UK Treasury to investigate high-frequency trading practices, news report reveals

The UK Treasury is to launch a probe into practices surrounding high-frequency trading, according to reports in London's Financial Times.

According to the newspaper, the investigation has been set up to assess what impact a computer-generated error made via these trades would have on the economy as a whole.

High-frequency trades are currently the subject of regulatory scrutiny in the US following the ‘flash crash’, which occurred on the Dow Jones Industrial Index earlier in the year.

The index fell by approximately 1,000 points in less than 20 minutes and a report into the reasons behind the crash is expected to be released by the Securities and Exchange Commission over the coming weeks.

In an email from within the Treasury, which the Financial Times gained access to, the department said: “This ‘flash crash’ exposed the vulnerability of high-frequency algorithmic trading, which was a contributory factor to the decline in confidence that is still being felt across markets.”

It added: “The possibility remains of a computer-generated trading failure occurring in the UK and having a significant economic impact.”

The Treasury’s report is expected to focus on the use of algorithms which enable traders to rapidly buy and sell a wide range of shares and derivatives.

Lucas Pedace of the government Office for Science is due to lead the report.

Safaricom upgrading its mobile banking services

Safaricom whose M-PESA mobile banking service has taken Kenya and Africa by storm is upgrading its services to capture a wider telecoms pie in a bid to remain the dominant player in the market amidst a fierce tariff battle.

Outgoing Safaricom Chief Executive Michael Joseph says the M-PESA service will remain an additional value for its customers.

Industry analysts saw last week's move by Telkom Kenya to lower its price on data bundles as a move to bring down Safaricom's dominance in the market. However, Safaricom which claims to have the fastest 3G network says the quality of its services will sustain its subscription as it had superior speeds.

Joseph said the company was working to improve on its successful money transfer services while seeking to win the tariff wars by all means.

Among the new developments lined up by Safaricom include expansion of its maximum sending amount that currently stands at 35,000 shillings to 50,000 to increase the transaction range and reducing the minimum transaction amount from the current 200 to 100 shillings a move to capture the lower end market.

Meanwhile Joseph expressed his delight after the review of the communication regulations removed a clause in the equality and competition rules that defined the dominant operator as one whose revenues exceeded 25% of the total income of all licensees in a particular segment of the market and prone to regulation.

Joseph was speaking during the signing of partnership between Safaricom and Sarova hotels through which Sarova customers will be able to pay their bills through M-PESA.

Research in Motion launches payments development toolkit

BlackBerry maker Research in Motion (RIM) has launched a payments development toolkit to encourage developers to create their own transactional apps for selling digital goods and services using the handset.

The early release Payment Service SDK can be integrated by developers into their applications as a library as long as it is distributed through the BlackBerry App World storefront.

Users can incorporate options such as subscriptions, feature unlocking and pay per use with their customers then making the purchases through their BlackBerry IDs, using various options such as credit card, PayPal and carrier billing, without having to leave the app.

UK Police arrest 19 over multi-million pound online banking raids

UK police have arrested 19 people in connection with the theft of millions of pounds from online bank accounts. The Metropolitan Police Services Police Central e-Crime Unit (PCeU) have arrested the 15 men and 4 women in dawn raids at addresses in London last Tuesday.

Authorities believe that thousands of PCs belonging to UK citizens have been infected with malicious computer codes, including the infamous Zeus Trojan, enabling an organized criminal network to capture personal log-on details.

The gang is then accused of using the information to access bank accounts and fraudulently transfer funds to previously opened 'mule' and 'drop' accounts.

Several major world banks have suffered losses with around £6 million thought to have been taken from UK citizens in just one three month period although police say this figure is likely to "increase considerably".

The PCeU worked with the UK banks through its Virtual Taskforce gathering information and evidence ahead of making the arrests.

The 19 were arrested on suspicion of offences contrary to the Computer Misuse Act, Proceeds of Crime Act and the Fraud Act and are currently in custody for questioning. Two were also arrested on suspicion of possession of a firearm.

Detective Chief Inspector Terry Wilson of the PCeU, says: "We believe we have disrupted a highly organized criminal network, which has used sophisticated methods to siphon large amounts of cash from many innocent peoples' accounts, causing immense personal anxiety and significant financial harm - which of course banks have had to repay at considerable cost to the economy."

Hackers "jailbreak" iOS of the new Apple TV

Members of a hacker group have managed to jailbreak the latest release of the Apple TV. A post on the iPhone Dev Team Blog reported that members were able to crack the customized iOS firmware shortly after its release last Monday on an Apple download site. The release came the same day Apple began shipping the $99 device.

The fact confirms earlier speculations that Apple TVs run iOS. iPhone Dev Team members ran it through an in-development iOS 4.1 hacking tool they developed called SHAtter. They quickly extracted the cryptographic key used to lock down the Apple TV firmware, which is the first step in finding a reliable jailbreak.

It's unclear exactly what could be done with a jailbroken Apple TV. Compared with other iDevices, it has a paltry amount of storage space. And, of course, there's still the prospect that Apple will make last-minute changes to Apple TVs that patch the vulnerability SHatter exploits.

Corruption, innovation, and financial development

The World Bank's Asli Demirguc-Kunt, Meghana Ayyagari, and Vojislav Maksimovic, have just published research that examines how corruption - defined as both bribery of government officials and tax evasion - is correlated with the firm's innovation and financial development. Using firm-level data for over 25,000 firms in 57 countries, they find that the odds of having to pay bribes increase significantly for innovative firms compared to non-innovators, suggesting that corruption may act as a tax on innovation. The authors also find a significant correlation between bribes and tax evasion. Firms that pay bribes are more likely to underreport their revenue than firms that do not pay bribes. This is consistent with theories that government corruption breaks an implicit contract between citizens and the state, prompting firms to retaliate by evading taxes. The authors then examine the net burden of corruption on innovators and find that while some innovators do retaliate by evading taxes, overall innovators are more likely to be victims, who pay bribes but do not evade taxes, than perpetrators, who don’t pay bribes but do evade taxes. Finally, firms that rely on bank finance to pay for new investments and working capital are more likely to be victims (paying bribes but not evading taxes), whereas firms that use informal financing and financing from family and friends and other sources are more likely to be perpetrators (evading taxes despite not having to pay bribes). This last finding could indicate that formal financial intermediation and bank monitoring may play a critical role in helping curb tax evasion. The authors conclude that financial sector reform may help curb corruption, thereby also giving a boost to innovation.

You can go straight to their paper by clicking HERE.

New Sri Lanka Interbank Payment System goes live

LankaClear has upgraded the Sri Lanka Interbank Payment System (SLIPS) to facilitate transactions which would enable customers to receive funds on the same day through SLIPS. This is in line with the Central Bank’s objective of moving towards much more efficient electronic fund transfer systems and away from the paper based instruments.

The environment in which commercial transactions takes place keeps on changing which requires constant upgrading of the national payment system infrastructure to meet the market demand. In recent years, the advances in information technology have paved the way for much more efficient, automated and secure payment systems facilitating on-line real time electronic fund transfers.

The migration to on-line electronic fund transfers has resulted in higher operational efficiency, cost efficiency, greater reliability and security of financial transactions.

In addition to the same day clearing of transactions, the new system facilitates online submission of the transaction files by the participating banks with a high level of security through Digital Signing of the transaction messages.

LankaClear, which is the national clearing house, envisages that customers will use the new system to make bill payments, third party account-to-account transfers and that corporate organizations such as stock-brokers and insurance companies will use the system to make payments to their customers as well as for payment collection in an efficient and cost effective manner.