There is considerable and growing interest in how to automate the intelligent processing of various information events (or more technically changes in state values like, for instance, changes in the price of a particular stock).

Various technical terms have been used to describe this new paradigm of processing information. Phrases such as Complex Event Processing ("CEP"), Event Stream Processing ("ESP"), and Business Event Management ("BEM") are bandied about. Potential users, business managers and IT managements are confused by what these various terms mean and how, if at all, they differ from one another. They often ask, "How does CEP differ from what they now do with custom C++, Java or C# coding and traditional SQL data bases?"

Toomre Capital Markets LLC ("TCM") would suggest that the all of above terms are really one in the same. As a result, as TCM continues its discussions with various financial firms, hedge funds, asset managers and financial intermediaries, henceforth we are going to refer to CEP, ESP and BEM all as part of the new (and likely) disruptive new technology paradigm called Event Driven Architecture ("EDA"). TCM is not the first organization to use this term, but have found that it is more easily understood by business managers in the financial services and capital markets vertical.

On February 27th 2007, Advanced Micro Devices ("AMD") and several other large technology companies like Hewlett Packard, IBM, Sun Microsystems. Intel, Dell, and Microsoft put aside their fierce competitive differences to form a new non-profit board called Green Grid. The new group's goal is to decrease the amount of energy used by data centers and the many servers often stuffed therein.

Green Grid plans to create standards and new technologies that will improve energy efficiency for servers and data centers. The new group will welcome addition members with the proviso that they pay a membership fee. As Bruce Shaw, director of worldwide commercial marketing for Advanced Micro Devices, said, "For 11 partners and also fierce competitors to come together and agree to put aside our differences, it's pretty special."

Toomre Capital Markets LLC ("TCM") associate Aldon Hynes has written several times about the increasingly popular virtual world call Second Life created by San Francisco-based Linden Labs. These postings include Virtual Foreign Exchange Trading and Building A Second Life Ticker Plant. Several finance professional peers have questioned why TCM has highlighted this 3-D virtual world. How does this virtual world relate to financial engineering, quantitative algorithms, risk management, credit derivatives, algorithmic trading, hedge funds or complex event processing they have asked? In short, Second Life does not directly relate -- yet.

Second Life is a 3-D, social networking, virtual world to which many younger, technically-savvy individuals are congregating. Many are attracted by what they can create in a virtual world and by the massively multiplayer on-line gaming. As a result, many of the Forbes 2000 Global organizations are setting up virtual presences in Second Life. Reuters has a virtual news bureau reporting on Second Life developments. Toyota sells in Linden dollars several versions of virtual automobiles. Computer services giant IBM has plunged into Second Life at the urging of its “metaverse evangelists” Roo Reynolds and Ian Hughes, using it as a location for meetings, training and recruitment.

The world financial markets are in the midst of significant regulatory change. Virtually every exchange and trading center is considering how to revamp its operations to improve speed and reliability amidst a general transition to 'fast markets' and electronic trading. Business models and trading rules are being reconsidered and new technologies (like very fast stream processing from StreamBase Systems) are being widely implemented for speed and compliance. Keen attention is being paid to a world where 'best execution' de facto means 'best price' and how orders may have to be 'smart routed' to other trading centers for fulfillment.

In June 2005, the United States Securities and Exchange Commission ("S.E.C.") formally approved Regulation National Market System ("Reg NMS"). Scheduled to be fully implemented by November 2007, these new S.E.C. Rules are designed to strengthen and modernize the regulatory structure of U.S. equity markets. In particular, they are intended to provide better transparency and consistent access to market bids and offers regardless of trading center. The ultimate goal of these rules is to get the United States customer the 'best execution' on each and every transaction, and to increase liquidity and the use of limit orders.

Algorithmic trading is a hot topic in the global financial community, especially with the coming complete implementation of Regulation National Market System ("Reg NMS") in the United States and Markets in Financial Instruments Directive ("MiFID") in Europe. Recent Toomre Capital Markets posts White Paper: Market Risk and Algorithmic Trading and Pondering Broker/Dealer Liquidity Management have generated considerable web traffic to this site from North America, Europe (particularly London and Germany) and South East Asia (particularly Australia). Some inquires have asked why Toomre Capital Markets LLC works closely with StreamBase Systems, which makes very fast enterprise-class stream processing engine software. Others have been confused about whether the StreamBase software is an algorithmic trading application like the Apama ESP Platform from Progress Software or Velocity from Vhayu Technologies.

The StreamBase software is not an algorithmic trading application per se. Rather it is very fast streaming technology that many leading financial firms and large asset managers use (or employ firms like TCM) to develop their own custom applications is areas like smart order routing, market data applications, algorithmic trading, transaction cost analysis (both pre-trade and post-trade analytics), and real-time compliance programs. In short, the StreamBase software offers:

Google Inc. is a darling of both the Wall Street and Silicon Valley communities where some of the best technical minds of a generation have been using their technological prowess to drive first search technology and then internet advertising revenues to heights not previously seen. Early on, Google began to build out their now considerable infrastructure with systems from "from service provider server all-star Rackable Systems." Later, Google began to design its own servers in-house with a great deal of emphasis on buying lower-cost, slower-clocked microprocessors that consume less energy in the hopes of reducing its power bill and keeping servers more reliably up and running.

As Google has grown over the last few years, their technological infrastructure has expanded considerably. In addition to acquiring thousands of microprocessors and tons of communication gear, "Silicon Valley gossip places Google right behind the Tier 1 server vendors as the largest purchaser of disks and memory." Google also apparently controls more network fiber than any other organization.

Google is notorious for its secrecy and has said little about which companies supply the microprocessors that go into its tremendous numbers of servers. That changed on Friday, January 26th 2007 when Google spokesman Barry Schnitt said, "We bought a small number of chips from Intel recently, but we continue to be supplied by more than one vendor." This terse Google statement apparently was made in response to rumors earlier last week that Intel had displaced AMD in its four quarter run as Google's chip supplier.

On Saturday, January 27th 2007, The New York Times published the article Intel Says Chips Will Run Faster, Using Less Power written by John Markoff. This article precedes Monday's forthcoming announcement by Intel that the chip giant has overcome a potentially crippling technical problem that threatened to prevent further shrinkage in size of transistors on a microprocessor chip. Moore's Law, originally postulated by Gordon Moore, one of the co-founders of Intel, is the technology axiom that states that the number of transistors on a chip doubles roughly every two years. The problem in the last decade has been as the size of a transistor's tiny switches shrank, the transistors tended to leak current as the nearby insulating material became ever yet thinner. There have been fears that material property limits would at some point prevent further shrinkage of transistor sizes.

The Intel announcement is expected to explain how they have found a new insulator material composed of "an alloy of hafnium, a metallic element that has previously been used in filaments and electrodes and as a neutron absorber in nuclear power plants. [Intel] will replace the use of silicon dioxide — essentially the material that window glass is made of, but only several atoms thick. Intel is also shifting to new metallic alloy materials — it is not identifying them specifically — in transistor components known as gates, which sit directly on top of the insulator. These are ordinarily made from a particular form of silicon called polysilicon." This advance in insulation will allow Intel to begin manufacturing high-end microprocessor chips with a transistor size of 45 nanometers during the second half of 2007, down from the current standard of 65 nanometers and the 90 nanometers Intel was using in late 2005.

Since the note White Paper: "Market Risk and Algorithmic Trading" was posted, there has been considerable web traffic looking for further information on either algorithmic trading or the topic of enterprise risk management ("ERM") in general. Partly as a result, TCM has been asked to create a posting with links to each of the white papers TCM has written on behalf of this technology client. These white papers include:

• The Future of Real-Time Enterprise Risk Management ("ERM")
• Driving Value in Credit Products
• Adopting a New Standard for ERM in the Energy Sector
• Market Risk and Algorithmic Trading
• And coming shortly… Operational Risk Management

Toomre Capital Markets LLC ("TCM") provides advisory services to firms either engaged in or providing technology to the financial services industry. Our specialties include applying emerging technology and innovative ideas to the broad field of Enterprise Risk Management ("ERM"). We assist these clients with implementing and marketing innovative solutions to the problems and opportunities that today's financial services firms and their customers confront.

As part of our services, TCM consults closely with Advanced Micro Devices, providing subject matter expertise on the capital markets, structured finance and risk management. Another example of our work is a recently released white paper entitled "Market Risk and Algorithmic Trading" that TCM wrote on behalf of AMD. We encourage the reader to review this white paper and to contact AMD or TCM to discuss thoughts and possible applications or consulting engagements.

Real-time Enterprise Risk Management (“ERM”) depends on accurate, timely and actionable business intelligence. Toomre Capital Markets is working closely with The Harrison Group, a leader in custom market research and strategic marketing, to help enterprises measure, monitor and manage the reputation risk of their products, services and brands. Already there is a plethora of unstructured “raw” data to transform into information which in turn drives knowledge and economic value added. However, news out of this month’s Consumer Electronics Show suggests that the already torrential flow of raw consumer-oriented data is about to vastly increase when measuring reputation risk and the proverbial long-tail.

Microsoft announced that it has developed the technology to take full advantage of the interactive television and video services that will start being streamed into consumers’ homes with the continuing widespread adoption of broadband Internet access. As the article Microsoft Makes Google Ad Beater on The Business Online explains, this “video hyperlink can detect products displayed on a television during a show or commercial, allowing viewers to zoom into products featured on the screen and click through to detailed product descriptions. For example, viewers of Sex And The City could click on Carrie Bradshaw’s designer shoes as she walks down a New York street and be taken straight to the shoemaker’s website.”

The Microsoft video hyperlink technology was developed by Microsoft’s adCenter Labs headed by general manager Tarek Najm where the team of 50 researchers are also involved in creating other new technologies. The scientists and researchers working at adLab specialize in fields like data mining, information retrieval, statistical analysis, artificial intelligence, auction theory, visual computing and digital media. One of the more notable technologies still under development is called “social network mining”, which refers to the increasing trend of consumers to communicate with one another over the internet as members of virtual communities or social networks.

How one measures, monitors and manages reputation risk is critical to improving Economic Value Added from corporate products, services and brands. As the power of big media continues to erode, businesses and consumers will gain even more information (whether positive or negative) from new media sources, such as e-mail, review websites, blogs, message boards and specialized web-based virtual communities. The measurement and monitoring of new media communication is a critical issue in effective reputation risk management.

Some months ago, Max Kalehoff of Buzzmetrics wrote an article in SearchInsider entitled “Can Search Help PR's Reputation?” that focused on how public relation firms are responding to search engines and reputation management. This article included the following intriguing quote (which is reproduced below with TCM highlights and links):

"Search is inextricably tied to your reputation," said David Dunne, general manager and director of worldwide operations for interactive at Edelman, the largest independent public relations firm. "Your audiences seek answers in search engines, where your messages are competing with those of NGOs, class action firms, and special interest groups." Dunne said that an entire Web-presence strategy is key, not tactics in isolation. "You need to listen, identify trends, and watch communications around a brand to gain insight and the opportunity to respond on multiple levels."

One of Toomre Capital Markets clients, The Harrison Group of Waterbury, Connecticut, is a leader in strategic marketing consulting and custom market research services. TCM is working closely with the Harrison Group to help corporate enterprises measure, monitor and manage their reputations through an interesting application of real-time risk management technology. Perhaps we can jointly help your organization address your reputation risk issues? Please contact Lars Toomre at TCM or Doug Harrison of The Harrison Group for more information.

As summarized in this article entitled Spending for Compliance and Corporate Governance to Account for 10-15 Percent of an Enterprise's 2006 IT Budget (CRM Today), increased corporate spending for compliance and corporate governance is having a significant impact on IT budgets, according to Gartner, Inc. According to preliminary results from Gartner's 2005 Financial Compliance Management Survey, IT financial compliance management spending will increase to between 10 percent and 15 percent of IT budgets in 2006, up from less than 5 percent in 2004.

This is a significant IT spending increase and bodes well for technologies that efficiently process streams of information in such areas as limits control, pre-trade compliance and operational risk applications. Toomre Capital Markets LLC consults with several risk management technological leaders that are worthy of further investigation in these areas, including QuIC Financial Technologies, Streambase Systems and CXO Systems. Please contact Lars Toomre or Aldon Hynes at Toomre Capital Markets LLC for further information.

The Financial Times of London also discusses the Harrison Group Wealth Study in a December 13, 2005 article written by Jonathan Birchallin entitled “America’s Super-Rich: Offended by Luxury, ‘Under Assault’ by Media.” As noted in this previous TCM entry, the Harrison Group is a client of Toomre Capital Markets LLC and as a result, TCM is acquainted with this work. This wealth study is an intriguing piece of market research and worthy of considerably deeper exploration if the reader seeks to serve or market to this top one-half of one percent of the American population. For those hedge funds, financial firms and professional service providers (e.g. lawyers, CPAs and family offices) seeking to market to the super rich, Toomre Capital Markets highly recommends that this study advance to the front of the reading list.

Harrison Group, Inc., a leading market research firm out of Waterbury, Connecticut, is a consulting client of Toomre Capital Markets LLC. One of their market research products, The Worth Harrison Taylor Study on the Status of Wealth in America, prepared with Worth Magazine, is a unique market research product on the characteristics of the American ultra-rich, defined in this study as possessing at least $5 million in liquidity.

As this article from the AICPA website www.cpa2biz.com entitled “Inside the Minds of the Ultra-Rich” and dated December 12, 2005 explains, “Most of these people are self-made millionaires, like most Americans who have made it to this level. They retain many of the same worries and hopes they had when they started out. But today they have even more to worry about. Not that anyone should worry for them; they are, after all, well insulated from falling back into the middle class. But their issues are complex — technically, strategically, and, particularly, personally.”

This wealth study is an intriguing piece of market research and worthy of considerably deeper exploration if the reader seeks to serve this top one-half of one percent of the American population. For those hedge funds, financial firms and professional service providers (e.g. lawyers, CPAs and family offices) seeking to market to the ultra rich, Toomre Capital Markets highly recommends that this study advance to the front of your reading list. Please feel free to contact TCM if you would like to learn more about this intriguing research product (or some of the unique technology that could support one of your own custom research studies).

Campion Walsh writes on Dow Jones Newswires on December 1, 2005 in a story entitled “U.S. Comptroller Warns About Exotic Mortgage Types” that Comptroller of the Currency John Dugan said Thursday he has grown increasingly concerned by risks to both borrowers and lenders from relatively exotic negative-amortization and payment-option mortgages. Regulatory guidance on mortgage lending, now in the works by the Office of the Comptroller of the Currency and other bank supervisors, will give a focus to negative-amortization mortgages and payment-option adjustable rate mortgages, or ARMs, considering the "payment shock" these loans can carry for unwitting borrowers, Mr. Dugan said.

With interest rates rising and the end of the initial low-two year payment period coming for many of the recently originated option mortgage products, Toomre Capital Markets has likewise been very concerned about the “payment shock” that the primary mortgage obligors will experience. Since so many of these types of loans have been securitized or sold in one form or another to the capital markets, such payment shock is also likely to ripple through both the mortgage-backed securities (“MBS”) and collateralized debt obligation (“CDO”) market sectors. TCM has previously written about this mortgage credit risk problem here.