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Cyber Attacks Force EU to Close Emission Trading System

In Financial Markets, Health and Environment, International Econnomic Politics, Law & Regulations, Natural science, Quantitative Finance, Technology, Trading software, Uncategorized, Views, commentaries and opinions on 22.01.11 at 03:15

A series of cyber-attacks on national registries, where carbon permits are stored, have forced the EU to close its emissions trading system (ETS) for at least a week. The European Commission posted the announcement on its website on Wednesday after Czech Republic-based firm Blackstone Global Ventures said about €6.8 million of carbon allowances appeared to have disappeared. Thefts on electronic registries in Austria, Greece, Poland and Estonia have also been reported over the last days.

“They will over time undermine the credibility of carbon trading as a policy measure.”

Kjersti Ulset


After discovering unauthorized trading on its account on Wednesday, Blackstone contacted the Czech registry OTE AS, which promptly closed all operations and began an investigation. The Paris-based BlueNext SA, operator of the world’s biggest spot exchange for permits, followed suit, as did registries in Poland and Estonia, before the EU finally imposed a region-wide shutdown.

It’s not the first time cyber criminal have been trading stolen permits at the international ETS market, but never has the activity been so comprehensive that the regulators have been forced to close the whole market.

“Incidents over the last weeks have underlined the urgent need for enhanced security measures,” the EU commission says in its announcement of the closure.

The bloc’s ETS system will be down, at least until 26 January.

Full statement

Q&A’s

A Criminals Market

According to The Guardian, European Authorities estimate that up to 90% of the whole market volume is plain fraudulent activities.

Belgian prosecutors highlighted the massive losses faced by EU governments from VAT fraud today after they charged three Britons and a Dutchman with money-laundering following an investigation into a multimillion-pound scam involving carbon emissions permits.

The three Britons, who were arrested last month in Belgium, were accused of failing to pay VAT worth €3m (£2.7m) on a series of carbon credit transactions.

European authorities believe the EU has lost at least €5bn to carbon-trading VAT fraud in the last 18 months.

Last month, the European police agency Europol reported that the European Union’s Emissions Trading Scheme had been victim of fraudulent trading activities over the past 18 months, worth €5 billion for several national tax revenues.

Europol, the EU’s law-­enforcement operation, fears the fraud will be used in other areas, especially gas and electricity trading markets, after criminals found VAT fraud was one of the most lucrative financial frauds.

The Most Lucrative Financial Fraud

Wednesday’s announcement and similar cyber-attacks have also damaged the EU initiative, together with reports of tax fraud and the recycling of used credits, the EUobserver.com reports.

“They will over time undermine the credibility of carbon trading as a policy measure,” says Kjersti Ulset, manager at Point Carbon, a company that reports on Europe’s emission trading, carried out in a network of registries across the union.

Despite its pioneering position, Europe’s ETS system has attracted criticism over its six years of operation, with some businesses saying it threatens the bloc’s competitiveness, while NGOs argue emission thresholds have been set too high.

By placing a price on carbon, Europe’s trading system is designed to lower company emissions and therefore protect the environment from global warming. Corporations received emission permits for free under the first phase (2005-2007) of the scheme. Some, however, are forced to pay for a portion of their permits.

The European emission trading system is the world’s largest, as the US plans for a similar cap-and-trade scheme was blocked by the US Senate last year.

Carbon permits are, however, traded as ordinary securities at the Chicago Carbon Exchange.

Brussels wants to see energy companies buy all their permits with their own money from 2013 and onwards, with other heavy industries gradually phased in by 2020.

China experts suggest pilot ETS projects could appear in Beijing’s next five-year plan, set to be approved in March.

Here at The Swapper we have been skeptical to the ETS all along.

It’s an artificial market, created on basis of nice thoughts, without a real supply/demand situation and is regulated in a way the is more similar to a pharmacy than a financial market.

But what is really worrisome, is the sharp increase in this kind of activity.

Just wait till you see the Chicago Board Option Exchange gets hacked!

Related by The Swapper:

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Internet Nuke Bomb Ready To Blow (Update)

In Financial Engeneering, Financial Markets, Health and Environment, High Frequency Trading, International Econnomic Politics, Law & Regulations, Learning, National Economic Politics, Quantitative Finance, Technology, Trading software, Uncategorized, Views, commentaries and opinions on 16.01.11 at 20:29

The Swapper have been warning about this since last summer when the mysterious Stuxnet worm was discovered at several critical energy and water supply facilities around the world. However, research by Symantec have later reveled that 60% of the infections are found inside Iranian borders. The threat from cyber space has risen to the top of the list over potential global risks in 2011, alongside pandemic diseases and terrorism. The internet, once seen as the solution to all of mans problems, have instead become one of the most severe threats to all of us.

“The primary involvement of states in cyber security, as both protagonists and principal targets, fundamentally changes the nature of the risk.”

Eurasia Group


By the end of 2010 McAfee Security counted 60.000 new pieces of malicious software being released on the internet every day, the hacker attacks on Java platforms (used in practically every security system, including online banks and the Pentagon) rose by 1.200% last year, and for the first time ever the value of theft of digital assets exceeded the theft of physical assets. And for Stuxnet; that’s only the beginning.

More than 100 foreign intelligence organizations are trying to break into US networks, Deputy Defense Secretary William Lynn wrote in the September/October issue of the journal Foreign Affairs. Some already have the capacity to disrupt U.S. information infrastructure, he says.

The US government’s main code-making and code-cracking agency now works on the assumption that foes may have pierced even the most sensitive national security computer networks under its guard, Reuters reports.

“There’s no such thing as ‘secure’ any more,” Debora Plunkett of the National Security Agency said last month, amid US anger and embarrassment over disclosure of sensitive diplomatic cables by the web site WikiLeaks.

“The most sophisticated adversaries are going to go unnoticed on our networks,” she said.

Plunkett heads the NSA’s Information Assurance Directorate, which is responsible for protecting national security information and networks from the foxhole to the White House.

“We have to build our systems on the assumption that adversaries will get in,” she told a cyber security forum sponsored by the Atlantic and Government Executive media organizations.

The United States can’t put its trust “in different components of the system that might have already been violated,” Plunkett added in a rare public airing of NSA’s view on the issue.

“We have to, again, assume that all the components of our system are not safe, and make sure we’re adjusting accordingly.”

The NSA must constantly fine tune its approach, she said, adding that there was no such thing as a “static state of security.”


And the US is not the only nation struggling to keep its sensitive data safe.

According to Iain Lobban, head of GCHQ, the UK’s core infrastructure is under constant attack. He says thousands of targeted emails are hitting the systems every month, planting worms that cause “significant disruptions.”

Mr. Lobban’s claims are supported in a national security report, naming cyber attacks as a top threat to the UK, alongside pandemic diseases and terrorism, according to the PC Pro Magazine.

A Global Threat

“Cyberspace is contested every day, every hour, every minute and every second,” the British security expert says.

The international risk analysis company Eurasia Group put cyber security at number 3 amongst the top 10 risks of 2011.

“For the past decade, increasingly technologically capable hackers and organized crime organizations have elevated cyber security as a business risk, but not as a political risk. The centralization of data networks, both in energy distribution (the move to the smart grid) and information technology more broadly (the shift to cloud computing) are now metastasizing the cyber risk, and governments are becoming more directly and actively involved in playing both offense and defense in cyberspace. The primary involvement of states in cyber security, as both protagonists and principal targets, fundamentally changes the nature of the risk. The new roles of governments and their antagonists bring geopolitics and cyber security together in three different ways,” Eurasia writes.

(Link to full report below).

Java Systems Under Heavy Fire

One of the main components in practically every security system today is the Java platform, produced by Oracle.

So it’s no wonder that attacks on the Java system increased by more than thousand percent in 2010.

“The number of attacks against flaws in Java has jumped by 1.000% – even outstripping attacks against vulnerabilities in Adobe PDF’s,” Microsoft says.

The attacks against Java code – not the Java script – rose from 500.000 at the beginning of last year to about 6 million in the last quarter of 2010.

Even if Oracle have manged to patch the vulnerabilities in Java, the have the same problem as Adobe – people forget to update their software.

And on top of that; Java is a piece of software that’s used in almost everything, it runs in the background, making more visible components work, PC Pro Magazine points out.

“How do you know if you have Java installed, or if it is running?” researcher at Microsoft Malware Protection, Holly Stewart rightfully asks.

(If you want to know more about Java, click the link below.)

1 in 3 Companies Exposed To Data Theft

According to the latest issue of Kroll Annual Global Fraud Report, suggest that the theft of digital assets has overtaken that of physical stock for the first time ever in 2010.

A Survey, conducted in cooperation with the Economist Intelligence Unit, indicates that the numbers of companies reporting theft of information has risen sharply – from 18% to 27,3% – in 2010.

“There’s a growing awareness among thieves of the intrinsic value of intellectual property,” Kroll vice president, Robert Brenner explains.

The survey also suggest that 88% of the  participating companies had been victim of some kind of fraud over the past year, nearly half of them are now fearful of expanding globally because of the cyber threat.

The experts emphasize that the numbers probably not are 100% accurate.

However, the message is pretty clear.

(Download the report below)

The Most Scary Thing

I guess most of you have heard about the Stuxnet worm/virus/malware in the news by now, and are familiar with the speculations that the extremely sophisticated malware might be some kind of cyber weapon, developed by government related scientists somewhere.

I sounds like a plot in James Bond movie – but the truth might be even more vicious.

Davey Winder

According to experts is not unlikely to be a prototype of the first ever cyber-weapon-of-mass-destruction.

Davey Winder, award-winning journalist, business consultant and security expert, explains:

“So what do we know about Stuxnet and the SCADA (Supervisory Control and Data Acquisition) systems?  Well, we know that Stuxnet is designed to be disseminated via USB sticks, and that it was developed to exploit specific zero-day vulnerabilities in the Windows operating system. To expand on that a little, Stuxnet actually exploits no fewer than four zero-day Windows vulnerabilities, a statement that alone should set the hair on the back of any security analyst’s neck prickling. Zero-day vulnerabilities are extremely valuable to the shady world of both hackers – where a zero-day is a kudos-generating device – and to criminals where zero-day equals pay-day. It’s relatively rare to see a single exploit being used in a piece of malware, and totally unheard of to see four expended in such a way.”

“Ask yourself, why would anyone waste three highly valuable zero-day exploits in a single piece of code when one would most likely do the job? Security experts recognize that this isn’t the modus operandi of the average hacker, nor the average criminal,” Winder writes in a recent article.

Personally, I believe that Stuxnet 2.0 is already out there – it just hasn’t been discovered yet.

The Internet Nuke Bomb

According to trend analyst, Gerald Celente, CEO and founder of Trends Research Institute, will cyber wars cause stir and come to fore in 2011.

And. as Eurasia, he is concerned about the government’s involvement.

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Here are some of the other highlights in Mr. Celente’s predictions for the year to come:

  • Every citizen in 2011 will realize that we are in the “greatest depression”
  • In 2011, the game’s gonna run out
  • Digital money, not worth the paper it’s not printed on
  • The youth of the world has mountains of debt to climb, and no way to get to the top
  • The greatest fear that governments have is freedom of speech
  • Your growth industries are the gangs
  • Crackdown on crime will lead to crackdown on liberties
  • Drones flying over your city looking in windows
  • The more government loses control, the harder they crack down

You may not take all of Gerald Celente’s forecasts equally serious, but many of the situations he describes is. in fact, common human behavior, observed in times of crisis since the collapse of the Roman empire thousands of years ago and up to our time.

At the latest count by McAfee Security Lab, about 60.000 pieces of malicious software is released on the internet every day.

And here’s how the last six months of 2010 looked like from the security software producer Kaspersky‘s point of view:

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Perhaps it’s time to upgrade?

 

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So, You Think You Can Blog? (Econotwist’s Greatest Hits 2010)

In Financial Engeneering, Financial Markets, Health and Environment, High Frequency Trading, International Econnomic Politics, Law & Regulations, Learning, National Economic Politics, Natural science, Philosophy, Quantitative Finance, Technology, Trading software, Views, commentaries and opinions on 09.01.11 at 20:40

Every serious blog is presenting their top lists for 2010 these days, so I better get my lists out there too. Frankly, I’m quite surprised by the response I’ve got. After all this was my first year as a full-time blogger. By summer last year, the econotwist’s blogs – mainly The Swapper and The Econotwist’s – reached 20.000 unique visitors per month. Some articles was also republished by other blogs, or featured on the publishing sites like Scribd. I estimate the top articles of Econotwist’s in 2010 was read by at least 200.000 people. And as usual I managed, completely unintended, to make some people a little bit angry.

“That article is about as credible as me writing about nuclear technology. Off-balance sheet transactions? SPEs? Interest Rate and Currency Swaps? Has that idiot even looked at an Annual report for BP?”

Reader’s response


The quote above was in response to the July 2 post – “So, You Thought BP Was An OIL Company?” I haven’t got that much pepper since I described DnB NOR‘s subsidiary in the Baltic region as at “financial lab rat”. Anyway, I see all feedback, good or bad, as extremely valuable. I have not been able to reply to all comments or requests. For that I apologize, and promise I’ll spend more time on your responses in 2011. As for themes I will be focusing on the technological side of the financial markets in addition to my other specialties – the relations between economy and ecology.

And I will have a couple of new prominent contributors joining in, as well as some other surprises…

But right now I want to give my sincere thanks to all of you who’s been cheering me on this year, making my first year as a blogger a definitive success.

To quote one of my favorite artists, (Keith Richards): GOLD RINGS TO YOU ALL !

And here is a summary of the most popular posts and publications by The Econotwist’s Blogs in 2010.

 

TOP POSTS

  1. So, You Thought BP Was An OIL Company?
  2. Mother Earth On Crack
  3. Volcano Ash Can Send The Earth Into “Deep Freeze”
  4. The Worlds Most Contagious Countries – Here’s The List
  5. Cyber Criminals Attack Critical Water, Oil and Gas Systems
  6. More Mysterious “Monster Fish” Comes To Surface
  7. The Ultimate Trading Weapon
  8. Norwegian Day Traders Convicted Of Market Manipulation
  9. Goldman Sachs: “Damn American Bastards!”
  10. Flight to Mystery
  11. The Sun Is Speaking!
  12. Here’s The REAL Norwegian PIIGS Exposure

 

TOP PUBLICATIONS

  1. Goldman Sachs: Global Economics Weekly. June 2010.
  2. Non Performing Loans, Europe June 2010. PriceWaterhouseCoopers
  3. Letter From Geithner
  4. SULTANS OF SWAP: BP Potentially More Devastating than Lehman!
  5. Speech by Mr Ben S Bernanke, Chairman of the Board of Governors of the US Federal Reserve System, at Princeton. 09242010.
  6. Goldman Sachs: “On The Eve of The Bank StressTests”
  7. Tudor Investments Letter October 2010
  8. Saxo Bank. Quarterly Outlook. Q3 2010.
  9. BP Annual Report and Accounts 2009
  10. Bank of International Settlement. Quarterly Report. June 2010
  11. Oslo District Court. Final Verdict In The Case of Market Manipulation by Day Traders. 10122010.
  12. Fitch. Special Report. “CDS Spreads and Default Risk – Interpreting the Signals”- October 2010.

 

Econotwisted T-Shirt (Limited Edition)

OTHER SMASHING HITS AND PERSONAL FAVORITES

 

BEST PHOTO COMMENTS

The Greatest Conspiracy

 

The Dark Side of The White House

 

Trade Hard - Mega Hard

 

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MOST VIEWED iROCK VIDEOS


 

#1. “Nobody Lnpws The Bubbles I’ve Seen” (By Versusplus.com)

 

#2. “It’s Beginning To Look A Lot More RiskLess” (By Versusplus.com)

 

 

No matter what happens in 2011 – don’t forget to have some fun!

All The Best

Mystery of Mass Animal Death Deepens

In Health and Environment, International Econnomic Politics, Learning, Natural science, Trading software, Views, commentaries and opinions on 08.01.11 at 01:35

The mystery of mass animal death epidemic deepens after 8.000 turtle doves fall dead in Italy with strange blue stain on their beaks. The blue stains are believed to be sign of poisoning or hypoxia – lack of oxygen. Hypoxia, a lack of oxygen, is known to cause confusion and illness in animals. It is also a common precursor to altitude sickness. Experts said results from tests on the doves will not be available for at least a week.

“We have no idea why this happened all of a sudden.The doves just started falling one-by-one then in groups of 10’s and 20’s.”

Eyewitness


Residents in Faenza described the birds falling to the ground like “little Christmas balls” with strange blue stains on their beaks. Thousands of dead turtle doves rained down on roofs and cars in an Italian town in the latest in a growing spate of mass animal deaths across the globe.

Initial tests on up to 8,000 of the doves indicated that the blue stain could have been caused by poisoning or hypoxia, the UK Daily Mail reports.

A witness told www.examiner.com: “We have no idea why this happened all of a sudden. The doves just started falling one-by-one then in groups of 10’s and 20’s.”

Hypoxia, a lack of oxygen, is known to cause confusion and illness in animals. It is also a common precursor to altitude sickness.

Experts says results from tests on the doves will not be available for at least a week.

They say that cold weather could have caused the birds’ deaths as the flock was swept into a high-altitude wind storm before falling to the earth.

It comes after two million dead fish were found to have washed up on shores in Chesapeake Bay, Maryland.

The alarming find is being blamed by authorities in Maryland on the stress caused by unusually cold water and over breeding among spot fish.

That investigation comes just days after the deaths of an estimated 100.000 fish in northwest Arkansas, which is being blamed on disease.

A statement by the Maryland Department of the Environment says: “Natural causes appear to be the reason. Cold water stress exacerbated by a large population of the affected species (juvenile spot fish) appears to be the cause of the kill.”

Preliminary tests of the water in Chesapeake Bay have showed the quality was “acceptable,” officials says.

The statement adds: ‘The affected fish are almost exclusively juvenile spot fish, three to six inches in length. A recent survey showed a very strong population of spot in the bay this year. An increased juvenile population and limited deep water habitat would likely compound the effects of cold water stress.”

Mass winter deaths among spot fish have occurred twice before in the Maryland area – in 1976 and 1980.

CNN reports:

Vodpod videos no longer available.

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Here’s some of the latest news stories:

  • Blue stain believed to be sign of poisoning or hypoxia – lack of oxygen that is precursor to altitude sickness
  • Cold weather and over breeding blamed for deaths of two 2million fish in Chesapeake Bay
  • Disease behind deaths of 100,000 fish in Arkansas River
  • At least nine incidents of mass animal deaths across the globe
  • Hundreds of confused birds plummeted to their deaths in multiple locations in the U.S.
  • Rapid movement of Magnetic North Pole towards Russia may have caused bird deaths.
  • .

    And here’s some of stories that have made headlines over the last two weeks:

    • 450 red-winged blackbirds, brown-headed cowbirds, grackles and starlings found littering a highway in Baton Rouge, Louisiana
    • 3,000 blackbirds on roofs and roads in the small town of Beebe, Arkansas
    • Thousands of ‘devil crabs’ washed up along the Kent coast near Thanet
    • Thousands of drum fish washed along a 20-mile stretch of the Arkansas River
    • Two million small fish in Chesapeake Bay, Maryland
    • Thousands of dead fish found floating in warm Florida creek
    • Hundreds of snapper fish found dead in New Zealand
    • Scores of American Coots found dead on Texas highway bridge

    .

    Not The End of Nature

    Experts have speculated that New Year fireworks, thunderstorms, cold weather, parasites and even poisoning may be behind the deaths.

    But conspiracy theorists have also speculated on the internet that secret government experiments could be behind them, with some even claiming it was a sign of a looming Armageddon at the end of the Mayan calendar next year.

    Another theory is that the rapid movement of the Magnetic North Pole towards Russia may have affected the birds’ innate navigation systems.

    However – wildlife health experts  says that these mortality events happen every year but we are just beginning to notice them now, ThaiIndian News writes on their website.

    “This is really not the unusual thing that people are trying to make it into,” Robert Meese, ecologist at the University of California, Davis, says in an interview with Discovery News. “A lot of this stuff happens without anyone documenting it.”

    Meese adds that there are many reasons for such massive die-offs – bad weather, migratory birds accidentally ingesting pesticides or even poisons or birds losing their way due to disorientation by fog or storms.

    Records kept by the United States Geological Survey list at least 16 die-offs of more than 1.000 blackbirds or starlings over the past 30 years, according to Marisa Lubeck, spokesperson for the USGS in Denver.

    But group deaths among animals have been going on for a lot longer than that. In one case, an estimated 1.5 million Lapland Longspurs died during a March 1904 storm in Minnesota and Iowa.

    And such phenomena occur amongst fish, whales, seals and even turtles

    “I think people are very often surprised that this kind of phenomenon happens, that wildlife are susceptible to disease and that there are large outbreaks in the wild, because they often go unseen,” says Paul Slota, spokesperson for the USGS National Wildlife Health Center in Madisonn.

    “I think people should be aware that mortality events in wildlife are normal. They are a fact of life.”

    Related by The Swapper:

    Who Killed The Blackbirds? The Aliens or Al Qaeda?

    Low-Oxygen Zones In Oceans Worry Scientists

    More Mysterious “Monster Fish” Comes To Surface

    Norway: Police To Investigate “Monster Fish”

    Coldest Winter In 1000 Years; Start Of New Ice Age?

    Saxo Predicts Public Debt Catastrophe, Insolvent Banks

    In Financial Engeneering, Financial Markets, Health and Environment, International Econnomic Politics, Law & Regulations, National Economic Politics, Quantitative Finance, Technology, Trading software, Views, commentaries and opinions on 07.01.11 at 03:43

    Yes, it’s that time of the year again; Saxo Bank is out with their “Outrageous Predictions” for the coming year, and they are more contagious than ever. Here’s how the Danish analysts describe an unlikely, but possible, scenario for the United States in the second half of 2011:

    “Politicians and pundits increasingly succeed in putting the Fed in the hot seat for having been the critical enabler of the US housing debacle and resulting bank bailout and public debt catastrophe. Meanwhile, the too-big-to-fail banks are back in deep trouble again as their troubled mortgage portfolios once again threaten their solvency.”

    Saxo Bank


    I doesn’t sound too unlikely to me, and if I were to bet, I would put my money on this one; Saxo Bank goes on predicting a Ron Paul led challenge of the Federal Reserve‟s authority, the US Congress blocking the FED‟s authority to expand its balance sheet and sets up an eventual challenge of the FED‟s dual employment/inflation mandate. On the other hand, it’s probably only wishful thinking…

    It’s about to become one of Scandinavia’s finest New Years traditions; the “Outrageous Predictions” by Saxo Bank.

    Inspired by Nassim Taleb and his Black Swan Theory, they issue an annual report every year in December where the analysts, led by Mr. David Karsbøl, list 10 unlikely, but absolutely possible, economic and political scenarios for the year to come.

    The track record so far is relatively good.

    Saxo Bank have managed to get an average of four hits, on their ten outrageous predictions the last four, five years.

    Last year, three of the predicted, highly unlikely, scenarios did in fact happen.

    Personally, I think Mr. Nassim Taleb would object strongly against using the term “Black Swan” about these predictions.

    But that aside, according to chief economist David Karsbøl at Saxo Bank, the analysis can be useful in stress testing your investment portfolio.

    In other words, it is worth taking into consideration.

    Okay, here it is:

    “Saxo Bank – Outrageous Predictions 2011”

     

    US CONGRESS BLOCKS BERNANKE’S QE3:
    As we move into the second half of 2011, politicians and pundits increasingly succeed in putting the Fed in the hot seat for having been the critical enabler of the US housing debacle and resulting bank bailout and public debt catastrophe. Meanwhile, the too-big-to-fail banks are back in deep trouble again as their troubled mortgage portfolios once again threaten their solvency. The Fed‟s Bernanke rallies the FOMC to indicate a strong new expansion of monetary policy to once again bail out the troubled banks and/or local governments. Emboldened by the political and popular winds blowing, however, a Ron Paul led challenge of the Fed‟s authority sees the Congress blocking the Fed‟s authority to expand its balance sheet, and sets up an eventual challenge of the Fed‟s dual employment/inflation mandate.

     

    APPLE BUYS FACEBOOK:
    What do you do when you want domination of the electronic and mobile device consumer market and have no significant presence in social networking? Oh, and a war chest of a mere USD 51 billion? You buy Facebook, the mother lode of (yet to be monetised) social networks. Facebook is worth USD 43 billion, according to sharespost.com. In interviews, Apple CEO Steve Jobs has explained that Apple was in talks with Facebook about partnership opportunities, but that the talks ultimately produced nothing. Facebook was after “onerous terms that we could not agree to”, according to Jobs. At the Web 2.0 Summit Facebook founder Mark Zuckerberg called for Apple to ease its approach to connecting Ping with Facebook, and said that Apple had to “get on the bus”. Steve Jobs might get on the bus indeed and buy Facebook outright. It makes perfect sense; Facebook doesn‟t compete against Apple and it „faces up‟ to Google, which Jobs loves since Google has become his new number one enemy. It‟s a deal made in heaven… The gigantic 500+ million Facebook user base could be integrated across Apple‟s consumer products and services – every Facebook user automatically has an iTunes Store account and FaceTime chat is integrated into Facebook chat. That‟s a lot of iOS devices.

     

    US DOLLAR INDEX TOPS 100:
    The economic growth trajectory in most areas of the world appears healthy for a time in 2011 – at least outside of Europe and Japan. But then trouble occurs in China, where its new 12th five-year plan aimed at increasing consumption fails to function as hoped. With the Chinese industrial base growing more slowly or not at all as a result of the policy shift, the satellite countries dependent on Chinese demand see their economies facing a rough adjustment. This puts global risk appetite in a tail spin, and with the Japanese economy struggling and the Eurozone in disarray, the US dollar suddenly doesn‟t look as bad as it did previously. This is especially the case since the market was massively short of the currency at the beginning of the year. The unwinding of these positions pushes the USD index 25% higher to over 100 late in the third quarter of 2011. – Outrageous Predictions 2011 –

     

    US 30-YEAR TREASURY YIELD SLIDES TO 3%:
    The dollar devaluation policy, with its roots in the „currency wars‟ of 2010, force emerging markets to use more of their spare dollars on Treasuries. Also, the US edges over the brink toward a „Japanisation‟ of its economy with core inflation dropping. The Federal Reserve‟s quantitative easing did not have any positive effects, apart from easing the balance sheet woes of American banks. Main Street did not receive much except some benefits from slightly higher stock prices, and with a failure to clear out the system, borrowing returns only slowly and recovery does not gain traction. And then there‟s the Eurozone, where the ECB, EU and IMF fail to cure the ills of the peripheral PIIGS, pushing the flock of flustered investors to the safe haven of Uncle Sam. The feel-good factor may have been on the rise in the US in the latter part of 2010, but it vanishes in 2011 and the 30-year Treasury yield drops to 3%.

     

    AUSSIE-STERLING DIVES 25%:
    The UK returns to the values of the old days; they work harder, they save more, and soon enough a surprisingly strong expansion in 2011 is underway as the austerity-stricken country defies the naysayers. The markets have it in for the UK, giving the wide expectation that the economy slows as Prime Minister Cameron‟s cuts work their way through the system. However, the large, narrow cuts will not hinder consumer sentiment and as real savings boost production the economy bounces back in the second half of 2011 to end the year as a growth frontrunner in Europe. Australia, on the other hand, is struggling with a weakening economy
    as China steps harder on the brakes to stop inflation from getting out of control. Add to this an Australian property market, which is at best in need of restraint and at worst looks like a bubble ready to burst, and we will see a decline of 25% in AUDGBP.

     

    CRUDE OIL GUSHES BEFORE CORRECTING BY ONE THIRD:
    Crude oil, now driven by fundamental investor macro expectations, gets carried away, surging to over USD 100 a barrel in early 2011 on the wave of euphoria that the US economy has broken free of the shackles.

    Unlike 2008, there‟s no follow through to drive the spike higher and investors are left holding oil positions they cannot sustain.

    Crude succumbs to a violent one-third correction lower later in the year.

     

    NATURAL GAS SURGES 50 PERCENT:
    Natural gas enters 2011 with a supply surplus as the global downturn has resulted in supply exceeding demand for two years – resulting in two years‟ of double digit losses. But heading into 2011 the fundamentals for Henry Hub improve dramatically. Increased industrial demand on a US recovery, historical cheapness relative to crude and coal, forward curve flattening and action on proposals to export more US natural gas reserves all combine to make passive investments in gas more profitable. And the icing – an unusually frigid cold snap leads to a rapid depletion of stocks. Henry Hub thus sees a one-in-25 year move up by 50% in 2011.

     

    GOLD POWERS TO USD 1800 AS CURRENCY WARS ESCALATE:
    The „currency wars‟ return with a vengeance in 2011, driven by improvement in the US economy rather than a need to help economic recovery.

    The US trade deficit widens as consumers and governments get their wallets out. As the deficit expands, President Obama‟s plan to „double exports in five years‟ increasingly becomes a pipe dream and incites the „man on the street‟ to twist the US Congress‟s arm to pursue a weaker dollar.

    Pressure piles on China and as investors flee to metals in search of some stability, gold shoots up to USD 1,800 an ounce.

     

    S&P500 REACHES AN ALL-TIME HIGH
    Dr. Bernanke, using his mandate of „make sure the stock market keeps going up‟, continues to pump liquidity into the system in 2011. Even „mom-and-pop‟ investors realise the only strategy worth following is to buy the dips. But the tactic actually works for the Fed, even though it‟s a house of cards, and the US consumers start to spend as their stock portfolios
    improve and they forgive their money managers. Corporate America doesn‟t buy the euphoria that a healthy share price is a good indicator of health, though, and continues the deleveraging process – margin improvements, a wary approach to spending and managing the balance sheet, refinancing debt at next to zero interest rates, and so on. Next thing you know, it‟s a proper recovery and the US benchmark index sees the 2007 peak in the rear-view mirror on its way to 1,600.

     

    RUSSIA’S RTS INDEX REACHES 2500
    It‟s a perfect storm for Russia‟s RTS index in 2011. The next global economic bubble starts to inflate early in the year, sending crude oil above USD 100 a barrel again. The average US investor won‟t do anything with his money other than buy the dips on the US stock market, and fans of the Russian stock market realise value in their index at a 1-year forward P/E of 8.6 and price to book ratio of 1.26. The RTS nearly doubles to 2,500 in 2011. The options market says it has a one-in-twelve chance of happening – but the RTS was last up there in mid-2008.


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    UK And France Want Ban On High Frequency Trading

    In Financial Engeneering, Financial Markets, High Frequency Trading, International Econnomic Politics, Law & Regulations, National Economic Politics, Philosophy, Quantitative Finance, Technology, Trading software, Views, commentaries and opinions on 26.11.10 at 18:31

    Britain and France is planning a crackdown on ultra-fast stock trading that they belive caused the so-called “flash crash” in the US stock market on May 6th this year, alarming both regulators and global investors, Reuters.com report.  Jepp, here we go again. Why don’t we just forbid the whole internet and get it over with…and don’t forget the cell phones!

    “My natural tendency would be at least to regulate, to oversee it very strictly and after a cost-benefit analysis of these methods, maybe to forbid it.”

    Christine Lagarde

    They have the Internet on computers, now?!

     

    French Economy Minister Christine Lagarde says the form of computerized trading, known as high-frequency trading (HFT), may need banning in some cases. She’s being backed up by the UK Financial Authorities.

    “My natural tendency would be at least to regulate, to oversee it very strictly and after a cost-benefit analysis of these methods, maybe to forbid it,” Lagarde said at a parliamentary commission hearing on financial speculation. Reuters.

    “Or at least give market authorities the power to forbid it in circumstances that are considered exceptional,” she added.

    Britain, Europe’s biggest stock market, where HFT accounts for about a third of trading on the London Stock Exchange, also signals tougher rules were needed – but emphasise that the rules must be proportionate and targeted.

    “HFT was simply the evolution of trading to a much faster pace due to advances in technology,” Alexander Justham, director of markets at the UK’s Financial Services Authority, told a TradeTech 2010 markets industry conference.

    Adding: “We are not here to turn the clock back.”

    Computerized trading and methods such as algorithmic trading transacts a huge number of shares in microsecond.

    “If you drive so fast, the technology should be that you can break as fast as well,” Justham says.

    Justham also says, according to Reuters, that HFT has narrowed bid/offer spreads,  but the jury was out on whether it has led to more efficient trading or whether it has created unfair advantages in trading.

    Arguing that there’s a key differences between the US and European stock markets, such as controls on who can trade, and the availability of so-called “circuit breakers” to stop the most brutal moves.

    “We are absolutely not complacent about the general risk of what all this means. Has the playing field been tilted?” Justham asks.

    Well, in this bloggers view it’s the authorities that’s been tilted.

    And just to be completely precise: I do definitely see the problems related to high frequency trading. Especially the fact that some market participants are able to get sensitive information before anyone else in the market does, and that’s just plain unfair. However, it’s the exchanges themself who offer this service to selected customers.

    So, in my view the regulators should start by regulating themself before they impose yet another set of rules on the investors.

    Anyway – Bank of France governor, Christian Noyer, said about the same in front of a French parliamentary panel on Wednesday evening,  that HFT was a real problem.

    “I would only see advantages if it was scrutinized as much as possible,” Noyer said.

    Read the full story at Reuters.com.

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    Here’s The Best Place For High Frequency Trading

    In Financial Engeneering, Financial Markets, High Frequency Trading, Learning, Natural science, Quantitative Finance, Technology, Trading software on 17.11.10 at 15:07

    If any of you oil company executives get a phone call from a financial trading firm who want to rent an oil rig, don’t be surprised. A recent analysis concludes that the best place for high frequency trading in the near future probably is in the middle of the Atlantic Ocean.

    “Simply owning or having sovereignty over a certain position on the Earth might turn out to be financially interesting.”

    Alexander Wissner-Gross

    To exploit the 50-odd milliseconds it takes for information to cross the Atlantic, it turns out that the sweet spot isn’t always at the stock exchange’s door. The best places for extreme high-frequency trading might be an empty lot in Uzbekistan, a barge anchored miles off Chile’s southern coast or on a floating device in the middle of the Atlantic Ocean, according to the analysis.

    The analysis,  to be discussed at High-Frequency Trading Experts Workshop 2010 organized by Golden Networking in November and December, tries to pin point the precise locations between the world’s major securities exchanges for gaming at the speed of light.

    In today’s markets, computers search for and act on relevant information in a flash, sending orders through fiber optic cables at nearly the speed of light. By buying or selling shares split seconds ahead of the rest of the market, holding stock for mere moments and then doing it all again, high-frequency traders are turning fractions of pennies into piles of dollars, UltraHighFrecuencyTrading.com writes.

    To trim the time lapse in this extreme markets, firms will even buy space for their computers as close as possible to an exchange’s computers, a practice called “co-locating” that cuts data travel time, giving some traders an edge.

    But to exploit the 50-odd milliseconds it takes for information to cross the Atlantic, it turns out that the sweet spot isn’t always at the exchange’s door. For some assets sold on more than one market, such as the New York and London stock exchanges, the money-making spot is in the middle of the Atlantic Ocean, researchers report in a paper to appear in Physical Review E.

    The team figured out primo locations for performing particular trades on the world’s 52 major securities exchanges.

    The analysis considers the speed-of-light delay between exchanges, and characteristics of the exchanges themselves, such as volume and frequency of trades.

    “‘One surprising feature is that a lot of these optimal positions are in the ocean or other poorly connected areas,” says study coauthor Alexander Wissner-Gross of the MIT Media Laboratory.

    “Simply owning or having sovereignty over a certain position on the Earth might turn out to be financially interesting.”

    But some choice of spots, such as Los Angeles, are already well-connected, says coauthor and mathematician Cameron Freer of the University of Hawaii at Manoa. For trading some stocks sold on both the New York and Tokyo exchanges, the ideal location is probably already wired.

    However, even for hot spots with preexisting infrastructure, it’s unlikely anyone will take advantage of this money-making map anytime soon, according to computational finance expert Michael Kearns of the University of Pennsylvania in Philadelphia.

    Related by The Swapper:

    Hey, You HFT Bashers! Are You Ready For This?“Artificial Intelligence” To Be Implemented In HFTThe Ultimate Trading WeaponHFT Turns To Low Liquidity StocksDerivative Trading Just Keeps Getting Bigger
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    Survey; High Frequency Trading Makes Markets More Efficient

    In Financial Engeneering, Financial Markets, High Frequency Trading, International Econnomic Politics, Law & Regulations, National Economic Politics, Quantitative Finance, Technology, Trading software, Views, commentaries and opinions on 12.11.10 at 03:17

    I’m really loking forward to read the full report on the survey – if I can hold of a copy, of cource. And I’m cerainly curious about who might have sponsored the research. However,  Jonathan Brogaard, a PhD candidate at Northwestern University’s  Kellogg School of Management, have studied high frequency trading in great detail, according to UltraHighFrequencyTrading.com. And he has concluded that high frequency trading only makes the markets more efficient.

    “HFTs may dampen intraday volatility. These findings suggest that HFTs’ activities are not detrimental to non-HFTs and that HFT tends to improve market quality.”

    Jonathan Brogaard


    The survey will be presentet for the high frecuency experts at their workshop in November and December, and the candidate from Northwestern University will provide the attendees with more details on how high-frequency trading works in practice to generate alpha and make the markets more efficient at the same time, the workshop organizer Golden Networking.org says.

    Golden Networking is community for business executives, entrepreneurs, investors and diplomats, founded by former McKinsey consultant and Columbia Business School MBA Edgar Perez.

    Mr. Brogaard’s research examines the impact of high frequency trading (HFT) on the US equities market.

    He has analyzed a “unique dataset” to study the strategies utilized by high frequency traders (HFTs), their profitability, and their relationship with characteristics of the overall market, including liquidity, price discovery, and volatility.

    The 26 HFT firms in the dataset participate in 73.7% of all trades.

    According to the research, and contrary to what is believed, HFT increases liquidity in the markets.

    Improves Market Quality

    Jonathan Brogaard have discovered that high frequency trading is an integral part of the price discovery process and price efficiency,.

    Here are some other conclutions form the survey’s final report:

    • HFTs tend to follow a price reversal strategy driven by order imbalances.
    • HFTs earn gross trading profits of approximately $2.8 billion annually.
    • HFTs do not seem to systematically engage in a non-HFTs anticipatory trading strategy.
    • HFTs’ strategies are more correlated with each other than are non-HFTs.
    • HFTs’ trading level changes only moderately as volatility increases
    • HFTs add substantially to the price discovery process.
    • HFTs provide the best bid and offer quotes for a significant portion of the trading day and do so strategically so as to avoid informed traders, but provide only one-fourth of the book depth as do non-HFTs.
    • HFTs may dampen intraday volatility. These findings suggest that HFTs’ activities are not detrimental to non-HFTs and that HFT tends to improve market quality.

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