The UK Telegraph has a fascinating technology article on Friday March 26th 2009 entitled Typing Technique 'Could Trap Paedophiles'. This article highlights some recent research by Professor Roy Maxion, an associate professor at Newcastle University, now working at Carnegie Mellon's Computer Science Department. Apparently "researchers believe technology could be used to determine a computer typist's age, sex and culture within 10 keystrokes by monitoring their speed and rhythm."

This newspaper article goes on to explain how this technology could be useful in tracking down on-line fraudsters and pedophiles. Professor Maxion's recent paper with Professor Kevin S. Killourhy entitled Comparing Anomaly-Detection Algorithms for Keystroke Dynamics provides more details on the basic research.

Toomre Capital Markets LLC ("TCM") is particularly fascinated by this research. If one truly could identify a computer user's age, sex and culture in as few as ten keystrokes, imagine how much more secure the Internet might become simply by requiring say passwords of at least a dozen characters. Imagine also what might happen if one of the search engines were to incorporate such technology into the place where one enters a query. Another possibility might include incorporating the technology into instant messaging software and/or the dialog boxes that users are frequently required to fill out in order to access some specific content.

Over the past few months, I’ve been working on a project that integrates sophisticated Matlab financial models with a Microsoft environment. Back in February, I wrote about writing from Matlab to Excel using ActiveX. Since then, I’ve been focusing on SQL Server and want to share those experiences.

The simplest way to access a Microsoft SQL Server from Matlab is to use the Database Toolbox. This toolbox allows for an ODBC or a JDBC connection to a database. Since our functions are running in a Microsoft environment, we went with an ODBC connection. The connection is very simple to open:

conn = database('ODBCdatasourcename','ODBCusername','ODBCpassword')

In our case, we would then ‘ping’ the connection to make sure everything has connected properly, and if not, return an error:

try
ping(conn) ;
catch ME
% insert error processing code here …
return;
end

We then execute our SQL and check the results

sql = ‘select a,b from c where d = 10’;
curs = exec(conn, sql) ;
curs = fetch( curs ) ;
NumRows = rows(curs);
if (NumRows < 1 )
% insert error processing code here about no rows returned
return ;
end

result = curs.Data;
for i=1:1:NumRows
if (~isnan(result{i,1}))
a{i} = result{i,1};
b{i} = result{i,2};
end
end
close(curs) ;
close(conn);

It has worked nicely for just about all of our needs. However, for speed and flexibility, we found it useful to use ActiveX for some of our database access.

On a recent project we have needed to compare two versions of a complicated financial model. One is written in Excel and the other in Matlab. The model uses over 150 different input variables, so it can be a challenge to make sure that essentially the same variables are passed to both models. Today, I modified one of the routines to use ActiveX to send data from Matlab to Excel. The process was not easy to figure out, but once I figured it out, it is extremely straightforward.

Initially, we were using the Matlab command xlswrite. It is a quick and easy way to write data from Matlab into Excel. It uses a COM server, and can be a little slow, especially if you are making multiple calls. However, if you want to do anything more than simple reading and writing of data to a spreadsheet from Matlab, you need to start using the ActiveX server functionality that Matlab supplies.

As Gartner senior analyst Ben Pring has said, cloud computing has "become the phrase du jour." The problem, though, as with its predecessor Web 2.0, everyone seems to have a different definition of just what cloud computing exactly means.

Many would agree that "the cloud" is a familiar metaphor for the Internet. However, when "the cloud" is joined with the term "computing", the combined meaning becomes even larger and murkier. Some analysts and vendors define cloud computing narrowly as an updated version of utility computing: basically virtual servers available over the Internet. Others go very broad, arguing anything you consume outside the firewall is "in the cloud," including conventional outsourcing. With such ambiguity, no doubt there is considerable confusion just what the value proposition of cloud computing might be.

The value of cloud computing becomes more clear when one focuses only what IT always needs: a way to increase capacity or add capabilities on the fly without investing in new infrastructure, training new personnel, or licensing new software. This focus helps one understand that cloud computing is really an aggregated way of referring to "Software as a Service" ("SaaS"), utility computing, web services in the cloud, incremental storage services (outside the firewall), and Internet integration.

To the extent that financial organizations are able to effectively and securely integrate these external services outside their firewalls (and tightly controlled internal environments), they will be able to take advantage of near ubiquitous and commodity-priced technology. In time, cloud computing is highly likely to force financial institutions to reexamine their "buy vis-à-vis build" decisions and force them to reconsider just what portion of the value proposition they truly need to control internally.

Toomre Capital Markets LLC ("TCM") welcomes the reader's comments and thoughts.

Recently, one of the clients of Toomre Capital Markets LLC ("TCM") asked, in light of the on-going credit crunch, what trends TCM foresaw would be important in the forthcoming year(s) for capital markets technology. Our response was rather downbeat and pessimistic, particularly for those companies focused on leading-edge technology. This also was not the message that the client necessarily wanted to hear.

Our basic view is that the credit crunch will take at least another year to work its way through the financial system. As a result, a number of financial firms will be fighting for their survival and there will be limited budget for new technologies and/or big strategic projects. Hence, most new technology investments will be small and incremental in nature with proven risk/reward trade-offs. This environment for capital markets technology is likely to continue at least until senior management and investors begin to reach a consensus about what the new business model for investment and global banks will be and what revenue streams will result.

Toomre Capital Markets LLC would be happy to discuss our perspective on this subject in a more private setting. If you would like to learn more, please contact TCM for more information.

As many readers of the Toomre Capital Markets LLC ("TCM") blog may already be aware, the next Hedge Fund Executive Forum Series event entitled Real-Time Decisions & Risk Reduction: Technologies that Reduce Latency and Sharpen Business Intelligence to Drive Results will be held in New York City on Thursday November 29th 2007 and then repeated in Stamford, CT on Tuesday December 4th. Lars Toomre will be one of the speakers at this event. Both Aldon Hynes and Lars Toomre hope that you will be able to join the Incremax and Toomre Capital Markets team at either of these venues.

These Hedge Fund Executive Forum Series events are designed to help key investment decision makers quickly get beyond buzz words and learn which strategic technologies and solutions will help drive the best results from every aspect of their organization -- the front, middle and back-offices as well as client service functions. Designed for investment managers with more than $500 million in assets under management ("AUM"), the focus of this particular event will be on data, input/output ("I/O") and how "push vs. pull" can be implemented.

The key challenge this forum event will address is how to create better real-time decision opportunities that result from first transforming fast-moving data into information and then into knowledge that ultimately adds to economic value. Some of the key solutions and technologies from Advent Software, AMD, Cisco, Microsoft, Reuters and Streambase Systems will be highlighted for further discussion.

Please circle the appropriate date on your calendar and plan on attending. Advanced registration is required and can be completed at this web link. Aldon Hynes and Lars Toomre look forward to speaking with you directly on the 29th or 4th. Hopefully, we will see you then. Please feel free to contact TCM directly if you have any questions or comments.

The Stamford, Connecticut chapter of the Professional Risk Managers' International Association ("PRMIA") held a very informative meeting on Wednesday, November 7th 2007 entitled "The Emperors' New Clothes?: After the Credit Crunch, What's the Future of Structured Credit, Financial Guarantors and Rating Agencies". Toomre Capital Markets LLC ("TCM") thought this was one of the most informative industry events yet and strongly recommends that the reader pay close attention to the incestuous circle of structured credit, financial guarantors and rating agencies. The speakers were:

• James Chanos – Managing Partner, Kynikos Assocaiates
• William Ackman – Managing Member, Pershing Sqaure Capital
• Edward Grebeck – CEO, Tempus Advisors

Some readers no doubt will recognize James Chanos and his fund Kynikos Associates as one of the most prominent short-seller hedge funds. Bill Ackman and his hedge fund Pershing Square Capital are primarily focused on the long side, but does have substantial short interest in the financial institution, rating agency and financial guarantor sectors. Bill is perhaps most well known for his excellent (and very negative) research report on MBIA from several years ago. The FORTUNE magazine article from May 16, 2005 entitled The Mystery of The $890 Billion Insurer has more information.

During the trading hours of November 7th, equities in the financial sector were under considerable pressure. This pressure is primarily tied to the great uncertainty about just what are Collateralized Debt Obligations worth, where the resulting large losses are buried and what are the secondary repercussions of the sub-prime meltdown, such as SIVs, option ARMs, and commercial mortgage credit-worthiness. After the close, American International Group ("AIG") reported 3rd quarter results that fell short of expectations primarily due to their losses from the mortgage markets. Then, Morgan Stanley ("MS") pre-announced that it be taking a $3.7 billion in losses in its proprietary trading businesses tied to principal investments in CDOs and other sub-prime mortgage-backed securities. (This amount may change over the balance of November until the end of Morgan Stanley's year end.)

Against this backdrop, James Chanos and William Ackman suggested that the markets are still in the early innings of this mortgage credit crunch process. Whereas some analysts have been suggesting as many as 1.5 to 2.0 million families may lose their residencies due to foreclosure in this mortgage credit cycle, their collective view is that the base level of foreclosures will be much worse, perhaps approaching 3.5 million or even 4.0 million incidents. They suggested that the collective market does not yet appreciate that things could get that bad nor have financial professionals begun to fully appreciate some of the national political repercussions of so many people losing their homes.

Many readers simply do not understand what Complex Event Processing (“CEP”) is and why it has such potential to change the cost and productivity of implementing and maintaining large enterprise software applications. CEP is an emerging technology and technique that Toomre Capital Markets LLC (“TCM”) has intently focusing on during the past several years ever since we discovered two small CEP companies at the 2005 SIFMA show: iSpheres and Streambase Systems. TCM has subsequently written the special supplement article for its client Advanced Micro Devices ("AMD") on the subject of Complex Event Processing that appears in the October 2007 issue of Wall Street and Technology magazine.

Today, on October 2nd 2007, the National Stock Market Inc. ("NASDAQ") announced a definitive agreement to acquire the Boston Stock Exchange ("BSE"), including the holding company (BSE Group), the Boston Equities Exchange (BEX), the Boston Stock Exchange Clearing Corporation (BSECC), and BOX Regulation (BOXR). Along with these businesses, NASDAQ will acquire an SRO (Self-Regulatory Organization) license for trading both equities and options. NASDAQ's acquisition of the BSE Group is valued at approximately $61 million.

Normally such announcements do not attract the attention of Toomre Capital Markets LLC ("TCM"). After all, the consolidation of the listed exchanges has been going on for a while. They no doubt will also continue, especially if the equity markets ever return to one of their periodic extended low volume periods that typically accompany a United States recessionary period. It is not at all clear to TCM in the post Regulation NMS environment just what the competitive value of a listed exchange truly is. The value of a clearing license, on the other hand, is quite clear and helps explain why NASDAQ acquired the Boston Stock Exchange.

Toomre Capital Markets LLC is currently finishing up another White Paper for one of its clients, Advanced Micro Devices (“AMD”). The last AMD White Paper was on the subject of Compliance Risk Management and this one will be on a new methodology of programming called Complex Event Processing (“CEP”).

As part of preparing to write this White Paper on Complex Event Processing, the global practice leader for Financial Services at AMD, Pat Aughavin, and Lars Toomre met with most of the CEP vendors. One of the specialist CEP firms is named Kaskad Technologies, Inc. Their Chief Technology Officer (“CTO”) is a great technologist named Colin Clark and he has been responsible for one of the largest ever implementations of a CEP application. Their lead customer, The Boston Stock Exchange, runs Kaskad's Korrelera Surveillance System to identify possible market abuse and ensure compliance with all rules and regulations.

During the past few weeks, Lars Toomre has been working from a client site (a top-ten hedge fund by size located in Manhattan) together with some members of the great team from G2 Systems, LLC. As a result of the long hours completing this particular project and the additional hours commuting, there has been little time left for writing and then updating this website on a regular basis.

In the financial markets, the week that includes July 4th normally is relatively quiet with many people away for at least some portion of the time. That hardly was the case this year at Toomre Capital Markets. This past week three incoming contacts reminded Lars why it is so important to somehow create time for sharing his thoughts and observations, despite all else that may be going on.

InformationWeek reports that "Banks worldwide will dramatically increase the portion of their IT budgets devoted to offshore services from low-wage countries in the next three years." According to a study by the consulting firm Deloitte, "Offshore tech spending will rise from 6% of the $44 billion the [banking] industry spends on IT annually to 30% by 2010."

Toomre Capital Markets LLC strongly suspects that this shift will accelerate if the any of the major developed countries experience an economic slow-down or recession. If correct, this study also does NOT portend well for financial services programming positions in the greater New York City and London metropolitan areas.

At the end of February 2007, Salesforce.com announced a mega-deal with the wealth management division of Merrill Lynch. Merrill is expanding its use of Salesforce.com's on-demand Customer Relationship Management ("CRM") service to some 25,000 seats. This agreement makes Merrill Lynch Salesforce.com's largest customer ahead of previous leaders Cisco and Dell with approximately 15,000 licenses each. This announcement coincides with the introduction of Salesforce's first solution offering for the financial services vertical called Salesforce Wealth Management Edition.

Toomre Capital Markets LLC takes note of this win, particularly with regards to privacy and the protection of sensitive customer data. One of the drawback's to the hosted CRM model like that offered by Salesforce.com over on-premise solutions like that offered by rival Seibel is that sensitive customer data is hosted outside the control of the organization. TCM wonders what bells and whistles Merrill wrapped around this product to ensure that customer data remains private and that the various brokers remain in compliance with the many rules and regulations that apply to customer privacy. Thoughts and comments are welcome.

Back on July 27th 2006, Toomre Capital Markets LLC ("TCM") highlighted Reuters' pursuit of "machine readable news" for algorithmic trading applications. Reuters eventually released two products in December 2006 aimed at the direct feed of economic statistics and company earnings information into quantitative algorithms.

On March 5th 2007, Regulation National Market System ("Reg NMS") will go into effect for the United States stock markets. Designed to even the playing field between U.S. stock exchanges and rival electronic trading platforms, these regulations require one exchange to route customer orders to other trading venues that display a superior price execution. The goal is to ensure that customers get 'best execution' on each and every one of their stock and equity option transactions, while eliminating the current practice of 'trade-throughs' (ie executing an order at an inferior price than that currently available nationally) and encouraging the greater use of limit orders.

Late on Friday March 2nd 2007, the New York Stock Exchange ("NYSE") asked the Securities and Exchange Commission for a partial delay in adopting the new Reg NMS rules with certain alternative display facilities such as Direct Edge, LavaFlow Inc., and Track Data Securities Corp. The NYSE also apparently needs more time to connect with the International Securities Holdings Inc., which is in the midst of rolling out its equities trading. None of those trading platforms are plugged into the broadly used Intermarket Trading System, which is what the NYSE and other major exchanges use to route orders. There is no indication yet of how the S.E.C. will react to yet another request for a delay.

In response to yesterday's post Event Driven Architecture - Event Processing Moving Forward?, several other sources of information on Event Driven Architecture have been highlighted. One is a new blog by the leaders of the Apama team over at Progress Software. Another is the web site of the Aite Group.

Another reader suggested that Toomre Capital Markets LLC ("TCM") also highlight the other major vendors of software for an Event Driven Architecture. In addition to Streambase Systems (whom we mentioned is a client of TCM), other significant players in the event processing space include: TIBCO BusinessEvents, Progress Apama, Coral8, Aptsoft, Aleri, Kaskad, KX and Vhayu.

At present, the two largest vendors in the financial services vertical are probably TIBCO and Progress Apama. However, one must always take vendor reports of number of customers with a grain of salt in the financial services space since so many financial firms request anonymity as a condition of their contractual arrangements.

No doubt there are pluses and minuses to each one of these respective vendors. However, Toomre Capital Markets LLC would like to reemphasize that leading financial firms need consider the competitive advantage that Event Driven Architecture provides in the move to real-time (and continuous) trading, near real-time Enterprise Risk Management, and near real-time compliance applications.

If the reader has any questions, please feel free to contact Toomre Capital Markets LLC as indicated below. Reader comments and thoughts are welcome.

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.