will also be responsible for bT Global Service’s global banking and financial markets customers across the world. He reports directly into Jeff Kelly, chief executive of bT Global Services.

Wolters Kluwer Financial Services, a compliance and risk management specialist, has hired Dharpan Koul to its FrS Global business as head of professional services, India. based in bangalore, Koul was previously vice president at core banking and business intelligence provider iCreate Software where he led its africa operations. Prior to that role, he worked at Oracle Financial Services, where he held posts as delivery manager, project manager and team leader across multiple countries in asia, europe and africa.

Plus Markets Group has named Gavin Bridge as head of business development at Plus Derivatives exchange. He has over 20 years’ experience with financial derivatives, joining from ICaP energy where he worked with renewable energy, emissions markets and oil derivatives. Previously, bridge worked in New york on the interest rate swap desk at interdealer brokerage firm Tradition.

lCH.Clearnet has appointed lisa Rosen as group head of compliance and public affairs. In this newly created role, rosen will oversee LCH.Clearnet’s regulatory and lobbying activities. Previously she was managing director and global head of regulatory affairs at barclays Capital in London. She joined barclays Capital after 10 years at Merrill Lynch, most recently as first vice president, head of litigation and contentious regulatory matters for europe, Middle east & africa.

as part of a recent expansion into europe from its North american home market, Clairmail, the mobile banking and payments vendor, has appointed otto Neuer as its first vice president of sales for central europe. based in Germany, Neuer has over 20 years’ experience of IT and business software solutions having previously worked at HP, Seagate Software, Cognos and most recently Informatica. He will cover Germany, austria, Switzerland and other central european states in his new sales role. BT


events

22-23 FebruAry 2012Correspondent & relationship banking,LondonNow in its 20th year, IIR’s Correspondent & Relationship Banking continues to serve as the annual gathering of the global correspondent banking community. It is the only event that focuses specifically on the full range of relationship and correspondent banking issues, particularly focusing on the key role correspondent bankers play in creating value throughout the bank.Topics for 2012 include: the evolution of correspondent banking, emerging markets, new banking models, Trade Finance developments, and new Global Trade Finance Routes.www.informaglobalevents.com/FKW52328bt

mArCh 12 -15 2012international payments summit, LondonThe 20th annual IPS event will be looking at the effect of the Single Euro Payment Area beyond Europe and features a new expanded exhibition.www.informaglobalevents.com

mArCh 25 – 28 2012isitC Annual industry Forum and Vendor show, bostonISITC brings together broker/dealers, custodians, investment managers, vendors/utilities and other industry professionals to develop proposed standards to enhance efficiencies in trade processing and related communications. In 2012 it will be asking – 2020 Vision: Cloudy or Clear?www.isitc.org

mAy 15-16 2012ebAday 2012, edinburghNow running over two days, the EBAday payments event will be held in Scotland.www.ebaday.com

June 19-21 2012siFmA Financial services technology Leaders Forum and expo, new yorkThe old SIA Show continues to remodel and rebrand as it regains its former pre-eminence as the event for securities industry technologists.www.sifma.org/events

oCtober 29 – noVember 2 sibos, osakaMore details are expected to be announced during March.www.swift.com

Directory of service

Accuity is the world’s leading provider of international payment routing data and AML screening software enabling banks and corporations to maximise payment efficiency and ensure AML compliance.

Our Payment solutions help maximise rates of payment STP and with our recent acquisition of CBNet, we are now the only company to source all payment data, including SSI’s, SWIFT/BICs and National Bank Codes directly from the authoritative sources.

Our compliance suite includes the world’s first compliance filtering engine, introduced in 1994, as well as a range of caution lists and screening solutions that provide a prime defence against participation in illicit financial activities, such as money laundering.

Our strategic services Group provides deployment, consulting, training and integration services. We are experts in reducing False Positive rates and helping improve rates of Payment STP.

visit www.Accuitysolutions.com/bankingtech to sign up for a free trial of any of our industry-leading solutions.

Accuity

PeterevAns

peterevans is a leading independent provider of front to back office solutions for the financial services sector. Clearly focused on the securities and investment market petervans has more than 23 years of experience of providing solutions to this sector.

xanite, peterevans new suite of products, offers a configurable, fully integrated, browser based, comprehensive front to back solution that can be either deployed as a single application or integrated as components into your existing platform. Each of the xanite modules can de delivered via an ASP or self-hosted. Covering wealth management, custody, corporate actions, clearing and settlement, private client and on-line stock broking with full operational and administrative support for the front, middle and back office. xanite gives full but controlled access to clients, portfolio, fund and relationship managers, brokers, middle and back office staff – on line anywhere in the world and provides a modern and flexible platform for expanding future business and revenues.

Accuity1 Quality CourtChancery LaneLondon WC2A 1HRUnited KingdomTel: +44 20 7014 3480Fax: +44 20 7061 [email protected]/bankingtech

cleAr2PAy

clear2Pay is a payments modernisation company that actively supports global financial institutions to meet their payments unification goals through its pure SOA Open Payment Framework (OPF). The company facilitates financial organisations in their provision of payments services across the entire value and process chain: Card, ACH, Branch, Bulk, High Care and International Payments. Clear2Pay also offers solutions and services such as e-Banking, the Open Test Platform, ChargeBack, Consultancy and Training. Clients include financial institutions such as ING, Banco Santander, Crédit Agricole, VISA, MasterCard, BNP Paribas, The Federal Reserve, NETS (Denmark), The People Bank of China (PBOC), Rabobank, The Co-operative Financial Services and Commonwealth Bank. Clear2Pay operates out of 14 countries and employs over 650 staff. In 2011 the company won the XCelent Customer Base 2010 award. For more information, please visit www.clear2pay.com.

Clear2Pay NV SASchaliënhoevedreef 20A2800 Mechelen, BelgiumTel: +32 15 79 52 00Fax: +32 15 79 52 01Jean de Crane, GM EMEAEmail: [email protected]

New Broad Street House35 New Broad StreetLondonUnited KingdomEC2M 1NHEmail: [email protected]: +44 (0) 2920 402200Web: www.peterevans.com

orc softwAre

About orc softwareOrc software (SSE: ORC) is the leading global provider of powerful solutions for the worldwide financial industry in the critical areas of advanced trading and low latency connectivity. Orc’s customers include leading banks, trading and market-making firms, exchanges, brokerage houses, institutional investors and hedge funds. solution DescriptionOrc Trading and Orc Connect provide the tools for making the best trading and connectivity decisions with strong analytics, unmatched market access, powerful automated trading functionality, high performance futures and options trading capabilities, ultra-low latency and risk management.

Advanced trading solutionsorc trading applications■ Orc Trading for algorithmic trading■ Orc Trading for arbitrage■ Orc Trading for market making■ Orc Trading for risk management■ Orc Trading for warrants market making■ Orc Trading for volatility trading

orc connect applications■ Orc CameronFIX for FIX to FIX routing■ Orc CameronFIX for FIX integration

Orc SoftwareAmericas: +1 312 327 8555Asia Pacific: +852 2167 1950EMEA: +46 8 506 477 00Email: [email protected]: www.orcsoftware.com

fiDessA GrouP

Exceptional trading, investment and information solutions for the world’s financial community. 85% of the world’s premier financial institutions trust Fidessa to provide them with their multi-asset

trading and investment infrastructure, their market data and analysis, and their decision making and workflow technology. $10 trillion worth of transactions flow across our global connectivity network each year. We offer unique access to the world’s largest and most valuable trading community of buy-side and sell-side professionals, from global institutions and investment banks to boutique brokers and niche hedge funds.

A global business with scale, resilience and expertise, we’ve delivered around 30% compound growth since our stock market listing in 1997 and we’re recognised as the thought leader in our space. We set the benchmark with our unrivalled set of mission-critical products and services and, uniquely, serve both the buy-side and sell-side communities. Ongoing investment in our leading-edge solutions ensures Fidessa remains the industry’s number one choice.

FidessaOne Old Jewry London EC2R 8DNTel:+44 (0)20 7105 1000Fax:+44 (0)20 7105 1001Email: [email protected] Web: www.fidessa.com

www.bankingtech.com

smArtstreAm technoloGies

smartstream technologies delivers operational advantage to clients through enterprise-wide, real-time Transaction Lifecycle Management (TLM®) solutions that automate, track and control financial transactions and processes within and beyond the enterprise.

Built on SmartStream’s TLM Enterprise Control Architecture, TLM solutions provide greater transaction visibility to create exceptions-based operations capable of automating complex and high volume transaction flows. Operational risk and cost is reduced, while customer service levels are improved.

SmartStream is owned by Dubai International Financial Centre (DIFC) and has global operations supporting over 1,000 clients, including more than 75 of the world’s top 100 banks.

contActs:neil hartley on +44 (0) 203 377 5385 or email: [email protected]

leon thomson on +44 (0) 203 377 3493 or email: [email protected]

tieto

tieto is an IT service company providing IT, R&D and consulting services. With approximately 16 000 experts, we are among the leading IT service companies in Northern Europe and the global leader in selected segments. We specialize in areas where we have the deepest understanding of our customers’ businesses and needs. Our superior customer centricity and Nordic expertise set us apart from our competitors.

Tieto Financial Services offers services, solutions and products to financial institutions throughout Europe. Our customers include major banks and financial institutions that have chosen us for our capability to take total responsibility for any assignment.

We enable Financial Institutions to utilize their business potential by combining our technology skills and deep financial industry knowledge with advanced Nordic customer behavior. Working with Tieto you get a reliable, committed long-term partner that helps you to industrialize your day-to-day IT-operations and get the most out of your IT investments.

tcs finAnciAl solutions

tcs financial solutions, a strategic business unit of Tata Consultancy Services, enables transformation in financial services through a holistic suite of solutions for firms in banking, capital markets and insurance, and diversified financial institutions. Each solution in the TCS BαNCS family runs as a scalable and robust service, integrated with existing enterprise infrastructures and technology architectures.

Our mission is to provide best of breed solutions that drive growth, reduce costs, mitigate risk and offer faster speed to market for 240+ institutions in over 80 countries.

TCS BαNCS is an integrated financial services platform. Its embedded transformation intelligence enables flexible, open and collaborative deployment and distribution of financial products and services.

TCS BαNCS aspires to be better than established benchmarks, which is why we’ve embedded an Alpha (“α”) consciously within our brand, to remind ourselves of the superior returns that we strive to deliver. Our ability to foster rapid time-to-market with new products allows organisations to transform themselves into nimble competitors with scalable offerings.

Our Co-Innovation Network is a true partnership for sharing best practices and innovation, and our ‘Experience Certainty’ mindset ensures the brightest of futures for all our customers.

For more information, visit www.tcs.com/bancs or contact us at [email protected]

About tata consultancy servicesTata Consultancy Services is an IT services, business solutions and outsourcing organisation with over 143,000 IT consultants located across the world delivering real results to global businesses through its unique Global Network Delivery ModelTM.

SmartStream TechnologiesSt Helen’s 1 Undershaft London EC3A 8EEUnited KingdomTel: +44 (0)20 7898 0600Email: [email protected]: www.smartstream-stp.com

TietoKutojantie 6-802630 EspooFinlandTel: +3582072010Fax: [email protected]/financialservices

TCS Financial SolutionsWeb: www.tcs.com

sunGArD

About sunGardWith annual revenue of $5 billion, SunGard is a global leader in software and processing solutions for financial services, higher education and the public sector. Visit SunGard at www.sungard.com Adaptiv SunGard’s Adaptiv provides enterprise-wide credit and market risk management and operations solutions for financial services institutions. Adaptiv assists institutions of varying size and complexity to deploy technology to meet both internal and regulatory requirements for risk management and operational control. Adaptiv helps financial services institutions from the banking, hedge fund, asset management, insurance and corporate sectors with its deep understanding of risk management and operational processes. www.sungard.com/adaptiv. front ArenaA trading solution serving a range of financial institutions, SunGard’s Front Arena solution provides straight-through processing by integrating sales and distribution functions, trading capabilities and risk management. Institutional asset managers and brokers, traders, and market makers use Front Arena to trade equities, fixed-income, interest rate derivatives, and credit. For more information, visit www.sungard.com/frontarena securities financeAround the world, $11 trillion in securities financing is managed on SunGard’s proven solutions for international and U.S. domestic securities lending and repo for over 250 clients. Through our Loanet, Global One, Martini and Astec Analytics products and services, we provide comprehensive business solutions and information with worldwide reach for equities or fixed income securities financing Contact: [email protected]

call a sunGard expert today: 0044 (0)208 081 2779

Email: [email protected]: +44 (0)208 081 2779Fax: +44 (0)208 081 2001

www.bankingtech.com

smArtstreAm technoloGies

smartstream technologies delivers operational advantage to clients through enterprise-wide, real-time Transaction Lifecycle Management (TLM®) solutions that automate, track and control financial transactions and processes within and beyond the enterprise.

Built on SmartStream’s TLM Enterprise Control Architecture, TLM solutions provide greater transaction visibility to create exceptions-based operations capable of automating complex and high volume transaction flows. Operational risk and cost is reduced, while customer service levels are improved.

SmartStream is owned by Dubai International Financial Centre (DIFC) and has global operations supporting over 1,000 clients, including more than 75 of the world’s top 100 banks.

contActs:neil hartley on +44 (0) 203 377 5385 or email: [email protected]

leon thomson on +44 (0) 203 377 3493 or email: [email protected]

tieto

tieto is an IT service company providing IT, R&D and consulting services. With approximately 16 000 experts, we are among the leading IT service companies in Northern Europe and the global leader in selected segments. We specialize in areas where we have the deepest understanding of our customers’ businesses and needs. Our superior customer centricity and Nordic expertise set us apart from our competitors.

Tieto Financial Services offers services, solutions and products to financial institutions throughout Europe. Our customers include major banks and financial institutions that have chosen us for our capability to take total responsibility for any assignment.

We enable Financial Institutions to utilize their business potential by combining our technology skills and deep financial industry knowledge with advanced Nordic customer behavior. Working with Tieto you get a reliable, committed long-term partner that helps you to industrialize your day-to-day IT-operations and get the most out of your IT investments.

tcs finAnciAl solutions

tcs financial solutions, a strategic business unit of Tata Consultancy Services, enables transformation in financial services through a holistic suite of solutions for firms in banking, capital markets and insurance, and diversified financial institutions. Each solution in the TCS BαNCS family runs as a scalable and robust service, integrated with existing enterprise infrastructures and technology architectures.

Our mission is to provide best of breed solutions that drive growth, reduce costs, mitigate risk and offer faster speed to market for 240+ institutions in over 80 countries.

TCS BαNCS is an integrated financial services platform. Its embedded transformation intelligence enables flexible, open and collaborative deployment and distribution of financial products and services.

TCS BαNCS aspires to be better than established benchmarks, which is why we’ve embedded an Alpha (“α”) consciously within our brand, to remind ourselves of the superior returns that we strive to deliver. Our ability to foster rapid time-to-market with new products allows organisations to transform themselves into nimble competitors with scalable offerings.

Our Co-Innovation Network is a true partnership for sharing best practices and innovation, and our ‘Experience Certainty’ mindset ensures the brightest of futures for all our customers.

For more information, visit www.tcs.com/bancs or contact us at [email protected]

About tata consultancy servicesTata Consultancy Services is an IT services, business solutions and outsourcing organisation with over 143,000 IT consultants located across the world delivering real results to global businesses through its unique Global Network Delivery ModelTM.

SmartStream TechnologiesSt Helen’s 1 Undershaft London EC3A 8EEUnited KingdomTel: +44 (0)20 7898 0600Email: [email protected]: www.smartstream-stp.com

TietoKutojantie 6-802630 EspooFinlandTel: +3582072010Fax: [email protected]/financialservices

TCS Financial SolutionsWeb: www.tcs.com

sunGArD

About sunGardWith annual revenue of $5 billion, SunGard is a global leader in software and processing solutions for financial services, higher education and the public sector. Visit SunGard at www.sungard.com Adaptiv SunGard’s Adaptiv provides enterprise-wide credit and market risk management and operations solutions for financial services institutions. Adaptiv assists institutions of varying size and complexity to deploy technology to meet both internal and regulatory requirements for risk management and operational control. Adaptiv helps financial services institutions from the banking, hedge fund, asset management, insurance and corporate sectors with its deep understanding of risk management and operational processes. www.sungard.com/adaptiv. front ArenaA trading solution serving a range of financial institutions, SunGard’s Front Arena solution provides straight-through processing by integrating sales and distribution functions, trading capabilities and risk management. Institutional asset managers and brokers, traders, and market makers use Front Arena to trade equities, fixed-income, interest rate derivatives, and credit. For more information, visit www.sungard.com/frontarena securities financeAround the world, $11 trillion in securities financing is managed on SunGard’s proven solutions for international and U.S. domestic securities lending and repo for over 250 clients. Through our Loanet, Global One, Martini and Astec Analytics products and services, we provide comprehensive business solutions and information with worldwide reach for equities or fixed income securities financing Contact: [email protected]

call a sunGard expert today: 0044 (0)208 081 2779

Email: [email protected]: +44 (0)208 081 2779Fax: +44 (0)208 081 2001

www.bankingtech.com


FEBRUARY 2012

OUT OF OFFICEFrom the Archive

We’re a bit down on running events here at the back page, ever since, a few years back, a quiet evening’s drinking was curtailed by the arrival in the pub of about a zillion sweaty bodies fresh – wrong word, that – from running around Battersea Park.

However, overcoming the memory of that trauma in the cause of the greater good, here is a photo of some runners setting out from the Master Gunner in City Road in the direction of the Old Doctor Butler’s Head, though many will likely have to go to the Telegraph.

All of which is by way of saying that the Standard Chartered Great City Race, the only corporate sporting event to be held exclusively on the closed-off streets of the City of London, will this year be happening on Thursday 12th July 2012.

This is the eighth year the Bank has sponsored this not-for-pro� t event. In the last three years all 6,500 places have sold out in record time. Due to its popularity, places will initially be offered to teams who have previously competed. Runners wishing to participate for the � rst time can register their interest and � nd out more about the race by visiting www.cityrace.co.uk.

The race is a charity vehicle to help raise awareness and funds for Seeing is Believing, a global initiative set up by Standard Chartered to help tackle avoidable blindness. This year the charity will once again be the of� cial bene� ciary of the Race with £5 from every £25 entry fee donated to an eye-care project in Zambia.

The latest news and training tips can be found by joining the designated Facebook page at www.facebook.com/StandardCharteredGreatCityRace

Richard Holmes, chief executive of Standard Chartered in Europe, said: “Since 2005, the Great City Race has established itself as one of the major highlights of the summer in the City and each year we are overwhelmed by the huge level of interest and support we get for the race. “For Standard Chartered it’s a wonderful opportunity to bring together over 400 companies and promote the bene� ts of teamwork, while also helping to raise money for great charitable causes.”

The event is organised by London Marathon. “We are delighted Standard Chartered is continuing as title sponsor. The Bank has been a very loyal supporter of the race and we’re very much looking forward to working with them to develop the race experience to ensure we continue to be the best running event in the City,” said David Bedford, joint race director and 1970s athletics legend. BT

Oh dear. The editor has had his normally dormant Facebook ID hijacked. This was quickly noticed because (i) there were status updates for the � rst time since he went off it in favour of Twitter, (since abandoned in favour of Quora ...) and (ii) the updates claimed that he’d lost a stone in weight. As this is the opposite of the truth in the post-Christmas period, it raises the possibility that it may have been a personal attack.

How could it have come about? Ah, let’s see ... could it have been when he unthinkingly clicked the link to a photo that had been, apparently, sent from a chum who happens to be a senior IT security and risk bod at a Very Big Bank?

Yes, of course it could. BT

On your marks ...

Living in glass houses

Standard Chartered moves global IT functions to India ... VoIP telephony starts to make inroads in fi nancial services ... XML-based apps arrive ... Omgeo and GSTPA yet to resolve interoperability issues ...

Bank of England prepares for UK staying out of the single European currency ... MasterCard make fi rst Secure Electronic Payment over the internet (for a Stephen King paperback) ... mobile phones edge into fi nancial services ... High Value Payments systems hit technical challenges ...

Banks urged to adopt EDI for corporate customers ... London Stock Exchange forced to open Regulatory News Service to rivals ... EC examines plans to improve cross-border payments systems ... Banque de France picks Swift’s Premium for High Value Payments ...

European exchanges to keep fl oor trading ... risk management systems needed ... smartcard tech standards battle rages on ... Credit Suisse plans complete automation by 2000 ... Reuters goes on acquisition spree ...

10Years

ago

15Years

ago

20Years

ago

25Years

ago

Thinking outside the bank - Banking Tech · 2011 figures show a steep increase Thinking outside the...

Documents

Transcript of Thinking outside the bank - Banking Tech · 2011 figures show a steep increase Thinking outside the...