Technology briefs

TECHNOLOGY NEWS

Accurate works for Nationwide

According to UK-based Accurate Software, the Nationwide Building Society, in opting for its Accurate NXG solution, has reduced its payment backlog by 50%. The implementation of Accurate NXG, a customisable operational risk management solution, began in July 2001 at the UK-based Nationwide’s banking division, replacing their previous system, which required manual intervention and left the firm vulnerable to risk and potential fraud. Said Paul Alibone, corporate project manager, business improvement team at Nationwide, "We have implemented an external package 100% successfully -- something we haven’t always managed in the past".

Deep IT cuts proving harmful

US market research firms Celent Communications and TowerGroup predict that IT spending by securities firms will decrease this year, but say user firms have slashed IT staff nearly to the point that they are harming themselves.

Overall, securities firm IT staffing has declined more than 15% since early 2001, according to the Celent report by Octavio Marenzi. Some firms, by saddling fewer employees with more work on systems unfamiliar to them, are damaging their operations.

"We believe firms are starting to take significant risks due to the reduction of staff," Marenzi writes. Celent and TowerGroup focus on the financial services industry.

Yet, although chief technology officers have been "obsessed" with cost containment, they have begun to realise that return-on-investment analysis "is a good thing, until it reaches paralysis", said TowerGroup analyst Rob Hegarty when he spoke at TowerGroup’s conference in Boston on May 1. "No firm ever cut its way to the top, particularly when IT is at the core of growth prospects."

TowerGroup estimates that the North American capital markets spend will decrease by 4.8% from 2002 to $20.7 billion in 2003, and 5.3% between 2003 and 2004. However, analyst Robert Hegarty says that 2003--2004 is such a "wild card" period -- as securities IT spending is so directly related to increasingly unpredictable trading revenue -- that the trend could "easily swing positive" by the end of 2004.

Marenzi is predicting that $25.6 billion will be spent in securities IT in the US alone in 2003, marking a decline of about one percent from 2002.

SIAC launches SFTI data network

Securities Industry Automation Corp (SIAC), a New York-based firm that runs the computer systems and communications networks of the New York Stock Exchange and the American Stock Exchange. has launched the Secure Financial Transaction Infrastructure (SFTI), a new network designed to provide firms with a more reliable way to access market data.

SIAC officials say SFTI is more secure than point-to-point connections and offers more options in terms of where to send access data. Firms use their chosen telecommunications provider and protocols to connect to SFTI via regional access points located in New York, Boston and Chicago.

After the data reaches one of the access centres, SFTI transmits it to SIAC via a Synchronous Optical Network (SONET) ring, a geographically dispersed conduit that guarantees a physically separate delivery mechanism and redundancy of transmission. If one SONET ring is compromised, data can continue to flow via another pathway, which supports business continuity.

Thirty-six firms have signed on to receive market data feeds from SFTI by the end of 2003. Nine are presently live with feeds.

SFTI will help market data vendors "ensure a higher level of resiliency", says Andy Bach, vice-president of communications engineering at SIAC. "It allows them to reconstruct market data in the event of a disruption to service. It gives them a higher degree of diversity and shields them from having to provide new lines in the event SIAC relocates or adds a new centre." Bach says SIAC will expand the system to other cities if there is sufficient demand.

Corporate actions automation to increase

A recent survey on corporate action automation confirms that there will be a widespread shift from patchy to substantial automation across the industry within all corporate actions areas. The survey, conducted by a trio of technology firms -- UK-based Smartstream, Belgium-based SWIFT, and London-based CityIQ -- was completed in May.

According to the survey, 75% of firms anticipate a substantial increase in the automation of corporate actions. At present, 27% of respondents claimed substantial existing levels of automation in the corporate actions area, but a remarkable 36% said that they currently had no automation at all in corporate actions. Of the respondents, 41% said they are currently reviewing the possibility of automating all or part of their corporate actions processing, and another 42% said they are either about to embark on automation, are in the process of doing so, or are about to complete their implementation.

Tullett Liberty launches STP application

UK-based interdealer broker Tullett Liberty launched a straight-through processing application called Post:marker in May. The product enables trade details to be transferred into client systems automatically, without the need for manual data entry. After a trade is completed, an electronic notification is sent to the trader from Tulletts, which the client can then accept or reject. After the trade is confirmed, details of the transaction can then be transmitted automatically into counterparties’ internal middle- and back-office systems. Said the firm in a statement, "eliminating manual keying and automating trade affirmation reduces the number of exceptions and speeds the detection and correction of any errors that do occur". Post:marker will be available to clients from June.

Reveleus launches Basel II tool

In early May, Boston-based financial analytics company, Reveleus, launched a Basel II software product suite for enterprise risk management and compliance with the forthcoming capital regulations as specified by the Bank for International Settlements (BIS).

Reveleus Basel II is a suite of interlinking modules that offers banks the tools to manage enterprise-wide risk, allocate capital and avoid regulatory penalties associated with non-compliance with Basel II, which is scheduled to take effect in 2006.

The system will allow banks to comply with Basel regulations for market and credit risk under standardised, foundation and advanced internal ratings-based approaches. It also provides a framework to help banks measure capital requirements for operational risk under the basic indicator, standardised and advanced measurement approaches.

Reveleus said the framework will extend, allowing risk managers to rapidly implement adjustments for Basel II compliance as the Basel Committee finalises its regulations. OpRisk

Rebecca Geldard, Naomi Humphries,
Ellen Leander, Daniel Safarik, Arielle Weliky